Why a team can continuously operate at more than 100% of the salary cap.

[xwalker]

NFL teams can operate at over 100% of the salary cap continuously, but there is a breaking point.

Simplistic Example:
I want to make it simple in order to clearly show the concept. In reality, money is usually pushed forward by spreading into years 2 through 5 instead of just the following year, but the concept is the same.

The cap is 100M.
CCE = Current (year) cap expenditure (this is the base salaries before they are restructured).
Carryover = the amount that was pushed into the current year from previous years.
Push Forward = The amount that is being pushed forward into future years.

Year 1: The team has 150M cap commitment in February and must get under the cap in March. They restructure contracts to push 50M into year 2.
Year 2: The current year expenditure is 100M but there is 50M that carried over from year 1. They push 50M into year 3.
Year 3: CCE = 100M, Carryover=50M, Push Foward=50M
Year 4: CCE = 100M, Carryover=50M, Push Foward=50M
Year 5: CCE = 100M, Carryover=50M, Push Foward=50M
Repeat...

Summary: If they can push 50M forward in year 1, then they can do it indefinitely even if the cap limit is the same every year. In reality the cap limit increases over time which makes it even easier.

 

[xwalker]

Example of operating over the breaking point (cap limit = 100M):
Year 1: The team has 150M cap commitment in February and must get under the cap in March. They restructure contracts to push 50M into year 2.
Year 2: The current year expenditure is 110M but there is 50M that carried over from year 1. They push 60M into year 3.
Year 3: CCE = 110M, Carryover=60M, Push Foward=70M
Year 4: CCE = 110M, Carryover=70M, Push Foward=80M
Year 5: CCE = 110M, Carryover=80M, Push Foward=90M
Repeat...

As you can see, if the CCE exceeds the cap limit, the Push Forward amount is going to continue to increase beyond the point of sustainability.

Reminder: CCE is the total of all base salaries at the beginning of the year before restructuring. This amount will be zero for a player that is cut unless he has a guaranteed base salary.

As you can see, 2 teams could be 50M over the cap, but their situations can be different.
Team A: CCE=100M, Push Forward=50M

Team B: CCE=125M, Push Forward=25M

Team A can push 50M forward indefinitely, but team B will be adding 25M to the Push Forward amount every year which is not sustainable.

 

[Hoofbite]

Example of operating over the breaking point (cap limit = 100M):
Year 1: The team has 150M cap commitment in February and must get under the cap in March. They restructure contracts to push 50M into year 2.

To carry over 50M wouldn't they have to be 50M under the cap? Or somehow restructure 100M of their original 150M?

So they'd add 20M every year after year 1?

They'd break even year 1 by restructuring just 50M and carry nothing over.

Then it looks like you're adding to your carryover with deficits (cap overages) moving forward.

I guess I could be misunderstanding your scenario but seems a little off.

 

[CowboysLaw87]

This makes sense. And this "pushing" scheme we've been running works fairly well to get us under the cap. But it isn't without hiccups, and one of those hiccups is that we HAVE to push every year. This forces our hand on certain players/contracts. For example (hypothetical)... we HAVE to push Carr money into future years to get under the cap and his contract was written with this ability (i.e., need) in mind. But he's underperforming... oh well, we HAVE to keep him aboard because pushing his money into future years guarantees it for 2014.

This scheme allows us to get under the cap every year, yes. But it totally sabotages our ability to make sound football decisions year-to-year, because those decisions are compromised by this need. It also limits our ability to be shoppers, because we don't want to compound the problems already in existence.

So while I understand and agree that this is a viable way to survive, I don't feel it's a viable way to construct a long-lasting championship caliber roster.

 

[xwalker]

To carry over 50M wouldn't they have to be 50M under the cap? Or somehow restructure 100M of their original 150M?

So they'd add 20M every year after year 1?

They'd break even year 1 by restructuring just 50M and carry nothing over.

Then it looks like you're adding to your carryover with deficits (cap overages) moving forward.

I guess I could be misunderstanding your scenario but seems a little off.

Restructuring in year 1 is how they lower the 150M to 100M and push 50M forward.

Carryover = Prorated amount of previous bonus money for the current year.

Push Forward = Amount pushed into all future years due to restructuring of current year's base salaries.

Example:
Restructure a 12M base salary over 5 years with a new base of 2M and a restructure bonus of 10M. The prorated restructure of 10M would be 2M per year for 5 years.

Year 1: 2M prorated restructure bonus + 2M base
Year 2: 2M prorated restructure bonus + base salary
Year 3: 2M prorated restructure bonus + base salary
Year 4: 2M prorated restructure bonus + base salary
Year 5: 2M prorated restructure bonus + base salary

The Push Forward in Year 1 would be 8M which is the prorated amount of the restructure bonus for years 2 - 5.
The Carryover in year 2 would be the 2M prorated restructure bonus.

