Looking At the Houston Texans Salary Cap and Coaching Vacancy

Posted on December 29, 2013 by Jason Fitzgerald

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Driving home from work the other day I heard a discussion between Jay Glazer of Fox and Mike Francesa of WFAN where they felt as if the Texans head coaching job was “one of the best openings in the last 10 years”. While some of their talk focused on ownership that doesn’t meddle most of it was centered around the strength of the roster and flexibility they have. Glazer compared it to the Chiefs of 2012. I admit I was surprised when I heard that so I wanted to look deeper at the team.

Going into the season I had felt the Texans were a team that likely was going to trend downward. We see it all the time in the NFL. You are pretty good for a long period of time and eventually the wheels come off. The 2011 Houston Texans were an excellent football team. Everything clicked on defense and their offense was potent. Unfortunately QB Matt Schaub was injured and that killed any hopes for real playoff success. The 2012 team was much more inconsistent than the 2011 team. They were up at times and down at others. Schaub returned but faded in critical situations. The wheels fell off for him and the Texans this year.

In terms of salary cap the Texans are not in a position to be active in the way the Chiefs were this past offseason. Kansas City had the cap room to trade for a mid grade QB, extend a franchise tender to a left tackle, extend a wide receiver on a top of the market contract, and then go out and sign a number of players to add to the poorly coached team. The Chiefs had millions upon millions to spend.

The Texans have been tight on cap space all season and will carry over just about $1.1 million to the 2014 NFL season. Based on their current cap commitments the team will have just slightly more than $9 million in cap space to spend on improving their team, a number that does not include tenders (though they have no RFAs of note) or escalators. Considering one of those improvements will come with the number 1 pick in the draft, whose cap charge will be just over $4 million, the team has essentially no money to spend with the roster as currently constructed.

The Texans will go into the offseason with nine free agents that are considered contributors to the team. Houston will need to create some cap space in order to re-sign some of these starters and rotational players. The list is as follows:

Name	Position	% Snaps
Wade Smith	G	87%
Antonio Smith	DE	74%
Garrett Graham	TE	72%
Darryl Sharpton	ILB	71%
Joe Mays	ILB	58%
Earl Mitchell	DT	54%
Ben Tate	RB	45%
Ryan Harris	T	43%
Greg Jones	FB	29%

The question becomes where do they go to create cap space? It would seem to be a foregone conclusion that the team releases Schaub, but that move only saves the team $4 million, essentially the room it needs to sign his replacement, which will be expected to be their top draft pick. But beyond Schaub where is there to go for cap relief?

The Texans need to restructure contracts in the past or sign players in a manner to fit short term within the cap has them with very limited options. They are not a team that has one or two players making large sums of money with no realistic chance of being on the team in 2014. The Texans highest cap savings are TE Owen Daniels and S Danieal Manning at $4.5 million each. Both were injured in 2013, but would be penciled in as starters in 2014. Both are also free agents following the 2014 season so there is no restructure relief available and extending two players on the wrong side of 30 coming off injury would not seem to be beneficial. Both could take paycuts but the team is not going to get major relief through just these two players.

CB Johnathan Joseph would be a logical candidate for restructure as he has an $11.25 million hit and they could push a portion of it to 2015, which is the final year of Joseph’s contract. Again that is only going to save around $4 million with the bill coming due in 2015, so it doesn’t make a huge dent in the Texans salary cap.

The two big questions will be what the team does with WR Andre Johnson and RB Arian Foster. Both are big ticket players, but Johnson will be 33 years old and Foster’s body already seems to be breaking down. The Texans have restructured Johnson’s contract so many times that going there again is going to cause damage in the future. Johnson is still a great player but he is nearing that age where the Wide Receiver numbers begin to decline and if you bring a rookie QB into the mix you never know what can happen. His cap in 2015 is already over $16 million and the team has over $7 million in dead money there if they had to release him. Adding more money to those totals seems like a bad idea.

Foster has an $8.5 million hit and release saves just $1 million in cap, but there at least has to be a discussion about his future. Tate is a younger and likely cheaper option at this time and it would seem unlikely that the team can afford both players. With Foster’s injuries it’s a situation that needs to be watched carefully. Foster would more likely be a June 1 cut candidate so that his salary cap savings can be applied to signing draft picks.

