Cash Spending in the NFL and the Impact on Free Agency

All Gas No Shake · Mar 10, 2014

great read

http://overthecap.com/look-cash-spending-nfl-impact-free-agency/

In addition to the salary cap spending one of the things we need to keep a close eye on is cash spending per team in the NFL. Im not sure how many readers know this but we also track cap spending each year as best we can so you can see what teams pay their players in real terms. The CBA removed the salary cap floors in the NFL and instituted cash minimums that will be applicable to each team and the NFL as a whole over four year periods. Last year was the first year in the current four year period.

While there are no real penalties for this (you simply pay back the money at the end of the 4 years) teams should be aiming to keep up with the percentages in each season. At a team-wide level a team must spend 89% of the cap and on a League-wide basis it is 95%. The basic calculation for a cash charge is base salary + roster/report bonuses + workout bonus + full signing/option bonus if committed in the year. Also factoring into this are injury settlements, grievances settled, incentives actually earned, practice squads, and any other forms of cash spent on players for the purposes of playing football.

Knowing these limits it gives us an idea of the amount of money that a team is likely planning on spending in free agency. While the current salary tables on the site are not up to date to include the latest signings such as Red Bryant and Everson Griffin they do give us a strong estimate of the spending that must occur and perhaps an idea as to why the initial run on contracts seems to be quite high this year.

Over the last two seasons the salary cap limits were $123 million and $133 million. To meet the 89% threshold that means teams must spend $227,840,000 on players in 2013 and 2014. To meet the league number the 32 teams must collectively spend $7,782,400,000 which works out to $243,200,000 per team.

To see where teams stand right now we need to make some adjustments to the cash spending. First we need to reduce the cash spending to 53 players since that is the amount who will count come September when rosters have to be trimmed down. We also need to include rookie signing bonus money which will be paid in full for every rookie drafted. While we don’t know compensatory selection distribution we do have estimates for the other 224 draft picks. We also need to include minimum workout payments that are paid to everyone participating in the offseason workout program, which I’ll estimate to be $441,000 per club (70 players x $175 per day x 36 days). We also need to include the Practice Squad for each team which should be $856,800 ($6,300 per week x 17 weeks x 8 players). I won’t make estimates for the other charges since it varies so much by team.

To those numbers I will add the cash estimates I had for each team in 2013. Please note that the 2013 estimates probably understate the numbers somewhat because I don’t do adjustments for incentives at the end of the year and had very limited information on actual grievances and in some cases injury settlements. If someone has updated data and wants to share it I can update the charts.

When we do this we see that 16 teams are over the threshold spending limits just by holding onto their draft selections and it is very likely that a 17th is also ok since we know we are definitely underestimating the 2013 spending for the teams. Five teams (Bills, Steelers, Saints, Chargers, and Vikings) are all going to have less than $10 million required to spend once we accrue the Griffin and Cassel deals for the Vikings.

Basically what we have are 10 teams that are in “need to spend mode”, of which six should be in “must spend mode” in free agency. Those teams that must spend are the Panthers ($27.9 under), Colts($29.3 million under), Jets ($35 million under) , Jaguars($38.7 million under), Redskins($46.8 million under), and Raiders($70 million under). Of those teams the Panthers, Colts, and Redskins can probably make an argument that their QB situations will require large contracts in the next two seasons so the spending is not as dire as the other teams, none of whom have a highly paid QB situation on the horizon.

The Jets and Raiders are really the two teams in the biggest “must spend” situations. New York will likely release Santonio Holmes and Mark Sanchez, which will bring their required spending to about $55 million under the requirement with two years to go. The Raiders are at $70 million. The Jets did draft Geno Smith last season making him extension eligible in 2016, but the expectation is not going to be great spending on him as free agency this year approaches.

These numbers should be important to both agents and teams alike. Seeing where some of these big required spends should be should give prime targets for players. While the Panthers salary cap is a mess and might prohibit them from being involved this year the other five teams are flush with cap room making this a perfect storm for potential free agents to break the bank. I often pick on the Colts for some of the spending that they do in free agency, but the reality is their payrolls are so low they are in a position where it’s almost necessary.

Likewise for other teams it’s important to really know what needs those teams have and prioritize their free agents that way. If you know the Jets, Jaguars, Raiders, and Colts are in the market for a cornerback it makes more sense to overpay Sam Shields in the short term to make sure you keep him on your team on a contract structure you like than get caught in a bidding war where his money doesn’t fit into your system.

Even further in the future spending is important. The cap is expected to rise greatly over the next two years and some teams are going to have few players under contract and low payrolls in 2015 and 16. For instance, the Broncos are right over the requirement now, but next year they have just $61 million committed to contracted players, of which Peyton Manning makes up $19 million. Considering Manning might retire in 15 or 16 this could be the perfect destination for a one or two year contract that gets the player decent cash terms up front. Their goal may well be to stock up on spending now knowing that in 2016 they may spend little as they enter the post-Manning era.

League-wide spending probably gives us a better idea of general spending habits upcoming in the NFL. Though a majority of the teams would meet their 89% thresholds right now far fewer match up if we increase it to 95%. Only eight teams would be over 95% if they made no material changes to their rosters. As things stand before free agency there is about $570 million that will need to be spent to meet the 95% league spending, which is about $18 million per team.

$18 million per team is a pretty hefty total to spend in free agency. That is probably at least one premier position player (cornerback, DE/34OLB, left tackle) per team or two players at secondary pay positions for each team. That total will drop once incentives and other payments are added in, but the number will still be high. I think that sheds some added light as to why some of the initial deals are really surprising all things considered.

Any way you slice it there should be millions upon millions to spend in free agency than last season. There is far more certainty since we have two years of salary cap data and spending data to sort through, and teams will adjust spending accordingly. So we all should keep that in mind when we hear of our teams “overpaying” for certain players. Provided that the contract structures maintain salary cap flexibility to allow for future renegotiations or releases with minimal dead money impact then the teams should be doing the job in the eyes of the fans.

I’d look for more shorter term deals where cash and cap are much more aligned that they sometimes have been in the past. That likely means less signing bonus money which will be replaced by larger guaranteed base salaries and/or roster bonuses. Teams will then decide, at their discretion, which players to prorate money for in the future as they get first hand looks at free agents rather than just looking at them via film. This is the model the Buccaneers employ, seems to be where the Bears and Browns are headed and to a lesser extent has been used by the Rams. That is probably a negative in long term security and earning potential for the players, but it will result in higher first and second year cash totals than maybe they saw in the past.

Here are my cash estimates that I am using. Any questions or comments feel free to leave them below or email me.
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4jetfans · Mar 11, 2014

2 and a half hours until the flood gates are open and the NEW YEAR begins. YEAH BABY.

Cash Spending in the NFL and the Impact on Free Agency

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Cash Spending in the NFL and the Impact on Free Agency

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