Per Steve Smith, the 49ers will be releasing receiver Torrey Smith, creating about $4.7 million in cap room and saving themselves $8 million in salary commitments for the year. Smith was the 49ers prized free agent signing in 2015, but he never took off in the offense catching just 53 passes for 930 yards in two years. The 49ers were reportedly shopping Smith last year at the trade deadline but were supposedly looking for a high draft pick which never made sense if it was true and looks worse now that they will release him for nothing. Continue reading 49ers to Cut Torrey Smith »
Linebacker Chris Borland’s decision to retire from the NFL after just one season, due to fears about long term health concerns, has sparked a number of debates on the subject. The initial debates were about what this meant for the game and how player’s might react in the future to news about the dangers of football, but I think now we are starting to consider what are the potential negative financial implications associated with the retirement and what San Francisco may do to recover money from Borland.
In the NFL players are often paid a signing bonus upon signing a contract. For draft picks it is almost a certainty that they will receive a signing bonus. As long time readers of OTC know, signing bonus money is subject to forfeiture over the life of the contract for a number of reasons. The most common reason is drug/PED suspension, but a lesser known provision allows a team to recover money if a player opts to retire rather than honoring his contract.
Often a retiring player has expressed his potential desire to retire at the time a contract is signed. In other cases the player is a well established veteran who has given the NFL, and usually that team, so many great years of service that the player is lauded on his way out the door. There are also a number of situations where retirement allows the team and player to graciously end a career rather than having to release the player whose skills have declined significantly. An injury can also cause a player to retire and many times such players will be released for procedural purposes, such as David Wilson of the Giants.
One notable case I can recall where money was returned was when the Broncos traded Jake Plummer to the Buccaneers and Plummer refused to report and retired. Tampa did go after the bonus money because they had zero relationship with Plummer to consider his decision reasonable. Barry Sanders retired abrputly at the peak of his career in part because he wanted to play on a more competitive team and also returned a significant portion of his bonus money. The Lions had only two years before signed Sanders to a lurcative extension and and no idea that he would consider retirement an option.
With Borland we have a very unique case. Borland wasn’t injured. He wasn’t a veteran. He hadn’t been traded/drafted by a team he refused to play for. He decided that the risk of playing in the NFL was not worth the potential financial reward.
I think there are many reasons that a player who expressed interest in the NFL would change his mind the way Borland did. The 49ers were not exactly the ideal location for any player in 2014. He looked around him and saw guys injured. The organization was in disarray with a head coach being pushed out the door, a QB under heavy scrutiny, and a player being kicked off the team for a domestic issue off the field. He played with the greatest linebacker of the last decade, who himself decide it wasn’t worth it anymore just a few days before. He still would have to play at least two more years before there was any significant financial reward. These things can quickly change the view of being in the NFL after actually experiencing it.
But regardless of why he chose to do it or if it was some grand gesture on his part, the 49ers should strongly consider going after his salary. There is precedent that is going to be set with this case. While Borland received a very modest (by NFL standards) signing bonus of $617,436, we should not get caught up in the amount of the bonus. What if Jedeveon Clowney, who struggled with injuries and had questions surface about his play, decided to retire after one year after receiving a $14,518,544 signing bonus? Not only is there the opportunity cost lost to the team but this would be a major financial loss. While the numbers are dramatically different the approach should be the same.
This is the same kind of logic that has forced the NFL Players Association to fight for the salary of Aaron Hernandez, who is likely going to be convicted of murder. It has forced them to defend Ray Rice and Adrian Peterson. While many people look down on it they are doing it because they need to do it for the benefit of the other 2,000 or so player who play in the NFL. For as bad as it may look to to try to obtain nearly $4 million for Hernandez to likely use on lawyers, had they not acted on his behalf the NFL could potentialy throw aside contractual guarantees for a number of reasons.
The NFL has to protect the interest of the teams in this case while also protecting the contract structures of future draft picks. If Borland’s decision becomes considered acceptable around the NFL, teams will no longer be willing to use the signing bonus as a large first year payment for the player. Instead they will increase yearly salaries and guarantee the compensation in order to protect it from being paid in the event of early retirement. That defers the time it will take for a player to earn his actual salary which is certainly not good for the players.
