The Salary Cap

Discussion in 'Tennessee Titans and NFL Talk' started by Smitty46953, Feb 25, 2007.

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  1. Smitty46953

    Smitty46953 Starter

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    With all of the talk about the Salary Cap I have done some research and hope this helps explain it just a bit ... Thought would share it with the Titan Fans as well...:grrhee:

    The NFL Salary Cap as I understand it???


    1. How much money does each team have to spend against the NFL Salary Cap?
    With the extension of the NFL “Collective Bargaining Agreement” (CBA) the Cap is set to be $109,000,000 in 2007.


    2. How is the Salary Cap established?
    This was also changed with the extension of the CBA. The Cap is based on income that the teams earn during a League Year. Under the new agreement the "pot" has been expanded to include total revenue. Thus, other sources of revenue, including such other items as naming rights and local advertising, have been added to the money earned from the national televison contract, ticket sales, and NFL merchandise sales. This expanded revenue is divided equally amongst all 32 teams for purposes of calculating the salary cap.


    Projected Revenue x CBA Percentage = Players Share Total Revenue


    Players Share minus Projected League wide Benefits = Amount Available for Player Salaries


    Amount Available for Player Salaries / Number of Teams = Unadjusted Salary Cap per Team


    The 2007 NFL Salary Cap was based on a 57% share of the 2007 projected Total Revenues. In 2008, the percentage jumps to 57.5%, and the same percentage applies to 2009 as well. In 2010 and 2011 the percentage will be 58%.


    3. What is the NFL Minimum Salary?
    Under the new CBA, the players are guaranteed 50% of Leaguewide Total Revenues. In the event that player costs are less that 50% of Total Revenues, then, on or before April 15 of the next League Year, the NFL shall pay an amount equal to such deficiency directly to the players. Beginning in 2006 each team had to pay a guaranteed “Minimum Team Salary” of 84% of the Salary Cap. Each year that percentage goes up by 1.2%, which means that it is 85.2% this season. However, the Minimum Team Salary cannot extend beyond 90% of the Salary Cap. Any shortfall in the Minimum Team Salary at the end of a league year has to be paid, on or before April 15, of the next league year, by the team(s) having such a shortfall, directly to the players who were on that team's roster at any time during the season. That is why some of the smaller market team owners had issues with the new CBA.


    NFL Minimum salaries change as follows:

    Years Experience Amount
    0 - $285,000
    1 - $360,000
    2 - $435,000
    3 - $510,000
    4-6 - $595,000
    7-9 - $720,000
    10+ $820,000




    4. What constitutes or defines a Salary and how does affect the Cap?
    All compensation paid to a player, including money, property, investments, loans or anything else of value. Salary, however, does not include benefits. The "Team Salary" falls under the Salary Cap. Team salary includes the amount a team must pay its current or former players under their player contracts. Only the top 51 player salaries for a team count against the salary cap in the offseason. During the season, all player salaries count toward the salary cap.


    5. Does the NFL Draft impact the Salary Cap?
    Team salary includes the Rookie Minimum Active Salary as of the day of the draft for all drafted rookies. The salary for drafted rookies will stay at this amount until the player is signed, the team’s rights are relinquished through waivers, or until the Tuesday following the tenth week of the regular season if the player remains unsigned.


    6. Do free agents have any impact on the Salary Cap?
    Restricted Free Agents (RFA), a Qualifying Offer is included in the team salary. This amount remains in team salary until the player is signed, the Qualifying Offer is withdrawn, or if a “June 1st tender” is made. If the player is unsigned and the Team makes a June 1 or June 15 offer, this offer will be included in team salary until the player is signed, the team gives up their rights to the player, or until the Tuesday after the tenth week of the regular season if the player is unsigned.For Unrestricted Free Agents (UFA), if a June 1 offer is made, the amount afforded will be included in team salary as of July 15. For transition and franchise players, an offer will be included in the team’s salary when it is made. The offers for UFA, transition players, and franchise players will remain included in team salary until the player is signed, the offer is withdrawn, the team gives up their rights to the player, or until the Tuesday following the tenth week of the regular season if the player is unsigned.


