Cash Flow

[Jackie Daytona]

I've said it before in the past, but I'm starting to think that I may be right with this theory.  The reason we're conservative too the point of driving everyone nuts, is bonus money.  

 

Irsay doesn't have the secondary stream of income of a Jerry Jones, or Shad Khan... He only has.... The Colts... And aside from tickets, merchandise sales had to dip pretty hard over the last year.  

 

We can have all the cap space we want, but I don't think irsay has the tens oof millions he needs to hand over immediately for signing bonuses.... Sounds crazy I know, and I'm sure he HAS more than enough liquid assets,but maybe not enough to where he wants to be loose with it?

 

That would definitely put an internal cap on who you sign, and remember, that ain't CB's signature on the check....

[r a y s k i]

It’s a good point actually but it’s also possible that we just think that none of the top free agents were worth the money they were given. Personally, I don’t think we missed out on anyone and most of the available free agents are/were slightly above average players getting signed for a lot more

 

Guys I wanted to see with us were Golladay and Trent Williams and they both got PAID

 

 

[Nate!]

While Ballard hasn’t typically splashed the cash, could be some truth here.  

[Colts1324]

I don't think that is the case. 
 

Irsay is probably making so much $$ from investments alone that it doesn't matter. 

[throwing BBZ]

1 hour ago, Shafty138 said:

I've said it before in the past, but I'm starting to think that I may be right with this theory.  The reason we're conservative too the point of driving everyone nuts, is bonus money.  

 

Irsay doesn't have the secondary stream of income of a Jerry Jones, or Shad Khan... He only has.... The Colts... And aside from tickets, merchandise sales had to dip pretty hard over the last year.  

 

We can have all the cap space we want, but I don't think irsay has the tens oof millions he needs to hand over immediately for signing bonuses.... Sounds crazy I know, and I'm sure he HAS more than enough liquid assets,but maybe not enough to where he wants to be loose with it?

 

That would definitely put an internal cap on who you sign, and remember, that ain't CB's signature on the check....

 

 We need to understand how much Extension Bonus $$ he is going to need soon to sign our own. $60, 70, 80, 90 M +++... of cash. I agree that it is being planned for. And it makes sense to do some of it before the season starts.

[LJpalmbeacher2]

1 hour ago, Shafty138 said:

I've said it before in the past, but I'm starting to think that I may be right with this theory.  The reason we're conservative too the point of driving everyone nuts, is bonus money.  

 

Irsay doesn't have the secondary stream of income of a Jerry Jones, or Shad Khan... He only has.... The Colts... And aside from tickets, merchandise sales had to dip pretty hard over the last year.  

 

We can have all the cap space we want, but I don't think irsay has the tens oof millions he needs to hand over immediately for signing bonuses.... Sounds crazy I know, and I'm sure he HAS more than enough liquid assets,but maybe not enough to where he wants to be loose with it?

 

That would definitely put an internal cap on who you sign, and remember, that ain't CB's signature on the check....

 

I agree.

NCF said something about it last season, I think. If I remember correctly the only or most of income comes from is Colts and is not in as strong position financially as most owners.. Like you said and I agree, there's a league cap but colts have an "internal cap" as well. And that's why the media reports were in on most Free Agents because we're always way under the League cap. But in reality we're  not way under Irsay's Internal cap.

 

And coming off a Covid year with diminished revenue,  Colts are at a Disadvantage financially. 

[NewColtsFan]

2 hours ago, Shafty138 said:

I've said it before in the past, but I'm starting to think that I may be right with this theory.  The reason we're conservative too the point of driving everyone nuts, is bonus money.  

 

Irsay doesn't have the secondary stream of income of a Jerry Jones, or Shad Khan... He only has.... The Colts... And aside from tickets, merchandise sales had to dip pretty hard over the last year.  

 

We can have all the cap space we want, but I don't think irsay has the tens oof millions he needs to hand over immediately for signing bonuses.... Sounds crazy I know, and I'm sure he HAS more than enough liquid assets,but maybe not enough to where he wants to be loose with it?

