January 31, 2006
by Keith Weiland
We live in a world where cash is king. Go ahead, ask any of those paper millionaires from the dot com boom of a few years ago if that paper is buying the groceries these days. Cash never goes out of style.
The NFL is like the rest of us when it comes to loving cash, but it isn’t usually the subject discussed when talking about team financials. All the talk is about the salary cap because it provides the framework under which teams can complete their rosters. But a team’s actual payroll is a whole other number entirely. Care to guess which figure concerns NFL owners more?
Texans owner Bob McNair is a self-made businessman, and a very successful one, too. Just a guess, but I figure he understands the value of cash. And contrary to the unused salary cap room his teams have had over the years, his cash outlays to pay his players have been among the tops in the league.
Why? Because the Texans have been building a roster with all new players, and those players negotiated a signing bonus in return for a signed contract. A signing bonus is essentially cash today for work tomorrow. The rules of the salary cap dictate that teams can allocate that bonus over the life of the contract, but for McNair, he cuts the check up front in nearly every circumstance.
Which brings us to an unusual circumstance of importance today, that being David Carr’s contract. Following a rudimentary decision by Carr to void the end of his contract for a higher salary (read: more cash now), the Texans now have what should be an equally rudimentary option to buy back the remaining three years.
Paying Carr will cost McNair an $8 million bonus and base salaries of $5.25 million in 2006 and 2007, and a base salary of $6 million in 2008. All indications are (and always have been) that the Texans will exercise this option. In doing so, they will be able to keep Carr on the roster through 2008 with a cap allocation of between $7-8 million each year.
McNair’s 2006 cash outlay to his quarterback will be a larger sum than Carr’s cap figure this year. He is scheduled to pay Carr half of the bonus, $4 million, on March 15. (The other half will be due to Carr on the same date next year.) Combined with the $5.25 million in base pay, McNair’s wallet will be $9.25 million thinner once the 2006 season is over.
But what if the Texans, owners of the top overall pick in April’s draft, were to levy a franchise designation on Carr instead of exercising that buyback option? If the Texans were to tag Carr as their franchise player, then they would owe him a guaranteed salary of $8.789 million in 2006. McNair would not give Carr a bonus on top of that figure, so his cash outlay in this scenario would be $461,000 less this season.
More importantly though, franchising Carr gives McNair flexibility, and that has value, too. By exercising the F-tag, McNair can give Carr another season to prove he is worth a long-term extension. It would allow McNair the chance to see how his quarterback works with his new head coach, Gary Kubiak. If Carr is a success, then great. Sign Carr as the franchise player and keep him around Reliant Park well beyond 2008.
The F-tag on Carr would also muddy the draft waters for the other 31 teams. Sitting atop the draft, the Texans would appear much more likely to ignore the top-rated quarterbacks available – USC’s Matt Leinart and Texas’ Vince Young – if Carr was sitting at home counting the dollars from his 3-year contact extension. Those muddier waters could help the Texans play the draft’s chess game a little better, helping them achieve a richer trade offer from a team jockeying for the top position.
And what if the Texans decide during their pre-draft evaluations between now and the end of April that either Young or Leinart is worthy of the team’s top pick? If Carr is subsequently traded, then an F-tagged Carr will be painless to absorb on the salary cap than he would be if he had an unamortized $8 million bonus still on the books.
While Carr would not have any control over whether he was deemed the team’s franchise player, being designated as one this offseason isn’t necessarily against his best interests. Sure, Carr will be short some money beyond this year, but it will give him the chance to score an even bigger contract in 2007, which, oh by the way, is currently an uncapped year. So if he is tagged, Carr would pocket just $461,000 less in 2006 and have the chance to score a huge bonus in 2007, cap or no cap.
For example, if Carr receives his three-year bonus as written, he will earn $24.5 million over the next three years. If he is F-tagged, then Carr will receive $8.789 million in 2006 and can negotiate a brand new contract in 2007. Maybe a new contract will net him a multi-year deal with a $15 million bonus and escalating base salaries averaging in the same $5-6 million range he is currently scheduled to receive. If so, Carr’s haul over that same three-year window could jump to about $30 million, or about $6 million more than by just playing out his rookie contract.
It’s always about the dollars. McNair’s decision to franchise Carr shouldn’t be any different.
Keith Weiland is all about the comma. He would like to add one some day to his bank account.
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