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What was Ralph Wilson’s “Cash To The Cap” about?

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Over the past years or so I’ve read articles about Ralph Wilson.  In doing so, one phrase keeps coming up - “cash to the cap.”  However I can’t find an actual definition anywhere.

 

Can someone clarify what “cash to the cap” means, specifically as it relates to Ralph?  My best guess is that it means you don’t spend the entire salary cap, and keep the money you didn’t spend.  Am I far off?  

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Here - 

 

https://www.buffalorumblings.com/2008/3/4/152159/2268

 

Here's the basic explanation, but it's worth reading the whole article IMO. 

 

Quote

The basic theory behind the cash to the cap system is as follows. Players' performance generally is at the highest in the early parts of their careers and tapers off as time goes by. Cash to the cap seeks to structure contracts so the amount payed to a player best matches their expected value and contribution to the team.

 

Under a cash to the cap system, to meet this goal of best pairing player contributions to the team with their salary, the Bills have been front loading contracts and paying entire signing bonuses up front. On the signing bonuses, most teams amortize the signing bonus over the entire term of the contract. So if a player is signed to a 5 year deal with a $15 million dollar signing bonus, that $15 million would most likely be spread out to an even $3 million dollars over the entire life of the contract. What the Bills do is account for and absorb that entire signing bonus in the year of the signing. So for the Bills, the accounting would be $15 million in year one, and no cap ramifications in any of the remaining 4 years of the deal.

 

 

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8 minutes ago, BillsFan4 said:

Here - 

 

https://www.buffalorumblings.com/2008/3/4/152159/2268

 

Here's the basic explanation, but it's worth reading the whole article IMO. 

 

 

 

 

 

Yep essentially the easy way to say also is in a given year Ralph would not lay out anymore money than was already allocated by shared revenue (cap). 

 

Unlike now where owner flush with cash and manipulates cap because the willingess to give iut big cash signing bonuses and amortize. 

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The new philosophy is the "Dead Cap Cash." Basically, you wait for a new regime to come in every few years and trade away all of the previous players and absorb the dead cap costs.

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2 minutes ago, BuffaloRush said:

Ok thank you.  So by paying the singing bonus all at once, did this hurt the team?

 

It used only the shared revenue. So lets say you have 25M in cap space. And you sign a player to a 5 year deal with a 20M signing bonus. 

 

They would count that entire 20M in first year so now you have 5M in cap space after one player. 

 

 

As opposed to taking thag 20M bonus and spreading it over 5 year reducing the cap by 4M instead of 20M (just talking bonus)

Edited by MAJBobby

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He was broke af because his buisness was the bills.

 

unlike other owners who bought teams and already had billions.

 

it helps when you sell fake cheese and noodles on the side.

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36 minutes ago, BuffaloRush said:

Ok thank you.  So by paying the singing bonus all at once, did this hurt the team?

 

It was a good excuse to not re-sign outstanding young veterans coming off who commanded market rate for their skills and replace them with high draft picks ... over and over.    Essentially, the Bills operated as a "cash only" business (the cash from the current shared league money) and didn't "borrow" from expected revenues to add talent.

 

Keep in mind that this was an accounting method.  No team is legally supposed to exceed the current year's salary cap, but if teams pro-rate signing bonuses in their accounts, then they get extra current $ against the current cap.  It's like buying a car on a credit vs paying cash.  If your car budget is $3600 for the year, you can pay $3600 cash for a beater car or pay $300/month on a car loan and get a nicer/better car, although you'll pay that loan for several years ... and if you total the car or decide to you don't like it after a few months, you might end up paying for that loan when you no longer have the car. (That would be "dead money").

Edited by SoTier
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9 minutes ago, BakersBills said:

He was broke af because his buisness was the bills.

 

unlike other owners who bought teams and already had billions.

 

it helps when you sell fake cheese and noodles on the side.