 

That would definitely put an internal cap on who you sign, and remember, that ain't CB's signature on the check....

I absolutely 100 percent subscribe to this.    Have for a long time.   Spot on.

[richard pallo]

1 hour ago, Colts1324 said:

I don't think that is the case. 
 

Irsay is probably making so much $$ from investments alone that it doesn't matter. 

Correct.  I think if we really felt it was worth the money to sign a particular FA we would do it.  There comes a point where it doesn't make sense.  Cost versus Benefit.  We have no problem extending the players we want to keep so far under Ballard.  In fact Irsay has remarked it's Ballard holding the line on what to pay for a FA not Irsay.  He has the freedom to walk away if he feels it's to much.  So I'm not worried or concerned.  If we want a guy we are not afraid to go get him and pay him just like we did with Buckner.  

[NewColtsFan]

7 minutes ago, richard pallo said:

Correct.  I think if we really felt it was worth the money to sign a particular FA we would do it.  There comes a point where it doesn't make sense.  Cost versus Benefit.  We have no problem extending the players we want to keep so far under Ballard.  In fact Irsay has remarked it's Ballard holding the line on what to pay for a FA not Irsay.  He has the freedom to walk away if he feels it's to much.  So I'm not worried or concerned.  If we want a guy we are not afraid to go get him and pay him just like we did with Buckner.  

Do you think Jim Irsay would ever admit it if it was true?   He’d never do that.   It would hurt the franchise.    

I’m deeply impressed that we can convince players to take smaller signing bonuses, or in some cases, no SB.   Other teams write large checks for those.   We don’t.   I think it’s not just a philosophy,  I think it’s a necessity.  As @Shafty138pointed out, the Colts are Irsay’s only real source of income.   There is no other business. 
 

I am NOT knocking Irsay.  Not complaining.  His reality is what it is.   I’m just observing.  

[csmopar]

Eh I don’t know. He seemed to have ZERO issue under Ryan Grigson doing the cash bonuses. Besides, what he would pay out on those bonuses, he could turn around and write off on his taxes as a business expense and therefore, have to pay the governments LESS money.  So I really doubt this plays a role whatsoever. 

[csmopar]

18 minutes ago, NewColtsFan said:

  There is no other business. 

Maybe. The way LLCs and other things work, he could have 100 businesses under various business names and the public would never know it. 

[NewColtsFan]

Just now, csmopar said:

Maybe. The way LLCs and other things work, he could have 100 businesses under various business names and the public would never know it. 

I’m running around a lot this morning, but Forbes has an annual list of richest sports owners.   Irsay is ranked pretty high.  But I think it only shows the Colts as a main source of income.  
 

I’ll try to find it later today. 

[csmopar]

1 minute ago, NewColtsFan said:

I’m running around a lot this morning, but Forbes has an annual list of richest sports owners.   Irsay is ranked pretty high.  But I think it only shows the Colts as a main source of income.  
 

I’ll try to find it later today. 

Even still, Forbes or any other magazines or whoever, would still be limited by available Stuff registered directly to Irsay. That’s how LLCs work. 
 

that said, no matter what, odds are yes the Colts are the main income source. It’s going to be very difficult for any other side projects to reach the income level of a nfl franchise. 

[NewColtsFan]

9 minutes ago, csmopar said:

Even still, Forbes or any other magazines or whoever, would still be limited by available Stuff registered directly to Irsay. That’s how LLCs work. 
 

that said, no matter what, odds are yes the Colts are the main income source. It’s going to be very difficult for any other side projects to reach the income level of a nfl franchise. 

I think any if thise type if companies wouldn’t generate enough to make a difference for the Colts.  I would think those would generate income for Irsay personally.   For things like his Rock and Roll guitar collection.   Private money, not Colts money.  

[hoosierhawk]

The Colt organization whether a C corp or an LLC is a stand alone company. Irsay doesn't intermingle personal funds and Colts funds.If the Colt corporation cannot stand on its own without Irsay having to inject money into it we have a whole new discussion. I believe this is a mute point having run corporations in the past.

