Backloading Contracts and Mortgaging the Future

When teams sign a player to a certain contract value they have a general expectation of return based on that salary figure. The salary cap numbers, however, can be manipulated pretty easily as some teams will create an incredibly low cap figure early in a contract only to see that contract explode in later years even though the cash component of the contract will always remain as is.  I’ve always been of the opinion that the more cap that you can eat early in the contract the more flexibility it gives you in the future when player’s performances decline. With all the talk of restructures of contracts and their impact on the future I wanted to explore just how much teams are backloading or frontloading those deals to have that cap flexibility. Continue reading Backloading Contracts and Mortgaging the Future »

Can Jimmy Graham be Fixed?

I haven’t had as much time to post these past few weeks, but with Seattle’s continued struggles I wanted to look at tight end Jimmy Graham who is on pace to average a non-rookie low in pretty much every statistical category. Sigmund Bloom posted an interesting question the other day on Twitter wondering if the Seahawks overestimated Graham’s ability or if they just can not adapt to his talent. As we all know Seattle paid a big price for Graham (their starting center and a 1st round pick) and this has the look of Percy Harvin, Part II- an ill advised trade that might result in the player finding a new home just one year later. Continue reading Can Jimmy Graham be Fixed? »

Saints Nightmare Continues

Following a brutal loss to the Tampa Bay Buccaneers on Sunday, the Saints season looks to have gotten even bleaker with an injury to starting QB Drew Brees.

I’ve written extensively on the Saints poor handling of their salary cap and how they are a team that has desperately tried to hang on to the past, but if Brees is to miss extensive time it should push the Saints towards the rebuilding effort they have avoided the last few years.  If Brees’ injury were to cause him to miss several weeks I think it would even be fair to ask if this is the last we have seen in aof Brees in a Saints uniform.

Continue reading Saints Nightmare Continues »

Navigating the Saints 2015 Salary Cap

I’ve discussed the New Orleans Saints salary cap strategies pretty much since the day I launched OTC. While most people were heavily focused on the Dallas Cowboys and their yearly salary cap crunch, it was also clear that the Saints were following a similar model and were headed down a path that would make people forget all about the Cowboys cap woes. With the Saints now eliminated from playoff contention and headed for a top 15 draft pick let’s look at what the Saints can do next season.

The Future Salary Cap

No team is as heavily invested in the future as the Saints. Our estimates peg the Saints around $160 million in cap commitments for 2015, the highest number in the NFL by about $9 million. That number will put the Saints anywhere from $18 to $22 million over the salary cap.

Those big numbers extend into future years as well. The Saints have around $140 million in cap charges on the books in 2016, nearly $30 million more than any other team in the NFL. That puts them in a difficult position because things are not necessarily as simple as just hiding money in the future when they will be better equipped to deal with it. There is already too much there to just add more problems to the future.

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Future Expectations

Before the Saints should set out to do anything with their roster they need to give an honest assessment of where the team truly stands, With the exception of a handful of franchises (notably the Patriots, Packers, and either the Manning Colts/Broncos) most teams operate in cycles and the Saints look to be in a down cycle.

The Saints are now five years removed from their Super Bowl championship. From 2009-2011 they produced a record of 37-11. In 2012 they fell to 7-9, effectively ending the cycle for that team. In these last three seasons they will be, at best, 25-23.That is the current cycle that the team is in.

One of the problems for New Orleans, I believe, is that they felt the 2012 record was an aberration due to the suspensions handed down to their coaching staff, so the team went on with business as usual. They certainly bounced back in 2013 with 11 wins, but this was not the same dominant team that played in the past. They struggled away from home and were no longer putting up points right at the top of the NFL.

If anything it was a surprising bounceback performance from their defense that pulled them into the playoffs and more often than not those seasons on defense are unsustainable.  Not surprisingly their defense will rank right at the bottom of the NFL for the second time in three seasons.

With the offense no longer as productive as they were at their peak and the defense in need of a major overhaul you have to ask if you want to continue down the same path with the same group of players or begin the process of overhauling the roster. The latter concept is the one that should choose.

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Paths to Changes

Salary cap relief comes in many forms, but the most popular is the restructuring of contracts. The Saints have mainly focused on maximum cap relief in the past. What happens when searching for max relief you simply take the highest priced players, bring their base salary to the league minimum, and prorate the charges over the balance of the contract. In many cases they may add a “dummy year” (meaning a year that automatically voids in the future) to further lessen the charges. This manner of operation has almost no thought given to the future. You are simply dumping as much money as you can in the future and dealing with that problem when it arrives.

