Pats salary cap complexity - possible overspending penalty

[Urgent]

Interesting take on Pats salary cap situation from Reiss:

And as for the millions in cap space, I've been doing some research on this area and believe I've uncovered some interesting information in regards to the team's cap spending that sheds a little bit of a different light on things. Because the team had such high cash spending the previous two years -- with the top-level Tom Brady and Richard Seymour deals leading the way -- the Patriots project to be one of a handful of teams who will actually be penalized by the league as part of the new CBA, and I believe will lose some cap space in a future season (possibly 2007) because of that. The Colts are also part of the small handful of teams who I think will be penalized; it's sort of like the luxury tax in baseball. I believe the Patriots would do a service to their fans by explaining this intricacy of the salary cap -- assuming I have it correct -- because I sense there is a perception out there that the team is not spending compared to other teams. In actuality, they've spent to a level that is actually going to penalize them.

Obviously very secretive guys. Funny to hear even Reiss beg for information...

I personally find it hard to believe the current CBA would include penalties for previously-acceptable cap behavior in the 2004 or 2005 season. (I assume Reiss means 2004 & 2005 as 'previous two seasons', not 2005 and the just-completed 2006 season when he speaks of the Brady and Seymour deals.) Why would teams agree to penalties in the future for actions in the past that were perfectly acceptable at the time? It would be like taking a draft pick away from any team that had two first rounders in a previous draft.

I wonder what Miguel's take on this is.

 

[BradyManny]

I personally find it hard to believe the current CBA would include penalties for previously-acceptable cap behavior in the 2004 or 2005 season.

I agree 100% - it's ludicrous to penalize someone after the fact. That'd be like changing the speed limit on 495 and then going back and giving tickets to everyone who had traveled on it before the switch.

 

[fgssand]

Where are the "Kraft is cheap" people now???

 

[hwc]

I wonder what Miguel's take on this is.

I think Miquel would say that his excellent spreadsheets can only be as reliable as the information available in the public domain (news reports, NFLPA salary data, etc.).

I think Miguel would be the first to say that there is a LOT about the Pats cap situation that is impossible to track in real time, especially in areas that don't directly impact listed NFLPA salaries.

 

[RayClay]

Oh c'mon, they're just cheap. And Reiss is a toady.

 

[PromisedLand]

I agree 100% - it's ludicrous to penalize someone after the fact. That'd be like changing the speed limit on 495 and then going back and giving tickets to everyone who had traveled on it before the switch.

It is ludicrous, so much so that our founding fathers made it unconstitutional to do the same thing under the law:

Article I. - The Legislative Branch
Section 9 - Limits on Congress
The Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person.
The privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it.
No Bill of Attainder or ex post facto Law shall be passed.

http://www.usconstitution.net/const.html

 

[VJCPatriot]

Unfortunately sports rules work outside normal legal rules. Otherwise the draft would have been considered unconstitutional as well. And as far as I know people are allowed to bargain away their rights, thus the CBA holds as legal since the owners and players agreed to abide by it.

 

[marty]

Interesting take on Pats salary cap situation from Reiss:




I personally find it hard to believe the current CBA would include penalties for previously-acceptable cap behavior in the 2004 or 2005 season.
.

Agreed, however, this may have some teeth and I find it interesting that Reiss having done some research, is still looking for clarification. Perhaps this is just one of the "sticking points" of contentious CBA negotiations of the past year. I'm more than happy to plead ignorance of the CBA and go along with the more simplistic history of spending that the Kraft's have done through the years. That's why I've never been in the "Pats are Cheap" camp, but solidly in the "Pats are Smart" one!

 

[spacecrime]

Where are the "Kraft is cheap" people now???

He has a radio show on ESPN, and a TV Show called "Down on all Fours with Felger."

 

[MoLewisrocks]

What I believe Mike is talking about is penalizing teams who spent substantial cash over cap. I know that was something the have nots were lobbying for as part of the new CBA and revenue sharing formula. Tightening the loophole that allows teams to fairly circumvent the spirit of the cap if they have the cash flow to pull it off and they don't care about driving up the cost of business for the other 31 of their partners - more than half of whom don't.

Snyder as the prime example manages to keep his team under the cap while collecting all that name talent by paying huge signing bonuses on backloaded inflated salary deals. This allows him to acquire talent short term and then worry about it later as the cap hits are spread into later years when he figures the cap will again explode or be removed or the world will end for all he knows. And if not he'll just cut all his vets to dump salary and absorb their dead cap while adding new expensive FA's with low early cap hits on their huge bonus fueled deals. Meanwhile he's driving up the market prices for teams with weak revenue streams who don't have state of the art stadiums or billionaire owners who can play that game. They are limited in the number of big bonuses they can risk eating the balance of in two or three years not just because they fear the long term dead cap hits piling up but because they can't keep funding the recurring new huge bonuses themselves. They feel that keeps them on an unlevel playing field regardless of revenue sharing and basic cap funding.

