Of All the Many Details in New NFL CBA, Retention of Absolute Hard Salary Cap Is Most Important

In life, sometimes you have to draw a line in the sand. The best example I can remember is Neville Chamberlain’s futile appeasement of Herr Hitler in his attempt to avoid World War II. Oh...I agree he had good intentions but you still have to draw a line. Sir Winston Churchill, on the other hand, lived by a code and he was livid at Chamberlain for appeasing Hitler by selling out Czechoslovakia. As we know all too well, Sir Winston was invariably proven right. This line is the reason Chamberlain will be remembered as a coward while Churchill's name will undoubtedly echo into eternity. Sometimes things are meant to be black-and-white and here is a great quoted example from the NFL 2011 CBA:

"No Club may have a Team Salary that exceeds the Salary Cap"

Notice there are no exceptions or disclaimers, like "except in the off-season" or "if your franchise QB retires and his $40mm guaranteed hits the cap immediately." There are absolutely no gray areas, period! This is no "soft" cap like in basketball, this is the real deal and until this CBA expires on August 4th, 2020 no team can exceed the Salary Cap at any time.  

Other pro sports leagues wish they saw this long ago but it is far too late for them to put the genie back in the bottle. Baseball and basketball would be much more popular if their fans didn’t feel used like farm teams and practice squads for perennial favorites like the Yankees and Lakers. I know, I know "but the Pirates are good this year and they will be very competitive in the next few years."  Maybe, but I'll believe it when I see it, I bet five years from now people will still be saying "next year is ours!"  Sorry but I'm just not feeling it.

NFL fans know their team may suck this year but they also know they may only be Joe Montana from the Super Bowl or even a dynasty. The 2012 Draft will likely be the Andrew Luck Sweepstakes; some team's fans are already hoping to be bad in order to land Andrew. Thank God we are not in that position, it's just sad.  And you don’t need a loose billionaire like Mark Cuban or a huge market like the NY Yankees, Green Bay has a population of a buck and change. I thought Pittsburgh was tiny but Green Bay's population is roughly 104,000. The current Super Bowl team represents a town not a city, aint that some shit! 

The Rooneys live by a strong code just like Winston Churchill and they don’t waiver. When was the last time we chased a high priced free agent? Never! Back in 1933 Art Rooney drew this line in Forbes Field and you can still find it if you get out your shovel and dig.  

NFL Stars could make much more if you removed the salary cap. Don’t you think Jerry Jones, Paul Allen or Dan Snyder would pay Peyton Manning $50mm a year? I mean Paul Allen is only worth $18 billion if $50mm falls out of his wallet it’s not worth bending over to pick it up:) But the hard Salary Cap also insures rabid football fans, I mean the PR on Cam Newton is incredible considering he is in a tiny market on a very bad team. And even owners like Jerry Jones and Dan Snyder know that parity and competition cannot be bought. At the end of the day fans know the real deal.

The Salary Cap has come under attack too, players were willing to dump it if the lockout salary offer could not be swallowed. As NFL fans we have to be grateful that the cap is still here. But this is not my point, this post's goal is to provide more detailed information on the new Salary Cap. This stuff is very dry so please bear with me....let's start at the beginning.  

All NFL player contracts expire the last day of February which is also the last day of the league year. This makes March 1st the start of the league year. This year because of the lockout a salary cap of $120mm was established and went into effect August 5th. There may have been some guessing here because NFL teams close their books March 31st and usually release their audited financials late August or early September. I don’t believe the Packers have released their audited financials yet and it is already August 29th. But anyway going forward it will work like this.

At the start of a new league year on March 1st, teams need to know the salary cap to plan out their roster moves. So to get a cap, accountants will assemble information starting in January and by March 1st they will establish a projected cap for the following year (this is the first "True-Up). Things like ticket sales are estimated based on factors such as attendance and planned ticket price increases. For other revenue where no contract exists, year-over-year growth rates will be used.  So March 1st there is a new cap number but there will be a final "True-Up" every year by August 30th based on audited financials. Regardless of the "True-Up" calculation, the Salary Cap cannot drop below $120mm until 2014 even in the unlikely event we went into another Great Depression.

So that is how the NFL will now determine the cap. I know, "who cares? I only care about my team?" Well, below are the major items that go into calculating your team’s Salary Cap: 

 

  • Player contracts including exercised options.

  • Drafted rookies are included at Minimum Active List Salary ("MALS") until player is signed, Team’s rights are relinquished through waivers or the Tuesday following the tenth week of the regular season if player still remains unsigned.

  • Exclusive rights player include MALS when tendered until player is signed or released.

  • Restricted Free Agents ("RFA"), the Qualifying Offer will be included in Team Salary until signed or offer is withdrawn. If player is unsigned and a June 1st or June 15th Tender is made, such Tender will be included until player is signed, Team’s rights relinquished or the Tuesday following the tenth week of the regular season if player still remains unsigned.

  • Unrestricted Restricted Free Agents ("URFA"), if a June 1st Tender is made it will be included in Team Salary as of July 15th and thereafter until the player is signed, the Tender is withdrawn, the Team’s rights are relinquished or extinguished, or the Tuesday following the tenth week of the regular season if players still remains unsigned.

  • Transistion & Franshise Players, the Tender will be included in Team Salary until player is signed, Tender withdrawn, rights relinquished or the Tuesday following the tenth week of the regular season if players still remains unsigned.

  • All Offer Sheets will be included in Team Salary when tendered until the player is signed to a Player Contract by any NFL Team, or the Offer Sheet is withdrawn.

And there are other amounts included like practice squads, expansion bonus, workout pay, injury, etc, etc. but they are small and less meaningful to this discussion.  FYI, the definition of "Required Tender" or "Tender" is: A Player Contract tender that a Club is required to make to a player pursuant to this Agreement, either as a matter of right with respect to the player, or to receive Rights of First Refusal, Draft Choice Compensation and/or other rights with respect to the player.

Now, I wrote this to help people understand some of the lingo and help see the big picture of the new CBA. But I am also doing this to point out how hard it is to truly calculate the Salary Cap. You must keep that in mind when you look at numbers out there on the web or even the media. When Adam Schefter or John Clayton tell you Steelers are $3mm under the cap, they have no idea of the details behind that number, they are relying on someone in the front office to give them a correct number. But think about the real details.

For an exclusive tagged franchise player the Required Tender is the average of five largest prior year salaries at the position or 120% of the player’s last salary, whichever is greater. Now salary is defined as the current cap number excluding "performance bonuses other than roster and reporting bonuses."  To calculate a non-exclusive franchise tag you must go back 5 years, find the 5 highest salaries and average those to the historic salary caps and multiply that ratio by the projected cap for the upcoming year. And don’t forget you also have the 120% calculation above, whichever is higher. What??? I am already dizzy. Yea, me too. That's why LaMarr Woodley's Tender was reported at $10mm by the media, you think that is the real number or a very rounded estimate? I'll give you 5 guesses.

And exactly, how do you even know what the 5 highest salaries are for the current year, much less five years back? Well, it’s information overload, I don’t even want to think about it:)  So these are some major issues in calculating a cap and I would be very skeptical if anyone claims to have many of the exact details. Trust but verify.

what ya think?

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