Houston also needs to be concerned with the future of LB Brian Cushing. When he plays Cushing is one of the better inside linebackers in the NFL, and the Texans are paying him accordingly, but he has only played 12 games in the last two years. This could turn into a Jon Beason situation where constant injuries lead to wasted cap room.

Now I’m painting a bleaker picture than this really is- The Texans do have really young talent ranging from JJ Watt, arguably the best defensive player in the NFL, to DeAndre Hopkins, who could very well be one of the next stud receivers in the NFL. The team this year just never recovered from some early losses and things spiraled out of control as injuries piled up. They also play in one of the worst divisions in the NFL making a quick turnaround that much easier.

But I don’t see how the Texans are a new coach away from greatness. This is a team that probably underachieved for some time in part due to coaching and then peaked in 2011. Now its time to begin turning parts of the roster over again. The Texans had 7 starters this year over the age of 30 and 8 over the age of 29, so turnover is a necessity. The short term cap position does not really lend itself to adding significantly to the team in free agency. The team does not have a Quarterback on the roster. There are just as many questions with this team as there are with most teams searching for a head coach. .

I don’t think that in terms of readiness that this job compares with some of the more recent coaching hires that included Mike Tomlin to the Steelers, Jim Harbaugh to the 49ers, or Rex Ryan to the Jets. The Steelers were set at the QB position when Tomlin took charge and did not really have a roster overhaul to consider. The other two coaches did not have Quarterbacks (though Ryan did end up with a top draft choice to play the position) but both had tremendous roster flexibility due to better managed salary caps and teams that had not yet peaked. At the time all three were highly desirable jobs.

The Texans are not a bad job like the Raiders, but to me they are a rebuilding team that must first navigate the breaking down of a team following successful period of football before they make the turn to returning deeper into the playoffs. Any coach that takes the team over should be expected to improve off this seasons dreadful performance but most likely it will take two to three years to drive home the results that many seem to think are just going to happen overnight.

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RB Arian Foster Done For the Year

Posted on November 10, 2013 by Jason Fitzgerald

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According to NFL.com Houston Texans Running Back Arian Foster is headed to Injured Reserve, which will end his 2013 season. Foster, who earns $31,250 for each game his is active, will lose out on $250,000 in compensation for the year due to the injury. His 2014 salary cap number will also reduce by $250,000 due to half of his 2014 roster bonus now considers not likely to be earned.

For Foster the injury could be a long term consideration for his contractual future. Running backs in the NFL are traditionally only effective for a short period and with the Texans failing badly this year there will naturally be questions about paying $5.75 million in base salary to a player who will have essentially missed 13 games (he barely played in two games this year because of injuries) in the last three seasons. Foster will only be 28 next year so he is not at the age where teams really begin to shy away from the runners, but it could be a consideration. Releasing Foster would save the team $1 million in cap space in 2014.

Foster has some added protection because Fantex has pledged a ridiculous $10 million dollars for a low percentage of his future “brand income”. This money should be contingent on Fantex raising the money through a Foster IPO and I wonder if an injury now damages their chances of raising the money. Provided they raise it, and I would imagine enough fans want to “own” a part of a player, Foster will have little to worry about.

The injury to Foster now opens the door for backup Ben Tate to prove that he is worth a starting position in the NFL. Tate will be a free agent following the season. There have been questions about Tate’s ability to handle a full load and he will get to answer those questions now. While I doubt he will get the kind of contract some have speculated about (upwards of $7 million a season) a strong showing should be able to get him in the Reggie Bush area of $3.5 to $4 million a season. A poor showing and he may have to settle for being a secondary back in the future.

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Looking at Fantex: Valuation of Arian Foster

Posted on October 31, 2013 by Jason Fitzgerald

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Fantex is a new platform in which people will be able to invest in athletes. Essentially the company will pre-pay an athlete a specific amount of money in return for a percentage of his future earnings. A few weeks ago they locked up their first player, RB Arian Foster of the Houston Texans. Today they have locked up their second player, TE Vernon Davis of the San Francisco 49ers.

