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Avoiding the Albatross

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Avoiding the Albatross

Teams may start "legally tampering" with players scheduled to become free agents later today and start officially signing free agents on Wednesday, March 13.  I have noticed that many fans are worried that GM Gutekunst might reach for a player and stick the Packers with a contract that harms the team for years.

No more contracts like Nick Perry's is easy to say but harder to execute.  When the target is a very good to an elite player, the potential for a cap-killing contract increases.  Yet, many fans want and expect the Packers to spend in free agency. 

The obvious way to avoid the albatross is to sign good players who do not get injured and play at least as well as expected over the course of the entire contract.  Well, duh.

Another way is to sign only mid-level free agents because they generally do not get big chunks of guaranteed money.  Even if the Packers gave them guaranteed money, the amount usually is not so large that it cannot be handled easily.  Tramon Williams is not difficult to release simply because his $1.625 million dead money is not that large in relation to the cap limit. 

There are other ways, though.  One way is to abandon the current model of structuring contracts.  The-only-guaranteed-money-is-the-signing-bonus model has to go. 

Player SB %   Player SB % FG% Player SB % FG %
Rodgers 37.87   Fuller 32.14 GB Cousins 100 100
Graham 36.66   Goldman 26.19 26.19 Kendricks 21.00 23.28
Bakh 33.33   Mack 24.11 42.55 Hunter 20.83 23.47
Williams 32.50   Burton 21.87 56.25 Diggs 20.83 23.47
Linsley 31.37   Trevathan 26.86 48.21 Smith 19.51 29.81
Perry 31.09   Hicks 15.62 45.83 Reiff 18.72 44.77
Adams 31.03   Gabriel 15.38 53.85 Rudolph 17.81 34.63
Taylor 30.30   Robinson 14.29 42.86 Rhodes 17.12 28.56
Daniels 29.26   Leno 12.16 37.02 Joseph 12.00 22.30
Bulaga 23.70   Amukama 11.11 66.67 Griffen 03.45 32.41

This is stark.  SB % denotes the percentage of the total value of the contract due to a signing bonus.  The second column for each team denotes fully guaranteed amounts including the signing bonus.  Only Rodgers actually has guaranteed money that is not due to a signing bonus for the Packers.  Green Bay's signing bonus percentages are astronomical.  Signing bonuses build in dead money in the later years of a contract.  They reduce flexibility to release an underperforming player.  Does this sound familiar?

It is true that the Chicago players have low signing bonus percentages but they still have very healthy percentages that are fully guaranteed.  One should realize that a lot of the fully guaranteed money is first-year base salaries and roster bonuses.  In other words, a lot of the guaranteed part of the player's money drops off the contract after the first, or usually at worst, the second year of the contract, leaving just the small signing bonus as something that potentially could cause dead money hits. 

Minnesota's signing bonus and fully guaranteed amounts are quite low.  Looking at their numbers, the players have a lot of payments that are called "virtually" or "essentially" guaranteed.  That is better for the team than fully guaranteed, of course.  I did not always agree with the assessment that money is virtually guaranteed, and some players had money guaranteed for injury, and one for skill and cap but not injury.  Those were too hard to categorize.

Using the signing bonus as the sole source of guaranteed money results in the team front-loading the cash and back-loading the cap hit.    

Another way to avoid the albatross is to stop playing games with the first-year cap hit.  Let's look at some of the Packers' recent contract extensions and free agent signings.

Name % AAV

1st yr.

  Name % AAV 1st yr. 
Nelson 47.12 9.76 4.6   D Bakh* 78.08 12.00 9.37
Bennett 47.86 7.00 3.35   Daniels* 95.61 10.25 9.8
Perry 50.17 11.8 5.92   Williams 72.50 5.00 3.625
Bulaga 52.86 6.75 3.57   Taylor 76.25 5.50 4.19
Cobb 53.50 10.0 5.35   Linsley* 80.59 8.50 6.85
Graham 56.67 10.0 5.67   Adams* 97.24 14.5 14.1
Matthews* 57.46 11.66 6.70   Crosby 59.63 4.02 2.40

* Denotes an extension.  I have generally taken the prorated signing bonus on extensions and added that to the first year cap hit number for new money.  For example, Adams got his $18 million in December of 2017.  The prorated $3.6M was added to his 2017 cap number even though he was in concussion protocol and would not play again that season.  Due to roll over, putting the $3.6M in 2017 merely reduced our cap space in 2018.  I added the $3.6 million to the $10.537 million cap number listed for 2018 to reach 14.1 million for his first-year cap number.  

