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Thread: Teach me about guaranteed money, dead money etc....

  1. #1

    Teach me about guaranteed money, dead money etc....

    I'm still foggy on some contract/cap issues. For a long term deal for a player how much money actually has to be paid out if a team wants to cut a player and move on. Is the amount of guaranteed money stipulated in each contract?

    For instance, if the Jets cut Sanchez how much actual money would they owe him. (Not cap money, actually dollars.)

    Second question, what determines the amount of dead money against the cap for player?

    Just for the heck of it I was wondering about a Vick for Sanchez swap straight across and the cap implications. (No I do not love Vick. I do not think he is the longer term answer and I don't like him as a person that much.)

    Vick seems to have more years left on his deal but the dead money seems less than for Sanchez. Strictly from a cap standpoint would one year of Vick and then cutting him be better than one year of Sanchez and then cutting him?

  2. #2
    Read this. It should answer most of your questions



    http://www.askthecommish.com/salarycap/FAQ.aspx

  3. #3
    If you have time to read beyond specific questions, read this


    http://www.askthecommish.com/salarycap/

  4. #4
    Excellent, thanks. Bookmarked for when I have a free moment to peruse them.

  5. #5
    Quote Originally Posted by Beerfish View Post
    Excellent, thanks. Bookmarked for when I have a free moment to peruse them.

    With all due respect, if you have the free moment to post in this forum, then you have a free moment to "peruse them" as you said.

  6. #6
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    Actual Money is almost 100% irrelevant unless an Owenr is being pissy.

    Cap Money is all that counts.

  7. #7
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    Quote Originally Posted by Beerfish View Post
    I'm still foggy on some contract/cap issues. For a long term deal for a player how much money actually has to be paid out if a team wants to cut a player and move on. Is the amount of guaranteed money stipulated in each contract?

    For instance, if the Jets cut Sanchez how much actual money would they owe him. (Not cap money, actually dollars.)

    Second question, what determines the amount of dead money against the cap for player?

    Just for the heck of it I was wondering about a Vick for Sanchez swap straight across and the cap implications. (No I do not love Vick. I do not think he is the longer term answer and I don't like him as a person that much.)

    Vick seems to have more years left on his deal but the dead money seems less than for Sanchez. Strictly from a cap standpoint would one year of Vick and then cutting him be better than one year of Sanchez and then cutting him?
    Major thing of note is the difference between a Signing Bonus and a Roster Bonus. Typically the player receives all the cash upfront, but the difference is how its treated for cap purposes.

    A RB is treated as 100% paid in the year the player receives the cash. In contrast, a SB is spread out, for cap purposes, over the life of the contract. So, if a player gets a $10 million SB in a 5 year contract, for cap purposes, the signing bonus is spread out over 5 years - $2 million each.

    So, if that same player is cut after 2 years, there is still $6 million of cap money from the $10 million SB that has yet to hit the cap. So, that money will become a cap hit in year 3 in the form of dead money. The team will take a dead money hit in year 3 of $6 million on account of being responsible for years 3, 4 and 5 of the the SB amortization. The team may have the option of spreading some of that cap hit over 2 years to minimize the impact of the dead money.

  8. #8
    I think it's not that complicated - if you know the contract details.

    In general, money you give a player (and only money you actually give to a player) has to hit your cap - either the year you give it or a future year.

    Most salary types (normal salary or roster bonuses) hit your cap immediately and fully.

    But any "signing bonus" gets prorated over the length of the contract. So a $40M signing bonus counts as a $10M cap hit each of 4 years. If that person is cut (or traded) after 2 years, whatever hasn't hit the cap already (i.e. the $20M from the last 2 years) gets accelerated.

    If a player is cut when they have guaranteed money in their future - whatever money that team ends up paying the player hits their cap. (If there's an offset in the contract such that the team only has to pay the player what he doesn't earn in another contract, the team might end up paying the player less than his guarantee.)

    If a player is traded with guaranteed money - well, the team that gets him has to pay that money, and has the cap hit associated with it.

    The thing that makes it complicated / negotiable is that you can obviously restructure a contract before you trade someone. So say Sanchez has $8M guaranteed this year and $4M guaranteed next year. The Jets could change that to a $6M roster bonus payable the day before he's traded, a $3.5M guaranteed salary this year, and a $3M guaranteed salary next year. Sanchez is now guaranteed $12.5M total (instead of $12M), plus he gets the money sooner, so it's better for him. But now the team that picks him up is only on the hook for $3.5M / $3M, instead of $8/$4. The Jets would take a $6M cap hit, plus his remaining un-prorated signing bonus (that the Jets paid him previously) would accelerate and hit their cap. I think Sanchez got a $8M signing bonus on a 3 year contract in March 2012 (from nyjetscap). So 2/3 of that would be dead money - i.e. $5.33M. So, in the restructure that I gave, the Jets would take a cap hit of $6M + $5.33M = $11.3M. This would save them about $1.5M on the 2013 cap, as he's scheduled to count $12.8M against the cap if they keep him.

