Steep learning curve for new owners
When the Walton- Penner Family Ownership group closed on their deal to purchase the Broncos in August, they said they were excited to learn the ins and outs of owning and operating a sports franchise.
“We have business experience, and we’ll obviously draw on that, but this is new and so for us, it’s a process of listening and learning,” CEO Greg Penner said then.
The learning curve got steep in a hurry when Denver faltered on the field last fall. In October, Penner acknowledged the leadership group didn’t anticipate such a rocky start to their first season. They didn’t expect their quarterback, signed a month after taking ownership to a $ 245 million contract extension, to struggle as much as he did. They certainly didn’t think in August that they’d be conducting a coaching search come January.
That has resulted in a baptism by fire of sorts.
Now comes the last big part of the calendar that they’ll be going through for the first time: Player acquisition season.
This one, beginning Monday with a legal tampering period and Wednesday with the formal opening of a new league year and free agency, has allowed for much more planning between ownership, general manager George Paton, new head coach Sean Payton and the rest of the organization.
The Broncos cleared more than $ 26.5 million in salary cap space Friday by releasing a veteran trio — Graham Glasgow, Ronald Darby and Chase Edmonds — giving the team much- needed cap space. Even with upward of $ 33 million in space now created, there is plenty of intrigue in how the Broncos will approach free agency. After all, their new ownership is the wealthiest in the NFL. Payton and his brain trust in New Orleans operated aggressively, particularly in the later years of Drew Brees’ career. Paton oversaw his first two offseasons as a general manager in the midst of varying levels of ownership limbo.
So, how will it look? Payton’s track record and the WaltonPenner Family Ownership Group’s resources suggest the franchise is in prime position to be aggressive, though there are also cautionary tales around the league in pushing salary cap tools toward the limit.
The going pro- rate
The NFL’S 2023 base salary cap is $ 224.8 million, but each team’s actual mark is slightly different, and, more substantially, teams can use all sorts of accounting maneuvers to create space.
Signing bonus money can be, for cap accounting purposes, prorated over the length of a contract out to five years. That typically allows teams willing to pay big signing bonuses to hold the
cap charge on new free agents to moderate numbers early in the contract.
“The Rams, the Saints, the Eagles, they have owners that want to spend and want to spend more, frankly, in each given year than the salary cap,” Pro Football Focus analyst Brad Spielberger told The Post. “The Rams last year had $ 208 million in cap spending and something like $ 288 million in cash spending. Not even close. Their MO is, basically, that it’s an advantage you can create.”
The Broncos’ new ownership group can play this game as much as they choose to.
“When you have Wal- Mart money, you can definitely push things around and find ways to be aggressive,” Spielberger said.
As long as the salary cap keeps going up each year, that prorated portion of the bonus is less onerous on the salary cap in the future than it would be in the present.
his isn’t foreign to the Broncos, of course. Pass- rusher Randy Gregory’s five- year contract, worth up to $ 70 million and signed last offseason, came with a 2022 cap number of $ 5.6 million. D. J. Jones? $ 4.02 million against the cap in the first of a three- year deal. Those two as of Friday count more than $ 29 million against Denver’s 2023 cap.
Teams, though, often use the same general mechanism that teams use to clear salary space without cutting players. Base salary and roster bonuses count against the current year’s cap, so teams will convert those into signing bonus money. That money, then, can be prorated over the course of the contract, lowering the current year’s cap number.
In the lead- up to free agency, clubs all over the NFL are doing
this in earnest. Miami, for example, cleared $ 44.5 million by executing conversions with three players — Armstead, wide receiver Tyreek Hill and former Broncos edge Bradley Chubb — this past week.
“( Teams) go to players with big salaries and say, you’re making $ 20 million, we’re going to take that $ 20 million and turn it into bonus and prorate it out the four remaining years of your contract,” former Packers executive Andrew Brandt said on a podcast outlining the way teams create cap space. “So now you’re still making the $ 20 million, the cap goes down to $ 5 million because you have this year and three more at ($ 5 million), in addition to whatever proration is already out there, so you’re stacking proration, and everybody’s the wiser. Players get better cash flow usually. If I’m a player agent, I’ll say ‘ Yeah, I’ll do it, but you’ve got to pay me the money now, not in the season,’ and teams will do that at least partially.”