In my simple example, I was only spreading the restructure bonus over 2 years which is why the Year 1 Push Forward was equal to the Year 2 Carryover.

If you were able to get a 1 year, 50M, Zero interest loan and were allowed to take out a new loan each year to pay off the previous loan, then you would never really have to pay back the loan. If you exceeded you budget during year 1 and required an extra 10M loan plus the 50M to pay off the original loan, then that would be unsustainable.

 

[Alexander]

Has the slide rule exploded yet?

 

[xwalker]

This makes sense. And this "pushing" scheme we've been running works fairly well to get us under the cap. But it isn't without hiccups, and one of those hiccups is that we HAVE to push every year. This forces our hand on certain players/contracts. For example (hypothetical)... we HAVE to push Carr money into future years to get under the cap and his contract was written with this ability (i.e., need) in mind. But he's underperforming... oh well, we HAVE to keep him aboard because pushing his money into future years guarantees it for 2014.

This scheme allows us to get under the cap every year, yes. But it totally sabotages our ability to make sound football decisions year-to-year, because those decisions are compromised by this need. It also limits our ability to be shoppers, because we don't want to compound the problems already in existence.

So while I understand and agree that this is a viable way to survive, I don't feel it's a viable way to construct a long-lasting championship caliber roster.

Yes, that's a different discussion about the other ramifications of restructuring of signing bonuses.

My point of this thread is that people believe that the bill is going to come due at some point for the money that is pushed into the future. In reality, the bill never comes due as long as they don't exceed the breaking point. It wouldn't work in the real world because the loan would have interest which would cause the total to continue to increase every year.

With the Carr example, they were somewhat locked in with the original contract. He received a 10M signing bonus. Regardless of the salary cap, if they cut him after 2 years that would be 10M/2=5M per year from the signing bonus. If they keep him for 5 years, then the signing bonus is only 10M/5=2M per year. That is an extra 3M cost per year of service in real U.S. Dollars if they cut him after 2 years. He was good in 2012 and is only 27 years old. It's doubtful that they would cut ties to him after 1 bad year regardless of the cap. They are not going to give up on the 10M signing bonus investment that they made that easily.

They have to give out signing bonuses even if they don't need to do it for cap purposes. Players and agents now expect signing bonuses.

 

[perrykemp]

Isn't the ultimate risk of restructuring related to dead money when players you push out guaranteed payments for get injured, stop performing, or otherwise can positively contribute anymore to the team?

Think Ratliff or even Ware at this point. Dead money = money you can't spend on players who CAN positively contribute to the team.

 

[xwalker]

Isn't the ultimate risk of restructuring related to dead money when players you push out guaranteed payments for get injured, stop performing, or otherwise can positively contribute anymore to the team?

Think Ratliff or even Ware at this point. Dead money = money you can't spend on players who CAN positively contribute to the team.

Which budget would you prefer:

Without Restructuring: 100M - Zero dead-money (total budget = 100M)

With Restructuring: 150M - 10M dead-money (total budget = 140M)

The increased budget from restructuring more than offsets the dead-money even when 2 or 3 expensive players go bad in a single year.

 

[Hoofbite]

Restructuring in year 1 is how they lower the 150M to 100M and push 50M forward.

If the team cap total is 100M and the salary cap is 100M, nothing pushes forward regardless of where they started.

You have to have excess cap space to get anything to carry over.

Your year 1 has simply gotten the team compliant by shaving 50M but not a dollar carries over because they are at the cap.

That's how your scenario looks.

You said cap ceiling 100M. Team cap of 150M.

They have to reduce by 50 just to break even.

Getting the cap to 100M doesn't give them any carryover.

 

[Risen Star]

Isn't the ultimate risk of restructuring related to dead money when players you push out guaranteed payments for get injured, stop performing, or otherwise can positively contribute anymore to the team?

Think Ratliff or even Ware at this point. Dead money = money you can't spend on players who CAN positively contribute to the team.

The Cowboys' "bill" comes due every year. They are almost always limited in what they can do in FA. Despite a roster in dire need of talent.

But hey, I forwarded this to the rest of the league to let them know they're doing it wrong.

 

[Nightman]

The Cowboys' "bill" comes due every year. They are almost always limited in what they can do in FA. Despite a roster in dire need of talent.

But hey, I forwarded this to the rest of the league to let them know they're doing it wrong.

Dallas is under the cap right now. If they restructure/cut Ware, redo Carr and Witten, they are 17m under. Then there is still Austin, Orton, Free, and Mack to deal with. That puts them around 30m under the cap. Do you want to keep going or 30m under enough?

 

[Idgit]

The Cowboys' "bill" comes due every year. They are almost always limited in what they can do in FA. Despite a roster in dire need of talent.

But hey, I forwarded this to the rest of the league to let them know they're doing it wrong.

