Best and Worst NFL Contracts 2016: New England Patriots

Over the summer we’ll be putting up our selections for the best and worst contract on each team. Our journey through the AFC East continues with the New England Patriots

Best: Rob Gronkowski, 6 years, $54 million, $13.2M guaranteed

The Patriots have a few contenders for this one that I thought deserved serious consideration. Tom Brady historically has had some very team friendly contracts, but I passed on him at this point because of his age and huge signing bonus commitment. Sebastian Vollmer has a pretty unique contract that puts a good deal of risk on the player and allows the Patriots to kind of control the upside.  But the Gronkowski deal at this point I think stands out above all the others. Continue reading Best and Worst NFL Contracts 2016: New England Patriots »

Rob Gronkowski’s Contract and How it Ties Into His Playing Decision

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There is a great column up on ESPN by Ed Werder about a growing resentment towards TE Rob Gronkowski of the Patriots for not playing in games on Sundays due  to a fear of re-injuring his forearm. I wanted to look at the financials of his deal and explain why Gronkowski’s camp wants to make certain that the possibility of re-injury is next to nothing.

Gronkowski signed an incredible $54 million dollar contract extension in June of 2012, that was the largest contract ever given to a Tight End. However, Gronkowski still had two years remaining on his rookie contract, which means that the extension years technically do not even begin until 2014. Gronkowski was given an $8 million dollar signing bonus, but that was the only change to the existing contract years as his base salary and workout structure for 12 and 13 were left unchanged.

In both 2014 and 2015 Gronkowski’s contract contains relative low salaries. He will earn $4 million dollars in 2014 and $5 million in 2015, for a total of $17 million over the first two extension years.  That is actually light for a top tier TE contract, let alone one that was for the highest paid player in the NFL. In the same timeframe Antonio Gates earned about $20.8 million, Vernon Davis about $19.8 million, and Jason Witten $18 million. On a percentage basis Gronkowski actually earns less of his 5 year contract value than Jared Cook of the Rams. Cook’s $14 million two year payout represents 39.9% of the value, while Gronkowki’s totals 38.6%.

What further complicates the situation is the guarantees and bonus structure located in the contract. Gronkowski’s 2014 salary is fully guaranteed, which essentially makes his 2013 season irrelevant towards his contractual future. 2015 is guaranteed, at the moment, for injury only. It does not become fully guaranteed until the day of the 2015 League Year.  The real money in the contract is unlocked by New England picking up an option in 2015 that will keep the 2016 thru 2019 seasons intact. The option is worth $10 million and would pretty much ensure him of earning another $18 million thru 2017. That would bring the 4 year total on the contract to $35 million which is exceptional money at the position.

This option is very unique in that it will be charged against the salary cap in 2015, but the decision is not made until after the 2015 season on actually exercising it. Gronkowski’s salary cap figure in 2015 is $8.65 million because of the early accrual of the option bonus. Releasing Gronkowski before his full guarantee kicks in would save the team $5.35 million in cap space.

So when you look at the salary structure of the contract Gronkowski’s ability to earn money in 2014 is not tied whatsoever to the 2013 season. That money is locked in. But his future is tied to how he performs in 2014 and again in 2015. If Gronkowski rushes back from injury, re-injures his arm, and goes through another 10-12 game season in 2014 his ability to earn his 2015 salary could be compromised. New England could even approach him about restructuring his deal to remove or defer the option if the play and/or playing time significantly declines.  If this becomes a long term lingering issue his chance to earn the big contract money that happens after 2015 will essentially vanish.

There seems to be, based on published reports, distrust between Gronkowski’s side and the Patriots due to the handling of Gronkowski’s initial injury. The belief is that the organization more or less rushed a surgery for their short term gain when no surgery was really needed. The Patriots also declined the option this year on WR Brandon Lloyd which may have opened some eyes around Gronkowski’s people about how non-guaranteed those options truly are. For Gronkowski’s financial future he needs to perform in future seasons, not this one, and that could be an issue as they decide when the time is right to allow him to take on full contract in a real game.

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Projecting a Contract for the Saints Jimmy Graham

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One of the biggest name free agents in 2014 will be Tight End Jimmy Graham of the New Orleans Saints. Because of his incredible start to the season, racking up 593 yards in just 4 weeks, he and his pending contract have become discussion points around the league, so we’ll take our look as well at Graham and see what could lie in store.

Statistically Speaking

I think there is a perception around the NFL that Graham had little to gain by having another incredible season this year. I actually agreed with that until running some of the numbers on Graham for the last two years where and comparing them with a number of other “high end” Tight Ends in the NFL over the same time frame. While Graham produced the most yards of any player at the position over the two year period he was also the most targeted player at the position.  His numbers were actually behind those of Rob Gronkowski on a per game basis. Here are the two year averages at the position for the top 10 in cumulative yards from 2011 and 2012.