Denver has plenty of options on this front as free agency arrives. Each of Gregory ($ 9.69 million saved on 2023 cap with a restructure), Courtland Sutton ($ 8.61 million), Justin Simmons ($ 6.62 million) and Garett Bolles ($ 6.34 million) could be approached about a conversion that would lower their 2023 cap charge, while Russell Wilson, Jones and Tim Patrick have a combined potential of roughly $ 13.5 million in conversion savings, too.
Over The Cap’s data suggests if the Broncos restructured every contract they can, they’d create more than $ 48 million in additional cap space. Gregory, Sutton and Jones ($ 4.46 million) may be the most logical candidates for conversions because large percentages
of their 2023 salaries are already guaranteed.
“Those guys already have guaranteed salary as it is and pretty low proration amounts right now, so those are the candidates in a general sense you’re looking at right now,” Spielberger said.
The risk
These practices, though, also come with a potential downside.
If a player is cut or traded, all of the prorated money on his contract accelerates onto the current year’s salary cap. This is how, to use an extreme example, Denver quarterback Russell Wilson has a modest $ 22 million cap number for 2023 but would cost $ 107 million against the cap to cut, according to Over The Cap data. All of the remaining prorated and guaranteed money he’s owed would accelerate to the present.
The bottom line: Prorating is pushing the sentence off into the future.
“Is the cap fake? It’s not fake, but there’s a loophole in the cap system that’s not in the NBA, not in the NHL, where you can do proration,” Brandt said recently. “Proration is the magic for teams that are struggling with the cap. They simply push out the cap, add voidable years to the end — which are dummy years just for proration purposes — and they can pay way over the cap.
“You have to understand this — cash is hard, cold cash, we get that. Cap is not cash. Cap is accounting. That’s all cap is.”
So one potential approach for the Broncos is to essentially convert and cut as they need to once free agency approaches. Should the right player become available, do what needs to be done in order to sign him. If not, avoid needlessly pushing cap charges into the future if they can be accounted for in 2023.
Denver has already shown signs of restraint. The Broncos could have jumped to the top of the defensive line market and perhaps convinced impending free agent Dre’mont Jones to sign a long- term extension in recent months, but instead they appear set to let him test free agency and see what offers come his way.
Payton, Saints’ aggressive approach
New Orleans used these tactics as aggressively as any team in the NFL, especially late in Payton’s tenure there as Brees neared the end of his career.
The numbers are staggering. New Orleans began the past three offseasons more than $ 100 million over the cap ( 2021), more than $ 75 million over the cap ( 2022) and more than $ 60 million over the cap ( this year).
They’ve had to part with players such as Terron Armstead, Marcus Williams, Chauncey Gardner- Johnson and Trey Hendrickson, but have retained others and also added key pieces to the organization, as well.
“From the outside looking in, everybody thinks the sky is falling,” New Orleans vice president of football operations Khai Harley, who helps the franchise manage and navigate the salary cap, told reporters in 2021. “( But) we sort of know what our plans are and know what steps need to be taken. Sometimes those are difficult decisions, but decisions that we have to make nonetheless.
“When the GM and coach say, ‘ Hey, we want to do XYZ,’ you want to figure out how to do it.”
In January after a second straight season of missing the playoffs, general manager Mickey Loomis took a slightly different tone as the franchise moved into another offseason of major contractadjusting work.
“Look, we’ve got to catch up. We’ve got to manage this back to the middle,” Loomis said. “That’s been our plan all along, and obviously the COVID year and the reduced cap and the reduced league- wide revenues and the smoothing out of all that has impacted that. But yes, we have to make up for some of that.”
Even still, New Orleans isn’t in deletion mode. The Saints signed quarterback Derek Carr to a fouryear contract reportedly worth up to $ 150 million with $ 60 million guaranteed at signing. His 2023 salary cap number? $ 7.2 million.
This is the world Payton operated in with Loomis and Harley. The question, then, is how aggressively the Broncos will play the same game with Payton now in Denver.
“I don’t think he’s going to come in and say, ‘ Yeah, I know we have this big quarterback contract and I know we spent a lot last offseason, so we can just sit back and be cheap,’” Spielberger said. “I don’t think that’s going to be the case.”