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How Rams can keep finding cap space to add big names

NFL: OCT 10 Broncos at Steelers Photo by Mark Alberti/Icon Sportswire via Getty Images

Many fans of the Seattle Seahawks were excited when reports emerged last week that the Cleveland Browns were looking at potentially releasing wide receiver Odell Beckham Jr. following repeated requests from the receiver to be traded. The release, of course, came to fruition on Monday, with Beckham hitting the waiver wire on Tuesday and some fans convinced that because of the combination of their cap space and the team’s position in the waiver order, Beckham would end the day as a Seahawk.

That, obviously, didn’t come to pass, and on Friday, seemingly out of the blue, the division rival Los Angeles Rams swooped in late and secured the services of Beckham for the remainder of the season. That signing came just ten days after the Rams added All Pro edge rusher Von Miller from the Denver Broncos at the trade deadline, and the combination of the moves left many fans wondering where the Rams were getting the cap space to add all these names.

Jokes aside, fans have wondered how it is that teams that have reportedly been flush up against the cap for several seasons can continue to find the cap space to make the roster moves they need to make. The simple answer is that while fans think of the salary cap as a hard and fast spending limit for any given season, the reality is that teams have access to more cap space than that available in any single year.

The reason behind this is simple, and to understand it is necessary to understand how the accounting for the salary cap works for signing bonuses. First, most money that a player makes counts against the cap in the year in which the player is paid the money. Whether this is base salary, roster bonuses, workout bonuses or gameday active roster bonuses, these all count against the salary cap in the year in which the player earns them. The exception to this is signing bonus, which gets broken up over the life of the player’s contract (for up to a maximum of five years).

For an example of this in practice, Brandon Shell carries a cap hit of $5.375M for the 2021 season. That $5.375 is made up of three parts:

  • Base salary: $3.075M
  • Per game roster bonus: $425,000 ($25,000 bonus per game he is active) and
  • Signing bonus: $2M

As noted above, Shell will be paid the base salary and the per game roster bonuses in 2021, while the $2M of signing bonus that counts against the cap is half of the $4M signing bonus he was paid when he joined the team prior to the 2020 season. The reason for this is because signing bonus gets split up evenly amongst the number of years of a player’s contract. So, a player who signs a two year contract with a $4M signing bonus has $2M of the signing bonus count in each season of the contract. If Shell had been given a $4M signing bonus on a three year contract, the bonus would count $1.333M in each of the three years of the contract. A $4M signing bonus on a four year contract counts $1M against the cap in each year, and a $4M signing bonus on a five year or longer contract goes against the cap for $800k in each season.

So, this is where “void years” come in. Void years are fake years in a contract on which a player will never play, but they allow the signing bonus portion of the contract to be broken up into smaller pieces, with those pieces able to be charged against the cap in future years. To see this in action, here is what an illustration of how much cap space teams have available in a given season should they decide to leverage the use of cap space in future seasons.

Basically, instead of a hard cap that limits a team from spending more than the salary cap in any given season, the reality is that teams can dip into future cap years in large amounts and have roughly double the actual salary cap available to spend in any given year by using signing bonuses and aggressive accounting to make use of future cap space.

For concrete examples of this, the Rams have leveraged the contracts of Aaron Donald and Jalen Ramsey to the limits, with Ramsey and Donald having combined base salaries of $3.392M this year. By converting $34M of base salary for Ramsey and Donald into signing bonus, the Rams were able to borrow $26.3M of cap space from future years for the 2021 season. The amount they borrowed from each year was as follows:

  • 2022: $7.7M (Donald $4.5M and Ramsey $3.2M)
  • 2023: $7.7M (Donald $4.5M and Ramsey $3.2M)
  • 2024: $7.7M (Donald $4.5M and Ramsey $3.2M)
  • 2025: $3.2M (Ramsey $3.2M)

Yes, it’s an aggressive way to manage the salary cap, but the Rams have a team that has its core in its prime with Matthew Stafford (33), Aaron Donald (30), Jalen Ramsey (27), Cooper Kupp (28) and Robert Woods (29) all basically at the age of peak performance and their Super Bowl window is right now. So, given that they have a team that is in contention for the number one seed in the NFL, they have decided to go all in and add a couple of big names the past two weeks.

That said, the Rams did not even need to use salary cap machinations to make the acquisitions of Miller and OBJ. In the case of Miller the Rams effectively bought cap space from the Broncos by having Denver pay the majority of Miller’s base salary prior to the completion of the trade, and is why Miller carries a cap hit for the Rams for the 2021 season of just $722,222. In addition, when it comes to OBJ, his cap hit for the Rams is also not large, unless the Rams have significant postseason success, with his cap hit for the Rams over the rest of the 2021 season set to be just $1.25M.

So, while it may seem like the Rams are sitting down in Southern California with a printing press, the reality is that the combined cap hits for Miller and OBJ for Los Angeles will be $1,972,222, or roughly what Seattle is paying Rashaad Penny in base salary this season ($1,948,014) and what L.J. Collier is scheduled to earn in base salary next season ($1,972,647). In addition, in the case of the OBJ contract, the Rams structured the deal creatively im such a way that the Packers could not match and offer an identical contract for cap reasons.

Which leads to the question of how valuable first round picks actually are.