Another option is to focus on minimum cap relief in which you create just enough cap space in 2015 to get by such that you can still release players and/or function in future seasons. The Rams are the team that does this best in the NFL. They simply restructure to become cap compliant rather than restructuring for the sake of going heavy in free agency. If they need more money in the season they restructure again. Not as many teams do this in the NFL.

Releasing players is usually the ultimate form of cap relief. When releasing a player you will clear most of their salary cap charge from the books, simply being left with dead money that was already paid but unaccounted for. The best targets for this are the playrs who may still be productive but are declining and will likely hurt them in the future. This was the reality that faced the Cowboys in 2014 when they cut Demarcus Ware rather than further mortgaging their future with Ware.

The Saints will have 8 players with salary cap figures in excess of $9 million and 11 players with charges in excess of $6 million in 2015. The top players are the ones who the team will need to focus on I order to get their salary cap in order for next season. So how would I work my way through the Saints?

The Easy Restructure

Defensive end Junior Galette has a $12.5 million roster bonus in his contract next season, all of which counts against the cap in 2015. I have no worries about restructuring his contract. He’s extremely productive and young. Though his cap charges can escalate in the future, they are reasonable for the position and adding a bit to it does not hurt me that much. By the time I would worry about his cap charges in the future I’ll still be able to release him without much trouble.

By converting the entire bonus I am creating $10 million in cap room in 2015 and adding just $2.5 million in future seasons. While that $2.5 million is not small, I can still release him in 2018 with just $5.7 million dead, which should be a fraction of a much larger salary cap. It’s possible to get away with less of a restructure but given the overall cap outlook I think this is a must to get the full value.

Look, but Don’t Touch

Drew Brees has a cap charge of $26.4 million in 2015 and $27.4 million in 2016 due to the backloaded, heavy signing bonus structure employed by the Saints. These are the only two years remaining on his current contract which would make it impossible to gain any real relief by converting salary to a bonus next season with using void years which will only serve to worsen the Saints salary cap in the future.

The Saints could consider extending Brees, but considering his contract leverage and age I don’t think it would benefit New Orleans to even broach the subject. Brees is a strong player’s advocate and I would never expect him to do what Tom Brady did by taking a discounted contract over three years to further benefit the team. Nor would I expect him to do what Peyton Manning did and instruct his agents to accept a low offer so he didn’t look like he was exploiting his position in free agency.  Brees is going to ask for the moon because he can.

I can not commit to $20 million or more a season to a player whose next contract will cover the ages of 38-40.  Because of the current cap conditions for the team any short term relief will mean a huge signing bonus that further compromises the team in the future. It will be better for the Saints to just wait until Brees is closer to free agency to actually make the move.

By the same token I am not going to touch the contract of Jimmy Graham. Many tight ends will begin their statistical declines after the 5th and 6th years in the NFL. Graham is already having a down season by his own lofty standards and it will hinder the Saints in the future if they use his contract for short term salary cap relief.

Roster Cuts

Because the Saints are so mortgaged with bonus money many players can not be released for huge cap savings. The most obvious candidate to release would be guard Jahri Evans whose salary cap charge of $11 million is excessive for the position. Cutting Evans, who is graded as below average by Pro Football Focus, would save the team $6 million in cap space in 2015. Considering he’ll be 32 next season his makes sense for the team.

LB Curtis Lofton carries a $9 million cap charge and is graded by PFF as the third worst linebacker in the NFL. He’s not worth the $7 million salary and you can find a better player in the draft. Releasing him saves the team $4 million in cap space.

NT Broderick Bunkley was only seeing action in about 40% of the Saints defensive snaps before he landed on injured reserve and with a $6.1 million cap charge there is no justification for keeping him. Releasing Bunkley saves the team $2.88 million.

Between the restructure of Galette’s contract and the cuts of the three players we went from $20.5 million over a $140 million cap limit to $3.3 million in cap space. More importantly we have now cut $21.8 million in 2016 salary cap figures, helping minimize our problems for 2016 as well.

The Bubble Player

Receiver Marques Colston has also showed signs of slowing down and has not been the same level of player this year as in seasons past. Colston is still the top targeted receiver on the team but it is not the same level of gap that has existed in the past. He has a $9.7 million cap charge and releasing him creates $4.3 million in cap room.