Polian has played that game in Indy - Manning's contract is like a revolving credit card account you pay (cap hit) the minimum on. He did it believing they would have a new stadium deal by 2008 with revenue to keep rolling it out until after he and Peyton are gone, even though it meant Irsay had to sell his memorabelia collection to fund much of the $34M+ bonus. They couldn't have resigned players like Harrison and Wayne either because of the bonus money involved except that they got a little windfall buyout refund on the old lease of the RCA Dome this year ($30M) that basically covered the bonus money they paid out again this year on Manning, Harrison and Wayne. Cash over cap. Paid now but spread across the books for the next 5 years. Manning's deal paid him $45M over the first 3 seasons though he's only counted about $25M on the cap over that same time period. If he went down they are screwed not just on the field but on the books. Cash over cap is what allows the haves to manipulate cap and what kills teams that have not got a lot of cash (hefty revenue stream or billionaire owner) to work with. If he hadn't gotten his new stadium deal this year, Irsay likely would have had to do what his father did - move the team. He has no other revenue source but the team his father left him.

The Pats have hinted to the FOB's (friends of Bill) that there is a concern here because of the money being paid out to Brady and Seymour over a two or three year period (2005-2007 said to be $50M) the team is exposing itself to increased risk if one of them were lost and the team had to carry that hit plus the cost of replacing their production things could get uncomfortable here cap wise in a hurry. Which is why they are reluctant to add more double digit bonus contracts on guys like Branch and Samuel - not to mention others will be lining up right behind them. They have the cash to do it, but the business sense not to because they had to dig out of a mess once in this decade and are now committed work with an eye towards long term stability. They don't want to be one of those oops... teams facing $20M+ in dead cap eating away at their ability to field a seriously competitive team in say 2008-2009. Because then you are either forced to go cash over cap if you can afford it or weather a cap constrained season or two while you maneuver your way out of cap purgatory.

 

[Jimke]

I would think that cash over cap would be reflected in the

Pats total salary for the 2006-2007 season. Michael Felger

made the comment a few weeks ago that the Pats total salary for

2006-2007 was near the the bottom of the NFL . The prior

couple of years their total salary was one of the highest in the NFL.

 

[Jimke]

USA Today has an NFL Salary Database for total salaries

According to them, the Pats were 5th highest last year, 24th

highest the previous year, and 9th highest the year before that.

 

[PromisedLand]

Unfortunately sports rules work outside normal legal rules. Otherwise the draft would have been considered unconstitutional as well. And as far as I know people are allowed to bargain away their rights, thus the CBA holds as legal since the owners and players agreed to abide by it.

Sports rules don't work "outside" normal legal rules, but they are not the same as them either. That's why I emphasized that the constitution bans posto facto LAWS. Private contracts (such as the CBA) can make up any rules they want as long as they don't violate a law.

But my real point was that it is ludicrous that the CBA works that way. Not even Congress can do what the NFL owners agreed to do to themselves.

 

[the taildragger]

I've read this thing about ten times and still don't get it.

are they under the cap this year or not? It's a brand new CBA! The ceiling jumped way up...we may have been over the cap in the past, but we're definitely not paying any penalties for 06.

It's not that Kraft is cheap...straw argument.

They spend to the cap EVERY year. I know this is off limits but they had space reserved for Deion. Sorry. Agents get paid to play hardball...I have faith that we can learn to adapt.

 

[Va_Pats_Fan]

OK, this is for any lawyer types out there.

This is taken from
http://www.nflpa.org/cba/cba_pdf/Ar...lary,_Salary_Cap,_and_Minimum_Team_Salary.pdf

I'm not even going to begin to try and decipher....

