The 2013 New York Giants season has had many storylines including a disappointing 0-6 start, followed by four wins in a row, and now a big match up against the Dallas Cowboys this Sunday.
One lesser known issue that faced the team this year was limited salary cap space caused by an almost $21 million cap hit (1/6 of the Giants cap space) for quarterback Eli Manning. Having a two time Super Bowl MVP quarterback is great, but the price tag can restrict a team’s ability to maneuver under the salary cap.
This offseason is the time for the Giants to give Manning a contract extension. Eli, 33 in January, will be a Giant for the rest of his career and like Tom Brady has done with the Patriots Manning will likely do with his team given the relationship they have developed over the seasons. Manning will still be paid like a two time Super Bowl winning quarterback but he will provide the Giants financial flexibility in regards to structure of a deal allowing for salary space to be created if necessary.
The first step will be to add four years to Manning’s existing contract, which currently runs through 2015, putting the quarterback under contract till 2019. The final contracted year will likely be some sort of an option year, player or voidable, as this will provide the team with an extra year in which to move salary.
Currently Manning’s 2014 cap hit is over $20 million but with an extension the Giants can lower this number increasing available salary cap space while paying Eli the same amount of money for that season.
The team gives Manning a signing bonus of $15 million upon completion of the new deal along with a $1 million season salary and a $500,000 workout bonus. He now makes $16.5 million in 2014, would have made $15.65 million under his old deal, but his salary cap number is reduced to $9.25 million increasing available salary cap space by about $11 million. So how did giving Manning a signing bonus reduce his 2014 cap hit?
The answer is, under NFL salary rules a signing bonus can be prorated or spread out over the life of a contract up to a maximum of five years. So while Manning gets $15 million immediately upon signing, that money is accounted for in evenly distributed units ($3 million over five years) on the team’s salary cap. Basically $12 million has been pushed into future caps $3 million in 2015, 2016, 2017 and 2018 with $3 million being accounted for under the 2014 cap, so $3 million under five years caps is $15 million or the equivalent of the signing bonus.
The Giants would have the ability to get the maximum proration again in 2015 if they choose to restructure Manning and spread his season or base salary out once again. Of course the team could restructure during any year but the shorter the term of the contract the less cap savings produced.
Here’s an example:
$15 million prorated in 2014 with a contract ending in 2015.
$7.5 million is accounted for in 2014 and 2015 so a cap savings of $7.5 million instead of $12 million with the maximum proration of five years shown above.
This is why the Giants would have an extra “option” year in the contract because while it is unlikely Manning would play under the terms of this final year having it allows for increased salary savings if the Giants need to use the contract for cap space.
Under normal circumstances teams do not like to push too much money in player’s contracts because of the potential downside called acceleration as any prorated money will be added together or accelerate on the current years cap if that player gets released. Another downside to pushing money is the player now counts more on future caps lessening space available for those years, so teams are limited in how much they prorate given the risks involved.
In the case of Eli Manning the Giants know he will play out most, more likely all, of his contract through 2018 so the dangers of acceleration become less risky. The Giants will look at Eli’s contract when it is necessary to create the salary room needed to give Manning a chance at a third Super Bowl. The rewards far outweigh the risks as the special relationship between this player and the team allows for the salary to be accounted for in a manner to best helps the team.
Eli will be paid once the sides agree to terms, he is not giving up money, but he will allow the Giants to use his contract to have the financial flexibility and resources necessary to build a high caliber team while Manning can still win them another championship.
This article comes courtesy of Dennis Agapito of JetNation.com