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Thread: NFL SALARY CAP PRIMER

  1. #1
    Moderator RoanokeFan's Avatar
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    NFL SALARY CAP PRIMER

    NFL SALARY CAP PRIMER

    "Itís that time of year again when contracts will be restructured, players
    cut, and rosters begin to be reshaped for the new season. As such, there is
    generally a lot of misconception and questions regarding the salary cap, which
    of course is the basis of what a team can and cannot do.
    So Iíve put
    together this Q&A primer for you that will hopefully answer some common
    questions. If something isnít addressed, feel free to shoot me a letter or post
    a comment below.<span id="more-3990"></span>

    <div class="art-postcontent">

    Q: What is the amount
    of 2012 NFL Salary Cap?

    A: The number hasnít been determined yet;
    however, itís been projected by some to be around $122M. Last year the figure
    was $120.375M. This is significant because back in 2009, the last capped year of
    the old Collective Bargaining Agreement (CBA), the cap was up around $128M,
    meaning that once the cap came back, teams that were close to that $128M mark
    had to scramble to get under the new $120M limit set for 2011. As teams continue
    to transition under the new CBA, more of the same scrambling is expected to take
    place again in the coming days.</p>


    Q: Why is it that some teams have so much space at the end of a year
    while others are constantly pressed against the cap?

    A: There are
    numerous reasons for this, including player incentives not coming to fruition
    and this being ďCreditedĒ back to the teamís following year cap and expiring
    contracts. Another reason might be contract restructurings designed to reduce a
    playerís cap hit, players being cut, split bonuses, etc.</p>


    Q: How is a playerís cap value calculated?
    A: A
    contractís value takes into consideration base salary, prorated signing bonus,
    and any other bonuses. For example, John Doe signs a five-year, $10M contract
    that includes a $5M signing bonus. Johnís base salary for each of the five years
    of the contract is $1M. His cap number, though, is bumped up to $3M because his
    signing bonus must be spread over the life of the contract ($2M per year). John
    wonít get an additional $2M per year Ė the singing bonus is paid up front by a
    team. But for bookkeeping purposes, he will count for $3M against the cap for
    each year of his contract.</p>


    Other lesser-publicized monies paid to players that count against the cap
    include per diem pay (such as for mini camps, training, camp, etc.) Any money
    paid by a club to a player inflates his value against the cap. This is why
    trying to calculate the EXACT cap figure for each team can be tricky.</p>


    What DOESNíT count against the cap are benefits (health, dental, etc.) paid
    to a player.</p>


    Q: How does one arrive at a figure reflecting how much a team has
    spent against the salary cap?

    A: In the off-season, only the top 51
    PLAYER salaries count against the salary cap. These include any outstanding
    tenders made to exclusive rights and restricted free agents. During the season,
    ALL player salaries, including those on reserve lists (with the exception of
    retired players) count against the cap.</p>


    Q: What happens if a player is cut before his
    contract expires?

    Letís use John Doe as an example. Letís say his
    team decides to cut him with two years remaining on his contract. Take the
    remaining prorated bonus ($2M per year times two, or $4M), and take his base
    salary, $1M. Subtract the remaining signing bonus from the base. The result is
    minus $3M, which means that John would cost his team $3M in dead money (money
    that essentially goes to waste and canít be used on another contract.)</p>


    This is why many teams wait to cut a player in the final year on their
    contract, as usually the base salary is significantly higher than the remaining
    prorated portion of the signing bonus.</p>


    Q: What else do I need to know about the cap and
    player contracts?

    A: Under the current CBA, a veteran player is free
    to negotiate his contract at any time. However, once he signs his extension, he
    cannot request a new negotiation for at least 12 months, unless his present
    contract expires. Players cannot go back and renegotiate for a year completed,
    meaning Victor Cruz canít go back and ask for more money despite the year he had
    in 2011. Also, rookie contracts cannot be renegotiated for one year after the
    rookie has signed on the dotted line, or the following August 1, whichever is
    later.</p>


    Q: If a player receives a contract extension before his present deal
    expires, how does that affect his cap value?

    A: The new signing
    bonus is prorated over the remaining years of the contract PLUS the extension.
    So for example, if John Doe has two years left on his contract and a cap value
    of $3M, and he signs a two-year contract extension that carries a $2M signing
    bonus. That $2M is split into fourths, with $500K additional being tacked on to
    the remaining two years of his first contract, and the other two $500K
    installments added to each year of the extension.</p>


    Q: Does the June 1 rule still exist?
    A: If a team cuts a
    veteran player after June 1, the remaining signing bonus will be spread over two
    years rather than accelerate into the current yearís cap. For example, John Doe
    is cut in year 2 of his contract with $2M left on his signing bonus and a base
    salary of $1M before June 1. His team is hit with dead money ($1M base salary
    less $2M signing bonus equals $1M in dead cap space).</p>


    If John is cut AFTER June 1, only $1M of his remaining $2M signing bonus hits
    the current cap year with the remaining million being dumped into the next
    yearís cap. Thus, if you subtract the $1M signing bonus from the $1M scheduled
    base, John Doe ends up costing his team ZERO against the current yearís cap;
    however, in the next yearís cap, heíll end up costing his team $1M against the
    cap.</p>


    Q: What happens if a player has a voidable year in his
    contract?

    A: If a player reaches all the incentives in a contract
    that trigger a void (shortening) of a contract year, the signing bonus will
    count against the teamís salary cap for the following year.</p>


    Q: What happens if a player is traded or waived?
    A: If a
    player is traded or waived, any remaining prorated signing bonus money
    automatically accelerates against the current yearís cap. However, the old team
    is no longer responsible for any base salaries that will be paid to the player;
    that responsibility is absorbed by the new team. In essence, a trade can create
    dead money against a teamís cap."</p></div>
    ďNever argue with an idiot. They will only bring you down to their level and beat you with experience.Ē MB Rule # 1


  2. #2

    Re: NFL SALARY CAP PRIMER

    thanks for the info

  3. #3
    Bench Player
    Join Date
    Sep 2006
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    Re: NFL SALARY CAP PRIMER

    John Doe signs a five-year, $10M contract that includes a $5M signing bonus. Johnís base salary for each of the five years of the contract is $1M. His cap number, though, is bumped up to $3M because his signing bonus must be spread over the life of the contract ($2M per year)

    Shouldn't this be $1M per year? 5M bonus over 5 years is $1M per year?

  4. #4

    Re: NFL SALARY CAP PRIMER

    [quote user="LBB"]John Doe signs a five-year, $10M contract that includes a $5M signing bonus. Johnís base salary for each of the five years of the contract is $1M. His cap number, though, is bumped up to $3M because his signing bonus must be spread over the life of the contract ($2M per year)

    Shouldn't this be $1M per year? 5M bonus over 5 years is $1M per year?[/quote]

    You are correct with the questioning. I think the article had a typo. It should be a "$5 million contract with an additional $10M in signing bonus" ($15 million contract total). Then the rest will make sense.

    I just want to point out that base salaries are not usually spread out evenly over the contract years as it is in this example. Base salaries can be spread out in anyway possible. Base salaries can be front-loaded (a lot of money in the first 1-2 years of the contract - ideal for the player), back-loaded (a lot of money in the last 1-2 years of the contract - ideal for the owner/GM), ascending, descending, compounded, roller coaster, fibonacci sequence, etc...

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