Explain to me why team's get hit with a Cap Charge (1 Viewer)

[Sweet Love]

I understand it is part of the CBA that there is a Cap hit when a team trades a player, but my question is, which party fought to have it be a part of the agreement? For example, Chad Johnson is pretty unhappy and trying to force a trade. His team would like to move him, but can't because of the hit (estimated at 8 million). So now, CJ wants to be traded, but can't and his team wants to move him but can't either. Who does this benefit??

The only thing I can see as to why this would be there is because of the fear that players would start forcing the trade issue more frequently, but it already seems to be happening and then if the player is forced to stay, creates discontent between the player and team.

If player A is set to make 5 million in one year and another team has $5 million or more in cap space, why isn't it looked at as a true transfer of money? It seems (and I could be wrong) that both trading teams get hit on the cap for one player salary. Team A gets hit for moving the player and Team B gets hit because now they have the player on their squad.

Honestly, any insight would be helpful.

 

[David Yudkin]

As I see it, the original team has to take the cap hit for signing bonuses because the money was already paid out. Anything that is yet to be paid would typically be on the acquiring team.

So in an example where PLAYER X gets a $10 million signing bonus over 4 years and is traded after 1 season, the original team will have to eat a $7.5 million cap hit.

That's just how they do it.

 

[Bushead]

I believe the "cap hit" is related to signing bonuses or other bonus money that is prorated over the life of a contract - not the players yearly salary.

Player A signs a new 5 year contract with a 15 million dollar signing bonus. Each year, 3 million of that bonus is counted against the cap. If they player is traded, for example, after the 2nd year of that deal, there is still 9 million of that bonus money that has not been accounted for against that team's cap number. So when he is traded, that money is all accelerated into the year the trade is made.

 

[brettdj]

It prevents the sign and trade deals the NBA has.

 

[Sweet Love]

Thanks for all the insight. My take away is that it hurts the teams that give high signing bonuses prior to the player becoming unhappy. I do have one more question. Could a team elect to have their signon bonuses hit the cap immediately instead of being spread out over the length of the contract? I know teams want to keep the hit as low as possible per year, but if they had this option, they would be able to deal players with more ease.

For example, lets say a player had a 10 million sign on for a 5 year contract. right now it would hit 2.5 per year for 5 years. Next year they sign someone else to a similar contract and it goes up to 5 mill a year in bonuses. I guess my point is that they are probably spending 10 million a year in bonuses anyway, so why not just have it hit the first year (again, if this is an option) and then next year it is off the books and you can keep doing this with the players in the future?

 

[brettdj]

Thanks for all the insight. My take away is that it hurts the teams that give high signing bonuses prior to the player becoming unhappy. I do have one more question. Could a team elect to have their signon bonuses hit the cap immediately instead of being spread out over the length of the contract? I know teams want to keep the hit as low as possible per year, but if they had this option, they would be able to deal players with more ease. For example, lets say a player had a 10 million sign on for a 5 year contract. right now it would hit 2.5 per year for 5 years. Next year they sign someone else to a similar contract and it goes up to 5 mill a year in bonuses. I guess my point is that they are probably spending 10 million a year in bonuses anyway, so why not just have it hit the first year (again, if this is an option) and then next year it is off the books and you can keep doing this with the players in the future?

They can do this by making it a roster bonus, not a signing bonus.

 

[David Yudkin]

Thanks for all the insight. My take away is that it hurts the teams that give high signing bonuses prior to the player becoming unhappy. I do have one more question. Could a team elect to have their signon bonuses hit the cap immediately instead of being spread out over the length of the contract? I know teams want to keep the hit as low as possible per year, but if they had this option, they would be able to deal players with more ease. For example, lets say a player had a 10 million sign on for a 5 year contract. right now it would hit 2.5 per year for 5 years. Next year they sign someone else to a similar contract and it goes up to 5 mill a year in bonuses. I guess my point is that they are probably spending 10 million a year in bonuses anyway, so why not just have it hit the first year (again, if this is an option) and then next year it is off the books and you can keep doing this with the players in the future?