However, he can still be productive on the team even as a declining veteran. As a free agent Colston would probably be looking at money in the Roddy White range of 3 years for $18 million, maybe a bit less. He already earns $7 million next season, which would be fair on a bonus, but he would need to accept a reduction in salary in 2016 to make it work.

For the purposes of this exercise Ill sign him to a new contract that pays him $25 million over four years with $7 million coming in 2015 and $5 million in 2016. That now gives the Saints $7 million in cap room in 2015 and saved another $1.5 million in 2016.

Other Savings Opportunities

The Saints could also release David Hawthorne if they decided to remove two starting linebackers from the team. That would save the team just under $3 million.

Ben Grubbs can have his contract restructured or he could be released outright, but if we are cutting Evans it is probably worth keeping Grubbs on the team to keep more contnuity on the line. I think you also have to be very careful with a restructure, likely holding it off for emergency needs only.

Pierre Thomas accepted a reduced contract in 2014 but with $1.5 million in cap savings possible to attain I could easily see him being replaced. He is probably a player that the team is better suited to release following the draft to see if they find a replacement.

Releasing tight end Ben Watson saves the team $1.5 million in cap room. I would imagine that his release is possible.

The team could extend Cameron Jordan rather than having him play out his rookie contract, but he is a player where I think the team is better off getting more of a look than rushing into a contract.

The 2015 Outlook

$7 million in space should be more than enough to sign a rookie draft class and function in the 2015 season. They can probably retain Mark Ingram if they would like to as well. While it does not give you the opportunity to be wildly active in free agency that is not something the Saints should be anyway. They need to stop looking for the quick fix and get the longer term solution on board.

If there is a player that they desperately need some of those “other savings moves” can get them in the range to do that. If they also decide they are happy with the receiving corps. without Colston they can create space that way.

But the bottom line is that this is an important offseason for the Saints future. If they continue the way of doing business they will likely end up in a dark place one to two years down the line. They can get their books in order this March and avoid having a Raiders-esque purge down the line where you risk becoming an expansion team because of the state of the contracts on your roster.

There are many scenarios we can generate, and the team should be looking through many of them but for all you amateur GM’s and capologists you can use our salary cap calculators to create your own path for the Saints. If you come up with something interesting feel free to share your thoughts in the comments.

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Breaking Down Junior Galette’s $41.5 Million Contract with the New Orleans Saints

Yesterday Saints’ outside linebacker Junior Galette signed a huge four year, $41.5 million contract extension and we were able to obtain the specifics of the contract through a source and its a very interesting deal.

Upon signing Galette is guaranteed $16.75 million of his contract. The fully guaranteed portion of the contract comes from a $750,000 base salary in 2014, a $3.5 million signing bonus, and a $12.5 million roster bonus that is paid on the 3rd day of the 2015 League Year. Normally a guaranteed roster bonus is prorated but to avoid that treatment (though in reality its delaying the inevitable) it will not be fully guaranteed until next week.

In 2015 and 2016 Galette has injury protected salaries of $1.25 million and $5 million respectively. These salaries will become fully guaranteed on the 3rd day of that League Year.

In 2017, 2018, and 2019 Galette can earn non-guaranteed base salaries of $5.2 million, $6.4 million, and $7.3 million. In each season he is eligible for $500,000 in per game active roster bonuses and in 2018 and 2019 will earn a $500,000 roster bonus if he is a member of the team on the 3rd day of the League Year.

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The contract also contains an interesting set of incentives that hinge almost solely on his performance this season. If Galette notches 12 sacks in 2014 he will unlock a $2.5 million roster bonus that is payable in 2016, a $1.3 million escalator in 2018, and another $1.2 million escaltor in 2019. He must also remain a member of the team in good standing to keep those incentives, none of which are guaranteed even if earned. If he is suspended, holds out, or lands on the NFI list it will also void those additional payments.

This is another in a long line of mega contracts for the Saints who are clearly all in when it comes to this season. Galette’s cap number only increased by $50,000 this year but the monstrous $15.45 million cap charge next season has left the Saints with around $160 million in cap charges for their top 51 players. The team has five players with cap charges in excess of $10 million and eight players over $9 million. They are basically replacing the Dallas Cowboys as the baseline for current cap manipulations with minimal regard for the future.

Galette will likely have his contract restructured next season which will make what looks like manageable future contract figures high end figures and creating more trouble for the Saints in the future.