The 49ers are entitled to 463,077 of Borland’s salary, which is 3/4 of his signing bonus, if Borland does not reconsider his decision to retire. Recovering $155,468 of that money should be easy. That is the amount of Peformance Based Pay that was earned by Borland for 2014. The 49ers will simply withhold that payment as a form of recovery. The other $307K will need to be turned over by the player unless there is any other cash witholding in the possession of the 49ers.
In a somewhat interesting salary cap move, 49ers pass rusher Aldon Smith has restructured his one year contract to essentially remove the guarantee from the deal according to Matt Maiocco. According to Maiocco Smith will receive a $2 million roster bonus in April (likely April 1) and then roster bonuses paid out through the season. Smith’s $9.754 million salary was currently guaranteed for injury and would become fully guaranteed on March 10, now most of the salary is not guaranteed. Sounds strange, right? Lets speculate a bit.
Smith’s demons off the field are well known and he has spent signifiant time on the non football illness list and suspended list the last two seasons. During that period his performance has slipped somewhat as well. In Smith’s first two seasons in the NFL he combined to sack the quarterback 1.05 times per game. In the last two seasons that ratio has fallen to 0.58.
Though he does have immense talent both things combined might be enough for him to consider his current earning potential if released. It is possible that in order to earn the same salary as he was scheduled with the 49ers he may have to give up years of free agency in incentive laden contracts. This allows him to play out free agency like planned and hopefully have a strong season with no off the field transgressions that should get him into the $14M per year discussions. The 49ers are also the team most likely to extend him so playing ball with the team on a contract only helps the relationship.
Now before we go off the deep end with Smith giving up guarantees it is quite possible that the contract is essentially virtually guarateed. The April 1 payment is likely guaranteed, at the least for skill and injury. His P5 I would imagine is also guaranteed. For the sake of argument lets assume his new salary is $754,000 and his per game roster bonuses are paid out in installments of $437,500 per week ($7 million total). That $7 million is not guaranteed but it likley has a very high likelihood of being earned.
Normally we associate those bonuses as requiring being active on Sunday, but that is not always the case. It is not uncommon for per game bonuses to include payment to a player for being on injured reserve or the PUP list. So in that respect they can be identical to salary. I would imagine that the negotiation will not pay him for games in which he lands on the NFI or Suspended/Exempt lists, which is basically the same as what would have happened if he had another off the field issue (base salary is not paid on those lists either, regardless of guaranteed status). So as long as he makes it through the summer he is likely going to end up paid the same as before.
So what’s in this for San Francisco then? Mainly salary cap relief. Per game roster bonuses are valued against the salary cap based on the players performance last season. Smith was only active for 7 games last season so using our hypothetical example Smith’s salary cap figure drops from $9.754 million to $5.8165 million, savings of nearly $4 million in immediate salary cap relief for the cap hungry 49ers.
There is a catch, however. That hidden money that is not counted against the salary cap now will need to be accouned for on a weekly basis during the season if earned, which should be pretty likely. So while it gives temporary relief the team still needs the space to account for it in the regular season. What that tells me is that the 49ers front office is strongly considering using the June 1 cut on one of their players.
The way a June 1 cut works is the player designated a June 1 cut will have his cap charge count in full until June 1 and then on June 2 only his current year’s proration will count against the cap with the remaining acceleration hitting the following year. This gives no cap relief for free agency but helps for in season cap management.
If we look at a player like Ahmad Brooks, cutting him now provides San Francisco with just $1.5M in cap relief, which isnt a very big help for free agency. If they designate him a June 1 they will gain $4.7 million for 2015, which more than offsets those roster bonuses being earned by Smith.
While I have no idea if that is the team’s intention it is the way I would look at this deal. Reworking Smith gives me the immediate cap relief right now for free agency and then a player like Brooks pays it back in June. Its a creative way to get some extra cap dollars to spend in free agency while remaining in full compliance with the cap.
Estimated 2015 Cap Space: $1.0M ($140M cap limit)
Players Under Contract: 63
Pro Bowlers: 2
Unrestricted Free Agents: 15(5 with 50%+ playtime)
Draft Selection: 15
Salary Cap Breakdown
Free Agents to Re-sign
With the development of Colin Kaepernick so important I think the 49ers are almost in a position where they must find a way to keep Frank Gore to keep their running game more or less intact. Gore is certain up there in age, but he has been able to keep things together through the age of 31. They should only need to lock in on two years with him and use a structure similar to that of Fred Jackson in Buffalo, but with a $3.5M or so price…Chris Culliver is a decent option in the defensive backfield and probably flies a bit under the radar which should make it reasonable to keep him long term. I would imagine he would slot in between $4 and $4.75M per year…Perrish Cox filled in nicely in the system last year and should not be expensive to retain on a two to three year contract.