 

Wilson was already wealthy when he purchased the Bills franchise in 1960.  I believe he inherited a business from his father that was associated with the auto industry and expanded that.   Keep in mind that $25000 *which is what Wilson paid for the just the franchise -- he would have had to invest more in actually getting the team up and running and supporting it until fans started paying enough admissions to show a profit) was a lot of money in 1960 when the average salary was maybe $5000/a year, the minimum wage was around $1/hour, and you could buy a livable if modest house for $10-20K.

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It essentially meant if the cap was $125m the Bills did not spend more than $125m that year.  Compare that to say the first full year of Pegula when the Bills went on their spending spree with Rex and Doug and they signed a lot of guys where they paid them big bonuses up front that for cap purposes were spread across years.  So their cash spend in 2015 was HIGHER than the salary cap. But the reality was some of that money was accounted for (under the cap) in future years.  That is not to say that Wilson's Bills never amortised bonuses over future years, they sometimes did but they still made sure that every single year their cash spend was not more than their cap spend.   

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5 minutes ago, GunnerBill said:

It essentially meant if the cap was $125m the Bills did not spend more than $125m that year.  Compare that to say the first full year of Pegula when the Bills went on their spending spree with Rex and Doug and they signed a lot of guys where they paid them big bonuses up front that for cap purposes were spread across years.  So their cash spend in 2015 was HIGHER than the salary cap. But the reality was some of that money was accounted for (under the cap) in future years.  That is not to say that Wilson's Bills never amortised bonuses over future years, they sometimes did but they still made sure that every single year their cash spend was not more than their cap spend.   

 

 

Ok so it is possible to spend above the salary of you get creative with how you disperse the money etc?   

 

The biggest knock I have about Ralph is how frugal he was with coaching and scouting departments.  Especially toward the end of his career, he always tried to skimp on coach and GM

 

 

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Just now, BuffaloRush said:

Ok so it is possible to spend above the salary of you get creative with how you disperse the money etc?   

 

The biggest knock I have about Ralph is how frugal he was with coaching and scouting departments.  Especially toward the end of his career, he always tried to skimp on coach and GM

 

Exactly. Every penny you pay a guy the day he signs eventually has to be accounted for..... but it doesn't all have to be accounted for on that year's cap.  It does on the company balance sheet.... but not on the cap.  

 

Agree totally on scouting and coaching spend.  We spent too long with dregs at many coaching and personnel spots.  Those areas are uncapped spend. Look at the staff Brandon Beane has been able to assemble. At the point he first put the staff together he hired 2 guys who had GM interviews that same hiring cycle (one of whom has since departed to be a GM), another guy who has interviewed for the Carolina job this year, a former GM in Dennis Hickey and a guy taking a demotion from a Director of College Scouting to National Scout to join the Bills.  It was pretty close to an all-star staff in many ways.  Nothing like the cast of nomads and nobodies we made do with for much of the Ralph era.  

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7 hours ago, SoTier said:

 

It was a good excuse to not re-sign outstanding young veterans coming off who commanded market rate for their skills and replace them with high draft picks ... over and over.    Essentially, the Bills operated as a "cash only" business (the cash from the current shared league money) and didn't "borrow" from expected revenues to add talent.

 

Keep in mind that this was an accounting method.  No team is legally supposed to exceed the current year's salary cap, but if teams pro-rate signing bonuses in their accounts, then they get extra current $ against the current cap.  It's like buying a car on a credit vs paying cash.  If your car budget is $3600 for the year, you can pay $3600 cash for a beater car or pay $300/month on a car loan and get a nicer/better car, although you'll pay that loan for several years ... and if you total the car or decide to you don't like it after a few months, you might end up paying for that loan when you no longer have the car. (That would be "dead money").

 

Good explanation. Nothing more than a gimmick to explain why we couldn't sign good players.  Average fan doesn't understand how salary cap works, so it was a snappy phrase to purposefully confuse.  A Russ Brandon gem.  

