The Salary Cap: Explanations
and the Chiefs Standing
by Paul Pulley | March 21, 2019
Questions have arisen about the current conditions of the 2019 Kansas City Chiefs salary cap condition. There are a few online sources for fans to access this type of information, namely overthecap.com and spotrac.com. While both of these sites are fantastic sources of information, they are only as good as their varied sources and are not affiliated with the NFL or the individual teams. Therefore while the information they provide is helpful and accurate the vast majority of the time, there can still be discrepancies from the actual contracts of individual players.
I believe the only entities with 100% knowledge of the actual salary cap is the NFL, with an overview of every team and then each individual team will have their own accounting method.
Some Salary Cap Terminology
My intention here is to skim over some of the most commonly used phrases and terms in regard to the salary cap. By no means is this meant to be all inclusive or completely thorough.
Total Contract Value
When a player is signed by a team, most often the first thing announced by the media is the term length and total overall value of the players new contract. This is often expressed as X years for X dollars, with an average per year number . For instance, when the Chiefs recently signed Tyrann Mathieu, his contract was reported as a 3 year deal for 42 million dollars, with an average value of 14 million dollars per year. While this information is factual, it seldom has any real value as to how the players contract will affect the salary cap in any given year.
The Signing Bonus
The signing bonus is exactly what it says, these are monies paid within the first year to a player when he signs his contract. This can be an advantage to both the player and the team. The individual player can receive a large sum of money up front, and the team can spread the cost of the signing bonus over the length of the contract, up to 5 years.
Example I: Sammy Watkins. Watkins signed a 3 year contract with a $21M signing bonus. Watkins was paid the $21M up front, but the salary cap implications are $7M per year for 3 years as the prorated portion of his contract.
Example II: Eric Berry. Berry’s last contract was a 6 year deal with a $20M signing bonus. Even though his contract was for 6 years, the signing bonus can only be spread over a maximum of 5 years, therefore his contract showed a $4M prorated bonus cap hit for each of the first 5 years of his contract.
Guaranteed Monies
Another term often heard is the guaranteed dollars of a contract. Simplistically, this is the minimum amount of money that a team will have to pay a player for his services per contract.
Contracts can be written so that guaranteed dollars in various amounts will kick in at different times during the life of the contract. Generally these are portions of the base salary and they are established where the money becomes guaranteed around the beginning of the league year.
Again using Eric Berry as an example, his contract was reported with having $40M in guaranteed money. A large portion of this was guaranteed at signing with various amounts kicking in at different times during the life of his contract. The last guarantee was $7.25M to become guaranteed on 03/15/2019. The Chiefs releasing Berry before this date saved the team those dollars in cash, but had no effect on the salary cap.
The Base Salary
The base salary is money the player earns throughout the season as long he is in full game status. Generally the base salary is paid in 1/17 increments throughout the regular season. A contract can be written in which a player receives a reduced salary if he ends up on injured reserve, although this isn’t always the case.
The Roster Bonus
The roster bonus can come in two forms, one is a bonus that is paid if a player is on the teams roster on a certain date. The other is a game day roster bonus, this is a part of a contract that will pay a player additional money as long as he is a member of either the 53 man or the game day 46 man roster, depending on how the contract is worded.
The Workout Bonus
The workout bonus is a monetary incentive to get veteran players to attend voluntary organized team activities (OTA’s). Travis Kelce’s contract is a good example of this as he earns an additional $250,000 per year for participating in the off-season voluntary OTA’s.
Incentives and Escalators
There are a list of incentives that can be included in a players contract that can pay them extra money if certain levels of production are met for any given season.
Examples of these can be passing yards, receiving yards, rushing yards, touchdowns, sacks, etc. Some incentives are for individual performance and some are for team goals. (There is an actual list in the 316 page collective bargaining agreement if anyone is interested is some light reading).
An example would be, in Dee Ford’s new contract with the 49ers, he will receive an extra $500,000 for making the Pro Bowl next year.
Incentives are labeled “likely to be earned” (LTBE) or “not likely to be earned” (NLTBE). The distinction is primarily based on the individual or teams prior years performance. For salary cap implications, LTBE’s count against the current years cap, while NLTBE’s do not. In the case of a NLTBE being earned, that incentive will be charged to the following seasons salary cap.
An example here would be Anthony Hitchens. Hitchens has a $250,000 incentive for making the Pro Bowl, since he didn’t make the Pro Bowl for the 2018 season, this incentive would be considered NLTBE for the 2019 season.
