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Examining A Possible Derek Wolfe Extension/Renegotiation

Derek Wolfe is one of the longest tenured Broncos, arriving via usage of Denver’s highest draft pick in 2012. Now, he is entering the final year of his contract, and there is question as to whether it will be altered in some manner as soon as before the start of the new league year. In this post, I’ll take a look at the manner in which this could happen.

The most informative tweet that has shared news of a possible change to Wolfe’s contract comes from Eric Goodman:

If Wolfe merely wants a three year extension, this by itself is a very easy request for the Broncos to accept. However, as NFL players in general should know, the grand majority of NFL contracts operate on a year to year basis. Even if Wolfe secures the length that he wants, the Broncos have the power to terminate that contract before it expires if they feel his play does not justify his pay at that future date. If Wolfe wants his best chance at achieving his goal, he should ask for more clauses to secure it in exchange for a pay cut.

Wolfe currently occupies the last rung of a tier among interior defensive linemen.

Ignoring Aaron Donald’s massive deal, the pay at his position by APY descends pretty steadily from Fletcher Cox’s $17.1 million, down to Wolfe himself at $9.175 million. After Wolfe, there’s a wider gap in which only three players reside between $6 million and $9 million. Wolfe’s remaining cash that is due to him is $8.55 million, a figure that is conveniently within that range. If Wolfe is willing to take a pay cut, there’s an easily identifiable range for both sides to aim for.

Contract A: the fully guaranteed contract

The simplest and most effective way for Wolfe to achieve his goal of ten years in Denver is to demand that the Broncos fully guarantee his extension. However, I’d expect the Broncos to balk heavily at such a suggestion:

  • Even at the most aggressive range of pay cuts at $6 million APY, $18 million in new guarantees (albeit only $9.45 million in new money) places him in the top 12 of veteran interior defensive line contracts.
  • The Broncos would also set themselves up to be liable for a large dead money hit should Wolfe be seriously injured (not irrelevant given his history) or significantly declines in play.
  • Furthermore, if a goal of the Broncos is to reduce his 2019 cap number, that sets them up for even higher dead money liabilities by pushing some of that money into the future.

Nonetheless, here’s an example of what such a $6 million APY contract would look like, with the Broncos reducing his 2019 cap number by $4.55 million:

Year Base Salary Prorated Bonus Cap Number Dead Money Cap Savings
2019 $4,000,000 $2,375,000 $6,375,000 $18,000,000 ($11,625,000)
2020 $6,000,000 $0 $6,000,000 $14,000,000 ($8,000,000)
2021 $8,000,000 $0 $8,000,000 $8,000,000 $0

Contract B: the aggressive signing bonus contract

A variant on the deal above would be to instead give Wolfe a massive signing bonus to attempt to discourage the Broncos from terminating his contract early. However, due to the June 1 rule of accounting, the Broncos can soften the blow of dead money by deferring prorated bonus cap charges to the next year, to the point where they could actually gain cap space in the year of terminating the contract.

This is demonstrated in the below example, where Wolfe’s full guarantee of $18 million is now contained in a signing bonus, with the APY upped to $7 million thanks to non-guaranteed, near veteran minimum base salaries:

Year Base Salary Prorated Bonus Cap Number Dead Money (pre-6/1) Dead Money (post-6/1) Cap Savings (pre-6/1) Cap Savings (post-6/1)
2019 $1,000,000 $8,375,000 $9,375,000 $20,375,000 $8,375,000 ($11,000,000) $1,000,000
2020 $1,000,000 $6,000,000 $7,000,000 $12,000,000 $6,000,000 ($5,000,000) $1,000,000
2021 $1,000,000 $6,000,000 $7,000,000 $6,000,000 $6,000,000 $1,000,000 $1,000,000

In addition to this deal not being ideal for Wolfe’s goal of staying in Denver for three more years, this deal is not ideal for the Broncos if they want to create cap space in 2019, as they pick up a minimal amount of $1.55 million.

Contract C: modus operandi for the Broncos

If the Broncos hear Wolfe’s demand of wanting a deal that puts him under contract with the Broncos through 2021, here’s a rough draft and simple version of the structure of what I’d expect would be ideal for them:

Year Base Salary Prorated Bonus Cap Number Dead Money Cap Savings
2019 $2,000,000 $4,375,000 $6,375,000 $18,375,000 ($12,000,000)
2020 $8,000,000 $2,000,000 $10,000,000 $12,000,000 ($2,000,000)
2021 $8,000,000 $2,000,000 $10,000,000 $2,000,000 $8,000,000

What’s happening in this deal is a two year extension that offers Wolfe $15.45 million in new money, and $16 million in new guarantees via a $6 million signing bonus and fully guaranteed 2019 and 2020 salaries. This adds up to an APY of $8 million that is on the higher end of the pay cut range.

However, 2021 would be an option year, and while some sort of guarantees could be attached to that option, the Broncos will want an out on his final deal that gives them the ability to receive compensatory pick credit for him should he sign elsewhere. The Broncos can also reasonably escape this contract before 2020, as well. While the dead money of $12 million is large, the cap loss is minimal, and can be netted out to $0 should a June 1 designation be used.

This contract is a demonstration to illustrate that while Wolfe may get three years on paper, it could very easily be crafted to function as an effective year to year deal that he is hoping to avoid.

Contract D: using an option bonus and void year to try to find middle ground

Year Base Salary Prorated Signing Bonus Prorated Option Bonus Cap Number Dead Money Cap Savings
2019 $1,000,000 $5,375,000 $0 $6,375,000 $17,875,000 ($11,500,000)
2020 $2,500,000 $3,000,000 $2,000,000 $7,500,000 $11,500,000 ($4,000,000)
2021 $1,000,000 $3,000,000 $2,000,000 $6,000,000 $6,000,000 $0
2022 Void Year $3,000,000 $2,000,000 Void Year $5,000,000 $0

This is a contract worth $22.5 million in total for an APY of $7.5 million, right in the middle of the pay cut range. The new money is $13.95 million. Wolfe gets a $12 million signing bonus and his 2019 and 2020 base salaries fully guaranteed for a total of $15.5 million. The Broncos again save $4.55 million in 2019 cap space.

The two unique parts of this contract are as follows:

  • A void 2022 year is created. At signing, this prorate Wolfe’s signing bonus over four years instead of three. The immediate effect of this is that the Broncos save more cap space in the front end of the deal
  • The Broncos retain an option on Wolfe’s 2021 year, but it comes with a $6 million option bonus attached. If exercised before the start of the 2021 league year, the bonus is prorated over the 2020-2022 caps.

The goal of the void year and option bonus is to discourage the Broncos from parting ways with Wolfe in 2021. If they decline the option, they will be hit with a $6,000,000 dead money acceleration that will result in no net cap savings that year.

* * * *

As usual, none of these example contracts will likely be close to the actual extension/renegotiation if it happens. This is especially true as they deal more in describing structure than total worth. But if news of such a deal does come in, keep in mind the following factors when early numbers come in:

  • Wolfe is already due $8.55 million in unpaid 2019 money. Be sure to subtract this from the total amount reported to learn the new money Wolfe is getting.
  • What will Wolfe’s full guarantees come in? And again, remember that he’s already due that non-guaranteed $8.55 million.
  • How much, if any, of a pay cut will the APY reflect?
  • How easy will it be for the Broncos to exit the deal before Wolfe’s goal of playing ten seasons in Denver is achieved?