Yesterday, Adam Schefter caused a stir with Raiders fans by tweeting that it was “highly unlikely” that QB Carson Palmer would be willing to restructure his contract.
This likely means that the Raiders had asked Palmer, through his agent, to take a paycut for 2013, something that most players are adverse to doing.
There was much discussion about what this meant for the team and what their options were.
Background:
Last year the Raiders were faced with a decision with Palmer – cut the QB for whom they had traded away a 1st and 2nd round pick (at least) or pay him his $12.5M salary for 2012. The cap situation, as you probably recall, was even more dire for the Raiders in 2012 than it is this year.
GM Reggie McKenzie chose to retain Palmers services and came to an agreement with Palmer to restructure his salary. Instead of being paid a $12.5M base salary, all of which would have been on the books for 2012, Palmer agreed to drop his base salary to his veteran minimum of $825,000 with the remaining $11,675,000 converted to a signing bonus.
Signing bonuses are spread out over the life of the contract and so the Raiders added two years onto his contract, making it a 5 year contract (5 years is the maximum amount of years that a team can spread out a cap hit under the CBA).
This extension took the entire contract through 2016 with the last two years designated as “voidable.” Basically, the deal was through 2014 as no on either side expects for Palmer to be with the team through 2016 – the two voidable years were simply to provide maximum cap savings through the first few years of the deal by spreading out the cap him over the maximum allowable amount of years.
Taking $11,675,000 and dividing it by 5 (for the amount of years the contract is spread) gives a prorated signing bonus of $2,335,000 for each of the 5 years of the deal.
The 2013 numbers:
In 2013, Carson Palmer is set to make a $13 million base salary. He also has the prorated bonus in the amount of $2,335,000 that will count against the cap which gives him a total $15,335,000 cap hit if he’s on the roster as of week one.
The salary cap per team is approximately $123 million for 2013 which means that as of now, Carson Palmer’s cap hit is approximately 12.5% of the team’s total cap number.
The team is also carrying a large amount of “dead money” in 2013, already. Dead money is money that they are paying to players – such as Richard Seymour, Darrius Heyward-Bey and many others – that are no longer on the team but whose contracts still affect the cap for this season.
If Palmer is cut:
When a player is cut, their guaranteed money accelerates into the current season. Therefore, if the Raiders cut Carson Palmer this year, all of the remaining guaranteed money from the $11,675,000 signing bonus signed last year would come into 2013’s cap.
The Raiders paid 1/5 of that money last season as part of the prorated amount so four years’ payments of $2,335,000 remain, or $9,340,000.
If the Raiders cut Palmer today, that $9,340,000 would count as more dead money for 2013.
Therefore, the Raiders must decide if Palmer is worth keeping around for approximately $6 million in cap savings for this season as well as savings in future years.
The $6 million is the approximate difference between his current cap number, $15,335,000, and the cap number for his dead money if he were cut, $9,340,000.
If Palmer is cut, the actual savings is much more in “real dollars.” Because the Raiders have already paid Palmer the signing bonus last season, the $9,340,000 is just accounting – they don’t actually have to pay him the money any more. Therefore, the “real dollars” savings for the Raiders in 2013 is $13 million dollars – the amount they would pay him in base salary.
2014:
If the Raiders choose to keep Palmer around this season, McKenzie will have to make another decision about Palmer in 2014.
In 2014, Palmer’s base salary moves up to $15 million and he still has a prorated signing bonus amount of $2,335,000 for a total cap number of $17,335,000.
If he were cut in 2014, the remaining amount of the signing bonus would be slightly over $7 million in dead money for 2014, for a cap savings of over $10 million in 2014.
The “real dollars” savings, again, would be his base salary of $15 million in 2014.
No hurry:
To my knowledge, the Raiders have no reason to have to make any decisions right now. Palmer doesn’t have a bonus that will come into effect in the near future that forces the team’s hand in having to decide anything right now.
The only deadline the Raiders really have is whether Palmer is on the roster at the beginning of week one of the regular season. If he’s on the roster at that time his entire 2013 salary becomes guaranteed because he is a vested veteran. If he’s cut before then, his 2013 base salary is not guaranteed.
The best option is likely to take both Palmer and Pryor into training camp in July, let them compete and make a decision at that time as to what they want to do. It’s anyone’s guess, and there would probably be a plethora of various options.
If Pryor earns the starting nod outright or is at least close to Palmer, Palmer can be cut at a later date and the cap implications are no different than they are now.
Also, the closer to regular season things go, the more leverage swings from Palmer to the team. Right now, Palmer has leverage because there are teams that need a starting quarterback and he would be the top QB on the market.
During or after training camp, most teams will have a full roster, less cap room and more plans already set and in motion. At that time, Palmer may be more amenable to a pay cut to stay with the team.
June 1st:
There is also the incentive that if the Raiders wait until after June 1st to cut Palmer this year, his accelerated cap hit of $9,340,000 can be spread out over both 2013 and 2014.
Clearly, it’s much easier for the team to deal with only $4,670,000 in dead money in 2013 and the remaining $4,670,000 in 2014.
Restructure:
Finally, there is an option that the team could choose to restructure Palmer, again, without asking for a pay cut. This would be comparable to what they did last year when they converted his base salary into a signing bonus so his actual take home pay for 2013 isn’t changed.
This isn’t likely as it would require additional amounts of prorated signing money that will only hurt the team in the next year or two.
Instead, the team is likely to either keep Palmer with his cap number intact for 2013 or, as explained above, cut him after June 1st, especially if they have other options.
As always, for news or thoughts on the Raiders throughout the day, follow me on Twitter @AsherMathews
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