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Good Cap Article


KRL
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Andrew Brandt always does an excellent job breaking down the business

of football:

 

 

http://mmqb.si.com/2015/02/25/nfl-salary-cap-myth-los-angeles-stadium/

 
 

We are entering a key stretch for the business of football. It is the time when teams architect, assemble and mold the product they desire for the 2015 season. Taking the handoff from the coaches and players, this is the time for the front office—general managers, scouts, salary cap managers, contract negotiators, etc.—to shine.

 

From a front-office perspective, it was always amusing how so many matters involving money—contracts, cap, restructures, guarantees, etc.—were portrayed in the media and perceived by fans. Much of the information, of course, is spun by agents, known this time of year as “league sources.” With that, here are a couple insights from experience about financial information you are going to see in the coming days and weeks to help cut through the spin, as well as my thoughts on the continuing fortune of Larry Fitzgerald and L.A.’s siren song.

 

The Cap Myth

Having managed the NFL salary cap for 10 years, I learned the secret to managing it was getting to a point where cash and cap room used lined up as evenly as possible. Once a “pay as you go” philosophy takes hold, a team can avoid piling up future charges and can always have flexibility.

 

Here’s a lesson I tell every agent and player about NFL contracts: Ignore the cap; it is simply an accounting mechanism for the team. Through the loophole of prorated signing bonuses, the NFL’s “soft cap” (think yarmulke) can easily be manipulated and often portrays an inaccurate picture of the team’s player finances. Rather, focus on the cash.

 

As an example, say a free agent player desires $20 million—between bonus and salary—in the first year of a five-year deal. Both a cap-strapped team and a cap-healthy team could make it work if they wanted to, albeit with very different structures. The cap-strapped team would put most of that $20 million into a signing bonus, prorating roughly $15 million for cap purposes over future years. The cap-healthy team would pursue the “pay as you go” model, loading most or all of that $20 million into 2015 (with no need for a prorated bonus) and avoid future leftover charges on the player.

 

Thus, while ample cap room protects against future charges, the lack of cap room rarely prevents present moves. Teams often use “lack of cap room” as an excuse to not retain or to release players. The truth, of course, is that if they really want to keep or add players, they will, damn the future consequences.

 

As an example, the Saints were one of the most cap-strapped team in the NFL last season, if not the most (and are again this season), yet they signed the highest-paid 2014 free agent (in terms of guaranteed money) in Jairus Byrd. The soft and malleable cap allowed for that.

 

Restructure vs. Reduction

With the fungible cap, teams approach their highest-salaried players to “bonus out” their salary; i.e., convert it to prorated signing bonus to create cap room. For players, there is no downside to these paper transactions. The cash is the same, often with even better payment terms, and the increases in future cap numbers may give them more leverage against being released.

 

Sometimes, however, these “restructures” are truly “reductions.” Teams are not only asking the player to move money around; they are asking the player to take less money. Requests for reductions can be risky, as some teams merely do so to save face with popular players nearing the end of their careers. The problem, however, is that the player may say yes, and the team truly does not want the player back at any price. This is why you see players released who wonder why the team never offered them an opportunity to take less.

 

The other risk with reduction requests involves credibility. If a player rejects a pay cut and the team responds with less of a reduction—or no reduction—it loses credibility for future deals not only with that player, but with all players. Every player and agent will know that when that team asks for a pay cut, they don’t really mean it.

 

When receiving an offer for a potential pay cut, an agent must use team relationships to determine if the player is better off taking the reduced rate or what he finds is behind Door No. 2.

Thus, not all restructures are created equal.

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This suggests, from the author's experience, that the Jets are definitely cutting Harvin without him accepting the full reduction/restructure amount offered. Otherwise Maccagnan won't be taken seriously when he approaches the next player with the same; they'll know (or think they know) he's bluffing.

Then again, as the article suggests, Maccagnan or Bowles (or both) simply doesn't want him back and the restructure offer was lowballed significantly enough that they were certain he'd turn down. But now they get to say they made him an offer, and most fans and teammates would be sympathetic to not paying Percy Harvin $10.5M for just this upcoming season (after paying him $6M+ for the meaningless balance of last season). 

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