SALARY CAP ANALYSIS: The impact of an uncapped season

Salary Cap SALARY CAP ANALYSIS: The impact of an uncapped season

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It’s the offseason and until the 2010 season begins the focus will be open augmenting the Ravens’ roster through free agency, trades and the draft. There’s also the huge issue of the collective bargaining agreement (“CBA”) and the upcoming “uncapped season.” With that in mind, I asked 24×7’s capologist Brian McFarland to answer a few questions…

TL: To start with Brian, let’s hone in on the CBA. Why in your opinion is the league at this crossroad and why can’t the players and owners get it together and reach a reasonable compromise for the benefit of a multi-billion dollar industry?

Brian:  For the owners, it became pretty obvious, pretty quickly, that the deal they had agreed to in 2006 had given too much of the pie to the players.  The Salary Cap increased from around $85M in 2005 to $130M in 2009.  It likely would have been $140M this year.  That’s a major increase over a short period of time. 

Part of the reason for such a huge increase was that the teams could simply not keep up with the Cap.  The CBA contains a provision (separate from the Salary Cap) that set a minimum league-wide amount to be spent on players.  If and when that minimum was not met, it increases the Salary Cap for the following year (over and above the set yearly increase).  So, basically, the owners contend that, even with normal spending habits, the amount to be spent on players was just too much.

That led the owners to exercise the opt-out provision of the CBA in May of 2008.  The subsequent downturn of the economy has only served to worsen the problem – at least according to the owners.

TL: DeMaurice Smith recently said when asked about the possibility of a 2011 lockout that on the scale of 1 to 10, a 14. The owners seem to have solidarity and are willing to enter an uncapped season. Both are putting on their best poker face. Which do you feel has the better hand?

Brian:  I’d say the owners clearly have the most leverage here.  The uncapped year rules that are in place make an uncapped year anything but a boon for the players, so the owners aren’t afraid to go “uncapped”.  Plus, the owners have apparently already been planning their finances to protect themselves for a possible strike or lockout in 2011.  The television deals, in fact, will continue to be paid – even if there is no football being played.

On the other hand, the players have found out that the uncapped year will not be the spending free for all that they had been lead to believe.  In fact, the rules are so limiting that there will probably be very little player movement in 2010.  

TL: Might some potential free agents suffer as a result of the uncapped season and if so could their interests undermine the union’s solidarity?

Brian:  Absolutely!  Over 200 players who would have otherwise been Unrestricted Free Agents (UFAs) will now be just Restricted Free Agents (RFAs), thereby still largely under control of their present teams.  For many of those players, it means the loss of a huge contract and continued exposure to the possibility of injury that could ruin their chance at their big payday.

Whether that’s enough to get the NFLPA to be more willing to agree to concessions, remains to be seen.  At least at this point, the NFLPA really has no choice but to talk tough and not be willing to compromise.  They got a great deal in 2006, but if they just buckle under and give back those gains, the Union will be viewed as weak and unable to protect the players in the future.  As such, I wouldn’t expect a quick resolution.  In fact, the only real leverage the players have is to force the owners to impose a lockout and hope that that will swing public sentiment in favor of the players.

TL: Some have questioned whether or not the owners are on the same page because big market teams like the Cowboys and Redskins prefer not to share the rewards of their own marketing efforts with other less entrepreneurial owners. Talk about that issue and what remedies might satisfy all owners.

Brian:  The owners appear to be pretty unified at this point.  In 2006, they seemed to be a bit more divided, but it appears that all of the owners feel that the deal negotiated back then was a bad deal for them and now they need to correct it.  Whether that resolve will last remains to be seen, but it certainly appears that they are comfortable with, and prepared for, a labor stoppage.

Revenue sharing will never go away, it’s what makes the NFL different from every other professional league and allows every team to have a shot at the playoffs.  It certainly is understandable, though, that some owners – those who go out and do everything they can to maximize their revenue – are not particularly happy with their brethren, who do not do so. 

I’m sure there will be some tweaks to the owners’ revenue sharing arrangement, but it won’t likely be anything that will change the competitive balance of the league.

TL: The owners have incorporated safeguards in the CBA to prevent free spending by the Jerry Joneses and Dan Snyders of the NFL world. One of those safeguards affects playoff teams and one such team is the Ravens. Being among the Final Eight teams, the Ravens must deal with certain restrictions as it pertains to free agents. What are those restrictions?

