New Deal May Jeopardize Redskins Cap Strategy

Apparently, revenue sharing among the owners and with the players aren't the only issues on the table in the CBA negotiations. According to ESPN.com, a major issue in the CBA negotiations is how the league counts player bonuses over the life of a contract. It's a term that both sides commonly refer to as "cash over cap."

The Redskins employ a cap strategy whereby they sign players to big-contracts with high bonuses and low salaries. This strategy, made possible by the team's high revenue stream, allows the team to annually entice multiple free agents with big bonuses. Moreover, the strategy allows the Redskins to be particularly creative when restructuring players' deals; it pays players big money immediately, but allows the cap hit to be spread out over several seasons.

This cap strategy arguably gives the Redskins a competitive advantage over lower-revenue teams that cannot afford to pay such large bonuses. Accordingly, lower-revenue clubs may begin to do battle with the Dan Snyders and Jerry Joneses over more than just revenue sharing proposals.
Mort believes that if this issue can be resolved between the owners, an extension to the CBA will be reached.

Things get more and more complicated every day. :frusty:
http://sports.espn.go.com/nfl/news/story?id=2351271

Interesting thread counselor(sp?), I think there's basically 2 approaches to this:
1) Cash over cap has led us to overspending/splashy signings w/little to show for it until this past year, i.e. you can't buy a team. So, if its eliminated or limited it might actually induce much needed fiscal restraint.

2) Now that we have good coaching & what appears to be solid mgmt., if Danny Boy can spend big for Gibbs we may be unstoppable. think about it, if Gibbs was our coach in 2000 we would've won the super bowl. Look back at that year, we beat the best teams in football - both super bowl teams (Giants & ravens), Tampa & St. Louis. We just flailed & lost to chumps like Arizona & the Cowpokers.

I feel like as long as Gibbs is at the healm we can spend Danny's $ wisely, I just worry that once he's gone the Danny will get trigger happy w/his checkbook again!!

This is the latest from FoxSports.com on the issue.

It depends on the day and whom you are talking with, but there are many within the NFL who believe that commissioner Paul Tagliabue and union boss Gene Upshaw have a handshake deal, but that the commissioner simply can't get enough support from ownership for his extension to the current collective bargaining agreement.

The rationale behind such thinking is that Tagliabue and Upshaw are smart men with a total understanding of the financial bottom line and that they both find it idiotic to spend the rest of their few remaining years on the job arguing about salary-cap issues considering the billion-dollar enterprise that keeps them wealthy and employed.

Basically, this past week has seen a lot of posturing on both sides of this huge financial issue but the word is that Upshaw wants to finalize an agreement and that it doesn't necessarily have to start with 60 percent of the total league-wide revenue. Interestingly, whatever he has discussed with Tagliabue he hasn't shared with his union members.

The players have no idea about what benefits and salary levels may be part of any potential long-range package.

One major holdup is that small-market teams like Jacksonville, Minnesota, New Orleans, San Diego and Oakland would like to limit their very rich competitors from spending more money on salaries above whatever salary cap number is agreed upon. For example, teams like the Redskins and Cowboys have in the past spent more money on player salaries in a given season because of excessive bonuses given star players (the current system allows teams to pro-rate bonuses over the length of a player's contract). Low revenue teams would prefer that there be no "cash over cap" in the new deal, particularly if there's no wholesale revenue sharing among the top revenue-generating clubs.

This may become a major ingredient in the new deal because the wealthy teams seem to be very much against subsidizing the revenue streams for teams like Jacksonville, a move that Cowboys owner Jerry Jones has compared to welfare.

There has been silence on both sides in the past 24 hours, which means that a formal deal does have a chance of happening before Sunday night's deadline. Free agency is supposed to begin on Monday, but that could be pushed back again if a new deal is ratified by 24 of the 32 owners this weekend.