What I see from the table is that the players with at least 70% of AAV for a first-year cap hit tend to have outs after one or two years.  Linsley's cap savings exceeds his dead money charge after playing one year.  Daniels and Crosby did, and Adams and Taylor will have cap savings that exceed their dead money hits after playing 2 seasons.  Daniels had $3 million in cap savings after the first year of his contract.  Tramon Williams' cap savings to dead money is almost 3 to 1 after playing for just one year.  Bakhtiari's cap savings will exceed his dead money charge after playing for 2 years of the 4-year extension.  Aaron  Rodgers is the exception due to the sheer size of his contract.

Not so for the players on the left.  Perry has to play three full seasons until his cap savings ($6.9M) approaches his dead money (still $7.4M).  The same was true for Bulaga though his dead money was manageable due to his small signing bonus.  Bennett and Graham were both on three-year deals and would have had some cap savings but not a 1:1 ratio to the dead money charge after playing for one year.  Playing games with the first year cap hit leads to trouble if the player does not perform.  Stop doing that.

What to Look for in any Free Agent Contracts:

The number rule is to sign good players.  The next most important thing is to keep the signing bonus down.  20 percent of the total value of the contract is good.  25 percent is okay.  The Packers should use a roster bonus in the first and second years of the contract and guarantee all of the first-year base salaries more often.  If necessary, guarantee some or all of the second year's base salary or roster bonus.  Players and their agents like large signing bonuses because they get their cash immediately and because it means there is significant dead money in the later years of the contract: that helps protect the players base salary in years three, four, and five.

All of the first year cap numbers should be at least 60 percent and preferably 70 percent of the AAV of the contract.  If the player is older or has an injury history, 75% to 80% is better.

If the player is young, has little or no injury history, and it is a four or five-year contract, a 60 percent first-year cap hit is acceptable, especially if the player is reasonably proven rather than a one-year wonder.  Just realize that at 60 percent, the Packers are probably stuck with this player for two years and probably three years if it is a four-year contract.

If the contract is for three years, the first-year cap number should be 80 percent or more.  Having cap hits that are 80%, 100% and 120% of the AAV makes for good outs after the free agent plays for a year and almost certainly after two years.

Calculate the one, two, and three-year outs for the player.  Graham has a one year out of $13 million with $7.33 million dead; a two year out at $22 million with $3.66 million dead.  I like to calculate the cap savings to dead money ratio.  When does it reach 1:1 or better yet, 2:1 or more.

Instead of recommending particular players, I think the Packers should identify several players they think will play well at multiple positions, such as free safety, outside linebacker, defensive end, wide receiver, right guard and right tackle.  Using that list, sign the players who will accept a reasonable signing bonus and overall contract structure.

 
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Fan friendly comments only: off Comments (46) This filter will hide comments which have ratio of 5 to 1 down-vote to up-vote.

Thegreatreynoldo's picture

The site's software program wouldn't let me use a photo of Russ Ball due to copyright issues.

I initially had an extra column showing GB's fully guaranteed percentages, but except for AR they were all exactly the same as the signing bonus percentages, so I zapped it.

The Fuller contract for Chicago is the offer sheet written by the Packers, so it has percentages that are typical for GB and not for Chicago.

Edit: Malik Jackson signed a 6 year, $85.5M deal with $31.5M guaranteed. Sounds massive. He was released after the third year and the team only had to take a $4M dead money hit because his signing bonus was just $10M (11.7%) of the total value of his contract. Sure, the team guaranteed a bunch of first and second-year base salaries, but it retained the flexibility to release him after three years. Jacksonville paid him $41M and erased all but $4M of the guaranteed money.

Old School's picture

Well done. It's nice to see someone urging caution instead of advocating we spend $15 million dollars to get an extra 0.1 sacks per game, or $8 million on an old, beaten up RG.

Sign the mid-level guys and build "outs" into the deal so that if it isn't working out we can change direction.

With our available FA money, we should be able to sign 2-3 second tier guys that will improve our roster before the draft.

Thegreatreynoldo's picture

Some of that, but I am not averse to signing Earl Thomas for 3 yrs/$33M. I am trying to urge caution and reduce risk by the structure of the deal. If Malik Jackson's $31M had been all signing bonus, Jax would be looking at just over $12M in dead money instead of a palatable $4M.

FS: line up the candidates Gute likes: say Thomas, Amos, and Gipsun. See which one will accept 20% as a signing bonus. That's the guy. Even if Gute covets Earl Thomas, if Thomas wants 40% guaranteed and all of it as a signing bonus, forget him. If you sign Thomas anyway, it better work out or that's an albatross. If he'll take 20% SB with first year base and a roster bonus guaranteed, I love the idea of Earl Thomas at $11M AAV.

Repeat at OLB, etc.

