Explain To Me A Signed Players Affect On The Salary Cap

[Guest Fibonacci]

ok Sorry apparently I am not sure how it works. I was thinking that Decoud signed for 17.5 for 5 years. and when I divided it up it was going to be 3.5 each year.

but I have one person on another sight saying I am wrong and it is going to be 1.5 this year. because of the way his signing bonus is.

-well what will it be after that?

Then I have some people telling me I am doing it right, or close enough to being right. just cause some players take more towards the end, and some take more towards the beginning, give or take a couple million.

[FalcoChicquera]

It depends how the contract is structured.

You have several moving parts here:

The signing bonus - In DeCoud's case, the SB was $4m. This is divided by the length of the contract (so 800k a year)

If a player is cut prior to 1st June in a year, all the signing bonus money that has not yet been paid out counts against that year's cap. Therefore, if we were to cut DeCoud after 1 year, we would be faced with counting $3.2m against the cap as "dead money"

Base salary - This can be structured however a team wishes, so in this case DeCoud gets 700k base year 1, $1.7m base year 2 and then $3.5m+ in years 3-5. This amount is ONLY payable if he is on the roster, so if we cut him we save the money.

Essentially, this contract is structured as a two year deal at $1.5m/$2.5m cap hits.

Then we have the option in year 3 to either pay $2.4m against the cap to cut him, or pay $4.3/4.5/4.7 against the cap to keep him. If his level of play is 2009 DeCoud, I imagine that $4m or so for a starting safety will look like a good deal, as the cap is expected to be higher by then. If not, we have a 1-time expense having had him at a below market rate in 2012/2013.

So, overall costs:

Year 1: $1.5m against cap ($800k SB, $700k salary)

Year 2: $2.5m against cap ($800k SB, $1.7m salary)

Year 3: $4.3m against cap ($800k SB, $3.5m salary) Costs $2.4m to cut (3x $800k SB)

Year 4: $4.5m against cap ($800k SB, $3.7m salary) Costs $1.6m to cut (2x $800k SB)

Year 5: $4.7m against cap ($800k SB, $3.9m salary) Costs $0.8m to cut (1x $800k SB)

--

It's actually a VERY Falcons friendly contract and to be honest I'm surprised he signed it - he would undoubtedly have gotten more on the open market. Maybe he likes it here?

--

Final thing - there's an accounting trick by which if a player is cut after June 1st his SB cap hit is split over two years. So if we cut DeCoud after training camp in 2014, we would have a $1.2m cap hit that year and a $1.2m cap hit the following year.

Edited March 7, 2012 by FalcoChicquera

[ancient raptor]

Good explaination.

[ancient raptor]

If the contract details found in th "Explain this" thread are anywhere accurate, then this is a GREAT signing.

[Herr Doktor]

It depends how the contract is structured.

You have several moving parts here:

The signing bonus - In DeCoud's case, the SB was $4m. This is divided by the length of the contract (so 800k a year)

If a player is cut prior to 1st June in a year, all the signing bonus money that has not yet been paid out counts against that year's cap. Therefore, if we were to cut DeCoud after 1 year, we would be faced with counting $3.2m against the cap as "dead money"

Base salary - This can be structured however a team wishes, so in this case DeCoud gets 700k base year 1, $1.7m base year 2 and then $3.5m+ in years 3-5. This amount is ONLY payable if he is on the roster, so if we cut him we save the money.

Essentially, this contract is structured as a two year deal at $1.5m/$2.5m cap hits.

Then we have the option in year 3 to either pay $2.4m against the cap to cut him, or pay $4.3/4.5/4.7 against the cap to keep him. If his level of play is 2009 DeCoud, I imagine that $4m or so for a starting safety will look like a good deal, as the cap is expected to be higher by then. If not, we have a 1-time expense having had him at a below market rate in 2012/2013.

So, overall costs:

Year 1: $1.5m against cap ($800k SB, $700k salary)

Year 2: $2.5m against cap ($800k SB, $1.7m salary)

Year 3: $4.3m against cap ($800k SB, $3.5m salary) Costs $2.4m to cut (3x $800k SB)

Year 4: $4.5m against cap ($800k SB, $3.7m salary) Costs $1.6m to cut (2x $800k SB)

Year 5: $4.7m against cap ($800k SB, $3.9m salary) Costs $0.8m to cut (1x $800k SB)

--

It's actually a VERY Falcons friendly contract and to be honest I'm surprised he signed it - he would undoubtedly have gotten more on the open market. Maybe he likes it here?