[Hoose]

2 minutes ago, hoosierhawk said:

The Colt organization whether a C corp or an LLC is a stand alone company. Irsay doesn't intermingle personal funds and Colts funds.If the Colt corporation cannot stand on its own without Irsay having to inject money into it we have a whole new discussion. I believe this is a mute point having run corporations in the past.

The word is "moot" not "mute".  And I agree with you. Irsay gets paid from the Colts, not vice versa. I'm not disagreeing with the lack of available funds for signing bonuses. Who knows? We do know that the money generated by NFL teams, for the most part, comes from TV contracts, and that the gate receipts/game day revenues are a cherry on top. And the TV revenues just got even more lucrative for everyone. The NFL is a pure cash cow. FWIW,  if Irsay needed to loan the Colts a few extra million to get the right players in here, I do believe, as a billionaire, that he could find a way to do that., and would.

Meaning, the signing bonus issue is more likely philosophical than financial. 

[hoosierhawk]

1 minute ago, Hoose said:

The word is "moot" not "mute".  And I agree with you. Irsay gets paid from the Colts, not vice versa. I'm not disagreeing with the lack of available funds for signing bonuses. Who knows? We do know that the money generated by NFL teams, for the most part, comes from TV contracts, and that the gate receipts/game day revenues are a cherry on top. And the TV revenues just got even more lucrative for everyone. The NFL is a pure cash cow. FWIW,  if Irsay needed to loan the Colts a few extra million to get the right players in here, I do believe, as a billionaire, that he could find a way to do that., and would.

Meaning, the signing bonus issue is more likely philosophical than financial. 

I flunked english. Sorry!!

[LJpalmbeacher2]

I definitely do think irsay is not as strong financially as most other owners.

I think that's why he buys older,used collectible stuff, like music instruments instead of buying Brand New.  

[Jackie Daytona]

15 hours ago, csmopar said:

Eh I don’t know. He seemed to have ZERO issue under Ryan Grigson doing the cash bonuses. Besides, what he would pay out on those bonuses, he could turn around and write off on his taxes as a business expense and therefore, have to pay the governments LESS money.  So I really doubt this plays a role whatsoever. 

You can't claim wages paid as a tax write off....

[csmopar]

4 hours ago, Shafty138 said:

You can't claim wages paid as a tax write off....

Actually you can. See IRS section 15-B for example. There’s also the RDA, both of these can be used to reduce the franchises net income, which is what the IRS determines tax on. That section is a king wordy read, but if you want a shorter, cliff notes, non lawyer written read, here ya go.

 

[Superman]

Per Spotrac, the Colts cash spending in 2019 was $192m, with a $196m cap charge; the salary cap was $188m. The Colts cash spending in 2020 was $212m, with a $231m cap charge; the cap was $198m, with a known but not quantified reduction looming. 

 

The Colts use a "pay as you go" contract structure, which keeps the yearly cash spending closely in line with the salary cap. The idea that this saves the team money is mistaken.

 

For example, they signed Buckner to a four year extension. Instead of a signing bonus that would be spread out evenly over the remaining years of the contract, they used a roster bonus, all of which counted against the 2020 cap, He got $23m in Year 1, and will get $17m in Year 2, for a total cash due of $40 in the first two seasons of his contract.

 

Compare that to Kenny Clark's contract. Slightly lower yearly average, so it's not a perfect comparison, but it still works. In 2020, he received a $25m signing bonus and a $1.6m base salary, and in 2021 he gets a $1m base salary, and another $1m in potential roster/performance bonuses. His two year cash payment is $28.6m. So even with a huge signing bonus, they're paying less cash to Clark than we are to Buckner.

 

The same comparison applies if you look at Ryan Kelly ($30m over the first two years) vs Corey Linsley ($26m over the first two years).

 

Another factor that doesn't get published or discussed is that sometimes, signing bonuses are NOT paid all at once. At times, signing bonuses are paid in installments. We really only hear about it if it will affect the cap, but it's a negotiable matter that doesn't change the cap structure of the contract. So the idea that teams that use big signing bonuses always pay that money at signing isn't accurate.