    7. Signing Bonuses:
    Teams with heavy payloads learned quickly that the best way to combat the Salary Cap was to circumvent it. They did this by back loading contracts, pushing all of the big money to the end of the contract. Teams can then either outright release the player to avoid having to pay his salary all together or they can renegotiate a more "cap friendly” contract. The team is not obligated to fork over the money for the remaining years of the contract if they cut the player, as their contracts are not guaranteed. So why would a player agree to this contract? This is where the Signing Bonus comes into play. The signing bonus is part of the player's salary. So it counts against the cap. When determining team and player salary, the signing bonus will be prorated over the length of the contract.

    For example, if a player signs a four-year deal with a $1 million signing bonus, $250,000 of that bonus will count toward team salary for each contract year ($1 million divided evenly over the four-year contract is $250,000 per year). If a team releases a player, the remaining prorated bonus money counts immediately against the cap. In this example, if the player is released after Year 1, the remaining $750,000 (the prorated signing bonus money for years 2-4) counts against the cap in Year 2, even though the player is no longer on the team's roster.

    Signing bonuses are what insiders were talking about, when they brought up the term “Cash over Cap”. One of the things that held up the CBA negotiations amongst the owners was the move to place some kind of cap on the amount of signing bonus money that could be pushed into future years for cap accounting purposes. Although there was no cap on signing bonuses, there was a limit put in place for 2006 that signing bonuses could only be prorated for up to five years, but that moves up to six years in 2007.


    8. When must teams come in compliance with the Salary Cap?
    March 1st



    9. Why are so many players cut after June 1?
    AfterJune 1, the team can stretch their salary cap liability over the next 2 seasons. Looking at the example used above, where a player signs a big contract for 4 years, including a $1 million signing bonus. If the player is cut after the first year of the contract, the remaining $750,000 of the "un-amoratized" signing bonus hits the cap immediately. However, if he is cut after June 1, the team can spread that money over Year 2 and 3 of the contract instead of taking the full brunt of the cap hit in Year 2. Doing this will save $500,000 against the cap hit for Year 2. This is a nice way of freeing up cap space in a given year. Note, however, that the money still has to be accounted for against the cap -- and the remaining $500,000 that was never accounted for will hit the cap in Year 3. Many NFL teams mortgage their future by overusing this practice.
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  2. PitBull

    PitBull Bred to Brawl

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    Great info there smitts..
    I never really looked deep into that topic in the past. Interesting.

    Thanks for sharing.
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  3. Smitty46953

    Smitty46953 Starter

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    Thanks Pitpup !!! Put some time into so thought might as well share it !!!:grrhee:
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  4. Gunny

    Gunny Lord and Master Tip Jar Donor

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    Coltfreaks own version of Starkiller.

    Nice work.
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  5. Smitty46953

    Smitty46953 Starter

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    Gunny, What is Starkiller? Never have heard that term?
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  6. mdfan

    mdfan Starter Tip Jar Donor

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    I'm not Gunny but I can answer your question - Starkiller is one of the mods here, he's also very knowledgeable about salary cap issues
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  7. PitBull

    PitBull Bred to Brawl

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    Dressed in blue overalls, blue tights and a red cloak, and armed with nothing but the laserbeam from his eyes, Starkiller refers to someone who spends most of his free time flying around the universe seeking out stars to blow up thus 'killing' them in the process. Here are some of the latest images from Nasa..

    [​IMG]

    [​IMG]

    [​IMG]


    Our mods kick butt :yes:
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  8. Starkiller

    Starkiller 9

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    What can I say... :ha:
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  9. Smitty46953

    Smitty46953 Starter

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    Gotcha, Have never crossed paths with Starkiller so did not realize was a mod on here.:grrhee:
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  10. Smitty46953

    Smitty46953 Starter

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    STARKILLER, If old Pitpup thinks this high of you, if I was you I would watch your leg before he becomes attached so to speak... :grrhee:
    #10
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