Cap question from an idiot on cap type things

[InChiefsHeaven]

OK, I asked this in the Chris Jones thread, but I think it got lost in the shuffle.

I don't understand a few things. Where Jones is concerned, (and for that matter Mahomes) isn't there ways they can pay the dude without it counting against the cap? Like...a huge ass signing bonus. Or incentives that are lucrative and ridiculously easy to earn, like work out bonuses, or consecutively being on time for meetings, not missing practices without an excuse...

So, please educate me. I don't understand why it has to be so hard. You give a guy a healthy but not bank breaking contract, but you give them a big bonus upfront. Or, does the bonus count against the cap, along with the incentives?

[Kman34]

Hookers and blow...

[InChiefsHeaven]

Originally Posted by Kman34

Hookers and blow...

Well, yeah, but that's not gonna cover millions of dollars...

[Sofa King]

Any discussion on circumventing the salary cap would be better placed in the Broncos thread.

[DaFace]

Signing bonuses are prorated over the course of the contract, so they don't really do anything to help with the cap.

Likewise, incentives count against the cap. It's just that, if the player doesn't earn them, they become part of the pool that can be carried over to the following season.

[DRU]

I still don't understand why players and owners can't create privately held LLCs and agree to "invest" or "grant" a particular amount of money into these LCCs, completely separate from anything having to do with football, and private so nobody even sees who owns the LLCs.

Between parties, they know they'll get their money through these means, but publicly, and for the cap, the actual player salary could be kept much lower.

[smithandrew051]

Originally Posted by DRU

I still don't understand why players and owners can't create privately held LLCs and agree to "invest" or "grant" a particular amount of money into these LCCs, completely separate from anything having to do with football, and private so nobody even sees who owns the LLCs.

Between parties, they know they'll get their money through these means, but publicly, and for the cap, the actual player salary could be kept much lower.

I think there are more side deals out there than we realize.

[Chargem]

Originally Posted by DRU

I still don't understand why players and owners can't create privately held LLCs and agree to "invest" or "grant" a particular amount of money into these LCCs, completely separate from anything having to do with football, and private so nobody even sees who owns the LLCs.

Between parties, they know they'll get their money through these means, but publicly, and for the cap, the actual player salary could be kept much lower.

The desire to win is probably offset by the fact that it takes profit out of the owners pocket?

Also these shady LLC ideas probably need a lot of trust. If it's off books and not in a contract, can the player trust the team to pay, or can the team trust the player after they pay an LLC?

[kccrow]

Originally Posted by InChiefsHeaven

OK, I asked this in the Chris Jones thread, but I think it got lost in the shuffle.

I don't understand a few things. Where Jones is concerned, (and for that matter Mahomes) isn't there ways they can pay the dude without it counting against the cap? Like...a huge ass signing bonus. Or incentives that are lucrative and ridiculously easy to earn, like work out bonuses, or consecutively being on time for meetings, not missing practices without an excuse...

So, please educate me. I don't understand why it has to be so hard. You give a guy a healthy but not bank breaking contract, but you give them a big bonus upfront. Or, does the bonus count against the cap, along with the incentives?

Short answer it's not especially easy, but there is one way.

A signing bonus is prorated over the duration or up to the first 5 years of the contract, whichever is shorter.

An option bonus can trigger in a later year and is then prorated over the duration or up to the next 5 years of the contract, whichever is shorter.

A signing bonus and option bonus in combination are used extensively in lengthier contracts, especially for QBs. For instance, you could extend Patrick Mahomes for 5 years and in doing so create a 6 year contract. If you give him a $30 million signing bonus, he'll have $6 million count against the cap the first 5 years. You could then trigger another $30 million option bonus in year 2 that then counts $6 million against the cap for years 2-6. This creates bonus proration of $6, $12, $12, $12, $12, $6 million in the years of the contract, which helps soften the burden in the first year of the contract.

A roster bonus triggers in the year of the contract it is written for and counts in full for that year.

Per-game roster bonuses trigger on a game-by-game basis in that same year.

Incentives are classified as likely to be earned or unlikely to be earned. Likely to be earned incentives count against the cap whereas unlikely to be earned do not (hard to get these in for proven players and be realistic).

The best bet is the use of salary escalators. A salary escalator is earned based on performance in the current year and escalates the next year's salary. For instance, you can pencil Jones in at $8 million salary this year and $10 million next year. You can write in an escalator that says that if Jones gets 10 or more sacks in 2020 then he will earn at $2 million escalator in 2021. His salary is increased to $12 million. You can guarantee or not guarantee the escalator or if the escalator is in a guaranteed salary year it will also be guaranteed, etc. You can, likewise, use a de-escalator and reduce his salary if he doesn't perform. For instance, if he doesn't get at least 40 tackles, he will lose $1 million. Most contracts don't have escalators/de-escalators for "proven" players.

