This will be primarily a devil’s advocate post. I still strongly believe that it’s in the best interest of the Broncos to secure a contract extension with Von Miller right now to take advantage of gaining 2016 cap space. However, I’m resigned to the fact that this likely won’t happen, and the more likely scenario is for this to follow the same arc as Ryan Clady and Demaryius Thomas: place a franchise tender on Miller now, with an extension ultimately coming before the July 15 deadline.
However, I’m going to explore what benefits there may be to letting Miller play out the 2016 season on the franchise tag.
One point that I’ve made before is that the fifth year option on first round picks in the current CBA allows teams to free ride an extra year on an outstanding player. To recap, contrast Miller with Justin Houston: they were both drafted in the same year, but because Houston’s contract was one year shorter as a third rounder, the Chiefs have had to pay a veteran premium on him in his fifth year (averaging out to $16.8 million per year), while the Broncos got Miller at only $9.75 million in his fifth year.
Now, the franchise tag for a linebacker is estimated to be at $14 million for 2016. But even that is going to undervalue Miller’s talent. Where Miller’s ultimate value will lie has yet to be determined, but let’s take an educated guess that it would be about $18 million APY–the halfway point between the APYs of Houston and Ndamukong Suh’s. In 2016, that would be a savings of $4 million.
A likely extension of Miller will include the next six seasons, from 2016 to 2021. Thus, an $18 million APY contract this year will be for a total of $108 million. But let’s now suppose that Miller plays out 2016 on that $14 million franchise tag. Let’s further suppose that Miller has another outstanding season, and that the 2017 salary cap rises another 7.5%, the estimated current rise. Inflating $18 million by 7.5% comes to a new APY of $19.35 million. Yet that number would still be lower than a hypothetical second franchise tag of $16.8 million, a 20% raise from $14 million.
Finally, let’s say that an extension for Miller comes in 2017 instead at that $19.35 million APY, but it is only for 5 years. In the end, the total that the Broncos would pay over the course of 2016-2021 would be $110.75 million. That’s $2.75 million higher than a $108 million deal now. But the extra $4 million in cash right now could mean the difference between retaining or losing one of Brock Osweiler, Malik Jackson, or Danny Trevathan in free agency, or keeping or losing DeMarcus Ware or Ryan Clady as cap casualties. Furthermore, while we would all hope that Miller is still at an All-Pro level for the Broncos at age 32 in 2021, there’s a nonzero chance that he wouldn’t see the end of that deal. The fewer years that are actually executed, the lesser the difference between these two deals becomes.
As I said, this is not a path that I’d recommend the Broncos take. Failing to come to a deal this year risks alienation between the Broncos and Miller that could complicate a later extension in 2017. This illustration also takes for granted aspects such as guaranteed money (though with Miller that’s not a primary concern with me) and contract structure to find ways to gain 2016 cap space (although this piece is more concerned with cash flow than cap space). But I do have to admit that this is a scenario that simply can’t be written off, and that it might not be an entirely negative scenario for the Broncos to end up in.