Recent Posts by Jason
With so much Antonio Brown news today and so many questions about how things work on the salary cap I decided to throw together a quick post on the topic that will hopefully answer the questions I have been getting. So lets take a look.
What is the dead money and cap savings is Brown is cut?
If Antonio Brown is cut the Steelers will need to account for at least $21.12 million on the salary cap. This dead money is from a $19 million signing bonus that was paid to Brown in 2017 and $12.96 million salary conversion paid to Brown in 2018 to help the Steelers with their salary cap this season. The $19 million was prorated over five years and the $12.96 million over 4 years. Both have three years of proration remaining and the Steelers need to account for all of that remaining money whether or not he is on the team next year.
If Brown is released the team will save $1.045 million in cap room. At least $495,000 of that would be offset by whomever takes his place on the roster so the effective cap savings are nil.
Wait I read that they will save $15.2 million if they cut him and millions more in the future? What gives?
The $15.2 million is the amount of cash that the team saves this year if they release Brown in March. From a salary cap perspective this is money that is saved for the future though it is not realized this year. The best way to visualize this is to do a quick scenario analysis based on when the Steelers move on.
|Year||Cap if Cut in 2019||Cap if Cut in 2020||Cap if cut in 2021|
As you can see they save $15.125 million by cutting him now versus 2020 and $26.425 million by cutting him now versus 2021.
This type of analysis makes plenty of sense when you are talking about an underperforming/declining player. If you have an 80% chance of cutting a player in 2020 you may as well just bite the bullet and do it now even if it looks bad on the cap. This is why decisions are made on players like Ndamukong Suh in Miami to cut now rather than later. It’s a strong argument for why the Giants should have moved on from Eli Manning this year.
Brown isn’t that type of player though. The odds of Brown being cut for football reasons in 2020 are very low so there is no need to accelerate the process nor any try benefit to it because he is worth the contract that he is being paid. If you are cutting Brown it’s because you think there is some irreparable damage between the organization and him that you can not fix. You aren’t going to give it a shot in 2019 only to cut him in 2020. Either the Steelers are in or out. This type of matrix should play no role in this particular decision.
Is the salary cap a concern at all for this move?
Yes and no. In general the salary cap is no longer a barrier for moves like this. Salaries have not kept up with the rising salary cap and teams have learned to work the system better to absorb cap hits like this one. The only true protection players have anymore are fully guaranteed salaries and teams pretty much only peg those to years of expected contributions.
That said it is still a ridiculous number. The highest one year cap charge we have is a $19.3 million cap charge for Peyton Manning in 2012 which was offset in part by the fact that the team declined an option on him. After Manning we are looking at Brock Osweiler at $16 million in 2017 and Jason Pierre-Paul in 2018 at $15 million. Ndamukong Suh had over $22 million in dead charges but they were split across two years and not a single season.
To put things in perspective the Steelers have had a total of about $31 million in dead money combined across three seasons! This would be completely against their way of doing business to take on that kind of charge no matter how upset the player is. So the big number should give the Steelers a lot to consider for this season.
What about a post June 1 cut? Does that make it cheaper?
A June 1 cut allows you to manipulate the accounting for dead money on a contract. In this scenario what happens is the Steelers would release Brown on the first day of free agency with the June 1 designation. From the start of free agency to June 1, Brown would still count on the Steelers salary cap at $22.165 million- his full cap charge. On June 2nd Brown would be removed from the books as an “active” player and only have his prorated charge count against the cap, which is $7.04 million. That would lead to a cap savings of $15.125 million in 2019.
But don’t get too excited. The other $14.08 million would simply move to 2020. So all the June 1 does is delay the inevitable.
Typically a June 1 is used when a team can not deal with the salary cap charge of releasing the player because of other cap related issues. Using the June 1 in cases like this allows the team to pretty much spend right up the cap in March when free agency is in full swing knowing that they have a big cushion coming their way in June which can be used for rookies and as a safety net in the regular season. The Dolphins were a team that kind of used this strategy this year.
Given that the Steelers are not really a big free agent spender and their cap, while not great, isn’t problematic, Im not sure they would benefit from this unless just from a psychological standpoint so they don’t see the big $20M number in one year. Its also worth noting that in 2020 there could be some different rules regarding dead money and some teams may not want to push too much money into 2020 from 2019.
What about a trade? How much cap relief is there is a trade?
A trade and a cut are treated identical on the cap unless the player has guaranteed salaries remaining in his contract. Brown has none. So cut or traded the cost is $21.12 million on the cap.
