The Detroit Lions Could Save Cap Space In 2017, Giving Star QB Hefty Salary Increase.

I think we can all agree that the Lions are about to make Matthew Stafford the highest paid player in the NFL. There is a debate as to whether they should, but not whether they will. There is a belief that his extension will use the Lions remaining cap space in 2017.

That does not have to be the case, in fact, it will likely save them cap space in 2017. I assure you that they are not an inherent evil, but have to be intentional, and understandable. In a conversation with Chris, he asked why the Lions wouldn’t just get the cap hit out of the way, and how that makes sense.

I promised to go over it in an article, because Lions fans likely need to read this, and it was a little more complicated than I could really get through in a text.

Salary Cap Mechanics 101

NFL contracts have a basic structure that you need to understand for this conversation. The first point we need to establish is that every player gets an upfront signing bonus. The salary cap hit for this signing bonus is deferred equally over the length of the contract up to a maximum of five seasons. The player’s salary and bonuses vary each season of the deal.

Base salary always counts against the salary cap in the season it is paid. Most bonuses also count in the season in which they are due to be paid. Bonuses that were not paid in the previous season but were counted against the salary cap result in a credit to the following year’s salary cap charges.

Bonuses deemed “unlikely to be earned” by the league, because they are incredibly difficult to obtain like a “Superbowl victory bonus”, hit the cap in the following year if they are earned.

Most bonuses also count in the season in which they are due to be paid. Bonuses that were not paid in the previous season but were counted against the salary cap result in a credit to the following year’s salary cap charges.

Relevant Economics to a Matthew Stafford Extension

A five-year deal signed in 2013 would be heading into its final season in 2017. In 2013 the salary cap was $123M. It has grown to $167 in 2017, for a growth of about 35%. The average of the top five quarterback cap hits in 2013 was $17.4M, and in 2017 it currently sits at $23.7M for a 36% growth rate. The current television deals, which are the primary driver for salary cap numbers rising in the NFL, are set until 2022.

Assuming a similar growth rate, the average of the top five Quarterback cap hits in the final season of Matthew Stafford’s contract extension will be in the area of $32.2M. There is no reason to suspect NFL revenue will stop growing at its current rate. At least there is no reason before those new TV deals are done. They will tell us how the networks feel about last year’s drop in the ratings.

That may sound like a big jump, but here is a list of the high-profile quarterbacks who will receive extensions during the interim:

Derek Carr

Matthew Stafford

Kirk Cousins

Drew Brees

Jameis Winston

Marcus Mariotta

Matt Ryan

Carson Wentz

Jared Goff

Tyrod Taylor

Russell Wilson

Cam Newton

Andy Dalton

All of the 2017 drafted quarterbacks: Mitch Trubisky’s fifth-year option will cost the average of the top five, putting him automatically in their ranks. Any successful starters will be extended before the 2022 season.

Not all of those players will get the new highest contract at the position, but they are all likely to figure into the top five equation at some point during their next contract. Those players need to push the number up an average of only $654K to hit the final number listed above.

That is not an unlikely outcome.

Relevant Numbers For A Matthew Stafford Extension

The first thing that happens in any contract extension is that the old contract ends when the new one is signed. That reduces Matthew Stafford’s salary cap charge from $22M to $5.5M before the new contract is taken into account. The second thing that happens is that his original salary for the year is rolled into his signing bonus.

Using Andrew Luck’s contract as a base, Stafford is likely to receive a signing bonus in the area of $35 million dollars. That is a slight increase over what Luck got. Deferred over five seasons (the one that was left on his old deal, and the four new ones) that add $7M to Stafford’s cap hit for the 2017 season and each following season. Matthew Stafford’s 2017 salary cap hit sits at a total of $12.5M before his salary for the season is factored in.

As a side note, people often confuse the contract’s guaranteed money with it’s signing bonus. Stafford’s guaranteed money will likely be somewhere near $75 million. The remaining $40 million will come in the form of guaranteed salary in the first few years of the deal.

The Structure Of A Matthew Stafford Contract

A rough guess on the terms of the extension put it at a four-year extension for $100M. What that legally means is that it is a new five-year contract worth $116.5M. That number comes from the last season of Stafford’s current deal having been replaced by the new contract. After the signing bonus has been paid, $81.5M still needs to be paid over five years of football.

If the Lions were to simply divide that by five, Stafford’s 2017 cap hit would add a $16.3M salary, rising to $28.8M. That is not how NFL contracts typically work though.

Any salary less than $9.5M for the first year of the deal would result in Stafford’s salary cap number for 2017 dropping. For example, if the remaining $81.5M were to be divided in this manner 5/17/17.5/20/22 the Lions would save $4.5M in salary cap space for the 2017 season. Under that scenario, Stafford’s cap hits would be 17.5/23.5/25/27/29.

That puts Stafford’s cap hit in the final season of his contract at $3.2M under the speculative average of the top five contracts at the QB position in the NFL.

Why Would The Team Do That?

The answer from the team’s perspective is simple. Unspent salary cap space carries over to the following season. Unless the Lions actually use it, that space will still be there to cover Stafford’s cap hits in later seasons. In the long run, it really doesn’t matter when the money hits the salary cap. They are unlikely to use it in 2017, there are simply no big money free agents left to bother with.

They don’t need it in 2018 either, as even with a Stafford extension they have a large amount of cap space available in that year. That leaves the $4.5M of cap space intact until at least 2019. There is no difference for the team other than for the accountants.

During this period, however, that cap space also serves as an insurance policy. The Lions have that $4.5M to deal with any issues that arise. Football is a dangerous sport, played by some volatile men. Nobody in February of 2017 would have considered any possibility that their starting quarterback in 2017 would be Sam Bradford.

Ten minutes before the news broke that Greg Hardy had allegedly choked slammed his girlfriend onto a pile of guns in a hotel room, the Panthers seemed set for pass rushers. To plan for the worst and hope for the best is always wise.

Why Would Matthew Stafford Do That?

Simply put, Matthew Stafford gets an additional $23.5M in 2017 in this scenario. He also gets a raise in salary every year over his previous salaries on a week to week basis. Pushing the cap hits to later years in the deal also gives him more leverage when negotiating with the Lions later.

Stafford will be 34 when this deal ends. He will be looking for a final payday if he continues his career. If it is with the Lions, the franchise tag would be slightly higher than normal in 2022 in this scenario. That assumes it works the same way as it does now, but there will be a CBA renegotiation during the contract.

Stafford is also potentially free to chase a ring. There is no downside for Matthew Stafford.

A contract laid out this way is best for the team, and the player. The Lions do not have to do this obviously, but I believe it to be in their best interest. Bob Quinn has shown that the team’s best interest is really his only concern.