Section 4. Salary Cap Amounts:
(a) Subject to the adjustments and credits set forth below, the amount of the Salary Cap for each NFL
Team in years that it is in effect shall be (1) in the 2006 League Year, $102 million; (2) in the 2007 League
Year, $109 million; (3) in the 2008 League Year, 57.5% of Projected Total Revenues, less League-wide
Projected Benefits, divided by the number of Teams playing in the NFL during such year; (4) in the 2009
League Year, 57.5% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number
of Teams playing in the NFL during such year; (5) in the 2010 League Year, 58% of Projected Total Revenues,
less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year; and
(6) in the 2011 League Year, 58% of Projected Total Revenues, less League-wide Projected Benefits, divided
by the number of Teams playing in the NFL during such year. Notwithstanding the preceding sentence or
anything else in this Agreement, there shall be no Salary Cap in the Final League Year.
(b)(i) In the event that the Salary Cap amount for the 2006 League Year or the 2007 League Year differs
from 57% of Total Revenues, less League-wide Benefits, divided by the number of Teams playing in the NFL
during such year, the difference for the 2006 League Year shall be credited or adjusted, as the case may be, in
the calculation of the Salary Cap for the 2008 League Year, and the difference for the 2007 League Year shall
be credited or adjusted, as the case may be, in the calculation of the Salary Cap for the 2009 League Year.
(ii) Upon receipt of the information set forth in Section 10(a)(i)(B) below, at the end of the League Year,
the parties shall agree upon the amount of the Salary Cap, subject to the adjustments and credits set forth below,
for each NFL Team for the Capped League Year, if any, following the next League Year. For example, the
parties shall agree at the end of the 2006 League Year on the Salary Cap for the 2008 League Year.
(iii) Wherever the parties have agreed that a difference in the Salary Cap is to be carried over into a
future League Year (e.g., Article XXIV, Section 10(a)(ii)), if the number of Clubs in the NFL changes from the
League Year in which the Salary Cap difference originated to the League Year in which it will be applied, the
amount of the difference will be adjusted to reflect the different number of Clubs in the NFL.
(c) The actual dollar amount of the Salary Cap shall not be less than the actual dollar amount of any
Salary Cap in effect during the preceding League Year, provided, however, that at no time shall the Projected
Benefits, plus the amount of the Salary Cap multiplied by the number of Teams in the NFL, exceed 61.68% of
Projected TR. See Appendix O.
(d) Adjustment Mechanism
(i) An Adjustment (“Adjustment”) will be triggered if, during any Capped League Year, League-wide
Cash Player Costs exceed or fall below the TR Trigger Percentage for that League Year multiplied by Total
Revenues for that League Year (the “Trigger”). The differences shall be defined as the “League Excess” and
“League Shortfall,” respectively.
(ii) At the end of each League Year, a determination shall be made as to whether an Adjustment with
respect to that League Year has been triggered, and if so, its amount and allocation into future League Years.
(iii) The “TR Trigger Percentage” shall be 59% in the 2006 and 2007 League Years, 59.5% in the 2008
and 2009 League Years, and 60% in the 2010 and 2011 League Years.
(iv) “Cash Player Costs” for purposes of this Subsection is the sum of Cash Salary (as defined by Section
4(d)(ix) below), Performance Based Pay, Minimum Salary Benefit, and all costs committed to be spent in that
League Year for other Player Benefits.
(v) “Club Excess” is the amount by which a Club’s Cash Player Costs exceed the TR Trigger Percentage
multiplied by TR divided by the number of Clubs in the League during the year in which such excess occurs.
(vi) “Accrued League Excess” is the total of all League Excesses from prior League Years that have not
been offset by a League Shortfall.
(vii) If an Adjustment is triggered by a League Shortfall in any League Year, such amount shall first be
reduced by any remaining Accrued League Excess and any remaining balance shall result in a pro rata
deduction from each Club’s Team Salary, allocated equally among the remaining League Years that may be
Capped Years under this Agreement.
(viii) If an Adjustment is triggered by a League Excess in any League Year, a pro rata share of the League
Excess for that League Year shall first be applied to each Club to offset any remaining Team Salary
“deductions” that previously arose from any League Shortfall (with such deductions applied first to earlier
Capped Years if the amount of Excess to be applied is less than the remaining “deductions” from prior League
Years); if after all such Club offsets have been deducted from the League Excess, there remains a positive
number in the League Excess on a League-wide basis, such number shall become the Accrued League Excess
for that League Year. The League Excess (not the Accrued League Excess) shall also be a “charge” to the Team
Salary of the Clubs with a Club Excess for that League Year. Each such Club will bear its proportionate share
of the League Excess, the proportion to be determined by reference to each Club’s share of the sum of the Club
Excesses of the affected Clubs, with such proportionate share allocated equally among the remaining League
Years that may be Capped Years under this Agreement; such charge to Clubs with such a Club Excess for that
League Year shall be in addition to, and not in lieu of, the League-wide Shortfall adjustment.
(ix) “Cash Salary” for purposes of this subparagraph is the sum of total Paragraph 5 amounts earned by
players (applying the valuation rules which apply to deferred salary specified in Section 7(a)(ii)), signing bonus
amounts paid or committed (including amounts treated as signing bonus pursuant to this Agreement) (applying
to signing bonuses the valuation rules that apply to deferred salary specified in Section 7(a)(ii) below),
incentives that have been earned and paid, or earned and committed to be paid to players (applying the
valuation rules which apply to deferred salary specified in Section 7(a)(ii)), grievances settled, termination pay
for which a player is eligible, injury settlements, Salary advances that were not included in Paragraph 5, and
anything else paid or provided to players during that League Year that would be valued under the Salary Cap
(e.g., the fair market value of automobiles gifted to players).

