Flacco’s Deal Not as Cap Friendly
There is very much an adage when it comes to examining NFL contracts – “the devil is in the (guaranteed money) details”.
Implicit in that statement is that a contract should never be judged on the raw numbers and any analysis of a contract should wait until after the full details of the contract have been disclosed.
A clearer example of this has probably never been more evident than the discussions that have occurred over the last 48 hours regarding the new contract signed by the San Francisco 49ers and QB Colin Kaepernick.
On Wednesday, news broke that the 49ers and QB Kaepernick had reach agreement on a new 7-year contract containing “guaranteed” money of $61M and with a total value of $126M.
The initial reaction came fast and furious…
“Wow! That’s a lot!”
That’s the most “guaranteed” money and second highest total value ever given to any player in NFL history!
Scorn and derisions immediately ensued.
“He’s good, but he’s not that good!”
“Kaepernick has only started 23 games, how can he be worth that much!”
“How could San Francisco even think of giving that much to a QB who has never won a Super Bowl and who averaged less than 200 passing per game last year (and barely over 200 yards per start for his career)?”
Yada, yada, yada…
Ravens fans responded with the predictable, “See, Flacco is now a bargain and can no longer be ‘overpaid’ when Kaepernick gets paid that much!”
Even the Ravens media team got in on the act in their daily Late for Work article on early Thursday morning when they quoted ESPN’s Jamison Hensley’s article from the day before that said the title of most overpaid QB “now goes to the San Francisco 49ers’ Colin Kaepernick”.
Within a few hours, though, the full details of the contract were reported and, as it turns out, the contract is totally the opposite – it is Cap (not Kap)- and team-friendly – and underscores why any pronouncements about contracts based on the early – incomplete – numbers are foolish.
This is true because the structure of Kaepernick’s deal is totally the opposite of Flacco’s and allows the 49ers multiple outs if Kaepernick fails to perform up to expectations. The key reasons for this is that Kaepernick’s deal contains only $12M in bonus money (Flacco will get 3 bonuses totally $51M in fully guaranteed money) and, most importantly, most of the $61M in “guaranteed” money is guaranteed against injury only, so he can be released for either Salary Cap or performance reasons.
As is often said, “guaranteed” money isn’t always really guaranteed.
So, with such relatively little truly guaranteed money – $12.328M – the 49ers can, if necessary, part ways with an underperforming Kaepernick with relative little damage to the Salary Cap.
The deal even includes de-escalators that would actually reduce Kaepernick’s base salaries and thus also reduce some of the guarantees (since many of his base salaries are part of guaranteed money) if he fails to play 80% of the offensive snaps in a season that the 49ers go to the Super Bowl or he isn’t named 1st or 2nd team All-Pro.
Lastly, because of the huge injury guarantee, the contract also calls for Kaepernick to take out a $20M insurance policy against him becoming unable to play due to injury. If that happens, he would have to repay that money to the 49ers, thereby lessening the Cap impact of the injury guarantee.
And, let’s be realistic, even with Kaepernick’s higher risk of injury due to his style of play, the chances of him have a true career-ending injury – i.e. can never physically play again – are pretty slim. He could certainly have a career-altering injury – one that doesn’t allow him to play at his present or expected level of play – but unless he truly can’t play and can’t pass a physical, the injury guarantee would not apply and he could be released without any of the remaining “guaranteed” money needing to be paid.
So, compared to Flacco’s deal, Kaepernick’s deal is a steal for the 49ers and any statements that Kaepernick’s deal is somehow more costly or that Kaepernick is “overpaid” are just senseless.
Now, to be clear, none of this is said to bash Flacco or the Ravens because those negotiations took place under totally different circumstances – circumstances where Flacco was a pending free agent, coming off of a Super Bowl MVP essentially handing Flacco all of the leverage.
If Flacco was “overpaid”, it was because he bet on himself and became a free agent at just the right time and the Ravens really had no choice but to re-sign him at a high price.
And, if Flacco plays up to his abilities, no one will ever complain about him being “overpaid”.
Still, there are problems with the structure of Flacco’s deal that really should have been avoided and/or should be avoided by the Ravens in future contracts.
Part of those issues revolve around the team needing to keep his 2013 Cap number lower, which calls for a contract with a larger bonus (or bonuses) and back-load base salaries. And, if the Cap increases as it did this year, the impact of Flacco may not be as bad as it initially seemed.
Still, Flacco’s huge 2016 Cap number of over $28.5M looms large and could be a huge headache for the Ravens.
Again, while part of that comes from the tight Cap the Ravens had in 2013, the Ravens history is full of contracts with tiered “fully” guaranteed bonuses or option bonuses that are essentially fully guaranteed because the hit from a release of the player (in lieu of paying that option bonus) is too much of a Cap hit. It’s a troubling pattern that has always existed and is presently biting them with Ray Rice’s and Haloti Ngata’s contracts, as well.
The argument that the Ravens needed to keep Flacco’s first year Cap number down can only go so far because the 49ers were able to keep Kaepernick’s 2014 Cap number lower (lower than Flacco’s 1st year Cap number, in fact) because of the much, much smaller initial Signing Bonus.
The alternative is a more “flat”, “pay as you go” contract – which can lessen the impact of the release of a player whose contract turned out to be a mistake because of the lower bonus money – which is becoming more and more preferred by a growing number of teams.
Kaepernick’s deal is a good example of this.
To illustrate the difference, while the contracts for Flacco and Kaepernick have similar total values and yearly averages, it only needs to be considered that if Kaepernick is released after the 3rd year of his new deal (for other than injury reasons), the 49ers would only have to account for less than $5M in dead money against their Cap. On the other hand, if the Ravens were to release Flacco after 2015 (the 3rd year of his deal), for any reason, the Ravens would take a hit of just under $26M in dead money.
In defense of the Ravens a bit, they really haven’t had a clean Cap (i.e. a huge amount of Cap space and not a lot of big contracts – only Ray Lewis and Jon Ogden at that point) since 2003 and it is a lot easier to use the “pay as you go” structure when you have plenty of present and future Cap space.
After 2003, when the Ravens continued with the large tiered bonuses and back-loaded base salaries –always admirably spending to the Cap and fielding mostly very competitive teams – it becomes much harder to switch to the “pay as you go” method because the higher Cap numbers in the early years collide with the larger Cap numbers from the back-loaded deals previously executed.
And, it’s very possible that this may not change until they have a downturn for a year or two and can start fresh with a cleaner Cap. That said it is most certainly something they should consider because the “pay as you go” method does provide much more flexibility to the team.
“Pay as you go” would likely help Ozzie Newsome and capologist Pat Moriarty avoid the pain of back-end of deals like the contracts for Ray Rice and Haloti Ngata (the uncapped year saved them from much of the same pain with Willis McGahee’s deal).
Hopefully that pain does not reoccur with Flacco in 2016, when his contract contains that $28M+ Cap number and basically forces the team to redo his deal or take the painful $26M Cap hit. We can only hope that Flacco’s play over the next 2 seasons makes that decision a no-brainer.
If he does play well, Flacco will again hold all of the leverage, but he will have most certainly proven his worth over multiple seasons. If he doesn’t…….ugh, it could be really ugly and the structure of Flacco’s deal could really, really come back to haunt them.
And, that is something that the 49ers won’t have to worry about if Kaepernick underperforms.