TE market 1

Had Graham been extended before this season I would think it would be arguable about approaching the contract numbers of Gronkowski. Unless the argument is strictly based on games (which is certainly important) Graham would not track as the best in the NFL at the position. That changes for Graham this season.

Graham is on pace for a 118 reception season for a ridiculous 1897 yards. His catch rate is up to nearly 70% and he is averaging 16 yards per reception. With Gronkowski on the shelf with another set of injuries Graham has distanced himself from the field and even if he slows down on the year, he should have done enough to break away from the pack. But if Graham finished the year with 1000-1100 yards I don’t think his leverage would nearly be as high as many people believed coming into the season.

Pushing Beyond the Position

Graham is going to shatter records this year with the type of season he is having which is going to bring up the major question of whether or not Graham should be treated as a Wide Receiver or a Tight End.  From a contract standpoint there is a major difference between the two positions. The highest paid Tight End averages $9 million a season. $9 million is less than Miles Austin makes per year with the Dallas Cowboys. So the disparity between the two positions is great. But this is an argument that no player has been able to win in the past. Can Graham?

The current highest ever receiving total for a Tight End is 1,397 yards which was accomplished by Gronkowski in 2011. Graham’s 2011 output of 1,310 yards ranks second all time. Only four players in the history of the NFL have produced more than 1,200 yards at the Tight End position. So the type of numbers Graham is producing are historic, but are they WR contract worthy?

For Graham to be in the conversation we obviously need to make some assumptions. The assumption I will make is that he will finish the year with about 1,540 yards, meaning he’ll produce for 13 weeks this season at his current rate and have three games of no production.    This averages out to about 90 yards a game down the stretch of the season which is not unreasonable all things considered.

I want to take the three year averages for Graham and compare them to the top 10 paid receivers in the NFL at the time they signed their contracts. So for Brandon Marshall we will be looking at his 3 year stats from 2007 through 2009 with the Denver Broncos and not with the Dolphins or Bears since those stats had no bearing on the contract he received. I will also include Gronkowski’s numbers for the last three seasons in the mix.

TE market

Graham, if he meets the production levels of the assumption, does not just track with the most highly compensated players in the NFL, he exceeds their performance. He ranks 2nd in receptions, 5th in targets, 2nd in yards, 2nd in touchdowns, 3rd in yards per game, 3rd in catch rate, 9th in yards per reception, and 7th in yards per target. Those would be exceptional numbers and he will likely be the first Tight End to produce at this kind of level walking into a contract year (I say likely because Tony Gonzalez possibly could have been in a similar spot back in 2005).

One of the arguments against Graham will likely be the offense that he plays in inflates his stats because of all the weapons the team has at their disposal. While there is some truth to that he is the most targeted receiver on his team the last few years and is the player who should get the most defensive attention on the Saints team. Saints QB Drew Brees does spread the football around so he may not be a number 1 like a Brandon Marshall who has the entire passing game run through him, but it does compare favorably to many on this list including Wallace, Jackson and Harvin.

Perhaps the bigger argument against Graham will be age. Graham, despite so few years in the NFL, will be 28 in 2014. So this is not signing a very young player like Gronkowski who will only be 25 next season. He is going to be looked at as more of a veteran in terms of years ahead of him. Still this is a prime age and the continued success of Witten, Gonzalez, Gates, plus numerous Wide Receivers over the age of 30 should help him fight any such arguments.

The Saints First Move

In hindsight the Saints probably made a mistake not extending Graham this season. Part of that was circumstances as the Saints had, and continue to have, a poor salary cap situation and they decided to try to keep the team intact rather than creating room that could have allowed for an extension that would have been slightly less than the one given to Gronkowski. Now he should surpass Gronkowski by quite a bit. At this point I’m not sure the Saints would even benefit from an extension now rather than next season.

The Saints, despite the cap woes, will apply the Franchise tag to Graham to control his rights next season. This is where Graham will need to argue that he is a WR and not a TE with the League. The Franchise tag for a Tight End is in the ballpark of $6 million compared to $10.5 million for a Wide Receiver.  The Saints will need to shave significant salary to be cap compliant in 2014 so that extra $4.5 million is of major importance. Getting the WR designation would also remove the threat of the Exclusive franchise tag as it would be in the ballpark of $14.5 million for a receiver and just $8.5 million for a TE.

Removing that threat is important for Graham, who will not want to play under any tag provisions that will only bring him closer to 30 when true free agency finally begins. In 2012 the Saints applied the Exclusive tag to QB Drew Brees. The two sides fought over a contract until mid-July when the Saints finally gave in to Brees’ desire to earn $20 million a season. Graham’s best contract will come from a situation where he can shop himself around the NFL even at the cost of a number 1 draft pick. If he gets that WR designation the Saints will be in a position where they are forced to negotiate for cap purposes.