View Junior Galette’s Salary Cap and Contract Page 

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Best & Worst Contracts 2014: New Orleans Saints

Getting back to our best and worst series with a look at the New Orleans Saints

Best Contract: Junior Galette

Junior GaletteThe Saints are kind of a strange team when it comes to contracts. On one end of the spectrum they do a pretty poor job with planning for tomorrow due to restructures, void years, etc… but on the other end of the spectrum they also find these really good bargains on players. Marques Colston is one of the better players in the NFL, and has been that way for years, but they more or less pigeonholed him as a “slot receiver” creating a lower cost position. Zack Strief is an excellent tackle and they seemed to get him at a pretty reasonable discount this offseason. But I will stick with my selection of Junior Galette as the best deal on the team.

What the Saints did with Galette is a textbook example of how you handle a part time player who flashes tremendous potential and has huge upside. When Galette was signed he played about 30% of the defensive snaps for the Saints, as a pass rushing defensive end. That year I had created a metric using Pro Football Focus’ raw data sets that identified Galette as the third most productive rusher in the NFL on a per snap basis. It was clear that there was major upside. The Saints locked him up for $2.5 million a year, which was a discount on even his production as a 30% player. The following is what I wrote before last season on Galette:

The upside is gigantic with Galette and if he develops into a 600 to 800 snap player, the Saints will have someone on the team carrying a cap figure that is going to be about 1/3 of the production amount. This is the type of deal that allows them to carry the salary for Drew Brees. At worst he remains a pure situational player and he is still a bargain even at this price if he continues to produce at his current rate.

Galette developed into a starter, played 848 snaps, and sacked the QB 12 times. His cap charge was just $1.7 million. This year it will be just $2.9 million. His guarantee was $3.5 million. Compare his contract to that of Everson Griffen. Griffen was also never a starter but he did play more snaps. Despite the added opportunities he was, at best, of similar production to Galette. But Griffen showed some upside and ended up received a deal that will never carry a cap charge below $8.2 million and contains $19.8 million guaranteed. This illustrates just how good the Galette deal really was.

Now Galette can actually void his contract if he grabs another 12 sacks this season, which was the concession the Saints had to make. While he may do that I don’t consider that a major negative on the contract.  As long as this contract remains he is not just one of the best contracts on the Saints, but in the entire NFL.

Worst Contract: Curtis Lofton

I could easily see giving the nod to either of the Guards, who have both gone through restructures and are near the top of the food chain, but both are higher quality players and have already made it through a majority of their contracts. While Curtis Lofton is not the highest paid player on the team his contract illustrates all of the problems that the New Orleans Saints seem to have when it comes to contracts with their player. While the $5.5 million a year is a reasonable enough figure for Lofton, the $12.8 million virtually guaranteed was on par with players who earned $2 million more a season than  Lofton did.

Needing to keep his salary cap charge low in the first year of his contract, the team deferred $5 million, in the form of a roster bonus, to 2013, which would have led to a salary cap charge of $7.1 million. In fact the Saints littered the contract with offseason roster bonuses in 2014 and 2015 as well. These are dangerous because it gives the team almost no time to work on pay reductions for a player and instead forces them in to what can be hasty decisions. In 2013 the Saints converted his $5 million roster bonus to a prorated bonus and added a voidable contract year to further reduce Lofton’s cap charges.

His cap charge in 2015 now sits at $9 million with dead money having rising from just $2 million to $5. Lofton has a large roster bonus coming his way ($4.5 million) so the Saints will need to find a way to rework the contract. If he opts to try free agency rather than take a pay cut all his money will accelerate to the cap, and in the end could still just end up back in New Orleans if they really want him. If they did not use the roster bonus mechanism this would be a much easier task to accomplish.

The $5 million in dead money gives Lofton some decent leverage with the team. If you consider that $5 million sunk it means the Saints need to find a replacement that can come in under $4 million in cap charges for the year to keep the positional budgeting at $9 million. While there are ways to work the numbers to do that it is mostly a lower quality player that will be attracted to the position, unless the team is looking to add to an already bad future cap situation. They likely, at best, would make a lateral move on the position. Had there been no restructures they would have had $6 million or so to spend in cap dollars to break even.  That is a different tier of player than where they will be looking now.

2013’s Best and Worst Panthers Contracts:

2013 Best Contract: Junior Galette (See above)

2013 Worst Contract: Will Smith (Released by Saints)

Click Here to Check out OTC’s other Best and Worst Contracts from around the NFL!

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