The $3M Question

I’ve been following the NFL labor negotiations closely – why I put myself through the ups and downs of that is another story.

Anyway, with word last week that the two sides are literally within days of putting a new CBA to bed, I’ve been keeping notes from the various reports about the provisions the new deal will include and one such provision that’s been reported by multiple media outlets is that all NFL teams will receive a one-time $3M cap credit to use on one player contract this year.

This exemption is said to work very much in the same way as the old veteran exemption under the previous CBA, where only approximately $700K of a 10+ year veteran’s salary counted against the cap each year, regardless the player’s actual cap number. In other words, if an eligible veteran had a cap figure of $2M, only $700K counted against his team’s cap. 

Before I go any further, let me give you a little bit of a background. I’m a salary cap junkie. I don’t know why this happened, but it did, and when given the opportunity to expand my knowledge of the salary cap, I’ve always jumped at the chance. 

So you can imagine how happy I was when I learned the salary cap is going to make its triumphant return in 2011. I’ve always thought that the cap provides an extra insight into what moves a team can and can’t make, which makes handicapping the transactions a bit easier. 

Soemtime soon, I hope to  take all the Giants numbers I’ve collected over the years and provide Inside Football subscribers with a player by player breakdown that will include each player’s cap hit if he’s terminated at any point in his contract. (I know there are press reports offering the bottom line salary cap figure, but there are some nuances that have been reported with the new CBA that might affect those numbers.)

However, that’s a project for another time, and one that I hope to get done before the madness that is free agency commences.

So let’s get back to the “$3M Question,” specifically who the Giants are likely to apply the exemption to.

I’ve narrowed it down to two possibilities: RB Brandon Jacobs and T Shawn Andrews.

First Thing’s First…
Before the Giants can decide who they will apply the $3M cap exemption on (assuming of course that it’s ratified as part of the final CBA and assuming that there are no alterations to how it can be applied, e.g. allowing teams to apply it to new contracts), the first step is to get all of the players under contract into the team’s facility and put them through physicals.

Giants fans are no doubt familiar with the issues Andrews had last year. After making a remarkable comeback, his back decided to quit on him last Thanksgiving following a couple of weeks where he had to take a full workload of snaps in both practice and in games.

Prior to that, Andrews showed signs of being dominating. However, when his back acted up, many people began to wonder if his NFL comeback was over.

To his credit, Andrews fought back and was able to get back on the field, although at times he didn’t quite look the same as he did prior to his setback. 

If Andrews can’t pass a team physical, the question of whether to apply the $3M exemption to his contract becomes a moot point and I think Jacobs will be the winner of the $3M question.

If Andrews is deemed healthy enough to remain on the roster, then I’m going to show you why and how the Giants can potentially get by keeping him this year despite his $3.5M roster bonus that’s reportedly due on the 30th day of the new league year.

Jacobs & Andrews: The Numbers
Jacobs is due a $4.65M base salary in 2011 (this money is not guaranteed as was the case with the first two years of his contract).  He’s also reportedly due a $1M roster bonus if he makes the final 53-man roster, and his prorated signing bonus is estimated to be $962,500.

That means Jacobs will count for an estimated $6.6M against the 2011 salary cap assuming that the same rules apply from the previous CBA (where a player’s signing bonus is prorated over the life of the contract).

Andrews, meanwhile, could count for $7.041M against the salary cap, an amount that consists of his prorated signing bonus, a $500K workout bonus (assuming that the players receive their lost bonuses because of the lockout cancelling the workouts as is being reported; a $3.5M roster bonus, and a $3M base salary.
 
Together, Jacobs and Andrews, both of who might not be starters in 2011, count for an estimated $13.64M against the reported $120M salary cap, or roughly 11 percent of the salary cap.

Assuming Andrews is healthy and the Giants keep Jacobs, who, then, is the best candidate for the $3M exemption?

Let’s take a look.

Brandon Jacobs
Head coach Tom Coughlin has expressed a desire in the past to get the big running back more touches in 2011, so it doesn’t sound that the team has plans to rid itself of Jacobs, even if they re-sign Ahmad Bradshaw and name him the starter. The Giants have always favored a two-pronged rushing attack in recent years, and it sounds like that’s the plan for 2011.

So what happens if the Giants re-sign Bradshaw? Can they really afford to pay two running backs at least $4M per season – starter money at some positions — if they’re going to share the work load?

The answer is yes, at least for 2011, if they use the $3M salary cap exemption on Jacobs.

If they exercise this option, Jacobs’ estimated cap number drops fromthe estimated  $6.6M to $3.6M, a reasonable amount considering he’d be splitting the workload with Bradshaw (or another running back if Bradshaw departs).

What about 2012, when the $3M roster exemption goes away, you ask?

