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Contract Question - When can a new deal be made from scratch vs Cap hits/Dead Money?


Virgil

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Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

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7 minutes ago, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

I mean maybe there's some NFLPA rule against it but I'd assume as long as he agreed to a deal it'd work but nobody would ever ***** do that. The only way to do it is to create one that somehow benefits him more while reducing the cap hit, and while we call Beane a wizard he doesn't have actual magic.

 

Though maybe I'm just not understanding what exactly you're saying.

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15 minutes ago, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

I’m my understanding is that you can work in extensions that basically work as a restructure in regards to cap hit, adding on extra years that allow you to bring down the cap hit short-term. If those extensions don’t come at the end of the contract, say there’s two years left, the original terms are ripped up and the new terms are set.

 

The reason you wouldn’t do this is if the player is not going to be here long term or is a retirement risk.

 

Diggs is a good example.

 

The original terms of his contract went through 2024. We extended him two years early, effectively “ending” that contract, and bringing his cap hit down to $11M and $14M for the last two seasons.

 

You can play this game of chicken for awhile, but if the player becomes old and you need to move on or retires, you are going to accelerate that money and there will be some pain.

 

It’s why Josh’s impending cap hit doesn’t matter, much like Brees’ cap hit didn’t matter. There’s still going to be a sizable hit, but as long as you can keep the balls in the air with extensions and restructuring, the real pain of the cap hit is delayed until they depart from the team.

 

This is how the Buc’s signed Tom Brady. Due to his retirement, they had all his dead money floating around. But there’s no reason to not keep extending and restructuring cornerstones like franchise QB’s because it’s gonna suck when they retire regardless.

 

In the Von example, we can add years on and reduce his cap hit but why would we do that? If he retired next year, it would just be more pain. 

Edited by FireChans
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I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

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6 minutes ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

I don't hate that trade, but I'd go with a 4th instead of a 2nd. Knox does have value. 

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10 minutes ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

I believe they do. IIRC, Brock Osweiler was such a deal. 
 

He was packaged to Cleveland with a second for like a 4th rounder back under the condition Cleveland picked up the part of the cap hit. 

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I think the NFL and NFLPA  should allow Teams to dump 1 contract per year, with the agreement the team has to pay the player 1/2 of the remaining contract.

 

In other words, Terry pays Von 1/2 of what he owes on his contract, but it's 100% off our cap.

Edited by SoonerBillsFan
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1 hour ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

Didn't the Browns or someone essentially did that when they traded for a player.  Basically, the Browns got a player, like a 2nd round pick in exchange for a box of tape.

 

As for your original question, think of (potential) dead cap space as a debt.  Like you, I'm not familiar w/ all the specifics, but basically if you've already paid for the performance of a player & that cost is amortized & kicked down the road, you still need to pay for that previously used asset.

i.e.  You sign a player worth $6m/yr for a 2 yr, $12m contract.  1st yr they get a $1m salary & a $5m signing bonus.  The cap hit that 1st yr is only $3.5m (& it'll be $8.5m the 2nd); if you cut them, you've essentially gotta pay for the benefit that you've already received but not paid for ($2.5m) but you save the pending $6m salary.

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1 hour ago, FireChans said:

I believe they do. IIRC, Brock Osweiler was such a deal. 
 

He was packaged to Cleveland with a second for like a 4th rounder back under the condition Cleveland picked up the part of the cap hit. 

 

Yes, I was thinking about that deal too.  In that case, if I'm remembering correctly, it didn't save the dead cap hit, just the salary portion.  I could be wrong though

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First, I think it's useful to define where "dead money" comes from:
 

Dead money exists because of how salary cap accounting rules operate. Signing bonuses, option bonuses and certain roster bonuses are prorated or spread out evenly over the life of a contract for a maximum of five years. When a player is released, traded or retires, the remaining proration of these salary components immediately accelerate onto his team's current salary cap. 

 

To use a simple example and only using signing bonus as the only bonus, if a player signs a 5-year deal for 15 million per year ($75 million over 5 years) and a signing bonus of $20 million ($4 million per year)...

 

If that player is no longer wanted after two seasons, the team can escape paying the player's base salary $15 million a year, but the signing bonus for every three remaining years accelerates at once and there is then 3 year's of "dead money," $12 million dollars.

 

So, as far as I know, midway through a deal, teams will convert base salary into signing bonus (thus spreading out the big base salary hit for a season when money is tight) but that money is equally distributed over the remaining years of the contract as bonus. The Bills have done that a fair bit lately.

 

But... I can't remember a situation where the INVERSE happens: the signing bonus is converted to salary which can be avoided. I think that's either your question or related to it: can a team escape the "dead money" hit of remaining signing bonus.

I don't think so. I don't even think if a player was willing if the CBA would allow for it. Possibly because bonus is "paid" immediately but just for accounting purposes it's spread over a deal. Maybe the concept is you can't take back a signing bonus that was paid upon signing and in the past. If not the simple reason of you can't take back something that was paid all at once in the past, I'm not sure why.

 

I'm about 85% sure of this. Someone correct me if I'm wrong please.

Edited by Nephilim17
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3 hours ago, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

Dead money is generally money you’ve already paid but not yet taken a cap hit for. 

there’s no getting out of accounting for money you paid a guy. 
 

sometimes it’s a future guarantee but rarely - that you could negotiate technically 

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2 hours ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

I Agree with you and don't get why the team trading the player has to eat the cap hit.

