Best and Worst Contracts 2016: Baltimore Ravens

In Week 2 of our Best and Worst series we turn our attention to the AFC North and the Baltimore Ravens.

Best: Elvis Dumervil, 5 years, $26 million, $8.5 million guaranteed

While the Ravens I think struggle a bit with the contracts that they offer to homegrown talent, they generally drive great bargains with players that come from outside the organization. The Dumervil situation was one of the more unique ones and the Ravens pounced on the opportunity, really signing a great contract with a terrific pass rusher. Continue reading Best and Worst Contracts 2016: Baltimore Ravens »

Vesting vs Full Guarantees Focusing on the Broncos and Ryan Clady

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One of our Twitter buddies had the following tidbit regarding Ryan Clady and his contract discussions:

On the surface that seems like a no-brainer of a contract for Clady. An $11 million APY in this market with $33 million guaranteed is a heist for the player. But whenever you see reports like this the first thing that should come into mind is whether the guarantees are real guarantees or not?

Guaranteed salary can take on many forms, only one type of which is truly guaranteed. We touch on this more in depth in our Caponomics videos, but the basics are that in the NFL you can be cut for skill, injury, or salary cap reasoning. Unless upon signing your salary is guaranteed for all three terminations the guarantees are nothing more than fancy words designed to make a deal sound amazing in the press when in reality the deal may be worth nothing close to the reported numbers.

The Broncos in particular rarely seem to fully guarantee players salary. They often use a “vesting” mechanism in which the player will convert a partial guarantee into a full guarantee by meeting some condition, typically being on the roster on a certain date. The vesting guarantees can be long horizon (more team friendly) or short horizon (more player friendly).  In the Broncos case it is normally the latter.  The structure of such guarantees are of even more importance when dealing with the Broncos who do not usually give their players large signing bonuses, which act as a deterrent towards early release due to salary cap implications.

So how do these deals work in practice?  We can first look at Peyton Manning who received a $96 million dollar contract. Technically the deal contains $96 million in guarantees, but the reality was just the first season was guaranteed. If released after that season and before the trigger event Manning would not have received another penny. To trigger his guarantees Manning has to pass a physical before the 2013 LY which activated $40 million in full guarantees, unless an injury occurs related to his original neck injury.  In 2015 and 2016 he has the ability to lock in yearly guarantees by passing a physical. This was both a player friendly structure (frontside) and team friendly (backside) with the rolling guarantee structure.

Wes Welker signed a 2 year $12 million dollar contract that was reported to be 100% guaranteed. That was only the case in regards to injury.  If Welker makes it thru the season in one piece and is released prior to the start of the 2014 League Year the Broncos will not owe him a penny. He needs to be on the roster to activate his guarantee.

Former Bronco Elvis Dumervil received tremendous press coverage when it was reported that his contract contained over $43 million in guaranteed money. As things turned out most of those guarantees were against injury only with him required to be on the roster every year for the guarantees to really mean anything. Dumervil missed out on $12 million in 2013 when he was released before the vesting date. Dumervil’s contract was incredibly team friendly.

So as we turn to Clady the question is just how much of the $33 million will be truly guaranteed and how much will need to be earned?  I would think it is doubtful that it would be fully guaranteed as the Broncos simply do not concede on that point. On top of that there is considerable precedence at the position. Joe Thomas,  D’Brickashaw Ferguson, Jake Long, and Duane Brown all have partial guaranteed contracts with possibilities of earning full guarantees along the way. None had their deals fully guaranteed upon signing.

Thomas’ deal could be a good starting point for an idea of potential structures.  Thomas’ contract was reported to contain $44 million in guaranteed money. The only amount fully guaranteed upon signing was a $6 million dollar signing bonus, $4 million roster bonus, and $8 million dollar Paragraph 5 salary. Another $20.5 million was guaranteed for injury and would become fully guaranteed by being on the roster a few days following the Super Bowl each year, a date that is considered more player friendly that dates pushing into the actual league year. $5.5 million was only guaranteed for injury.