Good question.

Jacobs will enter the final year of his contract in 2012. If he struggles through 2011, or if another running back (Da’Rel Scott? D.J. Ware?) becomes this year’s Peyton Hillis, it becomes easier for the Giants to terminate Jacobs’ contract in 2012.

If they do so, the team would save $4.9M in cap space because they would only be on the hook for the final prorated portion of Jacobs’ signing bonus, all $962,500 of it.

Best of all for the Giants, since 2012 is the final year of Jacobs’ contract, they would not have to worry about any dead money spilling over to 2013’s cap.

Shawn Andrews
If you’re wondering if makes more sense to use the $3M cap exemption on Andrews, we don’t think it is because even if Andrews’ cap hit is reduced to $4.041M once the credit is applied, that’s still a very high figure for a player who projects to be a backup in 2011. To put that number into perspective, projected starting tackles David Diehl and Kareem McKenzie are scheduled to earn base salaries of $4M and $4.3M respectively.

However, if the Giants apply the credit and restructure Andrews’ contract (assuming that a restructured contract is eligible for the $3M credit, which we think will be the case), then it makes sense to use it on him.

When a contract is restructured, the base salary is reduced to the league minimum commensurate with the veteran’s experience, and the money is converted into a signing bonus, which is spread out over the remaining life of the contract, including any new years that are added.

Andrews received a very low signing bonus ($250K) when he signed with New York last year. If the Giants were to trim his base salary to the veteran minimum commensurate with his experience — those figures have yet to be determined for 2011 — they could conceivably pay him a minimum base, convert the balance to the signing bonus, and recognize a savings.

Let’s use the old CBA numbers to illustrate. The 2011 season will be Andrews’ seventh, so if we use the minimum base salary from 2010 for a veteran with 7-9 years of experience, that figure would be $760K.

If the Giants reduce Andrews’ 2011 base salary to $760K, that means they’d have to make up approximately $2.24M. Before we factor in his new prorated signing bonus, Andrews’ adjusted 2011 cap number would drop to $4.76M.

If  the $2.24M that is removed from the base salary is turned into a signing bonus and is spread over the remaining five years of Andrews’ contract, his new prorated signing bonus (which also must include the $41,667K from his original signing bonus) comes to roughly $489K per year for the remainder of his contract.

Adding that new number back into Andrews’ estimated 2011 cap figure, it comes out at $5.2M, which is still a high number for a player who is not projected to be a starter in 2011.

Enter the $3M credit (again, assuming the rules allow the credit to be applied to a restructured contract). Andrews’ 2011 cap value then drops to $2.2M, a very reasonable amount for a backup veteran tackle.

Sounds great for one year, but what about for 2012 when the $3M goes away?

Glad you asked.

The 2011 season is the final year on RT Kareem McKenzie’s contract. If Andrews is truly over his back problems and able to play out the remainder of his contract, there is no reason why he wouldn’t be considered for McKenzie’s spot next year. (If Will Beatty doesn’t work out at left tackle, the Giants would also have the option of moving Andrews into this spot if David Diehl moves inside to guard.  

The $3M Question: What to Do?
Having presented both sides of the picture what move would you make if you were the Giants?  Do you go with the running game, which is the bread and butter of the offense, or do you go for the offensive line, despite the fact that if Andrews is removed from the picture, the Giants will still have the rights to Diehl, McKenzie, Beatty, rookie James Brewer, and Jamon Meredith in 2011?

 Leave a comment below with your thoughts.

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And We’re (Almost) Back!
I’m happy to announce that it’s looking as though Inside Football, which managed to stay on schedule despite the lockout and my illness, is not going to miss an issue if the lockout ends in the next few days, as is being reported.

Inspired by the progress made, I spent the last week writing a special “NFL Transition” issue that I of course tailored to the Giants’ needs.

The main article takes a look at the proposed NFL Transition schedule of events. I then offer my two cents (or more like ten cents) on what moves I think the Giants might make and why.

The second article is a rundown of the various key points of the proposed new CBA as they apply to the salary cap, player safety, the rookie pay scale and others. I’ve been keeping a notebook on the CBA negotiations and have been recording the bits and pieces to come out about the new CBA. So in that article, I try to look at the impact the changes will have on the game of football. As new information becomes available, I’ve been adjusting that article accordingly and will continue to do so until the CBA is declared final.

Inside Football subscribers will get that issue just as soon as the lockout is officially lifted. If you’re not a subscriber but want a copy (which would be sent via e-mail), the cost is just $5.00. It can be pre-ordered at our new online subscription shop; when it’s ready to go, it will be e-mailed (you can check our web site, www.insidefootball.com to see when it’s been released.)

I’m rather proud of the work I did in this issue, and I hope you’ll want to take a peek.