How Calvin Johnson frees the Lions to spend in free agency

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Yes, another article about Calvin Johnson. There’s a TL;DR at the bottom if you’d just rather not read this, you clicked, that’s a hit, we’re good, I still love you like a brother. It’s been discussed by the team, the press, by everyone except the man himself. I have a theory why but it’s not really the point of the article. He’s not motivated by money, wasn’t strong arming the team in to keeping a coach, but he hasn’t just said yes or no to coming back. Could the free agency period be Bob Quinn‘s audition for Calvin Johnson? Might it determine whether or not he considers coming back? Now you might be thinking that that’s a pretty cold move by the player, holding the team hostage so they don’t know whether they need to replace him or not, and preventing them from knowing how much cap space they’ll have. But the first simply is not true because they do need to grab another receiver whether Johnson is back or not; that has to be a part of Quinn’s depth mission. The second part is where most media and definitely most fans seem confused. Calvin Johnson’s status has as little or as much impact on free agency as the team wants it to have. Whenever decision day comes, it will play out in one of four ways, and none of them matter very much in terms of free agency, certainly not limiting the team as the free agency period opens, likely not before the draft has concluded. If Calvin is still sitting on the fence when the draft ends, the team needs to get a decision from him or make one for him.

The Lions will have about $30 million in cap space to work with. That’s easily enough to sign say, Mitchell Schwartz, George Illoka, Leon Hall, Rishard Matthews, Alex Mack, and Derrick Shelby, then retain Haloti Ngata, Tahir Whitehead, and finally extend Darius Slay, and Riley Rieff. Now there is no way that all of those players sign for an average per year salary of 3 million dollars is there? Here is a little bit of salary cap 101, because in order for this to make sense a certain amount of the way that the Collective Bargaining Agreement works needs to be understood and Mike has been kind enough to remind me that to some, this article will likely be gibberish without a primer. If you are already an amateur capologist, just skip down to the heading “What does that have to do with Calvin?” If not: this is how player contracts work.

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SALARY CAP 101

The first thing that needs to be understood about the salary cap is that the hit from a player’s signing bonus is split in to even pieces which are distributed along the length of the contract, but the player gets most or all of the money immediately. As a result of this they will often take near league minimum salaries in the first season, having received a huge amount of money already that year, and have their salary climb as they near the end of the deal. So a 6 year 36 million dollar with “$18 million guaranteed” deal does not have a six million dollar salary cap hit in each of the six years. The deal likely has a $12 million signing bonus and guarantees the salary for the first two years. An NFL player contract is not usually guaranteed; the team can cut a player and never pay them any money that has not otherwise been guaranteed by the terms of the contract. The 36 over 6 deal often has cap hits that go something like 3/5/5/7/7/9. The reason both teams and players like this format is that a) the player gets 18 million dollars over two years, and a raise in most years of the deal, and b) any season after midpoint of the deal, the team saves cap space by cutting the player if he has under-performed. Another factor that has led to this being the norm is that the salary cap always goes up, causing newer free agents to get bigger deals, and the almost yearly raises have all but ended player hold outs from derailing the off-season program when they think they’re underpaid – they might be a little lower than the guy who just signed, but they’re high enough. The last year of a player contract is often never actually paid. Teams normally extend or cut players before that final year of a major contract to avoid that elevated cap charge.

Using that formula, 30 million dollars of cap space can actually get a team $50-$60 million worth of free agents, depending on the length of the contracts they give out –  the shorter the term of the deals, the smaller the multiplier effect. By varying the length of the deals, a team controls the pace at which the contracts escalate the cap hits from the players. This is the job of a team’s “cap guru” ensuring that the specific duration and layout of the contracts doesn’t put the team in a bind down the road. A recent article was published saying that the Lions’ cap money was going to be used up primarily in the signing of depth players and rookies. That may end up being the case but it certainly does not have to be.

The Lions have 46 players under contract after they cut Tulloch and sign the players they tendered Thursday. During the off-season only the 51 largest contracts on the team count against the salary cap, this is how the roster balloons to 90 players for the start of training camp.  This means that after the first four players are signed not all of their cap charge changes the Lions cap number. If a $1.5 million dollar backup linebacker is signed to play special teams the cap charge only goes up by about $1 million; because the 51st biggest deal that was there (usually in the area of 500k) no longer counts until final rosters are set before week one. Then it’s 53 players all of whom count against the salary cap.