  9. #9
    Essentially "dead" money is money that you have paid or are obligated to pay to a player that has yet to be accounted for on the NFL books. For most players dead money is simply prorated money that is yet to be accounted for.

    Basically what this means is the NFL treats a player like a depreciable asset like a company would. Every player is determined to have a shelf life of either the remaining length of the contract or 5 years, whichever is shorter. When signing bonus money is paid up front the value is spread out over deal. If a player receives $5 million and has a 5 year contract each year the team will take a $1 million expense or cap charge related to that bonus. If you decide to cut the player the money unaccounted for accelerates and is considered dead on the books. So if that player above is cut in the third year of his contract $3 million becomes the "dead money" cost.

    The other type of dead money is guaranteed money that you are obligated to pay the player even if he is not on the team. That is what makes the Sanchez cut unbearable. If he is cut Woody has to cut him a check for $8.25 million dollars. That amount also immediately counts towards the salary cap.

    When you trade a player the signing bonus "dead money" will count on your books but that second category transfers to another team which is why trading Sanchez is the only option the team has. If the Jets traded Sanchez and found a team willing to take on all of his salary his dead cap to the Jets is around 9 million. No team would pay him that much, but at least its a hope.

    Mike Vick will cost the Eagles $4.2 million to trade or release. His actual salary for the year is $15.5 million but none of that is guaranteed if the Eagles cut him a day or two after the Super Bowl. A salary swap for the Jets and Eagles would not really work for the Jets. They need Vick to get cut and then to sign him to a cap friendly contract.

  10. #10
    Quote Originally Posted by Vin View Post
    With all due respect, if you have the free moment to post in this forum, then you have a free moment to "peruse them" as you said.
    Reading and retaining is no where near the low level of posting on this site is brain wise.

  11. #11
    Quote Originally Posted by Beerfish View Post
    I'm still foggy on some contract/cap issues. For a long term deal for a player how much money actually has to be paid out if a team wants to cut a player and move on. Is the amount of guaranteed money stipulated in each contract?

    For instance, if the Jets cut Sanchez how much actual money would they owe him. (Not cap money, actually dollars.)

    Second question, what determines the amount of dead money against the cap for player?

    Just for the heck of it I was wondering about a Vick for Sanchez swap straight across and the cap implications. (No I do not love Vick. I do not think he is the longer term answer and I don't like him as a person that much.)

    Vick seems to have more years left on his deal but the dead money seems less than for Sanchez. Strictly from a cap standpoint would one year of Vick and then cutting him be better than one year of Sanchez and then cutting him?
    Here's the way it works:

    Guaranteed money = Money that must be paid to a player regardless of whether he is on the team in the year the money is due. Money can be guaranteed for skill (i.e. player cannot be cut for reasons of decreased performance but can be cut for injury), for injury, or both.

    Cap cost is the amount of money allocated to a particular year for accounting purposes - including money actually paid in that year (salary, workout bonuses, etc.) plus signing bonus proration (i.e. you paid John a 10M signing bonus at the start and count it as 2M against the cap for each of the next five years) and accelerations (if you cut a player, all prorated money remaining on the deal gets counted in the year the player is cut - i.e. if you cut John before year 3, the remaining 6M of unaccounted signing bonus, plus any guaranteed salary from the remaining 3 years).

    Dead money is any cap cost that is attributable to a player not on your roster.

  12. #12
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    Quote Originally Posted by Beerfish View Post
    Reading and retaining is no where near the low level of posting on this site is brain wise.
    Simplified:

    Guaranteed Money = Money the player will get in the future from the team - ie "guaranteed money."

    Dead Money = Money the player already has collected from the team that will count against the cap even if he doesn't play at all or plays for another team - ie bonus money the player already has collected.

  13. #13
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    Quote Originally Posted by thshadow View Post
    I think it's not that complicated - if you know the contract details.

    In general, money you give a player (and only money you actually give to a player) has to hit your cap - either the year you give it or a future year.

    Most salary types (normal salary or roster bonuses) hit your cap immediately and fully.

    But any "signing bonus" gets prorated over the length of the contract. So a $40M signing bonus counts as a $10M cap hit each of 4 years. If that person is cut (or traded) after 2 years, whatever hasn't hit the cap already (i.e. the $20M from the last 2 years) gets accelerated.

    If a player is cut when they have guaranteed money in their future - whatever money that team ends up paying the player hits their cap. (If there's an offset in the contract such that the team only has to pay the player what he doesn't earn in another contract, the team might end up paying the player less than his guarantee.)

    If a player is traded with guaranteed money - well, the team that gets him has to pay that money, and has the cap hit associated with it.