This isn't what he's saying. The debate about on whom the money is spent is different from the debate about how. If the 'on whom' is right, nobody's complaining about the 'how.' If the 'on whom' is wrong, everybody is complaining about everything, regardless. Which is exactly what happens.

 

[xwalker]

If the team cap total is 100M and the salary cap is 100M, nothing pushes forward regardless of where they started.

You have to have excess cap space to get anything to carry over.

Your year 1 has simply gotten the team compliant by shaving 50M but not a dollar carries over because they are at the cap.

That's how your scenario looks.

You said cap ceiling 100M. Team cap of 150M.

They have to reduce by 50 just to break even.

Getting the cap to 100M doesn't give them any carryover.

You misunderstand my definition of carryover. I'm not referring to carrying over extra cap space.

Carryover is just a term that I defined for the example. I could have just given it a variable name like Z. You have to give some name to variables in an equation.

"Carryover = the amount that was pushed into the current year from previous years."

Example:
If you signed a free agent in year 1 and gave him a 10M signing bonus then:

With a 2 year contract:
Year 1: Base Salary + 10M/2=5M prorated amount from signing bonus
Year 2: Base Salary + 10M/2=5M prorated amount from signing bonus

The Push Forward in year 1 was 5M and the Carryover in year 2 is 5M.

With a 5 year contract:
Year 1: Base Salary + 10M/5=2M prorated amount from signing bonus
Year 2: Base Salary + 10M/5=2M prorated amount from signing bonus
Year 3: Base Salary + 10M/5=2M prorated amount from signing bonus
Year 4: Base Salary + 10M/5=2M prorated amount from signing bonus
Year 5: Base Salary + 10M/5=2M prorated amount from signing bonus

With the 5 year contract, the Push Forward in year 1 is 8M which is the total of the prorated amounts for years 2-5. The Carryover for an individual year like year 2 is 2M. That is the amount that was carried over from previous years into that year.

 

[xwalker]

This isn't what he's saying. The debate about on whom the money is spent is different from the debate about how. If the 'on whom' is right, nobody's complaining about the 'how.' If the 'on whom' is wrong, everybody is complaining about everything, regardless. Which is exactly what happens.

Thanks. It helps to have someone else explain it.

 

[Hoofbite]

You misunderstand my definition of carryover. I'm not referring to carrying over extra cap space.

Carryover is just a term that I defined for the example. I could have just given it a variable name like Z. You have to give some name to variables in an equation.

"Carryover = the amount that was pushed into the current year from previous years."

I guess I missed how you defined "Carryover" and assumed it was how the league defines "Rollover".

For you, "Carryover" is just prorated total?

 

[Nightman]

If the team cap total is 100M and the salary cap is 100M, nothing pushes forward regardless of where they started.

You have to have excess cap space to get anything to carry over.

Your year 1 has simply gotten the team compliant by shaving 50M but not a dollar carries over because they are at the cap.

That's how your scenario looks.

You said cap ceiling 100M. Team cap of 150M.

They have to reduce by 50 just to break even.

Getting the cap to 100M doesn't give them any carryover.

I don't think you worry about carry over as much if you are getting 150m worth of contracts for 100m. All the restructures get them to point below the cap that they can sign the players they need to get back to cap. It's about maximizing the cap every year as opposed to creating extra space, just to carry over.

 

[xwalker]

The Cowboys' "bill" comes due every year. They are almost always limited in what they can do in FA. Despite a roster in dire need of talent.

But hey, I forwarded this to the rest of the league to let them know they're doing it wrong.

I tried to avoid making this specific to the Cowboys. I'm just trying to show people an interesting concept about the salary cap.

If a team acquires the wrong players and/or coaches, then they are going to fail regardless of how they manage the salary cap.

The following is not good logic:
The Cowboys have not had success in a long time.
The Cowboys are at or near the top in spending and restructuring.
Conclusion: The reason the Cowboys have not had success is because of their spending and restructuring habits.

 

[Risen Star]

I tried to avoid making this specific to the Cowboys. I'm just trying to show people an interesting concept about the salary cap.

If a team acquires the wrong players and/or coaches, then they are going to fail regardless of how they manage the salary cap.

The following is not good logic:
The Cowboys have not had success in a long time.
The Cowboys are at or near the top in spending and restructuring.
Conclusion: The reason the Cowboys have not had success is because of their spending and restructuring habits.

I don't agree. When you're a bad team in need of talent and you lack the funds in FA to help improve the roster, your spending does hurt you. The Cowboys have sat out many FA periods because of their spending.

 

[cowboys1981]

IMO, this is why the draft is very important. We can avoid relying on FA to fix our team and we can use our cap space to resign players.

I like how XW broke it down. It's obvious we can manage to make transactions to get under the cap every year.

Our problem is making the tough choices to keep players when we should be letting them go. JJ has changed his ways since his early years when he was quick to part ways with TL and JJ, who were both established winners and yet he struggles today with letting players go who have shown results opposite of.