Free Agency & CAP: It’s All About Structure

As someone who really finds how NFL team’s General Managers manage the rookie wage scale, the cap, and how they make preparations to pay upcoming free agents or attack free agency very interesting.

I think this topic is a main topic in a lot of free agency discussions going on among fans when they look at a CAP number for a team and what they will be able to do in free agency.

That is will my team be a player in free agency & do we have the CAP space to do it with? It’s one of the fun topics to discuss among fans when talking about how to fill holes or how to better their favorite NFL team.

The one thing I don’t see brought up enough when discussing this topic is structure of contracts.

It’s one of the main things that allow teams with good GM’s to maneuver around upcoming contracts for players to be paid, players already paid, and how to be players in free agency with some of the elite talent and not bargain bin shopping.

Since this is a Panthers blog I will be using them as an example for most of it but “structure” is what allows teams like the Saints and others who’s backs were against the CAP wall to continue to be players in free agency and spend big money.

What do I mean by that? Let’s use the Saints 2016 signing of TE Coby Fleener as an example. The Saints had little to no CAP room to make a splash in free agency in 2016. Yet they were able to land Fleener. How?

The structure of the contract. The Saints managed to structure the contract to be back heavy only costing them $2.4 million in the first year of the contract knowing they could create CAP space the following season.

While the back end of the contract get’s progressively bigger as far as the CAP hit goes the dead money gets progressively smaller leaving the team an out in the latter part of the deal.

Since the CAP is a year to year process teams have time to create room the following season if they choose this structure method. In doing so the Saints were able to go after a tight end that at the time would have drawn a ton of interest and cost a pretty penny on the market. Despite having little to no CAP to work with in that season.

That’s what make structure of a contract so much more important than just looking at a CAP number and saying “well this guy costs this much so we can’t afford him”. You have to look at four things when evaluating your teams contract status & CAP.

  1. Looking ahead to upcoming deals where you know the team will have to pay a player who is A) A good player coming off a rookie deal or B) A good player due a new deal.
  2. Take into account cuts, restructures, and contracts coming off the books that could create space. Especially for players at the end of their careers.
  3. Consider players who may take up space using a Franchise Tag. Plus also taking into consideration players with RFA or ERFA tenders.
  4. Take into account an extra $10 million in cap due to the cap raise that has continued at about a $10 million increase every season that until reported otherwise shows no signs of stopping.

The most recent example of this I can use is the Panthers re-signing of DE Mario Addison and the structure of his deal which we found out today.

The Panthers were able to re-sign Addison to a 3 year deal worth $22.5 million. With $11.5 million guaranteed and reported by Ian Rapoport $9.75 million to be paid in 2017.

Now here is where the structure comes into play in regards to the CAP and his deal.

According to the Charlotte Observer Addison’s CAP hit for 2017 will be $4.35 million followed by $8.92 million in 2018, and $9.17 million in 2019.

Addison will count $4.35 million against the cap this season, with cap figures of $8.92 million in 2018 and $9.17 million in 2019.

http://www.charlotteobserver.com/sports/nfl/carolina-panthers/article135735268.html

The Panthers decided to back load the deal while lowering the initial CAP hit up front. While a lot of the guarantees will be paid in 2017, they probably maneuvered them in a way to lower the brunt of the CAP hit while the signing bonus has probably been prorated throughout the deal.

So instead of the Panthers dealing with a major cap hit in the first year of the deal they won’t have to deal with a big hit until the next two year’s of the deal. During that time other contracts can come off the books & the CAP is likely to raise another $10 million.

While the dead money hasn’t been released yet I would assume it will drop significantly in year three of the deal if the Panthers wanted to get out of it since most of the guarantees will be paid up front in the first year.

Which is a great deal for the Panthers and still allows Addison to get paid and the Panthers room in 2017 to play with. So when you look at the salary cap which was officially announced today at $167 million. Which is over a $10 million increase from the previous year.

Then you look at the space the Panthers have to work with after counting off about $7 million to $12 million for rookies and the $4.35 million to Addison. The Panthers are sitting around $29 million to work with.

salarycap

Given what I just explained and the avenues for the Panthers to work with. You can see they have money and abilities to be a player in free agency every year starting this off-season.

As long as they continue to structure contracts right because structure is everything in how to make moves & be players in this spending game.

They can take $29 million in 2017 and stretch it into $40 or $50 million if they want. Mattering on upcoming deals, the deals they can get out of, increasing CAP, and players contracts that are coming off the books in the upcoming years.

They can also create more space if needed with moves I will touch on in my next piece I plan to write this week.

They can back load or front load a deal. The options right now are endless to be able to attack players in free agency with the space they have.

Now am I saying I expect the Panthers to be one of the top spending teams? No. I do expect them to be active early and often this off-season after finally managing to get their CAP in a good place. A lot more active than in past years especially with known commodities.

I suspect they will go after maybe one or two big names (mainly in either OT, DE, or Safety) then some mid tier guys, and bargain guys like usual. I think their high end yearly range will be around $8 or $9 million yearly for one of the “big names” unless the right situation presents itself to go above that like an elite Offensive Tackle.

For now that is my opinion on how free agency isn’t always about the CAP number you see but the structure of the deal presented to the players and for the teams. Also how the Panthers can be players with the some bigger money players instead of the bargain bin players in free agency as soon as this year.

Keep Pounding everyone!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s