    The thing that makes it complicated / negotiable is that you can obviously restructure a contract before you trade someone. So say Sanchez has $8M guaranteed this year and $4M guaranteed next year. The Jets could change that to a $6M roster bonus payable the day before he's traded, a $3.5M guaranteed salary this year, and a $3M guaranteed salary next year. Sanchez is now guaranteed $12.5M total (instead of $12M), plus he gets the money sooner, so it's better for him. But now the team that picks him up is only on the hook for $3.5M / $3M, instead of $8/$4. The Jets would take a $6M cap hit, plus his remaining un-prorated signing bonus (that the Jets paid him previously) would accelerate and hit their cap. I think Sanchez got a $8M signing bonus on a 3 year contract in March 2012 (from nyjetscap). So 2/3 of that would be dead money - i.e. $5.33M. So, in the restructure that I gave, the Jets would take a cap hit of $6M + $5.33M = $11.3M. This would save them about $1.5M on the 2013 cap, as he's scheduled to count $12.8M against the cap if they keep him.
    You are qualified to pass judgement on Tanny. Did he screw the Jets with Holmes,Revis,Sanchez, Harris, Pace,... contracts ?

    Can we clear Cap space through renegotiating player contracts to Signing Bonus' which can be paid (prorate) in the future where the Cap likely goes up?

  14. #14
    Quote Originally Posted by RMJK View Post
    You are qualified to pass judgement on Tanny. Did he screw the Jets with Holmes,Revis,Sanchez, Harris, Pace,... contracts ?

    Can we clear Cap space through renegotiating player contracts to Signing Bonus' which can be paid (prorate) in the future where the Cap likely goes up?

    I dont think he really screwed the Jets too badly. Sanchez is the one that made zero sense and is a killer. Ill never understand why they did what they did there. Harris is way overpaid, but at least there could be some justifications on it. The Jets have pushed the envelope with guaranteed salaries which was done to get players in under the cap in 2011. Tannys misjudgement was the talent level of that 2011 team.

    If the Jets want to rework Holmes, Harris, and Sanchez for cap relief they can. I actually think its makes sense in Sanchez' case if they cant trade him. The other two ensures they will be here in 2014. If people are cool with that then the Jets can sign some decent free agents this year.

  15. #15
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    Quote Originally Posted by Jason423 View Post
    I dont think he really screwed the Jets too badly. Sanchez is the one that made zero sense and is a killer. Ill never understand why they did what they did there. Harris is way overpaid, but at least there could be some justifications on it. The Jets have pushed the envelope with guaranteed salaries which was done to get players in under the cap in 2011. Tannys misjudgement was the talent level of that 2011 team.

    If the Jets want to rework Holmes, Harris, and Sanchez for cap relief they can. I actually think its makes sense in Sanchez' case if they cant trade him. The other two ensures they will be here in 2014. If people are cool with that then the Jets can sign some decent free agents this year.
    It is going to be interesting in the next several months to see what they do with this team. So many different scenarios.

  16. #16
    Quote Originally Posted by Beerfish View Post
    Originally Posted by Vin
    With all due respect, if you have the free moment to post in this forum, then you have a free moment to "peruse them" as you said.


    Reading and retaining is no where near the low level of posting on this site is brain wise.
    If you open a thread, and people take the time to provide answers to your questions, common courtesy dictates you take the time to read thier answers.

    Saying thanks I'll read it when I get around to it is totally fcked up. Especially from someone who is constantly negative and blasting other posters.

    I read it and my head hurts. But stop wasting peoples time if you aren't interested in the answers.

  17. #17
    Quote Originally Posted by Vin View Post
    With all due respect, if you have the free moment to post in this forum, then you have a free moment to "peruse them" as you said.

  18. #18
    Quote Originally Posted by JetsNeedNewton View Post
    If you open a thread, and people take the time to provide answers to your questions, common courtesy dictates you take the time to read thier answers.

    Saying thanks I'll read it when I get around to it is totally fcked up. Especially from someone who is constantly negative and blasting other posters.

    I read it and my head hurts. But stop wasting peoples time if you aren't interested in the answers.
    Don't be friggin stupid. I was at work. I can pop in and post and pop out again. I thanked the person for the links and I've read them. What do you want me to do, thank the person, tell them I will now take an early lunch at work and read the detailed articles and then report back to thank the person again?

    I only blast idiotic posters like sg3 and ray ray are you one of them, I can blast you as well if you like.

  19. #19
    Quote Originally Posted by Beerfish View Post
    Don't be friggin stupid. I was at work. I can pop in and post and pop out again. I thanked the person for the links and I've read them. What do you want me to do, thank the person, tell them I will now take an early lunch at work and read the detailed articles and then report back to thank the person again?

    I only blast idiotic posters like sg3 and ray ray are you one of them, I can blast you as well if you like.
    The finger vs the finger, gotta love it.

  20. #20
    The thing that hurt us with Mark was we rolled over money that we shouldn't have. I think he had like 6 mil guaranteed left lest year. In desperation so did not have to pay him 12 mil we gave him an extension. Piled on anther signing bonus and guaranteed all the money he moved to this year. That is why his base salary is guaranteed but can be traded. In a smart world we would have cut Hunter, Smith, and Devito and just road out Marks deal knowing we could tag him if he panned out. It was stupid moving around as much guaranteed money as we did. What did it get us? One more year of 3 patch work players that can't play.

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