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17 minutes ago, BuffaloRebound said:

 

Good explanation. Nothing more than a gimmick to explain why we couldn't sign good players.  Average fan doesn't understand how salary cap works, so it was a snappy phrase to purposefully confuse.  A Russ Brandon gem.  

 

Cash to cap is not a gimmick it is a well established cap management method and the Bills are not the only team to have ever employed it.  It is a limiting philosophy to some extent and it has generally been employed by poorer, smaller market teams.  But it isn't just some flashy name Russ Brandon thought up. 

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8 hours ago, SoTier said:

 

Wilson was already wealthy when he purchased the Bills franchise in 1960.  I believe he inherited a business from his father that was associated with the auto industry and expanded that.   Keep in mind that $25000 *which is what Wilson paid for the just the franchise -- he would have had to invest more in actually getting the team up and running and supporting it until fans started paying enough admissions to show a profit) was a lot of money in 1960 when the average salary was maybe $5000/a year, the minimum wage was around $1/hour, and you could buy a livable if modest house for $10-20K.

 

...trucking and insurance were his two major entities......I believe he also loaned $400,000 to the Raiders to keep them afloat......he offered to loan money to the then Boston Patriots as well, but they declined..........

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7 minutes ago, GunnerBill said:

 

Cash to cap is not a gimmick it is a well established cap management method and the Bills are not the only team to have ever employed it.  It is a limiting philosophy to some extent and it has generally been employed by poorer, smaller market teams.  But it isn't just some flashy name Russ Brandon thought up. 

 

Who else uses it the way the Bills did?  It was Wilson's way to gripe about non-shared revenue being used in salary cap formula even though his revenue sharing check was going up as much as the salary cap was.  Cash to cap made no sense then and makes no sense now.  Wilson was not backing out the non cash amortized bonus number in his 'cash to cap' strategy.  He simply took the available cap number which included non cash amortized bonuses and said I'm not writing checks for bonuses more than the available cap number to sign players, with no regard to the fact that his revenue sharing check from the NFL was going up every year.  

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29 minutes ago, GunnerBill said:

 

Exactly. Every penny you pay a guy the day he signs eventually has to be accounted for..... but it doesn't all have to be accounted for on that year's cap.  It does on the company balance sheet.... but not on the cap.  

 

Agree totally on scouting and coaching spend.  We spent too long with dregs at many coaching and personnel spots.  Those areas are uncapped spend. Look at the staff Brandon Beane has been able to assemble. At the point he first put the staff together he hired 2 guys who had GM interviews that same hiring cycle (one of whom has since departed to be a GM), another guy who has interviewed for the Carolina job this year, a former GM in Dennis Hickey and a guy taking a demotion from a Director of College Scouting to National Scout to join the Bills.  It was pretty close to an all-star staff in many ways.  Nothing like the cast of nomads and nobodies we made do with for much of the Ralph era.  

Excellent insight. The crushing weakness of the organization was not in its frugality but in its staffing. As you pointed out in another post their cash to cap accounting system was also used by other teams. What made the system more onerous was the bad personnel decisions in this stricter structure. Where the  franchise was also handicapped was when the better players contracts ran out. The self-imposed cap system made it difficult to pay the market rate for the second contract. 

 

In Ralph's business structure the MVP for the organization was Littman, his finance disciplinarian. He was the financial enforcer who had the most authority in this well run cash/flow operation. If the football side of the operation was staffed as well as the business side there would have been more success on the field. 

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Just now, BuffaloRebound said:

 

Who else uses it the way the Bills did?  It was Wilson's way to gripe about non-shared revenue being used in salary cap formula even though his revenue sharing check was going up as much as the salary cap was.  Cash to cap made no sense then and makes no sense now.  Wilson was not backing out the non cash amortized bonus number in his 'cash to cap' strategy.  He simply took the available cap number which included non cash amortized bonuses and said I'm not writing checks for bonuses more than the available cap number to sign players, with no regard to the fact that his revenue sharing check from the NFL was going up every year.  