Free Agents to Let Walk
Guard Mike Iupati will be in high demand and I think that will likely be a barrier towards retaining him. With the team in the process of turning over I don’t think San Francisco can commit the kind of money that would be required to keep Iupati and get good value on their investment. With free agency right around the corner I also don’t believe they can get their style of contract done with him and you simply don’t blow up your system for a guard…Michael Crabtree was given every opportunity to break out and instead he struggled through a poor season. This is one of those “change of scenery” situations that may work best for both sides unless he is willing to do an extremely low cost one year contract….
Contracts to Modify
After being upset that he failed to receive a contract extension in 2014, Vernon Davis fell off the map and landed on the back of the milk carton, having the worst season of his career with just 245 yards. You can make a strong case for giving up on him, but I consider it better for San Francisco to first try to bring his dollar figure down as older tight ends are often productive. Cutting his salary by half might be more than he would earn anywhere else…Steve Johnson will earn slightly more than $6 million this season, which is far too high for a player who hasn’t gained 600 yards in either of his last two seasons. Johnson has positive attributes and should see his numbers increase if Crabtree is gone, but his production is in the $3 million year range…It may be time to decide if the 49ers expect Patrick Willis to finish his career in San Francisco or elsewhere. If it is in San Francisco this is probably the right time to consider an extension that can make his cap figure more manageable this season and bring their spending down at the position…Aldon Smith will count for $9.75 million against the cap and it’s probably a good time to consider his long term extension or to trade him away. Smith is highly talented but has struggled with problems off the field that has impacted his available games. It makes for a tricky negotiation but carrying him for one year at this number to just turn around and franchise him or lose him is a waste of space in 2015.
Players to Consider Releasing
Both Johnson and Davis, mentioned above, are clearly in danger of being released if they refuse pay cuts…I don’t think there is any question that Ahmad Brooks will be released this season. If the team switches to a 4-3 he clearly has no role, but even if they don’t his role is limited. His cap charge next year is just over $7M and the team can create about $1.5M by releasing him…Releasing Craig Dahl saves the team $1.7Min cap space, a move that seems inevitable since he only plays limited snaps and special teams on a team with a tight cap situation…Jonathan Martin was likely brought in as a favor to the head coach who is no longer on the team. Martin can’t play and his $1 million salary can be spent better elsewhere… Ian Williams has suited up for 11 games since signing a contract extension in 2013. It was a move based on youth, but it hasn’t worked out. Another $1.2M in space will come with his release.
While I believe that the window likely closed for this group last season, I think given some of the talent on the team and their salary cap makeup that can’t just throw in the towel on this group and begin cutting players left and right for minimal savings. Their next phase of development really hinges on Kaepernick and the team will never be certain on him if they give him a shell of a team to work with. If he plays well they can contend for another season with this group. We have seen it countless times with teams who have had a good history, fall off, and then seem to piece it together one more time before age really catches up with them.
For San Francisco this should indicate a holding pattern where you are keeping a majority of your veterans and filling your roster with affordable players that won’t hamstring the organization two and three years down the line if they do not pan out. I would not expect the team to be active in free agency at all and instead just focus on getting players back healthy and having them buy in to a new voice in the locker room.
The best course for success is to use the draft to get some players who can learn for one year behind a very good veteran group and be ready to take the field running in 2016. That is the way to avoid the crash and burn that could be staring at the team in 2016. I don’t know if the team can continue to take some questionable health picks in the draft anymore where going in they seem to acknowledge it’s a year of rehab and film session. I think they just need bodies that can play and potentially stand out.
Clearly the team needs offensive playmakers that can play wide receiver and/or tight end. Anquan Boldin will be 35 years old and will eventually need to be replaced and they really don’t have a clear number 2, let alone a potential 1. Given the need for the QB to improve finding these type of players should be of prime importance. If Iupati walks guard becomes a mid-round need, especially if there are no long term plans in place to keep Alex Boone.
Defensively the team needs to begin rebuilding their defensive front. Justin Smith could retire and even if he does not the 49ers know that day is coming soon. They will need at least one defensive end in this offseason and clearly need more talent for the interior of their line. If there is one area that they need to hit on in the draft it’s their defensive line. If they fail to nail this down for the future their whole defense will suffer and the 49ers will lose their identity if that happens.