--

Final thing - there's an accounting trick by which if a player is cut after June 1st his SB cap hit is split over two years. So if we cut DeCoud after training camp in 2014, we would have a $1.2m cap hit that year and a $1.2m cap hit the following year.

Nice post. It was all astrophysics to me before, now it's basic math. Thanks!!

[capologist]

It depends how the contract is structured.

You have several moving parts here:

The signing bonus - In DeCoud's case, the SB was $4m. This is divided by the length of the contract (so 800k a year)

If a player is cut prior to 1st June in a year, all the signing bonus money that has not yet been paid out counts against that year's cap. Therefore, if we were to cut DeCoud after 1 year, we would be faced with counting $3.2m against the cap as "dead money"

Base salary - This can be structured however a team wishes, so in this case DeCoud gets 700k base year 1, $1.7m base year 2 and then $3.5m+ in years 3-5. This amount is ONLY payable if he is on the roster, so if we cut him we save the money.

Essentially, this contract is structured as a two year deal at $1.5m/$2.5m cap hits.

Then we have the option in year 3 to either pay $2.4m against the cap to cut him, or pay $4.3/4.5/4.7 against the cap to keep him. If his level of play is 2009 DeCoud, I imagine that $4m or so for a starting safety will look like a good deal, as the cap is expected to be higher by then. If not, we have a 1-time expense having had him at a below market rate in 2012/2013.

So, overall costs:

Year 1: $1.5m against cap ($800k SB, $700k salary)

Year 2: $2.5m against cap ($800k SB, $1.7m salary)

Year 3: $4.3m against cap ($800k SB, $3.5m salary) Costs $2.4m to cut (3x $800k SB)

Year 4: $4.5m against cap ($800k SB, $3.7m salary) Costs $1.6m to cut (2x $800k SB)

Year 5: $4.7m against cap ($800k SB, $3.9m salary) Costs $0.8m to cut (1x $800k SB)

--

It's actually a VERY Falcons friendly contract and to be honest I'm surprised he signed it - he would undoubtedly have gotten more on the open market. Maybe he likes it here?

--

Final thing - there's an accounting trick by which if a player is cut after June 1st his SB cap hit is split over two years. So if we cut DeCoud after training camp in 2014, we would have a $1.2m cap hit that year and a $1.2m cap hit the following year.

Well done, very good explanation!

[Guest Fibonacci]

WoW is all I have to say. I never knew it was

It depends how the contract is structured.

You have several moving parts here:

The signing bonus - In DeCoud's case, the SB was $4m. This is divided by the length of the contract (so 800k a year)

If a player is cut prior to 1st June in a year, all the signing bonus money that has not yet been paid out counts against that year's cap. Therefore, if we were to cut DeCoud after 1 year, we would be faced with counting $3.2m against the cap as "dead money"

Base salary - This can be structured however a team wishes, so in this case DeCoud gets 700k base year 1, $1.7m base year 2 and then $3.5m+ in years 3-5. This amount is ONLY payable if he is on the roster, so if we cut him we save the money.

Essentially, this contract is structured as a two year deal at $1.5m/$2.5m cap hits.

Then we have the option in year 3 to either pay $2.4m against the cap to cut him, or pay $4.3/4.5/4.7 against the cap to keep him. If his level of play is 2009 DeCoud, I imagine that $4m or so for a starting safety will look like a good deal, as the cap is expected to be higher by then. If not, we have a 1-time expense having had him at a below market rate in 2012/2013.

So, overall costs:

Year 1: $1.5m against cap ($800k SB, $700k salary)

Year 2: $2.5m against cap ($800k SB, $1.7m salary)

Year 3: $4.3m against cap ($800k SB, $3.5m salary) Costs $2.4m to cut (3x $800k SB)

Year 4: $4.5m against cap ($800k SB, $3.7m salary) Costs $1.6m to cut (2x $800k SB)

Year 5: $4.7m against cap ($800k SB, $3.9m salary) Costs $0.8m to cut (1x $800k SB)

--

It's actually a VERY Falcons friendly contract and to be honest I'm surprised he signed it - he would undoubtedly have gotten more on the open market. Maybe he likes it here?