Using that same structure and eliminating the portion of the guarantee that simply doesn’t vest we can get a signing bonus around $5 million and $10 million in fully guaranteed money that will be paid out in 2013. His 2014 salary would be $9.3 million and 2015 salary would be $8.7 million, both of which would be guaranteed for injury only and converted to full guarantees if he is on the roster in February of each year. Using that structure Clady’s cap charges would be $11 million, $10.3 million, and $9.7 million with backend charges of $11.5 and $12.5 million. His dead money in those last two years would only be $2 million and $1 million respectively which would fit in with the Broncos current Manning window.

So I’ll be very interested to see how it all breaks down, but I would not be surprised if its something similar to what I have outlined above.I think the key is just how much money they can push the Broncos on in the first two years. Those are two seasons where the guarantees are most likely to be realized. If Denver tries to push more vesting guarantees into 2015 then it is a deal Clady may reject unless he can earn those guarantees by being on the roster in 2014 rather than 2015.

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A Salary Proposal to Bring Elvis Dumervil Back to Denver

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I think at this point everyone is pretty aware of the situation that occurred between the Denver Broncos and DE Elvis Dumervil, but lets recap anyway. The Broncos wanted Dumervil, slated to earn $12 million in cash and carry a $13.623 million cap charge, to take a paycut or be released. The two sides eventually agreed to a figure of $8 million in cash salary with a stipulation that Dumervil have the contract to the Broncos by a certain time due to avoid language in his prior contract from kicking in that could cause his $12 million dollar salary to become fully guaranteed on Saturday. Basically Denver wanted the deal complete before the NFL day ended at 4PM EST.

Due to a broken fax machine and an apparent lack of technology on Dumervil’s end the deal never made it to the Broncos who wanted to cover their financial backside and subsequently released Dumervil. About 30 minutes later the new contract made its way to Denver which has made the Broncos irate and Dumervil I’m sure upset.  While there are probably hurt feelings on both sides as they try to blame the other side publically they need a way to resolve the situation to which I want to offer two suggestions for thought.

Before getting to deals I think its important to point out that the $8 million Dumervil was going to earn from Denver was going to be his best offer. The market crashed this year, specifically on the defensive end, and one of the reasons why Dumervil agreed to this paycut in the first place is because it was the most money he and his agent felt he could likely earn. So to think that another team will swoop in and may him more money to steal him from Denver is probably not realistic. It could happen but the odds would be against it in my opinion.

There are two components to Dumervil’s deal that we need to look at- cash flow and salary cap flow- as both are of importance to the Broncos. Under the terms of the restructured deal Dumervil was going to earn $8 million in cash in 2013 and carry a cap charge of $9.623 million. His cash takehome in 2014 was slated to be $10 million with a cap charge of $11.623 million. Also important that season to Denver is his dead money charge. His dead money in 2014 was set to be $3.246 million in the event they wanted to walk away next year, a likely occurrence due to their desire to cut his salary in 2013.

Because Denver released Dumervil they immediately face a cap charge of $4.869 million from the acceleration of his $2.538 million dollar signing bonus received in 2010 and $6 million dollar salary advance, that was treated as a signing bonus for cap purposes, in 2011. The Broncos can not avoid that cap charge. So for those suggesting just paying him $8 million it does not work because of the salary cap implications. An $8 million dollar salary would lead to cap allocations of $12.869 million for Dumervil, a number Denver clearly was looking to avoid with the paycut. So we need  a method to make Denver whole with regard to their cap obligations while also keeping Dumervil whole in regard to his promised pay.

The first pay structure I would suggest is to offer Dumervil a salary of $4,754,000 in 2013, and raises in each of the next two seasons of $1,623,000 with a 2014 and 2015 fully guaranteed salary of $1,623,000 with no offsets. Under this scenario Dumervil is guaranteed his $8 million dollars while the effect on the Broncos cap and cash flow is zero compared to the original agreed to restructure. Here is how it would work (I am including acceleration as prorated money just for the sake of clarity):

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Under this deal the cap charges match for both sides and the potential cash will match. When Dumervil is released in 2014 the dead money obligation for the Broncos is the same so it’s a net neutral position for them. We have essentially brought our contracts right back to where they were at the start. The one negative on the contract is that it would take Dumervil more time to earn his money since he would not get his $8 million immediately as he would in the original deal. He would likely need to wait until he is released. Since it seems his side was the side with more blame that would seem reasonable.

