After some nerve-wracking hours, Broncos fans generally felt quite relieved at the very close of Franchise Tag Deadline Day with Demaryius Thomas agreeing to terms on a long-term extension. I’ve let us all celebrate over that news for a couple of days. But as we move into next week, we do need to now come back to earth a bit.
One of the Broncos’ division rivals just delivered a contract blockbuster that raised the market for one of its own impending stars entering a contract year. When the Chiefs awarded Justin Houston a six-year, $101 million extension, thoughts of who would be next in line for that kind of money should have immediately focused on Von Miller.
When I wrote my first thoughts on what to expect with Miller, I made two observations that turned out to be correct. First, there was no interest for Miller to agree to an extension until he could see what Houston could get from the Chiefs. Second, I believed that the hard floor for Miller would be the Mario Williams comparable ($16M APY/$24.9M guaranteed), and that he’d even have a chance to surpass the APY of JJ Watt ($16.67M), despite Watt reaching consensus as the NFL’s best defensive player.
Well, Houston succeeded in edging out Watt’s APY, coming in at $16.83M. But what is more disturbing is that Houston shattered Watt’s guarantee ceiling, getting $32.5M at signing over six years, $20.5M coming in a signing bonus. Part of that structure has to do with the Chiefs being currently hamstrung by the cap. Regardless, Miller and his agent should see the Houston deal as valid precedent to force the Broncos to pony up in order to retain John Elway’s first ever player acquisition.
Jason Fitzgerald has updated Houston’s page on OTC, where you can see the details. Houston’s high signing bonus was needed by the Chiefs in order to give them operating room under their salary cap for 2015 that, before this deal, stood at less than $1 million. The deal should have given them about $8 million in room for this year. As we discovered with Thomas’s contract, the Broncos don’t necessarily have that problem. So when they craft a contract for Miller, they have more flexibility to tailor terms to their own cap needs.
From a cap and contract standpoint, there’s no need for the Broncos to delay a Miller extension…
In his press conference, Elway said that “We’ll have a plan for Von next year.” My initial response is that it shouldn’t take until next year to form that plan. Like it or hate it, Houston is a very comparable player to Miller, and his contract has set precedent. There’s little need for either side to haggle far beyond the general terms of Houston’s contract. Miller’s APY will likely end up between $16.5M-$17.5M, and his guarantees shouldn’t be too far off the $32.5M at signing that Houston got.
…but do the Broncos have the cold, hard cash to extend Miller in 2015?
It’s all too easy to focus on cap dollars when it comes to running a team, but it does take actual dollars to put those cap numbers into reality. As you may know, the Broncos just unloaded a truckload of cash to Thomas in an $11 million signing bonus, and will unload another $11 million in base salary and a roster bonus on him before 2015 is out. That $22 million payout currently has the Broncos fifth in cash spending across the league. The Broncos are already slated to pay Miller $9.754M in 2015—can they come up with almost $20 million more on Miller at this moment? Only the Broncos know that question for sure, but Elway’s explicit mention of “next year” is evidence suggesting that they can’t.
In case you’re wondering, the Broncos can’t just defer cash payment of money guaranteed at signing to future years—say, giving Miller a fully guaranteed $20 million option bonus in 2016 that could then be prorated like a signing bonus. Any money that is fully guaranteed upon signing must be set aside in escrow if it is not going to be immediately given to the player. See “The Escrow Condition” section in this article by Jason on the Russell Wilson contract negotiations. Any such deferment would have to be an injury-only guarantee, and I can’t see any way that Miller would agree to such a condition.
Can the Broncos’ texture sustain another Elite-valued contract?
This is something that I considered when I introduced the texture concept, and in comments Jeremy asked the important question of whether having Miller, Thomas, and (assuming he doesn’t retire) Peyton Manning with Elite cap numbers against the cap. My response is that it’s doable (the 2014 Lions made the playoffs with Matt Stafford, Calvin Johnson, and Ndamukong Suh all with Elite cap numbers), but not desirable. If Manning did come back, I would think that would help spur action for a Miller extension before the Broncos would have to decide whether to place the franchise tag on him. In this scenario, you can craft a contract that keeps Miller’s 2016 cap number out of the Elite range, and then shift more cap-heavy guarantees to the future.
If Manning retires, or if the Broncos decide to clear out space by making both DeMarcus Ware and Ryan Clady cap casualties, then the team should have no problem with keeping much of the guarantees in 2016, thus earning them more flexibility in future years, as well as the chance of seeing Miller’s cap number possibly fall below Elite in future years if the salary cap continues its current increase.
Here are two types of 2016 extensions in which Miller can win the battle, but the Broncos can win the war
Version A: the “Manning retires” contract
| Year | Base Salary | Prorated Bonus | Cap Number | Dead Money (pre-June 1 cut) |
Cap Savings (pre-June 1 cut) |
| 2015 | $9,754,000* | $9,754,000 | $9,754,000 | $0 | |
| 2016 | $17,500,000* | $2,000,000* | $19,500,000 | $34,000,000 | ($14,500,000) |
| 2017 | $6,500,000* | $2,000,000* | $8,500,000 | $14,500,000 | ($6,000,000) |
| 2018 | $16,000,000^ | $2,000,000* | $18,000,000 | $6,000,000 | $12,000,000 |
| 2019 | $17,000,000 | $2,000,000* | $19,000,000 | $4,000,000 | $15,000,000 |
| 2020 | $18,000,000 | $2,000,000* | $20,000,000 | $2,000,000 | $18,000,000 |
* guaranteed upon signing
^ guaranteed after a specified date on the league calendar
Miller’s 2016 cap number is a bit symbolic: it represents the exact amount that would come off the books if Manning retires. It’s also very close to the $18.9 million in space that would be gained if both Ware and Clady are cut. This is an extreme “pay as you go” type of contract: here, the Broncos are getting as much of the guaranteed money out of the way as possible early, aided by a signing bonus of $10 million that’s on par with the $11 million given to Thomas. But 2017 sees a year in which Miller is unlikely to incur an Elite cap number, giving the Broncos flexibility to pursue other contracts for that offseason.