--

Final thing - there's an accounting trick by which if a player is cut after June 1st his SB cap hit is split over two years. So if we cut DeCoud after training camp in 2014, we would have a $1.2m cap hit that year and a $1.2m cap hit the following year.

Thank you for this. I got it now. and all I can say is wow. after looking at this it does not look bad at all. Thank you so much. I will always go back to this thread to look at this.

Now I like this signing even more. because it is like Nolan gets to try him up for a few years. If he continues his skills, then we might keep him. if he goes down, then he'll be cut and we save money. if he exceeds then we will be making money off of him.

I cannot believe he signed this as well. 26 years old. I do not know what TD does, but he makes guys sign cheep some how.

so all in all there is a chance we could pull the trigger on Williams.

finally. Thank you times a million for explaining this. it was basically a combination of that everyone was telling me the truth.

[Guest Fibonacci]

Nice post. It was all astrophysics to me before, now it's basic math. Thanks!!

yes it is a little hard to wrap my head around. but I am sure with all the other signings to come, by the time we get our 4 signing I should have it as basic math.

[Dominique is Manufique]

just curious on the base salary

It depends how the contract is structured.

You have several moving parts here:

The signing bonus - In DeCoud's case, the SB was $4m. This is divided by the length of the contract (so 800k a year)

If a player is cut prior to 1st June in a year, all the signing bonus money that has not yet been paid out counts against that year's cap. Therefore, if we were to cut DeCoud after 1 year, we would be faced with counting $3.2m against the cap as "dead money"

Base salary - This can be structured however a team wishes, so in this case DeCoud gets 700k base year 1, $1.7m base year 2 and then $3.5m+ in years 3-5. This amount is ONLY payable if he is on the roster, so if we cut him we save the money.

Essentially, this contract is structured as a two year deal at $1.5m/$2.5m cap hits.

Then we have the option in year 3 to either pay $2.4m against the cap to cut him, or pay $4.3/4.5/4.7 against the cap to keep him. If his level of play is 2009 DeCoud, I imagine that $4m or so for a starting safety will look like a good deal, as the cap is expected to be higher by then. If not, we have a 1-time expense having had him at a below market rate in 2012/2013.

So, overall costs:

Year 1: $1.5m against cap ($800k SB, $700k salary)

Year 2: $2.5m against cap ($800k SB, $1.7m salary)

Year 3: $4.3m against cap ($800k SB, $3.5m salary) Costs $2.4m to cut (3x $800k SB)

Year 4: $4.5m against cap ($800k SB, $3.7m salary) Costs $1.6m to cut (2x $800k SB)

Year 5: $4.7m against cap ($800k SB, $3.9m salary) Costs $0.8m to cut (1x $800k SB)

--

It's actually a VERY Falcons friendly contract and to be honest I'm surprised he signed it - he would undoubtedly have gotten more on the open market. Maybe he likes it here?

--

Final thing - there's an accounting trick by which if a player is cut after June 1st his SB cap hit is split over two years. So if we cut DeCoud after training camp in 2014, we would have a $1.2m cap hit that year and a $1.2m cap hit the following year.

yous say the base salary can be structured how a team wishes. is this a "typical" example or decoud's actual annual figures?

[delaigle]

sorry

Edited March 7, 2012 by delaigle

[Guest Fibonacci]

sorry

I look at the bonus as what makes the team stay in wanting to continue the contract with the player. and the player wants to continue to do good because of two reasons. one: get paid more on his next contract. two: cause if he does not then he is only going to get the signing bonus and then make less for his next contract.

so it is a very good thing in which is a win win for both.

[delaigle]

I look at the bonus as what makes the team stay in wanting to continue the contract with the player. and the player wants to continue to do good because of two reasons. one: get paid more on his next contract. two: cause if he does not then he is only going to get the signing bonus and then make less for his next contract.

so it is a very good thing in which is a win win for both.

my sorry simply meant I made a stupid post and then erased it

[falconidae]

Great explanation FalcoChicquera. Would like to add there are endless variations on this basic theme.

There are bonuses that are not prorated over the life of a contract. The yearly salary can only go up so much a year. A re-structure is generally when salary is converted to a signing bonus so the cap hit can be spread out over the remaining years of the contract. There are incentives "likely to be earned" and "unlikely to be earned". One doesn't count against the cap, and the other does- if you have, for example, an incentive of 150,000 per year for making the probowl and you made the probowl last year, that 150,000 counts towards the cap the next year, but if you've never made the pro bowl, that same incentive wouldn't count against the cap....