When a player is cut or retires, the remaining part of the signing bonus that was scheduled to be applied to the salary cap in future season is accelerated, either fully charged to the current season’s salary cap or being halved and deferred over two years; it depends on the exact timing and how the team and player file the paperwork. The team can make a retiring player return some of the signing bonus money that was scheduled to hit the cap in future seasons because the player has not actually earned that money yet, the prorated portion of the signing bonus is considered to be part of the player’s salary in the year it hits the cap, despite having been paid at the beginning. The factor that offsets this acceleration for the teams, is that the salary the player was going to be paid comes off the books and gives the team that much cap relief. When you read “x-player was due a salary of $5 million this season, by cutting him the team saved $4 million dollars against the salary cap”, what that means is that $1 million  of the players signing bonus had not hit the salary cap yet, and was charged to the team’s salary cap when they cut him.

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WHAT DOES THAT HAVE TO DO WITH CALVIN?

If Calvin Johnson decides to retire, the Lions can get slightly more than $14 million in cap space by making him pay back some bonus money, or $17.5 million in cap space by designating him a post June first cut and splitting the dead cap charge between two seasons, which is an option they have. The downside of that second option would be that teams would then be free to offer contracts to the player, but if he was not coming back here anyway it’s an option the team should consider. Either option is easily enough cap relief to cover 8 million dollars-worth of rookies and upgrade the bottom ten players on the roster significantly.

Before the retirement talk came up, all media outlets agreed that Calvin Johnson was going to have to do something about his contract if he was going to be back with the Lions and that has not changed, a $24 million cap hit, and a $16 million salary is completely unacceptable for any wide receiver. There are options that involve keeping Calvin Johnson as well that save the team cap space though, and here are my ideal and worst-case scenarios that still involve Calvin Johnson being on the team.

Ideally Calvin Johnson takes something similar to Larry Fitzgerald’s deal at about $10 million per year, all guaranteed, for a couple more seasons. This scenario relies on Calvin wanting to come back after he sees a roster that is likely to rely on him less, with a better running game, and more options in the passing game. By calling $8 million of the first year’s salary a signing bonus, the team would get cap relief of $6 million from the reduced salary, and $6 million more from prorating the rest of that signing bonus over the rest of Calvin’s deal, for a total of $12 million. The effect on the 2017 salary cap would be: $4 million dollars in cap relief if he plays, $10 million if he retires in 2017, or about $15 million if they were to designate him as a June first cut.

The worst case scenario in terms of the salary cap is that Calvin says no to a pay-cut, but wants to come back for one more year, and the team agrees. Even as the worst case scenario though it’s not that bad. By converting $14 million of his $16 million salary in to a signing bonus, the team can free up $11.5 million in cap space. That is not as much available for depth signings, but the team keeps Johnson and I am assuming that we can all agree that keeping Calvin Johnson on the roster is better than improving the fourth running back on the roster – I am OK with George Winn keeping his job if it means Calvin Johnson is back. Then if he retires next season, the cap consequences are similar to this season, with $15.5 million in dead cap space to either take on the chin, or split between two years, but his $16 million salary freeing up equal cap space.

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TLDR:

The resolution of the Calvin Johnson saga, no matter what it is, will be able to free up the cap space the team needs to cover the rookies, and improve the depth positions on the roster if the team wants it to. It in no way has to affect the free agent strategy of the team, or limit them in any way. The team is not hamstrung by a need to blow its cap dollars on backups. I read that article a couple days ago about how the team was in dire straights if they wanted to improve depth, and I have read all the reports that the Lions are not going to be players on any names in free agency just like you have, but there is a joke made a million times by various pundits over the years: How do you know a team official is lying to you in the off-season? He’s talking.

I’m still found at /u/A5hcrack on Reddit, @a5hcrack on twitter, drinking Kool-aid 24/7. 

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About the Author

Ash Thompson
Ash Thompson is a fanatical football fan, and less fanatical hockey fan despite his Canadian heritage. He is sorry aboot that. His spirit animal is a beaver with a shark's head. He is also known as /u/a5hcrack on reddit, and can be found on twitter @a5hcrack