There is no avoiding the fact that there is revenue disparity throughout the NFL, much of it created by Tagliabue's ability to help franchises build new stadiums. In this scenario, franchises like New England, Tampa Bay and Philadelphia, which were in the bottom third of the league 10 years ago, have leap-frogged the middle class into the top 10. Also, a small-market franchise like Indianapolis will eventually be among the league's richest due to a new stadium deal, which included $120 million in stadium naming rights last week.

Colts owner Jimmy Irsay may have wanted to leave Indiana for California, but he was literally forced to stay (smart business decision) because of all the revenue he can earn in Indianapolis compared to fluctuating future promises in somewhere like Los Angeles. The Colts, who recently signed receiver Reggie Wayne with a $12.5 million signing bonus, are in position to keep many of their stars because the franchise is financially secure.

Thanks to a new stadium, the Colts will be financially secure, despite playing in a small market. (Matt Detrich, The Indianapolis Star / Associated Press)

Conversely, Bengals owner Mike Brown would rather not pursue stadium-naming rights and keep Cincinnati's stadium named after his father, Paul Brown. The Bengals lose revenue because of that honor toward Paul Brown, but why should the rich owners make up the revenue difference because of money lost in such a circumstance?

Other owners like Daniel Snyder in Washington and Bob McNair in Houston have large debt payments as a result of purchasing their franchises and improving their stadiums, both of which have naming rights deals. They are willing to share some local revenue, but are both balking at contributions of over $15 million per club.

If a new CBA isn't approved, clubs like the Redskins could be in jeopardy of being over a projected $94.5 million cap. Will they be penalized? Will they be unable to retain some key players? The other issue is that many teams may be unable to compete in the free-agent market while others could go wild if they really want to.

For example, the Arizona Cardinals, Green Bay Packers and Cleveland Browns were $21.8, $20.9 and 20.3 million, respectively, under the projected 2006 salary cap. That is more than enough money to pursue a star running back like Shaun Alexander of Seattle, Edgerrin James of Indianapolis and Jamal Lewis of Baltimore.

Many teams like Minnesota, Baltimore, Jacksonville, Philadelphia, San Francisco, St. Louis and Houston have in excess of $10 million to spend in free agency. Those franchises are in very sound financial shape when it comes to player payroll.

However, if there's no CBA extension, you could see many teams and players agree on one-year contracts like Tampa Bay quarterback Chris Simms did this past week.

Such one-year deals will allow both the player and the team to renegotiate in a potential uncapped 2007 season. It's a gamble, but one that Simms thought was worth taking.

I honestly don't blame the lower-revenue teams for whining about how the Redskins handle the salary cap situation. Essentially, we are able to avoid the salary cap's constraints by doing what other teams cannot afford to do.

That said, I'll be very happy if we "win" this issue and are allowed to continue to spend over the cap each season. In fact, I'll be thrilled. I'd like to see us get back at low-revenue owners by stealing their players, inflating players' salaries, and watching thier parasitic, welfare-like franchises go down the tubes.

Here's another article by Pastabelly about this issue:

Millions of words have been written and spoken in the past several days about the NFL's current labor situation, more of them devoted to empty rhetoric than to reality.

But as the two sides settled in Friday afternoon in New York to resume negotiations aimed at avoiding the kind of labor enmity that has so severely impacted other professional sports leagues, they did so with three little words taking on monumental importance.

Cash over cap. “ It's human nature. People that have money eventually decide they'll solve an issue by throwing money at it. And people who have less money, and feel the pinch, are by nature going to hang in a little longer, because they feel they have to, that their [financial] security is being threatened. ”
—An unnamed owner

As reported Friday morning by ESPN's Chris Mortensen, cash over cap, certainly a hot-button term for the NFL's lower-revenue franchises, has become a key issue in the labor debate. And it's certainly integral to any eventual resolution that successfully addresses the double-edged components currently keeping the league and the NFL Players Association from striking a deal.

That deal was not struck Friday, as the sides broke in the evening after meeting for much of the afternoon, with negotiations scheduled to resume at 10 a.m. Saturday. It is not known how much progress, if any, was made Friday. So tightly guarded were the Friday discussions that a few league owners actually phoned media members seeking news on the crucial negotiations.