[Hydrae]

Originally Posted by kccrow

Short answer it's not especially easy, but there is one way.

A signing bonus is prorated over the duration or up to the first 5 years of the contract, whichever is shorter.

An option bonus can trigger in a later year and is then prorated over the duration or up to the next 5 years of the contract, whichever is shorter.

A signing bonus and option bonus in combination are used extensively in lengthier contracts, especially for QBs. For instance, you could extend Patrick Mahomes for 5 years and in doing so create a 6 year contract. If you give him a $30 million signing bonus, he'll have $6 million count against the cap the first 5 years. You could then trigger another $30 million option bonus in year 2 that then counts $6 million against the cap for years 2-6. This creates bonus proration of $6, $12, $12, $12, $12, $6 million in the years of the contract, which helps soften the burden in the first year of the contract.

A roster bonus triggers in the year of the contract it is written for and counts in full for that year.

Per-game roster bonuses trigger on a game-by-game basis in that same year.

Incentives are classified as likely to be earned or unlikely to be earned. Likely to be earned incentives count against the cap whereas unlikely to be earned do not.

The best bet is the use of salary escalators. A salary escalator is earned based on performance in the current year and escalates the next year's salary. For instance, you can pencil Jones in at $8 million salary this year and $10 million next year. You can write in an escalator that says that if Jones gets 10 or more sacks in 2020 then he will earn at $2 million escalator in 2021. His salary is increased to $12 million. You can guarantee or not guarantee the escalator or if the escalator is in a guaranteed salary year it will also be guaranteed, etc. You can, likewise, use a de-escalator and reduce his salary if he doesn't perform. For instance, if he doesn't get at least 40 tackles, he will lose $1 million. Most contracts don't have escalators/de-escalators for "proven" players.

Awesome, thorough response while admitting this is a very high overview. Great job!

[LittleMeatballNick]

Pay them in Super Bowl rings.

[Shiver Me Timbers]

Originally Posted by Sofa King

Any discussion on circumventing the salary cap would be better placed in the Broncos thread.

Lol

[DRU]

Originally Posted by Chargem

The desire to win is probably offset by the fact that it takes profit out of the owners pocket?

Also these shady LLC ideas probably need a lot of trust. If it's off books and not in a contract, can the player trust the team to pay, or can the team trust the player after they pay an LLC?

It wouldn't be any different for profits. They either pay you $200m in one place, or they pay you $100m in one place, and $100m in another.

Any agreements between the LLCs could absolutely be done with contracts. It would be no different than you and I going into business together under MyCompany, LLC and YourCompany, LLC. We can have a contract in place between these companies.

[Chargem]

Originally Posted by DRU

It wouldn't be any different for profits. They either pay you $200m in one place, or they pay you $100m in one place, and $100m in another.

You missed the point, we are talking about circumventing the salary cap, so if the cap is $200m we're talking about working out how to pay the players $220m in a year. That $20m comes straight out of the owners bottom line.

Originally Posted by DRU

Any agreements between the LLCs could absolutely be done with contracts. It would be no different than you and I going into business together under MyCompany, LLC and YourCompany, LLC. We can have a contract in place between these companies.

Again, missing the point. I agree, if the contract for Yourcompany LLC is to provde player Patrick Mahomes for football related activity, but then surely it just hits the cap? People are talking about somehow funneling extra cash to a player outside of the cap structure so he takes a lower cap hit. So now you need a contract with a bogus service for Patrick to provide to the Chiefs in exchange for cash, e.g. "consulting" fees. But if he doesn't actually provide the service, the Chiefs could withhold payment for services not performed.

[BossChief]

Originally Posted by DRU

I still don't understand why players and owners can't create privately held LLCs and agree to "invest" or "grant" a particular amount of money into these LCCs, completely separate from anything having to do with football, and private so nobody even sees who owns the LLCs.

Between parties, they know they'll get their money through these means, but publicly, and for the cap, the actual player salary could be kept much lower.

That’s what Bowlen, Elway and Davis did...in a way.

They agreed to get “differed signing bonuses” to be paid in 2 years after they were due and in exchange, the players would get triple the amount reported to the cap and said that the difference was “interest”.

The league found out when Pat Bowlen didn’t pay them and courts had to get involved.

https://www.washingtonpost.com/wp-dy...2004Sep17.html