I do think that Brees’ contract is also helpful in that Brees was the first player in the NFL to break the $20 million dollar barrier. At the time the highest paid player in the NFL was Peyton Manning at $19.2 million and behind him was Tom Brady at a shade above $18 million. In terms of percentage raise over top of the market that would place Graham somewhere between $9.4 and $9.9 million a year which I would guess would be the absolute least he would take if his played trailed off dramatically over the next 11 games. Graham is superior to Gronkowski at this point so arguing a raise should be simple. At the least Graham should be making it a point to be the first TE to break the $10 million a year barrier the same way that Brees was the guy who broke the $20 million number.

Contract Guesstimates

Now even though the numbers are projected to be exceptional for Graham and he is going to enter a contract period off his best season, dreaming of Fitzgerald/Johnson money is ludicrous. These are players I refer to as “break the system” players in that their salaries are so far above the norms for elite players that they have broken the contract system in place in the NFL.

Last year Calvin Johnson’s contract represented a 67% increase over the 5th highest salary at the WR position.  In other words he(well actually Fitzgerald since he was the original huge contract) broke the pay system in place. That number has decreased now (44.7%), but in part that is because Johnson’s and Fitzgerald’s contracts raised the market for the likes of Bowe and Wallace. Other position busters include Adrian Peterson (86.3%, around 65% at time of signing) and Darrelle Revis (64.1%). You have to be a special talent to break the system. The other player who did it would be Chris Johnson, who set the standard a few days before Peterson received his extension from Minnesota. That is really it.

If I am Jimmy Graham I want to break the system. That has to be my goal in this negotiation. While in the worst possible case I may settler for $10 million a year the reality is that I want Graham to be a position buster. Gronkowski failed to do that. His $9 million a year salary represented a 24% increase over the 5th highest paid player at his position. Using this logic helps me avoid the WR vs TE debate. I will agree Graham is a Tight End provided that the Saints agree that he has separated himself apart from the field the way all the others have. I think that is an easier argument to have than first going down the Wide Receiver versus Tight End route.

The two star receivers were unique. They were devastating number 1 targets that could not be replaced and had created a great deal of separation between themselves and the rest of the receivers in the NFL. The two running backs were unique and had were the only non-QB’s in the NFL that teams felt they could build around. Revis, in his prime with the Jets, had no peer. All of these players impacted the game beyond the norms of their position.  Graham is that same type of player.

This is not a negotiation about earning “receiver money”. It should be a negotiation about recognizing how great the separation is between Graham and Jason Witten or Jared Cook. The numbers show how superior Graham is to those players.   You can compare him to a WR the way Revis could be compared to a pass rusher or Peterson to a QB. Those players could find ways to back that up and so can Graham if he finishes this season over 1,500 yards.

I want to be somewhere around that 65% raise level that most of the others were at the time they signed their contracts. Once Graham is signed the 5th highest contract on the books should be that of Antonio Gates at $7.235 million. That works Graham out to be just under $11.94 million a season.  That should be the fair number for him. It will ensure that he is the highest paid Tight End for, most likely, the entire contract.

Graham will probably earn anywhere from 48% to 50% of the contract in the first three years, based on some of the other contracts that we want to use as a guideline. Revis receives 50% over the first three years, though his deal contained no guarantees. Fitzgerald earned nearly 52.5% of the 6 year contract value in his first three new money years while Calvin Johnson and Peterson earned 48%.  Chris Johnson’s contract was just 4 years in length so we will throw that one out. Looking at those numbers it’s reasonable for Graham to receive around $34.38 million within the first three seasons of his contract. That number will far surpass the $30 million earned by Gronkowski .

In terms of a first year cash payout we come up with the following: Revis earned 16.7%, Peterson 20.8%, Fitzgerald 34%, and Johnson 29.7%. I think it’s also worth mentioning that Gronkowski earned 22% of his contract in the first year and that the Saints were willing to go to 40% of the contract value for Brees. Knowing that Tight End is not considered a premier position, I don’t think I would touch the WR numbers. Peterson and Revis would be in similar less importance positions and accordingly received much less up front. I think I would be happy hitting the same percentage as Gronkowski, which works out to a payout of $15.76 million in 2014. Regardless, he needs to earn about 34% of his deal in the first two years to keep pace with the “system breakers”.

How to Keep Him on the Saints

Some of the numbers we are talking about are pretty steep. I currently have the Saints estimates around $138 million in 2014 cap commitments. Just to reach the salary cap limits they will need to bring that number down to around $124.5 million. $11.5 million will be created by releasing Will Smith and from there they will need to begin restructuring contracts to get below the salary cap limits and have room for completing their roster. Their cap does not get much better in 2015 either, so Graham is going to need to carry low cap figures in the first two years of his contract.