It does appear that both sides, operating Friday with only three or four representatives each at the bargaining table, are prepared to go through the weekend in an attempt to bridge their differences.

In the simplest terms, cash over cap is essentially the difference between a team's true payroll and the NFL salary cap in a given season. Many of the league's high-revenue teams, but certainly not all of them, have a considerable advantage over the clubs occupying the low-revenue rungs in terms of cash over cap.

To understand the concept of cash over cap, one must understand that the salary cap is just a bookkeeping number, one that can be massaged by amortizing signing bonuses and with other mechanisms. The cap has never been indicative of a team's payroll. The Washington Redskins, believed to be the highest revenue producing machine in the league, have had payrolls well over $100 million the last few seasons, even though the highest salary cap level ever was in 2005, at $85.5 million.

For the fans who can't get their heads around how this works, here's a simple example: Let's say the Redskins signed an unrestricted free agent to a five-year deal that includes a signing bonus of $10 million and a base salary of $1 million for the first season of the contract. In salary cap terms, the Redskins are charged only $3 million, arrived at by prorating the signing bonus over five years and then adding the base salary. But in real dollars expended, or payroll, that player cost the Redskins $11 million for the first year. That's a difference of $8 million between what the player was actually paid and what his cap charge was for the initial season of the contract.

Multiply that example by several player acquisitions, prominent free agents or high-round draft choices, and the total cash over cap is considerable.

So why is the issue of cash over cap suddenly such a potentially galvanizing element? Because for several years, some owners, such as Mike Brown of Cincinnati, have regarded cash over cap levels as dangerous. And because, over the past 18 months, NFLPA executive director Gene Upshaw has been identifying cash over cap as an element of the widening disparity between the NFL's have and have-not franchises.

Because it cuts at the heart of the revenue sharing debate over which owners have been internally battling for more than a year, cash over cap could be a critical issue in Friday's negotiations. There is a feeling that if the NFL and the NFL Players Association can divine a formula that addresses cash over cap -- maybe one that penalizes franchises for breaching various cash over cap thresholds -- it will somehow ameliorate the low-revenue teams' angst.

As noted earlier this week by ESPN.com, it's actually a well-bonded alliance of nine to 10 low-revenue clubs that has demonstrated far more solidarity in recent days. Sources have suggested to ESPN.com that, in an effort to strike a deal that will preclude them from having to make deep roster cuts, some high-revenue teams have begun to reach out to their low-revenue fraternity brothers. But the lower-revenue teams have not budged from their insistence that they will not ratify an extension to the NFL collective bargaining agreement that does not adequately address their revenue-sharing issues.

"It's human nature," said one owner. "People that have money eventually decide they'll solve an issue by throwing money at it. And people who have less money, and feel the pinch, are by nature going to hang in a little longer, because they feel they have to, that their [financial] security is being threatened."

By dealing with the concept of cash over cap, though, negotiators on both sides of the bargaining table might have a way to bring owners and players together. And, right now, it would seem that Upshaw has more urgency to upgrade the unity in his rank and file.

In the last two days, the one voice previously missing from the ongoing labor negotiations, that of the players, has been heard with more frequency. While lauding the advances that Upshaw has promulgated for the players over his long tenure, Miami defensive end and Dolphins player representative Kevin Carter reiterated during a Thursday appearance on The NFL Network the need to strike a deal. Minnesota Vikings center Matt Birk, in an interview with the Minneapolis Star Tribune, used an especially unflattering term in laying blame on Upshaw for the current situation.

That doesn't quite qualify as an insurgency but clearly, there is some unrest in the ranks, both from players and agents.

Whether all of the dynamics currently at work result in an agreement before the new deadline remains to be seen. That the two sides huddled again on Friday, after declaring earlier in the week that the start of the league year would move forward, presents some reason for optimism. But there has been optimism before in these negotiations, and it remains a long shot that the two sides can accomplish in 72 hours something they've been unable to achieve for a year and a half.