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Explaining The Restructure Of Joe Flacco’s Contract

Almost three weeks ago, Tom Pelissero reported this:

At the time that this happened, I didn’t think–and still don’t think–that it was controversial by any means. I only thought that it warranted a quick tweet, of which is below, as well as agreement from the original compensatory picks reporter, AdamJT13:

Nonetheless, it turns out that plenty have been critical of the Broncos for doing this. My issue with that criticism, however, is that much of it lacks an understanding of what the actual benefits and consequences of this move are. So I suppose a full article on the subject is in fact warranted.

How Flacco’s contract was changed

Before

YearBase SalaryProrated BonusCap NumberDead MoneyCap Savings
2019$18,500,000$0 $18,500,000 $18,500,000 $0
2020$20,250,000 $0 $20,250,000 $0 $10,050,000
2021$24,250,000 $0 $24,250,000 $0 $17,450,000

After

YearBase SalaryProrated BonusCap NumberDead MoneyCap Savings
2019$1,500,000 $3,400,000 $4,900,000 $18,500,000 ($13,600,000)
2020$20,250,000 $3,400,000 $23,650,000 $13,600,000 $10,050,000
2021$24,250,000 $3,400,000 $27,650,000 $10,200,000 $17,450,000
2022Void $3,400,000 $6,800,000 $6,800,000 Void
2023Void $3,400,000 VoidVoidVoid

I want you to pay close attention to the cell I highlighted in yellow above, as this is the key point to why this restructure is not a big deal. Once Flacco was going to be on the Week 1 roster, his scheduled $18.5 million base salary was going to be guaranteed via termination pay protection no matter what. These are cap dollars (as well as straight cash for Flacco) that the Broncos were now obligated to pay.

How the Broncos’ cap space was changed

Note that these are estimates rounded to the nearest $100,000. The 2021 cap space would also go down by $3.4 million, while 2022 would see a cap charge of $6.8 million once Flacco’s contract voids.

YearBeforeAfter
2019($1,600,000)$12,000,000
2020$70,600,000$67,200,000

See that figure in red? At some point before the regular season started, the Broncos were likely going to otherwise be over the cap, largely due to the higher number of players they had to move to IR (Drew Lock, Jake Butt, and Theo Riddick being the most prominent). So they had to make some move to be in compliance, and Flacco’s contract had the most potential to provide that, even above Von Miller and his 2019 base salary of $17 million.

Next up is the second important point I want to make, of which will also be highlighted in yellow to make clear: NFL teams may carry over an unlimited amount of unused cap space to the next season. In the case of Broncos, this means that if they don’t use any of the $12 million they have now, their 2020 cap space could go as high as to almost $80 million, well above the previous space of $70 million. So not only are the Broncos gaining cap room in 2019, they may very well do so in 2020, as well.

And also note that whether the final number is closer to $70 million or $80 million, as it stands now the Broncos will be somewhere in the top ten in cap space in 2020. There’s plenty of ability to further improve the team in the future.

“But…what about dead money?”

The key point of contention that I sense is the fact that by doing this restructure, the Broncos make themselves liable to carry a $13.6 million cap charge in 2020 for Flacco if they decide to part ways with him in the 2020 offseason.

But fretting over this is not warranted. As I said above, the Broncos are going to have to pay $18.5 million for Flacco’s services in 2019 one way or the other. Instead of thinking of that money siloed into whether Flacco is or isn’t on the roster, think of it like this: between 2019 and 2020, before Flacco’s expenditure the Broncos had about $97.7 million in cap dollars to work with. After paying Flacco $18.5 million, that goes down to $79.2 million. Whether the $18.5 million in cap dollars is dedicated entirely to 2019, or only $4.9 million in 2019 and potentially $13.6 million in 2020 if he leaves, is not relevant, thanks again to carryover.

“But doesn’t this lock Flacco into the Broncos for 2020, even if they don’t want him?”

No, absolutely not. Flacco is still on a year-to-year basis in Denver.

Flacco’s 2020 and 2021 base salaries remain unguaranteed, with no triggers other than the CBA standardized termination pay rule that does not apply until Week 1 of the respective regular season. If the Broncos want to move on any time before September 2020, they still will not pay any more in either cap dollars or cash other than the $18.5 million they paid for his 2019 services.

And reread Flacco’s 2020 contract year: even if they part ways and officially incur dead money, they still gain $10 million in cap space! That’s a large amount of cap dollars, and it might even be preferable to have that space if, for say, Drew Lock progresses to the point that he’s deemed a better option at quarterback than Flacco.

Why did the Broncos use void years?

Perhaps another aspect of the restructure that may be worrying some is the fact that the Broncos used void years to maximize the amount of cap space they could get now. Without those void years, the Broncos could only gain a maximum of $10.8 million, instead of the $13.6 million they picked up.

Generally speaking, most teams only need a leeway of around $5 million or so to operate through a regular season with the cushion to absorb roster churning that goes on during that period. So why did the Broncos go for void years to maximize space? The simplest guess I can provide is that they were planning for the possibility of extending certain players with deals that may have necessitated some extra 2019 cap space. Either those attempted extensions failed, or they may still be pending for later in the season.

* * * *

To review, here are the takeaways you should know from this transaction:

  • The Broncos had to use $18.5 million in cap dollars for Flacco’s 2019 services.
  • Thanks to carryover, it does not matter whether the Broncos incur all of that in 2019, or some of it in 2019 and the rest of it in later cap years.
  • The restructure does not guarantee, either de jure or de facto, Flacco a spot on the Broncos’ roster in 2020.
  • The Broncos are in fine cap shape for 2020, even if they do carry $13.6 million for a Flacco that is no longer on the team.