Brian:  The Ravens, as one of the 4 teams that lost in the Divisional Round, are subject to the Final 8 Plan and are limited as to the types, and quantity, of Free Agents they can sign, but not as much as some members of the media have portrayed.

The Ravens are allowed to sign the following Free Agents:

  • They may re-sign their own Free Agents;
  • They may sign players released by other teams (known as “Street Free Agents”);
  • They may sign RFAs to offer sheets;
  • They may sign one (1) UFA to a big-money deal (with a 1st year “salary” of approx. $5.5M);
  • They may sign any number of UFAs to minor deals (with 1st year salaries of less than approx. $3.7M);
  • With regard to signing an additional big-money UFA or a middle range UFA (i.e. one with a 1st year salary between $3.7M and $5.5M), the Ravens can only sign any such UFA if they have already lost a UFA making the same salary. 

TL:  OK, so the Final Eight Plan does not prohibit the Ravens from signing a top UFA like Julius Peppers?

Brian:  No, it does not – they can sign one top UFA, if they are so inclined. 

For whatever reason, there seems to be a lot of confusion about this.  The Final 8 Plan rules do not prohibit them from signing one UFA to a top of the market deal.  The “you have to lose one to sign one provision” does not apply to the first of such players, nor does it apply to the signing of lesser UFAs.

With regard to Julius Peppers specifically, he is presently slated to be a UFA.  Early reports are that the Panthers are not going to use the Franchise Tag on Peppers, but I have my doubts.  I just can’t see how the Panthers can let a player of that caliber get away without attempting to trade him first.

However, if the Panthers do decline to use the Franchise Tag, the Ravens are allowed to sign Peppers to a long term deal.  However, if they did sign Peppers, they would not be able to sign another big-money UFA, unless they lost one of equal value.  Given the pending UFAs for the Ravens – Derrick Mason, Kelley Washington, David Tyree, LJ Smith, Justin Bannan, Dwan Edwards, Frank Walker, Corey Ivy – it is unlikely that the loss of any of them would allow the Ravens to sign an additional UFA.  As such, the Ravens will only be able to sign one top of the market UFA.

TL: What if the Ravens opt to trade for a player like Anquan Boldin but Boldin wants a new deal before agreeing to the trade. Do the Final Eight rules affect this type of transaction?

Brian:  The Final 8 Plan does limit trades for the final 8 teams, but the provision is a bit ambiguous, so it remains to be seen how limiting it is?  It could either prohibit a Final 8 team from (1) trading for a 2010 UFA in a “sign-and-trade” scenario, whereby the player signs with another team and then is traded to a Final 8 team or (2) trading for a player, who, if a 2010 UFA, would be prohibited from signing with the team because of the Final 8 rules.

If it’s the later, then trading for a guy like Boldin becomes problematic since he is in the final year of his contract and the Final 8 category that he falls under prohibits his contract from being renegotiated for one year.  That would essentially mean a one-year rental, with Boldin (assuming a new CBA at some point) being a UFA before the Ravens could sign him to a new deal.  This provision would also apply to trading for a RFA for less than the RFA tender he received.  For example, if the Broncos place the 1st and 3rd round RFA tender on WR Brandon Marshall, but were willing to trade him for less, a trade to the Ravens (or any other Final 8 team) become problematic, because Marshall would be traded under his one-year RFA tender and, like Boldin, would not be able to receive the long term contract he has been seeking.

So, for the Ravens sake, hopefully the trade prohibition is only in place to restrict “sign-and-trade” scenarios.

TL: So it sounds like to me that it will be easier for non-playoff teams to improve through free agency and potentially trades…

Brian:  Absolutely, those teams are not subject to any of the Final 8 restrictions, but with so few UFAs and with teams having the ability to use an additional Transitional Tag, there will be far less players available.  For the most part, free agency is going to be a non-event this year (or at least, far less active than in the past).

TL: How might the look of contracts change with the other CBA safeguards designed to curb free spending?

Brian:  The structure of a contract is limited by two different 30% limitations.  The first limits the increase of the yearly “salary” (to include base salary, roster bonus, and option bonus prorations) a player receives to be no more than 30% of the player’s 1st year salary.  This provision began last year and was aimed at prohibiting teams from crafting a contract that would contain small amounts in capped years and large amounts in an uncapped year.