A lot of people are saying that the 49ers have wrecked their salary cap because of the limited space, but the reality is they are more or less around the averages in almost every category, they just have a deeper roster than most teams. One of the concessions that you often have to make when you have a successful veteran unit is the possibility that you may get old and be forced to move into a holding pattern until their pay warrants their release. While that may have made a few shortsighted moves using voidable years, the team is where they are now in regards to the cap because certain players just got older, but few are at a point where you want to release them. It also would have helped if the QB played to his salary level. The trick now is to rebuild the team with draft while working with this group that can still possibly contend for the playoffs. It’s easier said than done, but if they play their cards right they can jump back into the mix pretty quickly.
Yesterday we looked at the Fantex valuation of the Texans’ Arian Foster and today we turn our attention to their valuation of Vernon Davis of the 49ers. Fantex has agreed to pay Davis $4,000,000 in exchange for 10% of his future brand income. Is this a reasonable investment for a 29 year old Tight End?
While we do not have the specifics of the Davis brand contract I’ll assume that it includes salary earned in 2013, similar to how Foster’s income included his 2013 wages from the Houston Texans. Davis currently is under contract to the 49ers through 2015. In that time he has base salaries that total $15,122,000, workout bonus that total $600,000, and $1,200,000 in bonuses that are paid in $25,000 installments for each game in which Davis is active. If Davis was to play his entire contract out Fantex would be eligible to receive $1,692,200.
Davis has found himself in a good situation in 2013 due to injuries to the 49ers wide receiving corps and is making the most of his situation. He is currently on pace for 1,184 receiving yards which would shatter his prior career high of 965 yards. The 49ers are in a bit of a tight salary cap situation in 2014 and Davis has the 4th largest cap charge on the team per OTC estimates. Releasing Davis would have saved the 49ers over $3.2 million in cap space but his play this season has made that option unrealistic for San Francisco. He could be eligible instead for an extension that reduces his salary cap charges and adds another three years onto his existing contract.
Getting an extension at the age of 30 is not the hardship that it would be for Foster as this position has much more life. Jason Witten of the Cowboys received a long term extension when he was 29 while Antonio Gates received an extension with the San Diego Chargers at the age of 30. Tony Gonzalez has received multiple contracts since turning 30. However drawing a comparison to any of these players would be difficult as they are multi-time Pro Bowlers and All Pro players. Davis has just one Pro Bowl in his prior seven seasons. He will also be negotiating with a very tough set of contract negotiators in San Francisco who rarely overpay for their players.
Most likely Davis’ numbers would come in somewhere between Owen Daniels $5.5 million a season. and Witten’s $7.3 million a year. So for the sake of argument we can call it a $6.4 million a year extension with $10 million or so guaranteed. As a five year value that would make the contract worth $29.45 million when we include his 2014 and 2015 current seasons into the contract. That would bring him to 34 years of age and likely signal the end of his career.
In this case I think a fair assumption would be that he would earn 75% of the contract’s total value and then maybe get one last season at around $1 million in salary. That would bring his total NFL takehome, while under a brand share contract to Fantex, to be about $29.76 million. Fantex would receive $2,975,590 meaning they would need him to earn $10.24 million in his non-playing career to recoup their initial investment. This is assuming that his 2013 wages are included in the calculation.
Much like the Foster deal this has almost no chance to be a profitable investment if profits are determined by players paying back these “advances” with interest. These deals are absolute bonanzas for the players who are nearing the end of their careers. The actual determinations of future earnings by Fantex, in regards to these two players, shows almost no fundamental understanding of the NFL lifecycle and NFL contract structure. If the goal is to gain notoriety by signing “name players” to enhance trading on their platform and gain company interest then we can look at these as endorsement deals of sorts, except Fantex is not funding them with their own endorsement dollars, but relying on investors to get caught up in the name value and fantasy betting crazes that are extremely popular right now. Fantex may prove to be profitable but the initial investors that are funding the company on the brands of players have little chance to do anything but throw money away.
Per multiple sources the 49ers will trade 2012 first round draft pick WR AJ Jenkins to the Kansas City Chiefs. Jenkins has been a major disappointment for the WR depleted 49ers and they were considering releasing Jenkins despite the fact that they owe him guaranteed salary if someone failed to pick up his contract when placed on waivers.
