NFL Salary Cap Management – Kicking the can down the road
Out of the 2012 regular season there are 6 NFL Clubs that are at least $10M over the Salary Cap entering the new League Year. None were playoff contenders; New York Jets, Dallas Cowboys, New Orleans Saints, Pittsburgh Steelers, Carolina Panthers, and New York Giants. Both the Panthers and Jets have chosen to seek new front office management and are looking for ways conventional and creative to make room for upgrading their rosters next season.
There have been two extensions to the CBA since first implemented in the early 90’s. The pain of getting to a settlement was at times like the 10th “gasser” in a midsummer workout. The ultimate outcome left you feeling much better about your endurance. Most restructurings helped alleviate the sting of poor financial decisions. Teams that saw no way out were suddenly given a reprieve from penalties associated with violation.
Some Clubs learned the lessons taught through being pushed against the ceiling and having nowhere to go. Others just chose to use their “mulligan” and kept playing through with engrained bad habits of bookkeeping. There are a number of ways to piece together a proposal to an ownership to give your Club the breathing space it needs entering into a new Cap accounting period. The cleanest, most efficient are at times the most difficult in outright releasing players that no longer produce at the value of their associated contract. Many times these are veteran contributors that earned the right to those numbers years before the current situation. They’re being rewarded for what they “did” in the past and not necessarily what they’ll “do” in the future.
Is he worth it?
Pride clouds reality for both player and agent, neither willing to give under any circumstances for the good of the club. Other times loyalty perseveres and a chance to finish out where it might have started outweighs any sting of a pay cut. It also puts pressure on coaching staffs looking to remain faithful to their core players in the wake of doing what’s right for the organization.
This can rip at an NFL Front Office from the inside, a battle most shouldn’t have to go through in preparation for Free Agency and the Draft. All facets of the Club should be in lockstep regarding the direction to take in order to improve the overall financial health and well being of the team. There are times when the easy out is taken to alleviate the short term fear of losing a known quantity at a position versus looking at the big picture, long term projection of the player. Those are what the media and agents like to call Contract Restructurings.
There are numerous cases where this is appropriate, especially if the player continues to perform at a level commensurate with compensation. Age and production are vital aspects of deciding when “restructuring” is warranted. That’s why the Front Office Management and Coaching must be on the same page with the evaluation of the player or players in question.
Getting into a pickle
There are two ways to go about this. First, an EXTENSION; taking money out of an already inflated base salary and turning it into a guaranteed bonus that will add more years and push out the proration over the course of the extension. On some occasions this will cost even more in exchange for tying up the player even longer.
The second is what some call a MORTGAGE. Similar to an extension, the mortgage takes otherwise unguaranteed money out of base salary, turns it into a guaranteed bonus, and is prorated over the remainder of the existing contract.
Both have become accepted ways of dealing with Cap deficiencies and both are a bit like “kicking the can down the road”. Clubs that use these techniques as standard procedure in Cap Management are most likely unwilling to face the fear of replacing the player with an unknown. The base salary was inflated on the backend of the contract by agents to build in natural raises and for cosmetic purposes regarding overall average. Many times the player is in the latter stages of his career and there lies the dilemma – make the hard choice now, or kick the can down the road?
Long term responsibility
It starts with responsible Cap Management on the front end and adhering to policies that don’t put you in this position in the first place; an overreliance on Free Agency, inflated market values, bidding wars, cosmetic contracts.
Mortgage the future or deal with the present? A sound Cap Plan keeps your coaching and personnel honest, financial management consistent, and the chance at long term success a reality.