Anyone who has ever engaged in a capital purchase no doubt knows that one gets what one pays for.
In the NFL, however, it’s not always the team that spends and has to have something to show for it at the end of the year. Rather, it’s how a team is spending its allotted cap space that often times shapes how competitive a team can be.
Let's look at the New York Giants. Faced with a cap crunch for the better part of the current league year, which began in March, the Giants were forced to take an unusual approach toward building their current roster.
Specifically, they added more than a dozen veteran players who were willing to play for a qualifying offer (sometimes referred to as “show-me contacts”).
These one-year deals take advantage of a clause in the current Collective Bargaining Agreement (CBA), in which a veteran with more than four years of accrued service carries the same base salary cap value as a second-year player if the veteran is a) tendered a one-year contract for the minimum base salary commensurate with his experience, and b) his total bonuses and incentives do not exceed $65,000.
The benefit behind a minimum qualifying offer is that regardless of a player’s base salary, which again is commensurate with the number of accrued years of service, they would only count for a modest $620,000 against the salary cap, a figure that breaks down as $555,000 in base salary and $65,000 in bonuses/incentives.
To illustrate this principle, kicker Josh Brown signed a one-year minimum qualifying offer consisting of a base salary of $940,000 and a signing bonus of $65,000. The sum of his contract, then, is $1,005,000; however, because his deal meets the criteria for a minimum qualifying offer, Brown's cap hit is reduced to $620,000—the figure representing a base salary of $555,000 plus the $65,000 signing bonus.
Besides the financial savings gained by a team, an advantage to a minimum qualifying offer is that if the player doesn’t make the final roster, his cap charge drops to $65,000 and the team ends up credited with $555,000 of cap space.
The drawback, however, to this approach is if a player who signs this kind of deal has a career year. He has, in essence, shown his value to not just his club, but to the NFL and has put himself into a position for a more lucrative contract moving forward.
Getting back to the Giants, the reason why they took this road most likely has to do with the fact that they knew they were going to have to go through a cleansing period in which millions of dollars in dead money would need to come off its books moving forward.
Where Did the Money Go?
Despite their attempt to be judicious with their cap space, as of Sept. 19, the Giants have just $578,889 of cap space—the lowest of any team in the league according to the NFLPA's public report, which lists the salary cap statuses of every NFL team.
How did the Giants get to this point despite unloading big contracts such as those belonging to linebacker Michael Boley, running back Ahmad Bradshaw and defensive tackle Chris Canty, while also restructuring or reducing the base pays for current players like punter Steve Weatherford, cornerback Corey Webster, tackle David Diehl, guard Chris Snee and center David Baas?
Let’s take a look.
The first area one has to examine is the value of all active contracts, which consist of not just the 53-man roster, but also any players on the practice squad, injured reserve and physically unable to perform lists.
Here is a summary of the Giants’ cap situation as of Sept. 19, 2013:
There are a couple of things to note here:
1) The salaries of players on the suspended list, such as safety Will Hill, only count the actual number of games he is on the active roster. In other words, given his suspension is for four games, his salary cap figure will be based on 13 weeks of instead of 17 weeks, and the Giants will receive a four-week, prorated credit reflecting the money that they do not have to pay Hill.
2) Players who are on injured reserve could qualify for a lower cap figure if they have a “split” contract. This means that if a player is unable to fulfill his duties to the club, he will receive a lower base salary commensurate with his number of accrued years of experience.
Example: If a second-year player with a split in his contract ends up on injured reserve to start the season, instead of receiving a base salary of $555,000, his base drops down to $318,000.
You can find a list of the Proposed Minimum Base Salaries through 2014 at Steelers Depot.com.
The other category that eats up the salary cap space is the amount of money tied into players who are on injured reserve and who do not have splits in their contract.
In the Giants' case, they have $4.681 million tied up in safety Stevie Brown, running back Andre Brown and linebacker Dan Connor—all of whom are on injured reserve (Andre Brown has been designated for return, but he cannot begin contributing in games until Week 8 at the soonest).
Not one of the injured reserve players has a "split" in his respective contract, which means the Giants have millions of dollars tied up in three players who currently are unable to contribute anything to the team.
Dead money is defined as a cap charge associated to a player to whom a team has relinquished its rights.
Under the current CBA, when a player signs a contract, his signing bonus is distributed equally over the duration of the contract's life, up to five years, in order to provide the player with a nice upfront cash payment for signing on the dotted line while also giving the club a cap break on its books for that year.