 

The Buccaneers certainly were for a period and I believe there was a spell where two or three other teams were too.  I'm not saying it is the right strategy or even defending the Bills usage of it.  I was just taking issue with you suggesting it was a gimmick "made up" by the Bills.  It wasn't.  It is a recognised cap management technique that other teams used too though Buffalo kind of made themselves slaves to it at times.  

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1 minute ago, OldTimeAFLGuy said:

 

...trucking and insurance were his two major entities......I believe he also loaned $400,000 to the Raiders to keep them afloat......he offered to loan money to the then Boston Patriots as well, but they declined..........

 

Exactly.  The idea that Wilson was poor is simply untrue.  His net worth eventually increased because he owned the Bills but he wasn't dependent upon the team for his living.  In the 1960s or 1970s, Wilson also raced Thoroughbred horses, and some of his were pretty good runners.  Wilson was just a wealthy individual who was careful with his money and didn't waste it.

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8 hours ago, BuffaloRush said:

Over the past years or so I’ve read articles about Ralph Wilson.  In doing so, one phrase keeps coming up - “cash to the cap.”  However I can’t find an actual definition anywhere.

 

Can someone clarify what “cash to the cap” means, specifically as it relates to Ralph?  My best guess is that it means you don’t spend the entire salary cap, and keep the money you didn’t spend.  Am I far off?  

The others explained it pretty well.

 

Basically he worked outside the cap. Holding the Bills to not spending any more "actual cash" then the salary cap number. Even though he could have spent a lot more as they never spent what would have been allowed on a per year basis in regards to salary cap.
An amount that can be mega millions over the cap in actual cash outlay if they would have signed premium FA's and issued big sign bonuses like other teams routinely did.

 

They still did contracts the same as always like other teams. Sign bonuses amortized forward and properly loading yearly salaries per the rules. Just up to yearly cap cash outlay.

 

So Bills would show they had mega cap space per league salary cap calculations per year, but since Ralph was paying out "in real cash" at the salary cap level already, he would not spend(effectively borrowing on future years) to sign players with expiring contracts and for FA's.

 

This effectively made the Bills a team that could not compete and led to them being the NFL farmteam like MLB KC Royals and Miami Marlins use to be back in the day. Miami still is now again.

 

Take a look at actual cash outlays for 2017. http://www.spotrac.com/nfl/cash/2017/  NFL  recent years not a great example as in past years, as many teams horde salary cap now since they can carry surplus forward if desired and do not lose it. Lions spent way over cap last year. Cap was 167 mill.

 

With Ralphs cash to cap accounting method he would never bring unused salary cap money forward and just keep the profit. He could never spend money brought forward anyway in his cash to cap method as he refused to spend anymore actual cash then the salary cap number.

 

I do not recall any other teams agreeing to do this except possibly the Bengals. Ralph was hoping it would catch on and became league wide. It failed. What it was successful at was making Bills non competitive for over a decade and keeping Ralphs net worth from dipping below a Billion dollars. Thanks Ralph.
 

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8 hours ago, SoTier said:

 

Wilson was already wealthy when he purchased the Bills franchise in 1960.  I believe he inherited a business from his father that was associated with the auto industry and expanded that.   Keep in mind that $25000 *which is what Wilson paid for the just the franchise -- he would have had to invest more in actually getting the team up and running and supporting it until fans started paying enough admissions to show a profit) was a lot of money in 1960 when the average salary was maybe $5000/a year, the minimum wage was around $1/hour, and you could buy a livable if modest house for $10-20K.

  My observation based on those old enough to support families back then (early 1960's)  the average annual salary was more along the lines of 2,500-3,500 dollars.  10,000 dollars would have bought a very nice 3,500 plus square foot home.  The wacky inflation in homes started during the 1970's in a generally inflationary period.  I remember my FIL telling about looking at a sizable home during the early 1960's in Greece that needed a few things for 5,000 dollars.  It would have cost another couple of thousand dollars to put it in good shape.  I agree with your observation about the Bills  in general.

