FanPost

The state of the 49ers' salary cap

Over the last few weeks there have been arguments for us trading for Trent Williams, and perhaps even giving him a long-term contract and keeping all three of Staley, McGlinchey and Williams. There’s also talk of trading for Ramsey, giving up possibly 2 1st rounders plus (presumably) the largest CB contract in history.

In both cases, there has been a lot of hand waving about how we can afford this long term. I therefore wanted to do a post explaining our current cap position, and what it would mean to take on another long term premium contract.

What I don’t think is widely understood is this simple fact:

The 49ers right now have zero cap space unless they let players go.


This is a long post, so I'll put the key takeaways from this article at the top:

  • The $100m+ cap space that Shanalynch inherited (thanks Baalke – for once not sarcastic) has in practical terms all gone, and we are now in "every dollar in requires a dollar out" position.
  • As it stands today, we can keep all our key players from this season if we make a few easy cuts (McKinnon etc.) - so we are absolutely not in cap hell.
  • Any additional signings essentially require cutting an equal amount of additional salary (beyond the easy cuts).
  • Therefore, any discussion around a potential big free agent signing/veteran trade should not be "Would player X would improve the roster in isolation?", but rather "Would player X provide more to the team than players A,B,C who would need to be cut as a result"? The latter is a much more interesting conversation, IMO (as well as being the only one that's actually relevant).
  • Even if you think that our recent overspending strategy was required to get us to where we are today (and there’s mileage to that argument), we now need to move to the strategy of a mature quality team looking to consistently compete over the medium-long term, without any "bonus" cap space to dip into.
  • If the 49ers don’t modify their strategy, 2019 and 2020 will be the peak of this team, rather than the foundation.

But aren’t we still $20m under the salary cap this year?

Yes, but we also spending $23m more than the standard salary cap right – i.e. we are burning through our brought forward cap quickly, and that runs out next season.

Per Overthecap, we currently project to have $27m of space for 2020 (and that assumes a healthy $11m increase to the salary cap over 2019) - but that’s a mirage because we only have 43 players signed! The following players need to be either resigned or replace, which includes a couple of key starters and a few important backups:

  • RB Brieda (RFA – would expect a contract of c$4.5m)
  • TE – All backups ($3m per year for the set)
  • OL – Everyone except the starters and Skule (Coleman in particular not signed) ($3m per year)
  • DL Armstead (currently on a $10m contract – based on currently performance, a Brandon Graham $40m/3 year deal is a pretty good comp)
  • DL Blair ($3m per year)
  • DL Day ($1m per year)
  • CB Verrett ($1.5m per year)
  • FS Ward ($3m per year)
  • S Exum ($1m)

That’s going to be about $30m per year to resign those players (or players of an equivalent standard who will cost the same). In addition, the following will need long term contracts very soon:

  • Kittle (currently on the 2020 books for only $800k) – he’s going to get $15m+/year, and will almost certainly want to get paid before year 4 starts. Assume a 2020 cap hit of around $10m.
  • Buckner (currently on the books for $12.4m) – again going to get $15m+ minimum. This won’t impact our 2020 cap much, but obviously is key long term.

We’ll also need $4m or so for our 2020 draft picks.

What this shows is that even with $27m of space for next season, but we’re probably about $15m short of being able to keep everybody.

Don't we have a bunch of players we can cut to free up cap space?

True to an extent. Some are easy cuts (and/or resigned at heavy pay cuts) – e.g. McKinnon surely can’t be kept. Other useful backups – Blair, Ward etc. – are probably easiest to move on from as luxuries that can no longer be afforded.

But let’s be clear - trimming the fat alone won’t allow us to sign a big name free agent/trade for an expensive vet. The easy cuts are only enough to stay within the 2020 cap – to actually make additional signings (particularly premium free agent/trade splashes) we need deeper cuts.

Can't we use signing bonuses to delay the cap hits?

We can structure contracts to minimise the cap hit in 2020, but all you are doing is borrowing money from 2021 and beyond. This might be sensible if you have an aging vet at QB, in which case you probably think your chances of winning this year are greater than your medium-term outlook; but not if you have a young QB with only a dozen starts who is likely to be peaking in 3-4 years time.

In short, every extra dollar you pump into 2019 (when, realistically, we aren’t yet a Tier 1 team, 3-0 notwithstanding) reduces our chances of winning in 2021 and beyond (when we very much intend to be a Tier 1 team).

And it's worth noting that we already are prioritising 2019 and 2020 from a cap perspective - we are spending 112% of the salary cap this year, and we'll do the same again in 2020. From 2021 onwards, we'll be back to 100% of the salary cap. Going even more all in for 2019/2020 doesn't make sense and will hurt long term.

A balanced approach, treating all years as equally important, makes most sense given where we are in our development.

But salary cap goes up every year, so that will generate space for free agent signings, right?

The numbers above for 2020 already incorporate an assumed cap increase - i.e. we're already spending that.

For 2021 and later, the cap may well increase, but remember that all of our players' current contracts have cap hits that rise each year (generally by a higher rate than the usual annual cap increase). And if we resign players in the future, they'll get pay rises based on the new cap.

So the annual increases to the salary cap are what will allow us to keep the current roster (at best), but not provide more room for more expensive players than those we have.

