NFL Cap Management: Some trades don’t make dollars or sense

It’s easy to throw out the notion of a trade; the idea to get equal or greater value, putting your club in a better CAP situation and or with a prime pick in the coming draft.  If only it were that easy.

Real time example

Player finds himself on a team entering 2013 League Year (LY) almost $24.0M over projected CAP.  His individual charge as a Top 51 on his roster is $9.0M calculated; $3.0M in 1 year proration of past guarantees, $3.0M in Paragraph 5 (Base Salary for 2013), and $3.0 in a series of three $1.0M bonuses over the course the time leading up to the 2013 regular season.

Any and all prorated portions are the responsibility of current Club.  Transactions such as outright release or trades transpiring prior to June 1st accelerate all proration to the current LY.  Keep that in the back of your mind.

Base Salary is responsibility of the current Club Player is under contract with at the time.  Any bonuses are responsibility of the Club Player is under contract with at the time the bonus is earned.

Current Club can attempt to trade Player at the start of the LY to October 29th, but there will be financial ramifications.  What the Club is willing to incur is up to them as the “cost of doing business”, when they choose to do it should be analyzed regarding CAP/contract management.

Trade scenarios & ramifications

  • Scenario 1 – Club initiates trade prior to 5th day of new LY, significant because it’s the date of $1.0M Roster Bonus (RB).  If trade were initiated, Club would be hit with immediate $12.0M CAP charge (current $3.0 in proration + $9.0 in ensuing years).  New Club is responsible for all of existing three $1.0M bonuses, starting with the 5th day RB & base salary.
  • Scenario 2 – Club can’t initiate trade before 5th day deadline and is responsible for $1.0M in RB earned.  Trade is initiated after the earned RB and Player now accounts for $3.0M in current year proration, $9.0M in acceleration and $1.0M for earned bonus.  Total of $13.0M in the 2013.
  • Scenario 3 – Club can’t trade Player prior to earning Offseason Workout Bonus ($1.0M around mid June).  We’re now past June 1st.  Current Club pays Player $2.0M to account for RB and Workout Bonus.  CAP charge for ensuing years is alleviated in 2013 as result of post June 1st transaction.  Remaining $9.0M is accounted for in 2014.  Club is responsible for $3.0M in current year proration and $2.0M in Bonuses.
  • Scenario 4 - Club can’t trade Player until after start of Training Camp.  $1.0M Reporting Bonus is earned by Player.  Club has paid $3.0M in cash for bonuses and incurred $6.0M in Cap charges for 2013 LY.  Trading Club is responsible only for the $3.0M in base.

The “ripple effect”

Club trading for Player; maximum cash & Cap owed is $6.0M ($3.0M base & $1-3M in potential bonuses).  The catch?  Player is only realistically under contract for 1 year.  Remaining 3 years void if on the roster the last day of the 2013 regular season.  Acquiring Club can’t Franchise Player because of a prohibiting contractual clause.  So what am I willing to trade for a one year contract?  7th round, 5th round?  Reckless is the GM that would give anything higher without an extension already in place.

Current Club argues, “No way we’ll part with Player for less than multiple top picks.”  But as the receiving GM, you’d want assurance you could get an extension PRIOR to a trade for that compensation.  The leverage is in the hands of the Player.  Wrong team, no extension.  Bad team, no extension.  Poor contract, no extension.  No extension, no trade.

Reality check

A couple things to keep in mind.  Player has used “holdout” as leverage in both Rookie Contract and Free Agent extension.  Player is coming off injury that put him on IR almost all of the preceding season.  Player has referenced seeking top dollar on his side of the ball (entire NFL).  Would a GM make the trade and give up multiple top picks without an extension?  Perhaps.  Bad business, unless you WIN the Super Bowl in 2013.  Giving top dollar and  surrendering top talent through multiple picks (4 to 5 year contracts) is also bad business.

The alternative?  Club can keep the player at $6.0M for 2013, secure the service of a top player at the position and work to establish conditions for an extension (if warranted) in 2014.  Potential trading Clubs can wait to see if Player recovers from injury, save valuable top draft picks & secure top young talent for 4 to 5 years, and then pursue the Player in open market Free Agency in 2014 – all the wiser for 2013.

There are always alternatives.

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