The other 30% limitation has the same aim and applies specifically to a contract entered into in an uncapped year and prohibits a player’s salary from decreasing by more than 30% from one year to the next.  This second 30% limitation is specifically in place to prohibit teams from signing players in an uncapped year to a contract that pays the player a huge salary (again, to include base salary, roster bonus, and option bonus prorations) in the Uncapped Year, but then smaller amounts after that (on the assumption that a Salary Cap would return in subsequent years).     This limitation would not prohibit the use of a sizeable signing bonus in an uncapped year, but, assuming a CBA extension in the future and the resumption of the Salary Cap, any bonus given would likely be subject to proration when the Cap returns, so teams would not be able to have to all count in the Uncapped Year.

TL: Ozzie Newsome said he expects there to be a larger number of street free agents as a result of the uncapped season. For everyone’s benefit what does that mean and why do you think Ozzie feels this way?

Brian:  A Street Free Agent is a player who has been released by another team.  As a Final 8 team, the Ravens are not prohibited from signing Street Free Agents and have had some pretty good success over the years when signing players who have been released by their prior teams (for example, Rod Woodson, Shannon Sharpe, Samari Rolle, Derrick Mason, Trevor Pryce).

Ozzie is anticipating that a lot of teams will use the Uncapped Year as a tool to rid themselves of costly contracts of players who are no longer (for whatever reason) living up to their contract.  For the Ravens, that could include players like Willis McGahee and Trevor Pryce.

TL: During the State of the Ravens press conference Ozzie also mentioned that the uncapped year might be a good time to extend contracts. Why?

Brian:  Two reasons really:

  • With the lack of free agents available, teams may look to their own roster and spend their budget on extending players already on the team.  Also, players, who because of the Uncapped Year are RFAs instead of UFAs, might be more willing to sign an extension instead of having to wait another year to be a UFA.  Plus, if there is a lockout next year, it would be nice to get a sizeable bonus now to help lessen the blow of not getting paid next year during a labor stoppage.
  • There is no Salary Cap to limit the number of contracts that a team could negotiate.  One caution here though is that the team still has to be mindful that a Salary Cap is likely to come back at some point and, depending on the team’s spending, the team can’t put itself in a bind when they overspend now and have to pay the piper later when the Cap returns. 

TL: Ed Reed is contemplating retirement. Wouldn’t it be best if his retirement happens in 2010 strictly from a cap perspective since it will be an uncapped season?

Brian:  Yes, in an uncapped year, there is worry about dead money hitting the Cap.  This past year, the Ravens carried close to $20M in dead money against the Cap for players (McNair, Ogden, McAlister, Douglas) who were no longer on the team.  That was Salary Cap space that they could not spend on other players.  In an uncapped year, there is no dead money to worry about.

TL: Might the competitive balance in the league be upset by the fact that there will be no spending floor in the uncapped season?

Brian:   It would allow teams like Jacksonville, Tampa Bay, Buffalo, St. Louis and Cincinnati to pay as little to players as they’d like.  That certainly could have an adverse effect and could lead to really awful football in some cities.

TL: If there is no floor, does that mean that minimum salaries are a thing of the past?

Brian:  No minimum salaries are still in place, it’s just that teams could, conceivably, sign 53 players to veteran minimum deals.

TL: How might a rookie cap help the league going forward with or without a salary cap?

Brian:   The guaranteed money that top 10 picks are now getting is just ridiculous and it takes away Salary Cap space that would otherwise likely be paid to veterans.  The NFLPA has said it won’t discuss a rookie cap, but there have been plenty of players who have commented on how it’s needed given the crazy contracts that top 10 picks are getting. 

It seems pretty well understood that there will be a true rookie salary cap in place as part of the new CBA.

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Brian McFarland

About Brian McFarland

Known on Ravens Message Boards as “B-more Ravor”, Brian is a life-long Baltimorean and an avid fan of the Ravens and all Baltimore sports.  A PSL holder since 1998, Brian has garnered a reputation as a cap-guru because of his strange (actually warped) desire to wade through the intricacies of the NFL’s salary cap and actually make sense of it for those of us who view it as inviting as IRS Tax Code. 
   
Brian, who hails from Catonsville, MD and still resides there, is married and has two children.

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