If not then we need a structure where Dumervil can maximize his cash earnings in 2013. Under this deal we are going to pay Dumervil a base salary of $3,131,000 and pay him a signing bonus of $4,869,000 that is prorated over the next 3 seasons. This brings Dumervil’s earnings next year to $8,000,000 while putting the rest of the contract back in its normal state in terms of cap charges and dead money. The only thing Denver would want to consider here is the timing of the signing bonus payments in real terms. While the dead money total if he was cut this year would be high the odds of Dumervil being cut after agreeing to the terms of the original restructure were basically zero anyway.

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My guess is the second option is more reasonable to both sides, but either way both are an easy option to let both sides save face and bring the team back to where they want it to be and the player back to the salary he wanted to earn. Its not the epic disaster people are making it out to be and there are very simple solutions that can keep both sides happy with a little thought.

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Recapping Todays AFC Salary Cap News

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Today was quite the day of activity as teams look to gain as much cap space as possible before the beginning of free agency tomorrow. I am going to break things down by conference in two posts to keep things from getting too long. As for the salary cap charts please note that I will be doing my best to keep them updated and current over the next week but I’ll be playing catchup on some days so bear with me on it. Also the league has made more adjustments to the cap that I am unaware of for most teams so if you have any information please email me.

Miami Dolphins– While they did not do anything noteworthy the contract information for Brian Hartline and Matt Moore was reported by Ben Volin of the Palm Beach Post. It’s a great deal for Miami with Hartline. They got him at below top level number 2 money and have an easy out in year 3 of the contract. Moore’s contract is essentially a 1 year $4 million dollar deal as the high cap hit in 2014 makes him a likely release. This may have been a situation where they surveyed the landscape and thought his was he best fit and to approach it again next year. Miami went with extremely low year 1 cap charges for the two players all things considered, taking up just $4.615 million in cap space. Considering Miami’s cap situation it might mean that they will spend heavily in free agency.

New York Jets– The Jets tendered RT Austin Howard at the 2nd round level, which may be a bit shortsighted considering their salary cap space, or lack thereof. They may have been worried about a team signing him to a high cap charge year 1 contract that the Jets would be unable to match. No chance that he would draw any interest with a 2nd round price tag. The Jets also signed QB David Garrard to come in and join the QB carousel. The Jets are getting dangerously low in cap room where they may not have the room necessary to trade CB Darrelle Revis. The Jets need $3 million in cap space to trade Revis. They have a number of contracts that they can rework which would seem to be a priority if they want to sign anyone in the next few days. The Jets are asking WR Santonio Holmes to take a paycut.

Baltimore Ravens– The Ravens have tried for some time to get WR Anquan Boldin to accept a paycut which he refused to do, leading to his trade from the team. Boldin had been somewhat of disappointment since leaving the Arizona Cardinals but then made up for it with a great playoff run that culminated in the Super Bowl.  The trade will be made official once Boldin passes a physical with the 49’ers. The Ravens will clear $6 million in cap room once the trade is official. The Ravens also tendered Ed Dickson today.

Tennessee Titans– Jay Glazer announced that G Steve Hutchinson will announce his retirement tomorrow. Hutchinson will save the Titans $3.75 million in cap room.

Denver BroncosAndrew already covered of what went on in Denver as they are creating enough cap room to go out and do something big if they want to. I would imagine a lot of Revis speculation in the coming days. He is a perfect fit and they have a cap system that can absorb him if they desire. The Broncos continue to try to get DE Elvis Dumervil to take a paycut. Both sides have their own leverage here. The Broncos have no reason to keep the inconsistent player and could look for a cheaper veteran such as Dwight Freeney to replace him. Dumervil, as a young pass rusher, can likely get his full $12 million salary from another team if he hits free agency. My guess is Denver will not do anything with him until they are assured of a replacement.

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