Can we designate him a June 1 trade?
Nope. The June 1 designation only is allowed on players who are released. You can still get the benefit of post June 1 accounting on a trade but that means you have to make the trade on June 2 or later. That is problematic for a few reasons.
The main issue here is that Brown has a roster bonus due if he is on the roster on the 5th day of the league year. That payment is then the Steelers responsibility and counts on the Steelers cap regardless of whether or not he is traded. So the dead money moves to $23.62 million in total, and the number for this year up to $9.52 million. That moves the savings down to $12.625 million rather than $15.125 million.
The sides can avoid this by renegotiating his contract to delay the bonus until later in the year (say training camp) but would require it to be guaranteed and likely with language that doesn’t void the guarantee if he doesn’t show up to workouts, mandatory OTAs, etc…Since the relationship is that bad I couldn’t see either side doing that. Plus there is no guarantee a trade occurs and neither side would want this drama dragging on into the summer.
There is also zero benefit for Brown to delay his release into the summer. If released from his contract he will have the best opportunities to earn a big contract in March not July. So he should not work with Pittsburgh on anything that prevents him from hitting free agency in those first days of the league year.
Well what about the team acquiring him can’t they do something to make the dead money less?
No. The dead money is a sunk cost. There is nothing Brown can do to make a trade more appealing for the Steelers nor anything a team could do to trade cap space for Brown to make the dead money less difficult for the Steelers. It’s against the rules.
The only way to offset some of the salary would be to make a star for a star kind of trade with a team that had excessive cap room to eat other costs. Lets say the Giants created a bunch of cap room releasing some veterans and were willing to do a Beckham for Brown swap (and this is pure fantasy, nothing more or less). The Giants could in theory prepay $10M of Beckham’s salary as a bonus before the trade. In this case rather than taking on $17M in Beckham salary plus the $20+M in dead money for Brown they only take back $7M in salary for Beckham. It’s a $10M swap. You could do something similar by signing a free agent the Steelers want and then trading him to the Steelers after you pay him the signing bonus and in return get Brown.
Would a team want to trade for him? What is their cap cost?
If a team traded for Brown they would get him at cap costs of $15.125 million in 2019, $11.3 million in 2020, and $12.5 million in 2021. None of that is guaranteed either. So the team would get one of the top wide receivers in the NFL at a cost of $12.975 million a year with no guarantees. Of course they would want to trade for him. That’s a steal. I mean Allen Robinson as a free agent got $14 million a year with $25 million in injury protection. Sure Robinson is younger but there is no comparison.
Why would Brown want to be traded?
He shouldn’t want to be traded. If he wants off the team he should do everything in his power to be released from his contract. There is far more money in free agency for him than the risk free $13 million a year a team would acquire him for in a trade. While he can’t block a trade he can do enough to make teams wary of trading for him unless they give him a raise.
Should the Steelers move on without him?
Probably not. From a financial perspective it makes no sense. Though he probably won’t be happy as he loses more targets to JuJu Smith-Schuster the team is better off with both on the field than off it. The team is built to compete now and you maximize that with the most talent you can get on the field. Brown may be an issue at times but there is no reason the team can not work through this and get everyone on the same page professionally. Its just hard to really come up with a scenario where the Steelers make out better without him than with him.
One of the things I have been getting more and more questions about is Alex Smith’s contract with the Redskins. As we all know Smith suffered a really bad injury a few weeks ago and has now reportedly had complications in surgery that have made his future even more questionable than before. Smith was in just the first year of a $94 million contract when the injury occurred so let’s look at what will happen from this point forward.
Smith’s contract was a pretty standard NFL contract. TheRedskins fully guaranteed Smith $55 million upon signing, including a rather large $27 million signing bonus. All told Washington paid $40 million of that guarantee in the first year of the contract. The $15 million that remains will be paid in 2019. This money is a sunk cost for the Redskins (for the most part,more on that in a minute) and there is no way to avoid the payments.
Where the Redskins have options is with an additional injury guarantee in Smith’s deal. Smith’s 2020 $16 million salary is guaranteed for injury at the moment. An injury guarantee means that if a player’s contract is terminated while he is injured his injury protection kicks in and he earns his salary if hurt. The condition to collect on the guarantee is that Smith would not be able to pass a physical in 2020. So obviously that is a long time for Smith to recover from his injury.