 

[spacecrime]

I would think that cash over cap would be reflected in the

Pats total salary for the 2006-2007 season.

No. Salary plus bonuses paid. Not the deferred bonuses (as in cap) but the actual bonus paid is cash out.

For example,
Deion's $13 million dollar bonus may be a cap hit of $2.2 mil a year, but for cash out it is $13 million in 2006.

Peyton got a $34 mil bonus. He got that when he signed the contract. It may have been cap friendly with only $5 mil counting against teh cap, but it was $34 mil cash. That is cash over cap.

 

[Miguel]

On Page 63 of the amended CBA it says
"Nothing contained herein shall preclude a Team from having a Team Salary in excess of the Minimum Team Salary, provided it does not exceed the
Salary Cap." As far as I can tell, there is no mention in the amended CBA what happens to a team if they do exceed the Salary Cap.

There is stuff in the new CBA that I would have to read several times before I can get a good handle on it like the Adjustment Mechanism (Examples can be found in Appendix P). I have yet to find anything in the CBA that supports a luxury tax concept. I am not saying that Reiss is wrong. I just can't prove or disprove his contention. Please note that the amended CBA as found on the NFLPA site http://www.nflpa.org/CBA/CBA_Complete.aspx seems to be a work in progress so Reiss may have access to more details.

The Colts had the highest payroll in the NFL this year spending around $111/$112 million on players this year. In 2005/2006 they have spent around $188 million on players. The Pats have spent around $186 million on
players in 2005/2006. The Falcons had the 2nd highest payroll in 2005 and in 2006 so if this luxury tax concept is true they will be most affected by it.

What I do not get is
1.)why have a luxury tax concept at all??
2.) Why no mention of it until now???

 

[upstater1]

I've read this thing about ten times and still don't get it.

are they under the cap this year or not? It's a brand new CBA! The ceiling jumped way up...we may have been over the cap in the past, but we're definitely not paying any penalties for 06.

It's not that Kraft is cheap...straw argument.

They spend to the cap EVERY year. I know this is off limits but they had space reserved for Deion. Sorry. Agents get paid to play hardball...I have faith that we can learn to adapt.

Well, we're 3 million nder the cap now. It used to be we kept about 1 million in reserve. But as the cap rises, that reserve amount is going to rise too. Can we really complain that the Pats only spent $107 million under the cap this year instead of their allotted $10 million? Come on, how much difference does that $3 million really make?

 

[MoLewisrocks]

OK, this is for any lawyer types out there.

This is taken from
http://www.nflpa.org/cba/cba_pdf/Ar...lary,_Salary_Cap,_and_Minimum_Team_Salary.pdf

I'm not even going to begin to try and decipher....

I think just a glance at that (more induces instant migraine) will suffice to say assuming Belioli has deciphered it and whatever they are doing - that the Felger's of the world don't yet grasp - is the best possible course of action would be a safe bet.

I think most all teams spend cash over cap from time to time in order to sign a #1 draft pick or big name FA or retain a franchise type player in the process of dealing with the other 80 odd guys. This team has tried to stagger such signings or the bonuses tied to them so as not to be continually cash over cap. Snyder is over all the time because he doesn't care about the league or his partners or any repercussions. Irsay is over because it was the only way he could maintain fannies in seats until a new stadium deal was inked. And as more billionaires become recreational NFL owners they will go over out of pocket at will in hopes of hoisting a Lombardi unless the have nots find a way to hold them accountable.

If I read this right it's a future cap penalty which would stop Snyder et al while just paying a luxury tax wouldn't phase them any more than it's stopped the Sox and Yankees.

 

[Pats726]

What I do not get is
1.)why have a luxury tax concept at all??
2.) Why no mention of it until now???

Miguel..when was this new CBA actuallu completed?? I remember during the summer it was NOT actually finished in words an ddetails so I am wonderfing if this is not a result of that...later understanding of it all...As for having a luxury tax so to speak...seems pretty weird...esp when one has the cap..