 

Just pointing out that some of these assumptions are based on faulty information. I don't know whether the Colts have a more restrictive cash flow situation than other teams, but the way they structure contracts should not be used as evidence, one way or the other.

 

Here's one of the big benefits of the Colts way of structuring contracts: it keeps their year to year cap relatively flat. With signing bonuses prorated over the life of the contract, you'll almost always see cap hits increase dramatically after the first two seasons. (And of course, when players get released/traded, you'll see large amounts of dead cap.) Clark goes $6m, $7m, $20m, $21m, $22m. So as the cap goes up, his cap hits go up, and if the Packers have multiple contracts structured that way, those increasing cap hits are basically swallowing up any cap room they might get from future cap increases. 

 

Buckner's cap hits go $23m, $17m, $16m, $20m, $20m. Relatively flat over the life of the contract. (Same holds true for Kelly vs Linsley.) So as the league salary cap increases, but the Colts' cap figures stay flat, when we see a year over year league cap increase, the Colts actually wind up with additional cap room, because it's not swallowed up by contracts they already have.

 

The big principle that people lose sight of is this: Every dollar you spend will eventually be counted toward the cap. The contract structure may allow you to push the cap hits into future years, but you will eventually have to count that money toward the cap.  It's like using a credit card for a big purchase, vs paying in cash. The credit card might allow for some extra spending today, but the credit card bill will restrict your spending tomorrow. And once you buy, you must pay.

 

We can argue the merits of one approach vs the other. I think the desire for instant gratification would favor using bigger signing bonuses so you can add a $20m/year player with a $7m cap hit, and then call yourself a cap guru. But two years later, that same player has a $28m cap hit, and he's still just a $20m/year player (if you're lucky; most big ticket FAs don't live up to their contract). Your team won't have cap space, and you'll either be cutting players and absorbing dead cap hits, or you'll be doubling down with a restructure, paying even more money and using more future cap space to pay for today's expenses.

 

On the other hand, not using big signing bonuses limits how much bang you can get for your $40m in cap space in a given offseason. But you'll never see a team that structures contracts the way the Colts do running into cap issues. Next offseason, even with Leonard, Smith and Nelson re-signed, the Colts are going to be top five-ish with $60-70m in cap space.

[Hoose]

1 hour ago, Superman said:

Per Spotrac, the Colts cash spending in 2019 was $192m, with a $196m cap charge; the salary cap was $188m. The Colts cash spending in 2020 was $212m, with a $231m cap charge; the cap was $198m, with a known but not quantified reduction looming. 

 

The Colts use a "pay as you go" contract structure, which keeps the yearly cash spending closely in line with the salary cap. The idea that this saves the team money is mistaken.

 

For example, they signed Buckner to a four year extension. Instead of a signing bonus that would be spread out evenly over the remaining years of the contract, they used a roster bonus, all of which counted against the 2020 cap, He got $23m in Year 1, and will get $17m in Year 2, for a total cash due of $40 in the first two seasons of his contract.

 

Compare that to Kenny Clark's contract. Slightly lower yearly average, so it's not a perfect comparison, but it still works. In 2020, he received a $25m signing bonus and a $1.6m base salary, and in 2021 he gets a $1m base salary, and another $1m in potential roster/performance bonuses. His two year cash payment is $28.6m. So even with a huge signing bonus, they're paying less cash to Clark than we are to Buckner.

 

The same comparison applies if you look at Ryan Kelly ($30m over the first two years) vs Corey Linsley ($26m over the first two years).

 

Another factor that doesn't get published or discussed is that sometimes, signing bonuses are NOT paid all at once. At times, signing bonuses are paid in installments. We really only hear about it if it will affect the cap, but it's a negotiable matter that doesn't change the cap structure of the contract. So the idea that teams that use big signing bonuses always pay that money at signing isn't accurate.

 

Just pointing out that some of these assumptions are based on faulty information. I don't know whether the Colts have a more restrictive cash flow situation than other teams, but the way they structure contracts should not be used as evidence, one way or the other.

