Renting to Own in the NFL – Saints Sign Brees with Back Loaded Contract

Upon hearing of the $100 million, 5 year contract for Drew Brees, and instantly recognizing the $20 million per year as a full sixth of the Saints’ salary cap, I began thinking of the roster implications. Brees had been playing for $10 million less than that for years. Now, as he demands more, one must ask how much of his performance was juiced by the extra $10 million the Saints have had to throw around. Presumably $5 million of that was used for offense, a better line, better receivers, and better rushers. Without that $5 million to help protect him, would his shoulder have withstood the punishment? Will it now? What would his record be like without it?

Then I read something that made no sense to me, that due to the contract structure, the Saints actually have more salary cap room with his $20 million per year contract than they would have had with the franchise tag of $16.3 million.

Huh? Whowat?

I dug. And what I found seems to not be being talked about, at least enough. Brees contract has the short term and long terms sensibility of paying $20 a week to rent to own a $400 television for 2 1/2 years. Feels great at first, but it sucks in the end, as all back end loaded agreements do.

Whydat?

Brees contract, as I believe I understand it, and to some degree speculate based on what I’ve read and heard, consists of a low guaranteed salary in the early years, a guaranteed bonus up front, and higher salaries and presumably not guaranteed bonuses later. Thus, the cap cost in the early years is the low salary plus the guaranteed bonus amortized over the life of the contract, which sums to considerably less than the $20 million average over 5 years. That leaves New Orleans with a back end loaded expense structure, kind of an NFL contract version of renting to own, as the cost of the contract as it plays out will eventually affect the cap. The structure affects not whether the compensation will count towards the cap, but when.

I fear this bodes poorly for the Saints. NFL News is reporting, or should I say noting, that the $40 million Brees will receive this year is more than the entire starting offense. Howsdat for a morale booster? On top of this, his least expensive year seemingly will be in a lost year (if not years), lost due to their bounty scandal penalties. Finally, the unspoken must be spoken. How many times, in all sports, has the big contract marked the end of an awesome player’s awesomeness? I’m just saying…

Saints fans, and even just NFL fans, cheer big contracts like this, saying things like “yeah it is nice when a player finally gets paid what he’s worth.” They miss where the money comes from. NFL owners have a salary cap of $120.6 million in 2012, with a salary floor equal to 99% of that amount. Thus all NFL teams spend about $120 million on players. When one player gets a $10 million raise, that is not $10 million from “the man,” but instead from the men, an average of $192,000 per man among the other 52 players on the roster.

I think a lineman just exclaimed, “Whatsdat?”

Yes, I’ve chosen to ignore the salary cap flexibility in the early years. I don’t rent to own my stuff, either. I know that at $20 a week for 2 ½ years for a television may feel great this week or even this month, but it will punish me in time. Similarly, a $100 million contract over 5 years is going to get recognized in the salary cap, just maybe not in the first year. What is not clear to me is what provisions the contract has for the non-guaranteed portion. Presumably injury, but perhaps also performance, comes into play. In any case, if Drew is to be around, then $5 million not smacking the salary cap now is $5 million hammering the bejesus out of it later.

One argument in favor of this back loaded agreement in the press is that although the contract will have a greater impact on the salary cap in later years, presumably the cap will be higher so it will not matter as much. This assumption of this statement misses part of its own substance, that the cap will presumably be higher then. Thus, to compete, financially speaking, you’ll need the then higher cap level available for your roster.

Whodat?

The collector. Datswho.

Author’s Note: I found a great forum on NFL salary caps while looking around for specifications on Brees’ deal. Also, Wikipedia has a good page on salary caps. Finally, if you’re really interested, check out the 316 page 2011 to 2012 NFL Collective Bargaining Agreement.