The benefit of trading Jenkins is that the future guaranteed Paragraph 5 salary transfers to the team that trades for the player. That saves the 49ers from potentially having to pay Jenkins $1,727,391 after having cut him from the team. Jenkins did have offsets in his contract, but had he cleared waivers a team could sign him for the minimum salary of $480,000 and $570,000 over the next two seasons leaving the 49ers with more money owed and hurting their short term salary cap as they wait for credits to be applied.
The 49ers will have a dead money cap charges of $873,187 in 2013 and $1,746,374 in 2014 attributed to Jenkins. The Chiefs will take on cap charges of $705,797, $1,021,594, and $1,337,390 from 2013 thru 2015, the first two years of which are fully guaranteed. This trade also illustrates the team benefits of the new CBA as a trade under the prior CBA would have been difficult as the 49ers would have likely paid Jenkins a salary advance or option bonus in March and reduced his base salaries to the minimum. The cap charge associated with such a trade would have been too high for the 49ers to absorb.
After writing this I just saw that the terms of the trade included WR Jon Baldwin going to the 49ers. Baldwin had a fully guaranteed salary of $1,061,510 that now transfers to the 49ers. Next year Baldwin will carry a cap charge of $1,404,765 for San Francisco, none of which is guaranteed. His dead money charge for the Chiefs will be $998,018 in both 2013 and 2014.This was a necessity for Kansas City as they could not absorb the salary cap impact of Jenkins’ contract without moving other players. Kansas City only has around $7,500 in cap room, not enough to trade a conditional pick for Jenkins salary. The trade in essence becomes a financial swap of disappointing first round players that provides the short term needs for the Chiefs and long term needs of the 49ers.
The trade works out to be a financial benefit for both sides. The 49ers will save themselves around $665,000 in guaranteed salary and remove any future guarantees from the books in 2014, when their salary cap looks to be quite tight. The cap starved Chiefs will receive an immediate cap benefit of about $355,000 in return for taking on guaranteed salary in 2014. So it’s a benefit for both sides that, at the very least, makes sense from a financial perspective even if both sides feel there is little to gain from the players involved.
San Francisco has not made many mistakes in the last few seasons, but the drafting of WR AJ Jenkins seems to be one of them. Jenkins, a 1st round draft pick in 2012, only dressed for 3 games in 2012 and has reportedly performed poorly during training camp. The 49’ers lack of depth at the position should have opened up a terrific opportunity for the young WR, but it seems as if he has not capitalized on the chance. Tim Kawakami of the Mercury News wonders if the 49’ers could consider cutting Jenkins rather than wasting a roster spot on a player who seems to be developing so slowly.
The difficulty in cutting Jenkins lies in the salary cap treatment that would apply to Jenkins. As a former first round pick Jenkins has guaranteed salary remaining in his contract that totals $1,727,391. The June 1 rule does not apply to guaranteed salary meaning the entire amount would accelerate to the 2013 salary cap if the player was cut. If cut Jenkins salary cap number would actually rise by $1,021,594. Assuming he would be replaced on the roster by an undrafted rookie, cutting Jenkins would reduce the 49’ers cap space for the year by $1,426,594.
Thought the 49’ers salary cap saw an unexpected bump due to CB Tarell Brown’s forfeiting of a $2 million dollar escalator by not being informed of the conditions of his contract, they are no so flush with cap space that losing so much cap room is an easy pill to swallow. The 49’ers have around $7 million in cap space. Once cap calculations expand to 53 players you can take another $1 million off that figure for the roster expansion, $1 million for a Practice Squad, and they need to replace Michael Crabtree at some point, which is at least another $405,000.
As you can see that $7 million in reported space is really closer to $4.5 million for their internal roster management decisions. If they lose an additional $1.4 million the team will be looking at just a touch above $3 million in cap room at the start of the season. While teams can operate within that budget it is a very low figure and leaves little margin for error. The 49’ers have always been a proactive team in regards to contract extensions and that figure could hamper those efforts. Last season the team needed to restructure multiple contracts in the middle of the season to sign Navarro Bowman to his contract extension. While there are more players they can look to do that with if needed it may be a better idea to maximize their cap space in 2013 than to flush it away on a player whose replacement may be just as unlikely to dress on gameday.
If cut Jenkins will also carry a $1,746,374 dead money charge in 2014 due to acceleration of his signing bonus.