They can do this by making it a roster bonus, not a signing bonus.

There are two main differences in roster vs. signing bonus, though.For one, roster bonuses are not guaranteed, so a player could very likely never see that money. And a roster bonus counts against the salary cap at the time it is awarded and cannot be spread out over multiple years. So both sides have things that work against them.

 

[GregR_2]

Thanks for all the insight. My take away is that it hurts the teams that give high signing bonuses prior to the player becoming unhappy. I do have one more question. Could a team elect to have their signon bonuses hit the cap immediately instead of being spread out over the length of the contract? I know teams want to keep the hit as low as possible per year, but if they had this option, they would be able to deal players with more ease. For example, lets say a player had a 10 million sign on for a 5 year contract. right now it would hit 2.5 per year for 5 years. Next year they sign someone else to a similar contract and it goes up to 5 mill a year in bonuses. I guess my point is that they are probably spending 10 million a year in bonuses anyway, so why not just have it hit the first year (again, if this is an option) and then next year it is off the books and you can keep doing this with the players in the future?

Sometimes this is what teams do, but you have to be willing to absorb that big cap hit in the year that you sign them. The Vikings, who had something like $30m under the cap one year, did this when they signed Antoine Winfield and put the bulk of his bonus (over $10m) into a roster bonus that hit their cap the first year, leaving them with only his $3 and $4m salaries each year to hit their cap.A lot of teams don't have the cap room to start doing that with big name players. I imagine there are also some other contractual points, like you can't get players to repay roster bonuses if they retire, but they may have to repay signing bonuses.I get your point though that the NFL and players didn't have to make the cap hit escalate when traded. They could just have the team that acquires him have to pick up the charges in the normal amounts. So if you have a 5 year player with a $5m bonus... and he's traded after 2 years, he has 3 years left and still has $3m in bonus that hasn't been accounted for, and the team he ends up on then has to have that $1m prorated amount hit their cap each year for the next 3 years. Why they didn't opt for that kind of setup, which I gather is your question, I don't know for sure. I suppose one side or the other saw it as advantageous to them to do it this way. My guess would be the players like it this way. If the cap hit makes it prohibitive for you to trade a guy, you instead cut him with the June 1 deadline that spreads the cap hit over 2 seasons... making you more likely to cut him than trade him. If you cut him, now the player is free to go out and negotiate with another team and get still another signing bonus. That would be an advantage to the players to control where they go and to get the most money for going there if that is what they want.

 

[GregR_2]

Thanks for all the insight. My take away is that it hurts the teams that give high signing bonuses prior to the player becoming unhappy. I do have one more question. Could a team elect to have their signon bonuses hit the cap immediately instead of being spread out over the length of the contract? I know teams want to keep the hit as low as possible per year, but if they had this option, they would be able to deal players with more ease. For example, lets say a player had a 10 million sign on for a 5 year contract. right now it would hit 2.5 per year for 5 years. Next year they sign someone else to a similar contract and it goes up to 5 mill a year in bonuses. I guess my point is that they are probably spending 10 million a year in bonuses anyway, so why not just have it hit the first year (again, if this is an option) and then next year it is off the books and you can keep doing this with the players in the future?

They can do this by making it a roster bonus, not a signing bonus.

There are two main differences in roster vs. signing bonus, though.For one, roster bonuses are not guaranteed, so a player could very likely never see that money. And a roster bonus counts against the salary cap at the time it is awarded and cannot be spread out over multiple years. So both sides have things that work against them.

Though if you put the roster bonus on year 1 of the contract, it's probably extremely likely that the player gets it. How many players get signed to contracts with bonuses worth mattering and then don't make the team the year they are signed? I think that's what he was getting at.

 

[DoubleG]

"...one veteran wide receiver...let's see, that'll be $1,475,000 for shipping and handling."