With Ian Rapoport reporting that the Broncos are working aggressively to get a long-term contract completed for Von Miller, I wanted to examine what this would mean in terms of how the Broncos manage their 2016 cap situation.
The short answer is that, by signing Miller to an extension now, the Broncos can reduce his cap charge for this year by putting more of his first-year salary into a signing bonus, whereas by using the tag on him, they can put more of his first-year salary into the space committed to the tag and keep his signing bonus low.
While keeping a player’s signing bonus as low as possible is ideal for ensuring any dead money hits for cutting a player early are minimal, sometimes you’re OK with giving the player a larger signing bonus if he has proven he is worth committing to for the long term.
The evidence is strong that Miller is a player the Broncos want to keep for the long term, so it would be OK to give him a larger signing bonus to keep his 2016 salary cap number low. You don’t want the signing bonus to get too large, but it can be large enough so that, say, you need to get out of the deal after three years, you won’t hurt your cap situation too much.
Before I get into comparisons, I’m going to make a couple of assumptions. First, I believe Miller will get a six-year deal because that is what the Chiefs gave Justin Houston. Second, I would not be surprised if Miller gets $20M in the first year of the contract, which would come in a combination of a signing bonus, a roster bonus and his base salary. Obviously, he will get more than just $20M in full guarantees, but I’m focusing on that number to show how the first-year salary could be structured.
Let’s say the Broncos do have to use the tag on Miller because they can’t come to terms on a long-term deal. That means the Broncos will likely need $14M in cap space for the tag, but they can use that $14M toward the fully guaranteed money Miller will obviously get in 2016, in the form of a base salary or a roster bonus. If the Broncos paid him a total of $20M in the first year of the deal, that would mean a $6M signing bonus. Assuming Miller is extended for six years, that means $1M is pro-rated over each year of the deal and any dead money that comes from releasing him is very low. If the Broncos had to cut Miller after three years, for example, it would mean just a $3M dead money charge. The flipside is Miller would count for a $15M cap charge in 2016.
If the Broncos extend him, though, they could still pay him $20M in the first year by giving him, say, a $12M signing bonus and $8M in either a roster bonus or base salary, giving him a $10M cap charge in 2016. Assuming a six-year deal, cutting him after three years would mean a $6M dead money charge, which is still manageable. But the $5M in cap space saved in 2016 could go a long way toward retaining players the Broncos might have to cut or toward extending other players.
And if the Broncos believe that Miller really needs to be part of the long-term picture, they could even go with a $15M signing bonus and $5M in 2016 salary. That would mean $2.5M is pro-rated over the six years, but it would mean Miller’s 2016 cap charge is just $7.5M. Getting him for that cap number would give the Broncos even more flexibility in retaining or extending players.
How much the Broncos put into Miller’s signing bonus depends on many factors, ranging from how much money he actually gets in the first year to the length of the contract to how much John Elway believes that Miller will be part of the long-term picture. My third example carries more long-term risk, while the first example carries less risk but commits more cap space in 2016 to Miller’s contract. The second example could represent a good compromise.
I will make a few other points regarding what happens with a Miller extension.
* Remember that when you hear the talk that Miller wants to be the highest paid defensive player in the NFL, he is engaging in a negotiation tactic: Always ask more than what you expect to get. I believe Miller and his agent really want him to be paid in the ballpark of J.J. Watt and Justin Houston, but if they ask for that money, they are likely to get less. So that is why Miller and his agent are smart to use Ndamukong Suh’s deal and ask for more than that, because that is how they are going to ensure Miller gets paid a deal similar to Watt or Houston.
* If Miller is extended, I don’t think they use the tag on anyone else. The incentive for extending Miller is not just to get that deal out of the way, but to reduce his cap number lower than what the franchise tag would be. Tagging Malik Jackson means committing around $15M in cap space and forces the Broncos to make other moves. Tagging Brock Osweiler is out of the question, as you will not want to commit $20M up front to him.
* The player who is most likely to be affected by a Miller extension is Osweiler, in terms of how the Broncos could structure an extension If the Broncos get Miller extended, they can put more money into Osweiler’s base salary and lower his signing bonus, so that dead money charges are minimal if they have to release him after 2016. In my example of an Osweiler deal, I suggested a $6M signing bonus, but an extension for Miller could allow the Broncos to put an additional $3M into the first-year salary (either base salary or roster bonus) and reduce the signing bonus to $3M. While that would raise his 2016 cap charge to $10M, it would mean just $2M in dead money if he was cut in 2017.
To illustrate this: In my offseason plan, Miller would likely have a final cap charge of $15M if he is tagged and extended far into the offseason, while Osweiler would have a cap charge of $8M, but the combined cap charge is $23M. Compare that to my second example above plus the adjustments to Osweiler’s contract structure I made above and the combined cap charge is $20M, or $3M less than my offseason plan. Thus, extending Miller now gives you more flexibility in terms of what you can do in 2016.
So I think extending Miller without using the tag makes a lot of sense. Miller has indicated he wants to get a deal done and we know John Elway has been good at his sales pitches to players he’s interested in signing or keeping. There are some tradeoffs that come with a Miller extension versus using the tag, but I believe they are worth it considering what the Broncos get in return.