Minniman's picture

What a great and sobering article James.

Eagles won a Super Bowl by essentially building a roster of solid players over individual brilliance.

To that point of the "champion team over a team of champions" anyone see what type of a year Von Miller had last year? Personally, he played well (if not down a little from previous highs) but was blunted by a lack of support.

In looking at the Dee Ford option you state perfectly the conundrum there - he just isn't year-on-year proven. Personally, I'd pass on trading for Dee Ford and watch how he performs this year without players like Houston etc.

Rak47's picture

If the Packers are looking for potential at a bargain then they have to seriously be checking out Markus Golden and Shaq Barrett. They would most likely get the biggest bang for their bucks from those two at edge.

KnockTheSnotOutOfYou's picture

James,
Wow!

Wonderful having so many knowledgable people sharing information on this website. Thanks!

Guam's picture

Great article on contract structure TGR and your point is well taken. Our contracts have been a bit too player/agent friendly and we need to pull back on the signing bonus.

I remember seeing a statistic that only 17% of free agent signees are still with their team after three years. Teams need to be able to cut underperforming free agents without incurring cap hell.

dobber's picture

Aces, TGR. Thanks!

Bearmeat's picture

Thanks James.

This just in: I realized that Russ Ball is not good at any portion of his job... not just scouting players. Minnesota and Chicago are in cap hell relatively speaking compared to us, and they can manage. Why?

Because of the signing bonus?

Packer Fan's picture

Whatever the situation is or how the contracts are written, time is passing and players are being signed. I don't know if that's good or bad. BG will have to sign someone someday. We will see what happens soon.

Packerpasty's picture

lets not sign anyone, keep our own mediocre roster full of JAG's and be content with finishing out of the playoffs for the next decade...remember the Lion's game..or games...get accustomed to it....another good idea is lets drop out the first round so we can stockpile 4/5 round choices...quantity...its still fun to come to Lambeau for a game experience just lower your expectations...

Jonathan Spader's picture

I have very low expectations for comments being made by packerpasty does that count?

egbertsouse's picture

Avoiding the albatross contract? I think that ship sailed with the Rodgers contract.

mamasboy's picture

I pray to God that you are not right egbert! Hopefully his second collar bone doesn't turn out to be the final nail in the coffin of his elite QB play. It could be that his knee was responsible for the excessive number of blown throws. The kind he could usually make in his sleep. We'll see.

Pierre's picture

The team signed Rodgers to too much money and way too early also. He hasn’t lead this team to a SB in eight years; what makes anyone think he’ll do it in his later thirties when his QB play regresses each year along with his injuries and health condition.

edp1959's picture

So it's the sole responsibility of Rodgers to lead this team to a SB? Doesn't matter what mediocre players are added around him with the exception of a couple. He should still take this team to the SB and if it doesn't happen let's place all the blame on him.

Pierre's picture

The team signed Rodgers to too much money and way too early also. He hasn’t lead this team to a SB in eight years; what makes anyone think he’ll do it in his later thirties when his QB play regresses each year along with his injuries and health condition.

nostradanus's picture

Let this first week or two of Free Agency pass and the remaining players will come at a reasonable price tag.

The Packers won't get the cream of the crop there but they will be able to plug more holes in a roster depleted of talent.

The Packers should be able to get a Pass Rusher, Safety, an Offensive lineman and still have a reasonable amount of cap room left.

that is all...

Bert's picture

Landon Collins to Washington. 6 years, $84MM!! Crazy.

dobber's picture

For an SS no less!

Packer Fan's picture

Now I know why BG hasn't signed anyone. Agree the numbers for Collins is crazy. Just gonna have to wait till the market settles down.

Guam's picture

I thought Washington had a great pair of safeties. Wasn't one of them Clinton-Dix...……..

dobber's picture

HHCD is an FA.

Guam's picture

Sorry dobber, I was trying to be sarcastic. Just thought it was funny to see Washington give up a fourth round pick for 8 games of HHCD and then break the bank for Collins. Sometimes my humor is a little off......

dobber's picture

Sometimes I whiff...

splitpea1's picture

This is why the Redskins are the off-season champs every year. Does this signing make them better than PHI or DAL? Only if Collins can play QB.

Thegreatreynoldo's picture

Did Washington get a good medical report on Alex Smith? Because I thought his devastating injury was going to seriously impact their cap situation.

Edit: Oh, I didn't realize they traded for Keenum. Still, their cap situation is dire until they resolve the Alex Smith contract problems. Definition of a team that thinks mediocrity is fine.