 

Here's one of the big benefits of the Colts way of structuring contracts: it keeps their year to year cap relatively flat. With signing bonuses prorated over the life of the contract, you'll almost always see cap hits increase dramatically after the first two seasons. (And of course, when players get released/traded, you'll see large amounts of dead cap.) Clark goes $6m, $7m, $20m, $21m, $22m. So as the cap goes up, his cap hits go up, and if the Packers have multiple contracts structured that way, those increasing cap hits are basically swallowing up any cap room they might get from future cap increases. 

 

Buckner's cap hits go $23m, $17m, $16m, $20m, $20m. Relatively flat over the life of the contract. (Same holds true for Kelly vs Linsley.) So as the league salary cap increases, but the Colts' cap figures stay flat, when we see a year over year league cap increase, the Colts actually wind up with additional cap room, because it's not swallowed up by contracts they already have.

 

The big principle that people lose sight of is this: Every dollar you spend will eventually be counted toward the cap. The contract structure may allow you to push the cap hits into future years, but you will eventually have to count that money toward the cap.  It's like using a credit card for a big purchase, vs paying in cash. The credit card might allow for some extra spending today, but the credit card bill will restrict your spending tomorrow. And once you buy, you must pay.

 

We can argue the merits of one approach vs the other. I think the desire for instant gratification would favor using bigger signing bonuses so you can add a $20m/year player with a $7m cap hit, and then call yourself a cap guru. But two years later, that same player has a $28m cap hit, and he's still just a $20m/year player (if you're lucky; most big ticket FAs don't live up to their contract). Your team won't have cap space, and you'll either be cutting players and absorbing dead cap hits, or you'll be doubling down with a restructure, paying even more money and using more future cap space to pay for today's expenses.

 

On the other hand, not using big signing bonuses limits how much bang you can get for your $40m in cap space in a given offseason. But you'll never see a team that structures contracts the way the Colts do running into cap issues. Next offseason, even with Leonard, Smith and Nelson re-signed, the Colts are going to be top five-ish with $60-70m in cap space.

This is informative and well written. Thanks for doing this.

[csmopar]

4 hours ago, Superman said:

Per Spotrac, the Colts cash spending in 2019 was $192m, with a $196m cap charge; the salary cap was $188m. The Colts cash spending in 2020 was $212m, with a $231m cap charge; the cap was $198m, with a known but not quantified reduction looming. 

 

The Colts use a "pay as you go" contract structure, which keeps the yearly cash spending closely in line with the salary cap. The idea that this saves the team money is mistaken.

 

For example, they signed Buckner to a four year extension. Instead of a signing bonus that would be spread out evenly over the remaining years of the contract, they used a roster bonus, all of which counted against the 2020 cap, He got $23m in Year 1, and will get $17m in Year 2, for a total cash due of $40 in the first two seasons of his contract.

 

Compare that to Kenny Clark's contract. Slightly lower yearly average, so it's not a perfect comparison, but it still works. In 2020, he received a $25m signing bonus and a $1.6m base salary, and in 2021 he gets a $1m base salary, and another $1m in potential roster/performance bonuses. His two year cash payment is $28.6m. So even with a huge signing bonus, they're paying less cash to Clark than we are to Buckner.

 

The same comparison applies if you look at Ryan Kelly ($30m over the first two years) vs Corey Linsley ($26m over the first two years).

 

Another factor that doesn't get published or discussed is that sometimes, signing bonuses are NOT paid all at once. At times, signing bonuses are paid in installments. We really only hear about it if it will affect the cap, but it's a negotiable matter that doesn't change the cap structure of the contract. So the idea that teams that use big signing bonuses always pay that money at signing isn't accurate.

 

Just pointing out that some of these assumptions are based on faulty information. I don't know whether the Colts have a more restrictive cash flow situation than other teams, but the way they structure contracts should not be used as evidence, one way or the other.

 

Here's one of the big benefits of the Colts way of structuring contracts: it keeps their year to year cap relatively flat. With signing bonuses prorated over the life of the contract, you'll almost always see cap hits increase dramatically after the first two seasons. (And of course, when players get released/traded, you'll see large amounts of dead cap.) Clark goes $6m, $7m, $20m, $21m, $22m. So as the cap goes up, his cap hits go up, and if the Packers have multiple contracts structured that way, those increasing cap hits are basically swallowing up any cap room they might get from future cap increases. 

