Interesting Note On Cherilus Contract

[HtownColt]

Pardon if people already knew this, but I guess this just went over my head. Something didn't add up because I knew Cherilus cap hits wasn't that big given his contract, I found an article that lays it out for me. Thought I would share it:

"Salary Cap Quirk: We're adding this entry to the Colts' salary cap outlook to draw attention to Gosder Cherilus' contract. The right tackle signed a five-year, $35 million contract that included $16 million in guaranteed money on March 14. On paper, Cherilus will earn $15.5 million in cash this season, including a $5.5 million base salary. However, Cherilus only has a $3.9 million cap number this season.

How can that be? Well, Cherilus' contract is not structured the way free agent contracts usually are.

Instead of a signing bonus plus low base salaries that gradually or substantially increase in each year of the contract, Cherilus' base salary decreases from $5.5 million in 2013 to $1 million in 2014. As a result, a "50 percent down" rule in the CBA decreases the cap charge of the first-year base salary by the difference between the Year 1 and Year 2 base salaries. In this case, that amount is $4.5 million, which according to Article 13, Section 6(iii)(5) of the CBA, is treated as a signing bonus and will be prorated (at $900,000 per season) against the cap over the next five seasons. As a result of the funky contract structure, Cherilus' cap number is $3.6 million lower than the $7.5 million figure that his signing bonus and base salary suggest it should be."

http://sports.yahoo.com/blogs/nfl-shutdown-corner/indianapolis-colts-salary-cap-outlook-explaining-gosder-cherilus-140128310.html

[IrishColt22]

is that every year or just year 1 

[Superman]

Oh really? I didn't know that.

 

Spotrac has Cherilus' cap hit for 2013 at $7.5m. According to this, however, his cap hit should actually be $3.9m in 2013. And then the cap hits Spotrac has for 2014-2017 should be $900k higher. That would mean that we actually have about $9m in cap space for 2013, pending Werner's contract.

[Carlos Danger]

why aren't all longer veteran FA contracts structured like this? I know that Cherilus is only 28, but the way this is structured seems safer for the team... Maybe I answered my own question, but it seems like more veterans would be willing to sign a contract like this if they have injury or age question marks, rather than signing a smaller overall contract with more money up front or signing a risky one year "prove it" deal that leaves them with zero future assurance...

 

IDK... maybe I'm missing something... or maybe Cherilus was willing to work it out in order to start for a contender.. opposite his old college roommate... not very many fan bases would have welcomed him as enthusiastically as we have, either...

 

The more reasonable explanation is Indy offered the most money, but only if they could structure it to be more cap friendly than your average 35 million dollar contract... I like it, though...

[TKnight24]

Yeah, I suck at math.

So is this a GOOD thing for our cap, or a BAD thing for our cap?

If it's a good thing, Grigson is doing smart moves.

If it's bad, Grigson sucks joking

[Superman]

Yeah, I suck at math.

So is this a GOOD thing for our cap, or a BAD thing for our cap?

If it's a good thing, Grigson is doing smart moves.

If it's bad, Grigson sucks joking

 

It's good for the 2013 cap, but all the money still hits the cap eventually. 

[Superman]

why aren't all longer veteran FA contracts structured like this? I know that Cherilus is only 28, but the way this is structured seems safer for the team... Maybe I answered my own question, but it seems like more veterans would be willing to sign a contract like this if they have injury or age question marks, rather than signing a smaller overall contract with more money up front or signing a risky one year "prove it" deal that leaves them with zero future assurance...

 

IDK... maybe I'm missing something... or maybe Cherilus was willing to work it out in order to start for a contender.. opposite his old college roommate... not very many fan bases would have welcomed him as enthusiastically as we have, either...

 

The more reasonable explanation is Indy offered the most money, but only if they could structure it to be more cap friendly than your average 35 million dollar contract... I like it, though...

 

It doesn't impact the way Cherilus receives his money. It's all about accounting. He still gets $15.5m total cash in Year 1. I think most veteran FAs would jump at that kind of cash. The only quirk is that his Year 2 base salary is drastically lower than it is in Year 1, so this accounting rule kicks in and changes the way the Year 1 base salary is applied to the cap over the life of the contract.

 

Cherilus didn't take less money or sacrifice anything up front. 

[Carlos Danger]

It doesn't impact the way Cherilus receives his money. It's all about accounting. He still gets $15.5m total cash in Year 1. I think most veteran FAs would jump at that kind of cash. The only quirk is that his Year 2 base salary is drastically lower than it is in Year 1, so this accounting rule kicks in and changes the way the Year 1 base salary is applied to the cap over the life of the contract.

 

Cherilus didn't take less money or sacrifice anything up front. 

t.y. for clarification...

[dw49]

It's good for the 2013 cap, but all the money still hits the cap eventually. 

 

 

 

It ends up giving the Colts ample "wiggle room" for 2013 but I'm not sure if they were to do it over , they would have opted for that. Probably a no brainer move when they signed him as they knew they were going to make a huge splash in 2013. It gave them more money to spend this year and 900K a year for the next 5 is pretty negligible. The more I write , the more I don't agree with myself. It must be that the Colts wanted to be at around 9 mill at this point in time or the could have written the last couple free agent contracts a little differently. Also who knows if the reported # is really accurate.

[Superman]

It ends up giving the Colts ample "wiggle room" for 2013 but I'm not sure if they were to do it over , they would have opted for that. Probably a no brainer move when they signed him as they knew they were going to make a huge splash in 2013. It gave them more money to spend this year and 900K a year for the next 5 is pretty negligible. The more I write , the more I don't agree with myself. It must be that the Colts wanted to be at around 9 mill at this point in time or the could have written the last couple free agent contracts a little differently. Also who knows if the reported # is really accurate.

 

 

Here's the provision, by the way, on page 94 (109): http://images.nflplayers.com/mediaResources/files/PDFs/General/2011_Final_CBA.pdf

 

iii) Amounts Treated as Signing Bonuses.

For purposes of determining Team Salary under the foregoing, the term "signing bonus" shall include:

...

(5) The difference between the Salary in the second contract year and the first contract year when Salary in the second contract year is less than half the Salary called for in the first year of such Contract;

 

So, because Cherilus' base salary goes from $5.5m in 2013 down to $1m in 2014, this provision kicks in.

 

Who knows whether they actually structured this contract this way specifically to take advantage of that rule. To me, it kind of seems like an arcane provision that is only kicking in because of the significant drop in base salary in 2014. They could have just given him a larger signing bonus and balanced out the base salaries in Years 1 and 2, with the same result. I don't see this is as a tool that a team would use to manipulate the cap. I see it more as forced compliance to regulate base salaries, in order to prevent cap manipulation.

 

::shrugs::

[dw49]

 

 

Here's the provision, by the way, on page 94 (109): http://images.nflplayers.com/mediaResources/files/PDFs/General/2011_Final_CBA.pdf

 

 

So, because Cherilus' base salary goes from $5.5m in 2013 down to $1m in 2014, this provision kicks in.

 

Who knows whether they actually structured this contract this way specifically to take advantage of that rule. To me, it kind of seems like an arcane provision that is only kicking in because of the significant drop in base salary in 2014. They could have just given him a larger signing bonus and balanced out the base salaries in Years 1 and 2, with the same result. I don't see this is as a tool that a team would use to manipulate the cap. I see it more as forced compliance to regulate base salaries, in order to prevent cap manipulation.

 

::shrugs::

 

 

Yes... could very well be the case

[lollygagger8]

Well at least the cap hit isn't so bad next year.