Example: If a player signs a four-year contract that includes a $1,000,000 signing bonus and a $500,000 base salary in Year 1 of the deal, the player's cap charge is $750,000—the base salary plus one-fourth of the prorated signing bonus, or $250,000.
If the player is cut after Year 2 of his contract, the remaining pro-rated signing bonus, $500,000, is charged against the team's current cap, unless the team designates the contract as a post-June 1 designation. If that happens, only $250,000 would count against the current year's cap, with the remaining $250,000 being charged against the following year's cap.
In the Giants' case, they have approximately 53 players—an entire NFL roster—who are no longer with the team but whose “dead money” keeps their memories alive.
That list includes players who were cut during 2012 training camp and players who received injury settlements (usually the "down" or lower minimum amount corresponding with the player's total accrued service) represents approximately $6.27 million of “dead money” that is not available for the Giants' current use.
The following table represents the three highest "dead money" figures currently chipping away against the Giants’ 2013 cap:
If we combine the Giants' estimated dead money with the amount currently being paid to players on injured reserve/physically unable to perform, the total represents approximately ten percent of their 2013 unadjusted salary cap ($123 million. This does not include the $1 million cap credit they received from 2012.
Top Active Contracts
Let's now look at the Giants' top contracts counting against the cap:
What’s interesting about these contracts is that all of them were originally negotiated before the prior CBA expired. By 2009, when the final capped season of the previous CBA, the NFL salary cap was, according to ESPN, $128 million.
Since the start of the current CBA in 2011, each player, with the exception of Tuck, has agreed to at least one restructuring which has helped provide the Giants with cap relief when needed. In addition, four of these five top earners have at least one Pro Bowl to their name—making it hard to argue their value to the team.
Now let’s see how each piece of the puzzle fits into the overall cap picture:
The estimated percentage breakdowns include 41.4 percent tied up in the Giants’ Top Five contracts, five percent devoted to dead money and 3.7 percent tied up in players who are currently on injured reserve and physically unable to perform.
How the Other Teams Are Doing
Below is the current cap space (as of Sept. 19, 2013) for the Top 10 teams with healthy cap space. You can see the entire list, which is updated several times a day, at the NFLPA.com web site, and you can find lists of estimated dead money and active contracts at OvertheCap.com for further evaluation.
As the season progresses, it will be interesting to see how competitive the teams that left themselves with a lot of financial cushion are.
Good News Ahead, Giants Fans
Although the Giants don’t currently have money to extend any current contracts, the front office has made a good effort to limit the amount of dead money due to hit the 2014 cap, which should result in plenty of space to take care of a lot of upcoming contracts—and then some.
According to OvertheCap.com, the Giants currently have $106.374 million committed to their Top 51 contracts in 2014. The "Top 51 Rule," which is in effect from the first day of the offseason through the end of training camp, only calculates the 51 highest contracts on record for that year. Within those figures are base salary, prorated signing bonus, workout bonuses and any incentives offered to each player for that year.
One other thing to consider regarding the Giants' number is that they could potentially see a significant increase in their available cap space for 2014—and that’s before the new cap figure is announced, before any leftover cap money from this year is factored in and before any incentives not earned by players are credited back to the cap.
Specifically, there is approximately $11.5 million of potential cap savings that can be recognized if the 2014 contract years of tight end Brandon Myers, guard Chris Snee and cornerback Corey Webster are voided.
If that happens, the Giants' Top 51 commitment will shrink to approximately $94.874 million, which, if we use the current $123 million cap figure as a basis, would give the Giants roughly $28.125 million to spend.
That amount should be more than enough for them to secure the services of core players in need of contracts after the 2013 season and cover external free agent expenses. It should also extend players such as defensive end Jason Pierre-Paul, safety Antrel Rolle and cornerback Prince Amukamara, who, in 2014, will be entering the final year of their respective contracts.
Taking things a step further, the Giants could clear even more room if they are able to extend the contract of quarterback Eli Manning, whose deal is set to end in 2015. If they can do that, they would almost certainly be able to lower Manning’s projected 2014 cap figure of $20.4 million.
The 2014 season is still young enough to where we don't yet know if injuries will force the giants to free up additional space by reworking some contracts now. We also don’t know if they truly are getting what they paid for, but it will be interesting to see if the gamble pays off.