While I consider the idea itself to be somewhat neat, I do feel that there should be major questions as to the amount of money that they are seeing fit to invest in the athlete’s brand for such a small return. While I can’t speak for the off field earnings, most NFL players will earn a majority of their money via the football field. Sure there are other opportunities once their career ends, and some have become very successful out of the league, but would you fund a general college graduate money to invest as he sees fit or to help him buy a home for a percent of his future wages? I would think in most cases the answer is no, but that’s a matter of personal taste I guess.

What I can talk about here is the football life of the players in question. For this post we’ll look at Foster and then move on to Davis in a later posting. Fantex will be paying Arian Foster $10 million dollars to get a 20% piece of action on Foster in the future. Foster is 27 years old and in the 2nd year of a five year contract that he signed in 2012. As is standard in most NFL contracts Foster earned significant money in the first year of the contract. Of the $43.5 million total contract value, 41.3% was earned in 2012, meaning Fantex is only eligible to collect on $25.5 million if I am reading their prospectus correctly.

Foster is virtually guaranteed to earn his salary in 2014, which is $5.75 million. He will also earn $31,250 for every game he is active. In 2015 the Texans will create $4 million in cap room if they were to release Foster, who will be 29 years old at that point. The NFL, in general, is not kind to older running backs. Since 2000 only 195 players have played the position at age 29 or older. At 30 the number falls to 129 and then 102 by the time the age is 31.

Are those players productive? At 29 players are still productive. 18 players ran for over 1,000 yards at the age of 29 and 32 logged over 700 yards. So about 11% of all 29 year old runners were very productive and 20% were productive. Of those playing at 30 the numbers are around 10% and 17% and it’s similar at age 31. Only three runners have logged a 1,000 yard season at 32 or older and just 10 a 700 yard season. The odds would be that Foster’s final season of his career would occur at the age of 31 with an outside chance of playing at 32 if the right situation occurs.

What would we expect before that time? We’ll be pretty aggressive with our thought process and assume that Foster will earn his full salaries from the Texans in 2014 and 2015, meaning he does not get cut nor miss a game. In 2016 we will assume he signs a contract similar to the one signed by Steven Jackson at the age of the 30 with the Atlanta Falcons at a 2% raise to account for salary cap inflation. We will also assume he earns his full salary in both 2016 and 2017 with his new team, no matter how unlikely that is. His best chance to earn his full salaries is to likely stay with one team which is what has helped Fred Jackson, now 32, stay in the NFL.

Year	Age	Salary	Fantex Take
2013	27	$5,750,000	$1,150,000
2014	28	$6,250,000	$1,250,000
2015	29	$6,500,000	$1,300,000
2016	30	$5,355,000	$1,071,000
2017	31	$3,060,000	$612,000
2018	32	$1,500,000	$300,000
Total		$28,415,000	$5,683,000

So from Foster’s football income, with a pretty aggressive outlook on our end, Fantex will still need to recover $5,467,000 just to break even on the initial $10 million IPO when Foster’s career is over. That would require Foster to earn over $21.5 million dollars in ventures outside the NFL, unless he commands a monster contract at the age of 29 or 30, which has almost no chance of occurring in today’s NFL. Considering the investor is more or less investing in Fantex and their ability to turn a profit to pay dividends, this specific investment, not even taking into account present value of money exchanged, has almost no chance of making money.

This deal with Foster is a pretty rock solid deal for the player. His only requirement is to not “resign” from the NFL through 2015, which would seem to mean voluntarily retire rather than be forced out of the NFL due to skill. There are provisions to allow him to no longer play if he is injured. Most likely the $10 million initial payment to Foster will never be paid back in full.

This is very different than investing in a business where an initial investment usually brings growing returns. If we look at Foster as a product, Foster is essentially at the mature stage of his lifecycle and about to decline. The lifespan is so short in the NFL that investing at this stage, other than to gain notoriety as a company, which is likely the goal of Fantex, should almost always be a losing proposition. The only real way to profit on this sport using this technique would seem to be to invest in the unknown quantity and hope someone hits. Imagine if a company like this took a risk on paying an undrafted free agent like Foster around $700,000 in 2009 before he was a star for a 20% stake in his future income? Of course for every Foster there are probably 30 UDFAs who never play a down in the NFL.

We’ll look at Vernon Davis’ football prospects in the near future.

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