That will work in Graham’s favor because it is going to require the use of multiple prorated bonuses to artificially lower his cap numbers while keeping the cash outflows high.  Though I don’t believe the Saints are a big option bonus team I would imagine that the contract will either contain an option bonus in 2015 or be designed to allow for a conversion of salary to prorated bonus.

My proposed contract structure will contain a minimum salary in 2014 and close to the minimum in 2015. I would use a $15 million dollar signing bonus and a $7.5 million option bonus payable in 2014. I’d have the first two years salaries fully guaranteed with an injury guarantee in 2016. I don’t believe that the Saints would need to go higher than that on the guarantees unless they need to backup the option with a guarantee. Considering the dead money in the deal Graham probably can concede on the paper guarantees. Here would be a proposed contract structure:

graham proposed cap

And here is how our cash flows will work out:

Graham proposed cash

This is going to be a very player friendly contract that will essentially ensure him of earning those first three seasons. His fourth year is virtually guaranteed unless the Saints choose to designate him a June 1 cut. For that reason I would imagine in this structure a roster bonus of $4-$5 million being in place in 2017 to ensure a quick decision by New Orleans. The high cap figures in 2017 and 2018 should force the Saints into an early extension or a release which at 31 and 32 years old would be a final chance to cash in.

The Saints get the low cap figures in the first two years. Applying an exclusive tag to Graham in 2014 would cost around $8.5 million. Under this proposed deal he is only going to carry $9.33 million in salary cap charges in 2014 and 2015 combined. That is a major benefit for the Saints. The cap structure is flexible enough to keep the June 1 release a possibility in the fourth year so they would have some outs after investing around $34 million in Graham for three years in the event he or the team goes south.

Overall I would think if Graham keeps this pace up he will have an exceptional chance at reaching the numbers discussed here. In the NFL teams will always find a way to keep the players that they feel are irreplaceable and I would be quite surprised if Graham is wearing another uniform at any point over the next few years. I’d expect this deal to be done certainly before the 2014 offseason begins and maybe even this year if the Saints feel that they have unused cap room that can be used towards the contract.

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Looking at the Contracts of Rob Gronkowski and Aaron Hernandez

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With the Patriots star Tight End duo in the news I figured I would do a quick once over of the details I had on their contracts to point out some of the options for the players in the event of the worst case scenarios and clear up some misconceptions about the guarantees in their contracts and potential future cap treatments.

Rob Gronkowsi signed an extension in 2012 that contained  about $13.2 million in full guarantees and another $5 million guaranteed for injury only. His cap numbers the next two seasons are very manageable at $2.75 and $5.4 million, neither of which rank in the top 10 of the position. His salary is fully guaranteed in 2014. The protection for the Patriots comes in 2015. Gronkowski’s base salary is guaranteed for injury only in 2015 and does not vest to a full guarantee until the 5th day of the 2015 League Year.

To collect on an injury guarantee Gronkowski would need to be incapable of playing in the NFL that season due to his injury, so provided he can pass a physical the Patriots can release him anytime between the end of the 2014 Super Bowl and the 5th day of the 2015 League Year with no financial penalties. If Gronkowski remained on the Patriots his cap charge would be $8.65 million, highest in the NFL, making it a unlikely number if he is a diminished player from all the injuries. If released prior to  the start of the league year his dead money cap charge will only be $3.3 million making it cost effective for the Patriots to release him.

The Patriots have even further protection in the form of a $10 million dollar option bonus due in 2016 in the event they want to give Gronkowski a look in 2015 even at the high cap number.  The option is unique in that it is accounted for against the cap starting in 2015 despite actual payment not being due until 2016.  The reason for this is that the decision date on the option is the final day of the 2015 League Year which occurs long after the season and Super Bowl are played. If the Patriots were to release him prior to the bonus the dead money in 2016 would only be $1.65 million and they would receive a $2 million cap credit for money accounted for but not paid in 2015.

So the fact is the Patriots have little to worry about when it comes to injuries with Gronkowksi from a financial standpoint. His cap hits are low the next two seasons and they have a large number of options in 2015 to move on with little financial penalty over the next two seasons.

Aaron Hernandez’ situation is a bit different as we are now looking at a potential off the field issue rather than an injury issue. I don’t think anybody knows what is really going on right now and its only fair to speculate that whatever is happening could prove to be a distraction to Hernandez. Hernandez already has a partial guarantee on his salary in 2014 and, unlike Gronkowski, no future options or vesting guarantees. He received a $12.5 million dollar signing bonus so the cost to release or trade next year would include $7.5 million in dead money just from that bonus.   If the situation proves to be serious and Hernandez is unable to play in the NFL the Patriots would have the right to recover money already paid earning credits each year he is unavailable to the team. So the Patriots have plenty of protection in the event of the worst possible scenarios as we wait to learn more about what this ongoing investigation is really about.

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