Version B: all on board for 2016
| Year | Base Salary | Prorated Bonus | Cap Number | Dead Money (pre-June 1 cut) |
Cap Savings (pre-June 1 cut) |
| 2015 | $9,754,000* | $9,754,000 | $9,754,000 | $0 | |
| 2016 | $2,000,000* | $4,000,000* | $6,000,000 | $34,000,000 | ($28,000,000) |
| 2017 | $12,000,000* | $4,000,000* | $16,000,000 | $28,000,000 | ($12,000,000) |
| 2018 | $16,000,000^ | $4,000,000* | $20,000,000 | $12,000,000 | $8,000,000 |
| 2019 | $17,000,000 | $4,000,000* | $21,000,000 | $8,000,000 | $13,000,000 |
| 2020 | $18,000,000 | $4,000,000* | $22,000,000 | $4,000,000 | $18,000,000 |
* guaranteed upon signing
^ guaranteed after a specified date on the league calendar
In structure, this contract is closer to Houston’s contract with the Chiefs. As Kansas City intended for 2015, for Denver it allows them to stay under their current projected salary cap space of a little over $7 million without cutting anybody. (Though, you’d likely still need to cut or restructure somebody to have room for the draft and free agency.) The $20 million signing bonus is very close to the $20.5 million that Houston got. But while 2016 is kept afloat, more ballast is put on the last four years of the contract, when Miller’s cap numbers would likely be the highest on the team and well in the Elite range for the foreseeable future.
Breaking down both the perception and the reality of these contracts
I don’t find either of the examples above likely to happen, as they’re extreme examples to set a structure range in which the real contract could fall. But both of these contracts have the essentials in common with each other.
For both of the contracts above, you would first hear the insiders announce this as a five-year, $85 million extension with $50 million guaranteed. After the details come out, we’d find out that only $34 million is fully guaranteed, with the 2018 base salary only triggering after a certain date on the league calendar. But still, we would hear that Miller got a higher APY than Houston ($17M over $16.83M), and higher actual guarantees ($34M over $32.5M). Sounds like a good win for Miller’s agent, and make no mistake, it pays Miller very well, and deservedly so.
However, there’s a devil in these details. You may have noticed that I included Miller’s 2015 cap year in the tables above, even though that season would already be in the books. There’s also the fact that I only extended Miller for five seasons (though a fluff sixth season could certainly be added if desired). The purpose is to demonstrate a dollar-for-dollar comparison between Miller and Houston, a demonstration that’s especially relevant when you consider the two are only months apart in age and have the same number of accrued seasons. If you add up the total amount of money paid from 2015-2020, Houston gets $101 million while Miller gets $94.754 million. If you restrict it to 2015-2017, where most of the guaranteed money resides, Houston gets $53 million, while Miller gets $43.754M.
This is where that fifth year option for first round picks really comes in handy for teams. Perhaps the most extreme example in the league comes from the spending spree the Colts have been able to do with Andrew Luck on his rookie deal. It’s why I partially disagree with Roddy White on his claim that if the Falcons wait on extending Julio Jones, it will cost them more. Contracts in the future may be more expensive but it also means that teams have run longer on cheaper contracts of the past. $9.754M may seem like a hefty price to pay, but for a player of Miller’s caliber it’s instead a bargain.
A(n unlikely) 2015 extension example
I’ll close with this contract, which as I noted is one that I doubt if the Broncos can afford right now due to $17.75 million being paid out directly to Miller and another $15 million being placed in escrow. It’s a bit of hybrid between the contracts of Houston (similar APY and full guarantees of $17M and $34M, and similar total value at $102M) and Thomas ($10 million signing bonus, 2015 cap numbers almost identical to their pre-extension figures). I set aside $15 million in 2016 as a roster bonus to potentially convert into a signing bonus if the Broncos run into cap trouble in 2016 if Manning doesn’t retire and the Broncos are convinced that Ware and/or Clady should come back too.
| Year | Base Salary | Prorated Bonus | Roster Bonus | Cap Number | Dead Money (pre-June 1 cut) |
Cap Savings (pre-June 1 cut) |
| 2015 | $1,250,000* | $2,000,000* | $6,500,000* | $9,754,000 | $34,000,000 | ($23,000,000) |
| 2016 | $1,250,000* | $2,000,000* | $15,000,000* | $18,250,000 | $23,000,000 | ($4,750,000) |
| 2017 | $16,500,000^ | $2,000,000* | $18,500,000 | $6,000,000 | $12,500,000 | |
| 2018 | $16,500,000 | $2,000,000* | $18,500,000 | $4,000,000 | $14,500,000 | |
| 2019 | $16,500,000 | $2,000,000* | $18,500,000 | $2,000,000 | $16,500,000 | |
| 2020 | $16,500,000 | $18,500,000 | $0 | $18,500,000 |
* guaranteed upon signing
^ guaranteed after a specified date on the league calendar