 

The player still gets paid so the team receiving the player should take the cap hit.

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38 minutes ago, Virgil said:

 

Yes, I was thinking about that deal too.  In that case, if I'm remembering correctly, it didn't save the dead cap hit, just the salary portion.  I could be wrong though

Right, the future guarantee that no one would want to pay travelled with the player not an already paid sum that hasn’t been accounted for 

24 minutes ago, Nephilim17 said:

First, I think it's useful to define where "dead money" comes from:
 

Dead money exists because of how salary cap accounting rules operate. Signing bonuses, option bonuses and certain roster bonuses are prorated or spread out evenly over the life of a contract for a maximum of five years. When a player is released, traded or retires, the remaining proration of these salary components immediately accelerate onto his team's current salary cap. 

 

To use a simple example and only using signing bonus as the only bonus, if a player signs a 5-year deal for 15 million per year ($75 million over 5 years) and a signing bonus of $20 million ($4 million per year)...

 

If that player is no longer wanted after two seasons, the team can escape paying the player's base salary $15 million a year, but the signing bonus for every three remaining years accelerates at once and there is then 3 year's of "dead money," $12 million dollars.

 

So, as far as I know, midway through a deal, teams will convert base salary into signing bonus (thus spreading out the big base salary hit for a season when money is tight) but that money is equally distributed over the remaining years of the contract as bonus. The Bills have done that a fair bit lately.

 

But... I can't remember a situation where the INVERSE happens: the signing bonus is converted to salary which can be avoided. I think that's either your question or related to it: can a team escape the "dead money" hit of remaining signing bonus.

I don't think so. I don't even think if a player was willing if the CBA would allow for it. Possibly because bonus is "paid" immediately but just for accounting purposes it's spread over a deal. Maybe the concept is you can't take back a signing bonus that was paid upon signing and in the past. If not the simple reason of you can't take back something that was paid all at once in the past, I'm not sure why.

 

I'm about 85% sure of this. Someone correct me if I'm wrong please.


the inverse wouldn’t happen as it’s both worse for the player and the team 

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3 hours ago, Virgil said:

I think the NFL should allow teams to trade dead cap space away.  If a team has the cap space and wants draft picks, let them make that decision.

 

I'm going to get flamed, but I would trade a 2nd round pick, Knox, and Von to someone if that took their contracts off our books completely without a hit

 

It kind of happened a few years back Cleveland traded to Houston their QB along with his massive contract plus draft picks so Texans would take the contract. Then if I remember right they cut him.  But the contract has to be written in such a way to do that without taking a big cap hit.

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1 hour ago, NoSaint said:

Right, the future guarantee that no one would want to pay travelled with the player not an already paid sum that hasn’t been accounted for 


the inverse wouldn’t happen as it’s both worse for the player and the team 

Sure, it's bad for a player, but if signing bonus was changed to salary, a team could cut the player and not be hit with dead money. That would be positive for a team.

 

But I don't think it's allowable. And the only reason for a player to agree, theoretically, is if the player wanted out so bad, he was willing to leave behind money to make himself tradeable and not give his current team a huge hit with dead money.
 

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8 minutes ago, Nephilim17 said:

Sure, it's bad for a player, but if signing bonus was changed to salary, a team could cut the player and not be hit with dead money. That would be positive for a team.

 

But I don't think it's allowable. And the only reason for a player to agree, theoretically, is if the player wanted out so bad, he was willing to leave behind money to make himself tradeable and not give his current team a huge hit with dead money.
 


my assumption in this claim wasn’t that the team was  non guaranteeing payment of the bonus and then cutting the guy right after.
 

You know. Because that’s not really a viable repeatable strategy 

 

the only reason worth discussing is because for some reason the team wanted to speed up the cap hit while keeping a player and that’s the opposite of helpful for them 

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On 2/23/2024 at 6:28 PM, FireChans said:

I believe they do. IIRC, Brock Osweiler was such a deal. 
 

He was packaged to Cleveland with a second for like a 4th rounder back under the condition Cleveland picked up the part of the cap hit. 

I think Knox will become one of the worse contracts in the NFL, essentially Beane gave him star TE money and he is not a star. Not sure if you could get any team to bite on that contract. 

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On 2/23/2024 at 5:33 PM, Virgil said:

Something I've never understood, is when a deal can be re-worked without penalty vs a deal that creates dead money.

 

For example, let's just say Von Miller.  Is there any way for them to throw out his old deal and sign him to a new 1 year deal?  I feel like the answer is no, as the Saints proved with their ongoing plan to kick the can down the road.  I also understand that the player needs to be on board for the new contract.

 

But overall, what are the rules with this?  I keep hearing about deals where the old contract is essentially torn up, but I just don't get the logistics.

 

The first thing to understand is that every dollar teams pay a player must be accounted for on the salary cap.* So if the Bills were to rework Von’s contract they would still be on the hook for cap hits for what they’ve paid him but hasn’t been account for. Think about it this way: There’s a running total of how much a team pays a player. Eventually the cap hits must equal that total. There is no way around that. 
 

*There are a few exceptions to this: 1) The Veteran Signing Benefit allows teams to give a small number of veteran players on vet minimum deals a small signing bonus that doesn’t hit the cap. 2) Cash that teams recoup from a player. 3) Salary forfeited by players who are suspended.

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