Escalators are similar to incentives, except the escalator increases future pay.
An example of this is Travis Kelce will receive an extra $375,000 on his base salary going forward for reaching the plateau of 1200 receiving yards in a season (Kelce had 1336 yards in 2018).
Then There’s “Dead Money”
Dead money is a phrase often used and it is simply the money that a player has already been paid (or the team has committed to pay) i.e. signing bonuses or guarantees, if that player is released (or retires) prior to all of these monies having yet to be charged to the salary cap.
Once a player is released, this unaccounted for money accelerates onto the current years salary cap as dead money. The exception to this is if a player is released after June 1st, or released with a post June 1 designation. In this case the dead money is spread over two seasons, with the money that would be owed to the current year counting on that years cap and all future monies counting against the following seasons salary cap.
Let’s once again use Eric Berry as a good example of this. As mentioned earlier, Berry’s contract included a $20M signing bonus, which would count at $4M per year for 5 years. Since Berry only lasted 2 years of his contract, there is still 3 years of signing bonus at $4M/year, $12M total, still to account for. There is an additional $2.95M of Berry’s 2019 base salary that was guaranteed to bring the total to $14.95M of dead money. Now, since the Chiefs used the post June ! designation on Berry, the $4M of signing bonus that would count against the 2019 cap, plus the $2.95M of base salary owed, for a total of $6.95M, will count as dead money on the 2019 salary cap. the remaining $8M (the final 2 years of the signing bonus) will be dead money on the 2020 salary cap.
On to the Chiefs Salary Cap
The Kansas City Chiefs began the off-season with approximately $24.5M of cap space, this is from memory, so I could be off on this.
Subtractions: Cap Savings
- Dee Ford: The Chiefs franchise tagged Dee Ford for $15.443M and then summarily traded him to the San Francisco 49ers. The salary cap implications of this was basically a wash, but the Chiefs did end up with a 2nd round draft pick in the 2020 draft.
- Justin Houston: Houston was released on March 10th. This move realized $14M of cap space, but also added $7.1M of dead money to the 2019 cap.
- Eric Berry: As mentioned earlier, Berry was released with a post June 1 designation. With this type of release, the full $16.5M of Berry’s 2019 cap hit will be carried through June 1st. On June 2nd, there will be a $9.55M reduction in the salary cap total and $6.95M added to the 2019 dead money.
Additions: Cap Expenditures, Free Agency
- Safety Harold Jones-Quartey: Jones-Quartey was signed to a one year $645,000 contract for the 2019 season.
- Safety Tyrann Mathieu: Mathieu signed a 3Y/$42M contract. Mathieu’s contract contains a $14.8M signing bonus and $26.8M in guarantees. The signing bonus prorated over 3 years equal approximately $4,933,333/year. Mathieu’s 2019 base salary is $850,000 and he has a $150,000 workout bonus. This gives Mathieu a 2019 cap hit of $5,933,333.
- Linebacker Damien Wilson: Wilson signed a 2Y/$5.75M contract. This contract contains a $1,750,000 signing bonus equal to $875,000 per year. Wilson will have a 2019 base salary of $720,000 with roster and workout bonuses totaling $280,000, leaving him with a 2019 cap hit of $1,875,000.
- Running Back Carlos Hyde: Hyde signed a 1Y/$2.8M contract. Hyde received a $800,000 signing bonus and has a base salary of $1.4M. There is also $600,000 in roster and workout bonuses. Hyde will have a 2019 cap hit of $2,737,500. This cap number is $62,500 below the total contract value because only 14 of the 46 man roster bonuses are considered LTBE.
- Defensive End Alex Okafor: Okafor signed a 3Y/$18M contract. His contract includes a $6M signing bonus and $8.805M in guarantees. Okafor will have a base salary of $805,000 in 2019 with roster and workout bonuses totaling $195,000, giving him a 2019 cap hit of $3M. There seems to be incentives for playing time and sacks that can total up to $2M/year, but these are apparently NLTBE.
- Cornerback Bashaud Breeland: Breeland signed a one year contract that has been reported as incentive laden. spotrac.com is reporting Breeland’s contract to be a 1Y/$2M contract with a $1.15M signing bonus, a base salary of $805,000 and a $45,000 workout bonus. This will give a total cap hit for 2019 of $2M, with apparently $3M worth of incentives that must be considered NLTBE.
This leaves the Chiefs with currently approximately $22.5M in cap space. There will be an additional $9.55M of cap space added on June 2nd.
Paul Pulley — ArrowheadOne
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