You can see this by looking at our current cap projection for 2021: we've got about $60m of cap space (assuming the cap is about $210m by then), but only 31 players signed! Importantly, the unsigned players include Kittle, Buckner, Brieda, Juice, Trent Taylor, Armstead, Sherman, Tartt, Ward and Witherspoon. It's pretty obvious that there isn't room to resign all those for $60m AND trade for a $20m contract.

[I won't get into the new CBA here, but suffice to say it's a complete unknown - there's a good chance that the cap will increase, BUT (a) remember that last time the NFL and NFLPA agreed to stagger the increases to the cap to ensure there wasn't a sudden jump, and (b) even assuming the players win concessions, they may well get concessions outside of the salary cap (e.g. medical insurance). So banking on a significant cap increase in 2021 because of the CBA is an enormous risk.]

Can’t we use other clever cap accounting? Everybody knows the cap is fake and can always be worked around!

The cap is very real and can't be worked around except by mortgaging your future for the short term.

The right way to think about the cap is similar to your own spending habits vs your salary, and moving cap space between years as being like a credit card. A credit card might allow you to spend today what you haven't yet earned, but it doesn't create money you don't have - all it does is reduce the amount you can spend next year.

When you see the Patriots let Trey Flowers walk, that’s not because they didn't want to keep their #1 pass rusher. It’s because the cap is real, and they decided they'd rather lose him than other players. One of the reasons the Patriots challenge for the Superbowl every year is that they are willing to make those tough decisions.

Over time, your cap hit is exactly equal to the amount of money paid to players. The only way to have lower cap hits over the long term is to pay your players less.

But Marathe will negotiate low contracts for everybody!

Unlikely, because he has never done that, despite common perceptions.

There are essentially two key aspects to contracts – money per year, and how much is guaranteed. The 49ers’ clear policy is to focus on keeping the latter as low as possible, even at the expense of the former.

Usually the reaction to a Marathe contracts is (a) gasp at the high cost of the contract when its first announced, and then (b) relax when the details are released, when it is clear we can escape after 2 years. But his contracts are still expensive, and the "outs" are often even more expensive that the original contract looked.

Let’s take Pierre Garcon as an example. He got 5 years, $47.5m contract (i.e. $9.5m per year), with effective outs after 2 years. However, the cost we actually incurred was $23m for 2 years' play, or $11.5m per year - 20% more than the original per year cost that already seemed high!

Not only that, but we paid Garcon $11.5m per year when the salary cap was lower, and we walked away from the remaining 3 years at $8m/year while the salary cap would have been much higher. The bit of the contract we actually kept was, in real (salary cap inflation adjusted) terms, 35% more expensive than the whole 5 year contract would have been. This is the way Marathe contracts have worked, for better or for worse - you pay a big premium in years 1+2 for flexibility down the line.

[NB I won't get into dead money in detail here, but the common view that avoiding dead money is important is wrong - using the credit card analogy, a dead money hit is simply paying off all the outstanding credit card debt for a player who has left. It's simply paying off a cost you have already incurred.]

Are you claiming we are in cap hell?

"Cap hell" – in my opinion at least - is when you have a team that can’t win, and yet can’t improve in the next couple of years because they’ve already spent the cap. It’s pretty rare these days as teams have gotten smarter.

We aren’t in cap hell at all. We are already winning, and we don’t need to rip apart the heart of the team. The cap isn’t making us worse; it’s just means it’s not easy to get better (whereas since 2017 it has been almost impossible not to improve).

My point is that we no longer have an advantage over other teams in terms of cap space – we're in the same cap space boat as the Patriots. The question is whether we can be as smart about it.

So we can’t sign any free agents/make big trades?

No, I’m not saying that. What I'm saying is that any new signings has to be offset by salary cuts.

Let’s say we sign Ramsey for two 1st rounders plus an $18m per year contract (enough to be the largest CB contract, which I think he’d demand). That means finding $18m to cut elsewhere, in addition to the easy cuts that already need to have been made.

What might that look like? Maybe we cut Sherman, Richburg and Goodwin – giving up a leader on defense, continuity on our OL, our only proven vet WR and best speed threat, plus the upside of next two years’ #1 draft picks (e.g. an OL pick and a premium S, say). Or maybe we give up on Dee Ford already, and cut Juice too (and again miss out on the #1 picks).

Does either option make us better? That’s subjective, and opinions might differ. But these are the difficult decisions that every major signing now requires.

The consistently good teams are willing to make these decision – the Patriots are the gold standard here, as ever. The mediocre teams can have a good year or two while they have a bit of cap space (due to carry forward or a cheap rookie QB), but fall back into the pack quickly once that runs out.

Conclusion

I've deliberately tried to keep this post to the general principles only, rather than what I think should be done in practice (or indeed how we got here). But my hope with this post is to make it clear that we are already overspending the cap in a non-sustainable way (i.e. we are about to run out of rolled forward cap space); and to push debate towards the tough decisions that need to be made, rather than the impractical "let's just sign everybody".

This is a FanPost and does not necessarily reflect the views of Niners Nation's writers or editors. It does reflect the views of this particular fan though, which is as important as the views of Niners Nation's writers or editors.