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9 hours ago, BakersBills said:

He was broke af because his buisness was the bills.

 

unlike other owners who bought teams and already had billions.

 

it helps when you sell fake cheese and noodles on the side.

 

Ralph may have been tight with spending . But he was never broke .  He was a successful  businessman  (transportation?) .  The Bills were not a core business.

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27 minutes ago, cba fan said:

The others explained it pretty well.

 

Basically he worked outside the cap. Holding the Bills to not spending any more "actual cash" then the salary cap number. Even though he could have spent a lot more as they never spent what would have been allowed on a per year basis in regards to salary cap.
An amount that can be mega millions over the cap in actual cash outlay if they would have signed premium FA's and issued big sign bonuses like other teams routinely did.

 

They still did contracts the same as always like other teams. Sign bonuses amortized forward and properly loading yearly salaries per the rules. Just up to yearly cap cash outlay.

 

So Bills would show they had mega cap space per league salary cap calculations per year, but since Ralph was paying out "in real cash" at the salary cap level already, he would not spend(effectively borrowing on future years) to sign players with expiring contracts and for FA's.

 

This effectively made the Bills a team that could not compete and led to them being the NFL farmteam like MLB KC Royals and Miami Marlins use to be back in the day. Miami still is now again.

 

Take a look at actual cash outlays for 2017. http://www.spotrac.com/nfl/cash/2017/  NFL  recent years not a great example as in past years, as many teams horde salary cap now since they can carry surplus forward if desired and do not lose it. Lions spent way over cap last year. Cap was 167 mill.

 

With Ralphs cash to cap accounting method he would never bring unused salary cap money forward and just keep the profit. He could never spend money brought forward anyway in his cash to cap method as he refused to spend anymore actual cash then the salary cap number.

 

I do not recall any other teams agreeing to do this except possibly the Bengals. Ralph was hoping it would catch on and became league wide. It failed. What it was successful at was making Bills non competitive for over a decade and keeping Ralphs net worth from dipping below a Billion dollars. Thanks Ralph.
 

  If you look at it from Ralph's point of view then you can understand what his motive was.  The guy was used to living in high society and as the other businesses became insignificant compared to the Bills he needed to tap the Bills to maintain what he was accustomed to.  The Bengals were a similar situation as they were 100 percent of the Brown family's income.  Art Modell was pretty much in the same boat when his Browns were still in Cleveland.  Most of the other old line owners succumbed to financial erosion before the modern NFL era of Jerry Jones and Bob Kraft.  Some such as the Rooney's brought in minor partners so they could cash out small portions of the team.  If you had a strong non NFL business such as oil as it was with Bud Adams you could have the best of everything but you still needed to have good people working for you which Adams never got figured out.

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11 hours ago, kdiggz said:

The new philosophy is the "Dead Cap Cash." Basically, you wait for a new regime to come in every few years and trade away all of the previous players and absorb the dead cap costs.

 

Frighteningly accurate . . .

 

And it got pretty annoying reading all of the speculation on what ralph's businesses were:  

 

After the war ended, he took over his father's insurance business and invested in Michigan area mines and factories. He eventually purchased several manufacturing outlets, construction firms, television and radio stations, and founded Ralph Wilson Industries.

Edited by Philly McButterpants

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12 hours ago, BuffaloRush said:

Over the past years or so I’ve read articles about Ralph Wilson.  In doing so, one phrase keeps coming up - “cash to the cap.”  However I can’t find an actual definition anywhere.

 

Can someone clarify what “cash to the cap” means, specifically as it relates to Ralph?  My best guess is that it means you don’t spend the entire salary cap, and keep the money you didn’t spend.  Am I far off?  

My understanding it was in terms of signing bonus and cap implication.  Say cousins gets 50 mil signing bonus.  instead of prorating that amount over the years of the contract they would use most if not all of that 50 mil towards the 2018 cap.

Edited by Mat68

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