Since '61's picture

TGR - thanks for very well written and informative article. If we can get Gute and Ball to read it we should be fine. Nice job! Thanks, Since ‘61

Bearmeat's picture

so glad we didn't sign him.

stockholder's picture

Keeps the door open for Oliver and Wilkens.

sam1's picture

Hmmmm where is that big money and moves the Gut: said he was going to do? With the money throwing at like Collins can see why it has been quiet for Packers so far!

PatrickGB's picture

A great article, I did not understand it but it was great none-the-less. I know that because you have done great work in the past. ;-)

Lphill's picture

Elliot Wolf should be calling the shots not Russ Ball , unfortunately he isn’t here . I am not optimistic about free agency for the Packers , I would not be surprised if they bring back Ha Ha and it looks like no Breland .

crayzpackfan's picture

A lot of big names (and big contracts) are being signed as I type. For better or for worse, GB seems to be pretty passive early on. I guess I don’t feel one way or the other about missing out on some of these players, however, I cannot help feeling at least a little frustrated that once again GB is so content to seemingly not be very involved in the process. I’m not looking for them to overpay like a handful of teams seem to do year after year (thank God). But I would like to at least see their name in the hat. Just like I’m against overpaying, I’m also against table scraps and over the hill players being the only players GB goes after. The few times GB has gone big, it paid off (Favre trade, Reggie White, Charles Woodson, Sean Jones, Andre Rison, Desmond Howard, and Kieth Jackson come to mind).

bartstarrfan's picture

The money so far has been outrageously high. Not at all upset to see that Packers stay out of the early madness.

RunToWin's picture

Thank you James for another informative article. I always learn something when you post.

The contracts being awarded early on indicate a degree of lunacy when one considers the relative impact of the player being signed. Collins is a good example here. The guys being signed aren’t close to Reggie White level impact FAs. No need to panic - I’m content to see how this plays out.

Interesting that the colts - who I think have the most cap space of anyone - aren’t throwing money around. Yet.

Qoojo's picture

Guaranteed best way to avoid albatrosses is not play games on the west coast.

Oz40's picture

Stories appear to show free agents not wanting to play for Packers.....is this true? Anybody with more info please post.

D Ernie's picture

Ya they know lo ball offers when they see em. Ted and Russ love Cheap dates.

D Ernie's picture

Why are the packers always in a cut or release situation and not trading? Perry and Mathews should be shopped for picks but that ain't happening.
If our players aren't trade bait that may tell us all something,

Thegreatreynoldo's picture

Did anyone notice that MN only gave Everson Griffen a $2M dollar signing bonus? 3% of the total value of his contract. I guess the Vikings knew his situation was fluid. El Hombre Mobile! (Yeah, I don't know Italian but I like the song!)

TL:DR - To use the phrase popularized by our own Since '61, it is time to chuck giving out huge signing bonuses!

bartstarrfan's picture

And here we've been lead to believe that Russ Ball was supposed to be some sort of cap and contract genius. These numbers tell a different story. Yet another reason I am very glad he wasn't given the GM reigns. I'm not so sure he should have the power that he currently does.

Thegreatreynoldo's picture

To be fair, in his way TT was more "all-in" than is credited. Every contract had the cap-hits backloaded and that's how we afforded some of these players.

Does anyone remember that Peppers' first year cap hit (in 2014) was just $3.5M? It was the lowest cap hit legally allowed by the CBA given his $7.5M signing bonus (again, about 29% of total value). Peppers' cap hit tripled in 2015, which made things awkward when it came time to sign other players. Peppers was worth it so ultimately it didn't matter much.

HankScorpio's picture

I've taken it as a matter of faith that SB is preferred to out-year guarantees. The article makes a compelling case that I've been wrong about that.

But when it comes to avoiding the albatross contract, someone needs to fire up the DeLorean to 88 and stop the signing of Jimmy Graham. So far, we've not learned the next bad signing the Packers will make. I expect that news will come in the next few days. Sadly, with Nick Perry and Jimmy Graham on the roster still, I have lost all faith in the brain trust at 1265. There are still 3 days before their respective RBs are due. So I remain hopeful that Gute will make these comments look foolishly premature. But not optimistic.

Thegreatreynoldo's picture

The contracts of Smith, Smith, Amos, and Turner all follow the old model.

All 4 have signing bonuses of 30% plus.
All 4 have 1st-year cap hits in the 50% to 60% range of total value.

All 4 are candidates to be an albatross. To prevent that, Gute has to be right that these guys can produce on the field.

GB had to use lousy structures to sign all of these guys, sign the draft class, and probably still sign Allison and someone else yet. These are "all-in" structures. That time might come, but I thought next year or 2021.

Sigh.

stockholder's picture

Safety Valve=. You dump Rodgers and his contract. Their going all in. Everyone in the division is getting ahead of them. Gute had too.

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