Peters Gets Paid (Again)
Posted by Sam
It appears that Jason Peters has achieved a $9.79 million escalator in his contract. According to NFLPA records, his base salary for 2010 now stands at $12.69 million for 2010, which is a huge increase over the $2.9 million base that used to be in their database. I had not seen this escalator publicly discussed before, so this was a surprise to me.
UPDATE: I am told by one of the team's beat guys that a team source says that this is not actually an escalator, nor is it new money. Appartenly, the team has converted bonus money into base salary. Assuming the original reporting on the deal is correct, this seems to mean that $9.79 million of the $11 million signing bonus [or, perhaps more accurately, the 2010-2013 prorations of the signing bonus of $8.8 million plus the $1 million workout bonus for 2010] wasn't actually paid in 2009, and now is base salary in 2010. That seems to move $6.6 million of prorations out of 2011-2013, when presumably the cap will be back in place.
I bring this up for two reasons. First, it can help us think about extensions for guys like DeSean Jackson, Kevin Kolb and Stewart Bradley. Second, it is one more piece in understanding what exactly the Eagles are spending this year.
Extending Around the 30% Rule
I have discussed the 30% rule in the past. What it does is limit the ability of the team to increase salaries beyond the player’s 2009 base salary. For guys like Jackson, Kolb and Bradley, that could be problematic.
The Peters escalator illustrates one way around that. The salary escalator in question was likely classified as “not likely to be earned” (or "NLTBE").* The standard may have been making the pro bowl, the standard may have been games/snaps played, who knows. But regardless, it was put into the deal, and it allowed the player to earn more money without it being factored into the calculation for salary. [UPDATE: Just to be clear, this point is true regardless; DeSean Jackson got a large NLTBE bonus in 2009 for that very reason.]
The use of escalators, therefore, is a way to give players pay increases without violating the 30% rule. Further, for players like Kolb and Bradley, they have the added advantage (for this purpose) of not having played last year. Therefore, minimal playing time, like 35% of snaps in 2010, could be used as a trigger for escalators and would be classified as NLTBE, because they played less than that in 2009. This is just one way a creative team could potentially get around the 30% rule without just putting the entire extension into a signing bonus.
[UPDATE 2: As ICDogg points out in the comments, "Completion Bonuses" are a clever way around the 30% rule as well. Cap guru AdamJT13 explains these here. However, it is worth noting that this technique doesn't really get around the issue of putting large amounts of guaranteed money vs. non-guaranteed money in an extension, though it could combat risks of "bad behavior". It also back-loads a deal rather than front-loading it, which makes it a sub-optimal strategy for the Eagles.]
Derek asked me the other day over e-mail how the Eagles were doing against a hypothetical salary floor, now that they had axed every free dollar that they could.
By my estimates, they have saved about $43 million in cash this year. But they had a whole lot committed before that, so right now, they will spend (or have already spent) about $103 million in 2010, a number which will go up after they sign draft picks.
In cap terms, that number is actually bigger by my current estimates, at about $108 million. Adding in spending on draft picks and potential extensions/acquisitions to come, I would expect that number to increase to a level where it is comfortably over any floor we consider.
* Note that I do not know for certain that it was classified this way, or that classifying it as likely to be earned (“LTBE”) would have changed whether the deal complied with the rules. But I believe that if it had been classified as LTBE, we would have heard about it before.