It just goes on and on- fortunately, McKay and Dimitroff are masters of salary cap management. Ryan signed a 72 mil contract and had a cap hit of 2.8 mil the first year. He had a roster bonus of 20 mil this last year, which got prorated over the life of the contract, but, if Ryan had been a bust, he could have been cut and saved the team that money.

DRob's contract has been really cap friendly- because he signed in an uncapped year, the FO gave him a roster bonus [i think it was a roster bonus, might have called it something else] that didn't get spread out over the length of the contract, contract is backloaded, which means as much salary as possible is put into the last two years. His yearly salary since he signed puts him in the middle of the pack for CBs- he's been making 5-6 mil a year, not 10 mil like Aso and others.

Glad someone else is dealing with all the details.

[Guest Fibonacci]

my sorry simply meant I made a stupid post and then erased it

wow Taz that is wierd. when I clicked to reply to your post there was something else there. not sorry.

weird is all I can say.

[Guest Fibonacci]

Great explanation FalcoChicquera. Would like to add there are endless variations on this basic theme.

There are bonuses that are not prorated over the life of a contract. The yearly salary can only go up so much a year. A re-structure is generally when salary is converted to a signing bonus so the cap hit can be spread out over the remaining years of the contract. There are incentives "likely to be earned" and "unlikely to be earned". One doesn't count against the cap, and those that do- if you have, for example, an incentive of 150,000 per year for making the probowl and you made the probowl last year, that 150,000 counts towards the cap the next year, but if you've never made the pro bowl, that same incentive wouldn't count against the cap....

It just goes on and on- fortunately, McKay and Dimitroff are masters of salary cap management. Ryan signed a 72 mil contract and had a cap hit of 2.8 mil the first year. He had a roster bonus of 20 mil this last year, which got prorated over the life of the contract, but, if Ryan had been a bust, he could have been cut and saved the team that money.

DRob's contract has been really cap friendly- because he signed in an uncapped year, the FO gave him a roster bonus [i think it was a roster bonus, might have called it something else] that didn't get spread out over the length of the contract, contract is backloaded, which means as much salary as possible is put into the last two years. His yearly salary since he signed puts him in the middle of the pack for CBs- he's been making 5-6 mil a year, not 10 mil like Aso and others.

Glad someone else is dealing with all the details.

I am thinking it really is TD who knows how to do this amazing job. cause ever since he came in these contract always flip me out when I get to the bottom of it.

[Ryanless Falcons]

Anyone with mod privs, or anyone that knows a mod can you have this pinned for future reference and for future new members who are wondering the same things.

Also, good post and breakdown.

[FalconFanForLife]

Yes Thanks for the excellent explanation. I too have never really understood how the salary cap works.

[FalcoChicquera]

yous say the base salary can be structured how a team wishes. is this a "typical" example or decoud's actual annual figures?

These are the unofficial figures - in others words they have come out from someone who has been reliable in the past, but it isn't confirmed by the sites that track this stuff (spotrac, rotoworld etc.). I hope they are accurate but until they are formally announced it is difficult to know. If this is indeed the deal I imagine DeCoud's agent will want to keep it relatively quiet and just focus on the headline figure ($17.5m).

There are bonuses that are not prorated over the life of a contract. The yearly salary can only go up so much a year. A re-structure is generally when salary is converted to a signing bonus so the cap hit can be spread out over the remaining years of the contract. There are incentives "likely to be earned" and "unlikely to be earned". One doesn't count against the cap, and the other does- if you have, for example, an incentive of 150,000 per year for making the probowl and you made the probowl last year, that 150,000 counts towards the cap the next year, but if you've never made the pro bowl, that same incentive wouldn't count against the cap....

Of course there are many ways of manipulating the cap, but as a basic primer understanding SB's and salary is a start. But it's mainly on the huge deals that incentives, option bonuses and roster bonuses come into play, so for this contract I tried to keep it simple.

It just goes on and on- fortunately, McKay and Dimitroff are masters of salary cap management.

This is actually one of my favorite parts of the Falcons' management structure. To have two guys who have dealt with this stuff at the sharp end, as well as a salary cap staff member (Chase Falivene) gives a lot of different viewpoints in the room and helps us make the right decisions.

[Creative]

Thanks for that post, Chicquera. I had a decent understanding of cap hits and all, but that really simplifies it. Mods should sticky that for the offseason.