The tricky part for Washington though is that the 2020 injury guarantee is what is called a vesting guarantee. A vesting guarantee is one in which the injury guarantee becomes fully guaranteed at some point in time. For quarterbacks these are often early in a contract and it is no different for Smith. His $16 million injury guarantee vests on the 5th day of the 2019 league year. What that means is even if Smith can pass a physical in2020 but his skills are so diminished that he can’t be effective the Redskin sare still on the hook for the $16 million if his salary vests.
If Washington cuts Smith before that vesting date they do have the ability to escape that $16 million guarantee depending on how Smith’s recovery goes. But the situation gets more complicated when we look at the salary cap implications of cutting Smith.
Smith’s current salary cap number in 2019 is $20.4 million. If he was cut that number would increase by at least $17.7 million, which is the remaining portion of his unaccounted for signing bonus, leaving the Redskins with a $36.6 million dead money charge. On top of that typically future guarantees in a contract normally count when the player is released. Since Smith would be released with a failed physical termination in March the Redskins I believe should also have to account for an additional $16 million on the cap, regardless of whether or not the injury guarantee is actually paid in 2020 or not. If that is the case in brings thedead money to a ridiculous $52.6 million.
Regardless of whether Im incorrect on the acceleration of the guarantee, $36.6 million or $52.6 million is basically not feasible for Washington. The team has just $19 million in projected cap room for next year.Take off $17 million for Smith and they have nothing to spend. Add in the extra $16 million on top of that and they are in the worst position of any team in the NFL.
The Redskins could opt to use a June 1 cut on Smith. A June 1 cut essentially freezes Smith’s 2018 contract from March through June 1. On June 2 the cut would then be processed. In that situation the Redskins defer the $17.7 million in signing bonus acceleration to 2020. However the guarantee still accelerates so if the injury guarantee does count on the cap that would add $16 million to histotal putting the Redskins right up against the cap. In my mind none of these options are really feasible.
Washington does not get any cap relief from the NFL for this injury, which seems to be a topic people are discussing for some odd reason.Teams take on risks when they sign contracts and they are penalized when the contract blows up. So there is no special list to put Smith on to hide his cap hit. He will simply be placed on the PUP list next year.
There is some relief that would come the Redskins way if Smith can not play. Per JI Halsell, the Redskins did take out a $12 million insurance policy on Smith when they signed the contract. If Smith is unable to complete his contract due to the injury the $12 million will be paid to Washington. This reimbursement is going to give Washington salary cap relief but in my experience there is usually a delay in getting those cap credits meaning they usually come in future years so I don’t expect the $12 million to offset anything significant in 2019.
So what can Washington do? They have a few options. One option might be to work with Smith to defer the date on which is full guarantee kicks in just to give the Redskins more time to decide on the contract. I wouldn’t see Smith’s side agreeing to this since this was a football injury and you negotiate these contracts to protect from these rare instances like this one. They could just let the contract playout and hope Smith can play football somewhere. Even though his salary would become fully guaranteed there are offsets on the salary so they may be able to recover some of that $16 million in 2020 if he can play in the NFL.
I think what I might look to do is make the best of a bad situation. Odds are the Redskins are going to have to pay $31 million more dollars and account for $52.6 million on the salary cap for a player who most likely won’t play another meaningful snap for the organization.
If the Redskins reduce Smith’s salary next season to $1 million they can reduce his 2019 salary cap number from $20.4 to $10.275million giving them more money to spend on the season while they have to carry Smith on PUP. In 2020 you do the same if there is no new CBA agreement in place to bring his cap number down to around $15.1 million. At that point the Redskins will have deferred $27.2 million in cap charges to future years.
While this “kicking the can philosophy” is one I don’t like this is a unique situation. They aren’t adding money by doing it its just finding a way to shuffle it for accounting purposes. I cant come up with a scenario where it makes sense to take these massive cap hits in 2019 or 2020.My hope is that if there is a lockout I can release Smith in 2021 before alockup becomes official and potentially escape the $27.2M in dead charges entirely. Or maybe release at the end of the year if I have the cap room to doit in 2020 since a lockout would likely eliminate carryover anyway. Remember the Redskins will also be getting some type of credits for Smith because he cant play too which will help lessen the blows.
At the worst kicking the money in Smith’s contract allows me to use around 13% of my salary cap for the next three years on Smith rather than using 27% of my cap all on Smith next season and really blow up my year. The goal for Washington at this point now should be to just mitigate the impact on the salary cap and find the best way to account for his money without compromising the way I am going to build the team.