 

Buckner's cap hits go $23m, $17m, $16m, $20m, $20m. Relatively flat over the life of the contract. (Same holds true for Kelly vs Linsley.) So as the league salary cap increases, but the Colts' cap figures stay flat, when we see a year over year league cap increase, the Colts actually wind up with additional cap room, because it's not swallowed up by contracts they already have.

 

The big principle that people lose sight of is this: Every dollar you spend will eventually be counted toward the cap. The contract structure may allow you to push the cap hits into future years, but you will eventually have to count that money toward the cap.  It's like using a credit card for a big purchase, vs paying in cash. The credit card might allow for some extra spending today, but the credit card bill will restrict your spending tomorrow. And once you buy, you must pay.

 

We can argue the merits of one approach vs the other. I think the desire for instant gratification would favor using bigger signing bonuses so you can add a $20m/year player with a $7m cap hit, and then call yourself a cap guru. But two years later, that same player has a $28m cap hit, and he's still just a $20m/year player (if you're lucky; most big ticket FAs don't live up to their contract). Your team won't have cap space, and you'll either be cutting players and absorbing dead cap hits, or you'll be doubling down with a restructure, paying even more money and using more future cap space to pay for today's expenses.

 

On the other hand, not using big signing bonuses limits how much bang you can get for your $40m in cap space in a given offseason. But you'll never see a team that structures contracts the way the Colts do running into cap issues. Next offseason, even with Leonard, Smith and Nelson re-signed, the Colts are going to be top five-ish with $60-70m in cap space.

[twfish]

Thank you for putting this one to bed. I was just waiting for Dakitch to hop on this line of thinking

[Zoltan]

Jim Irsay is also in the top half of the league for wealth so.....

 

Now if we were talking about Mark Davis I would say it is believable because he's one of the few non-billionaire owners

[Superman]

Also, just thinking about the financials, it's kind of hard for an NFL team to lose money. The Packers reported a net operating profit of $70m in 2019. They received $296m in league revenue, and another $210m in local revenue. They had $201m cash spending on player contracts in 2019.

 

https://www.greenbaypressgazette.com/story/news/2020/07/21/green-bay-packers-report-record-half-billion-dollars-revenue/5383385002/

 

It's my understanding that the Packers pay a lot more for stadium maintenance than the Colts do. In fact, the Colts have one of the sweetest stadium deals in the league. They have higher paid coaches, and higher player costs. And yet, the Packers have a $400m slush fund. 

 

It's hard to imagine any team being cash poor. Especially to the extent that it would affect the team's player spending and have fans wondering if the owner is broke. 

 

Isn't the simpler explanation much better? The Colts don't like back loaded contracts, and with Nelson, Smith and Leonard coming up, they have their cap room allocated to keeping those players. Trading for Wentz was the big move for 2021, it cost the team $20m in cap space this year. That's your one or two attention grabbing free agents right there. The other $40m is for mid level rotation guys, draft picks, in season buffer, and extensions. 

[Jackie Daytona]

11 hours ago, Zoltan said:

Jim Irsay is also in the top half of the league for wealth so.....

 

Now if we were talking about Mark Davis I would say it is believable because he's one of the few non-billionaire owners

Pretty sure that takes into account franchise value as well, not just liquid assets....I'd have to believer there are more than 15 owners with more liquid assets than Irsay....no?

[Zoltan]

3 hours ago, Shafty138 said:

Pretty sure that takes into account franchise value as well, not just liquid assets....I'd have to believer there are more than 15 owners with more liquid assets than Irsay....no?

 

I'm not sure because I saw Mark Davis net worth as 800 million, while the Raiders net worth is 3.1 Billion.

 

https://moneyinc.com/the-15-richest-nfl-owners-in-the-world/

https://www.wealthypersons.com/mark-davis-net-worth-2020-2021/

https://www.forbes.com/teams/las-vegas-raiders/?sh=28faa25770ed