Peyton Manning, Andrew Luck and the Salary Cap

I know I haven't written anything in awhile, and I just couldn't bring myself to write about a "noodle arm" or "nerve re-generation." I have been wanting to look at the cap implications of this mess since it started so I think I'll take this chance.

Much has been made about the cap consequences of the Colts having both Peyton Manning and Andrew Luck on the same roster. Many have called it cap suicide. I have heard a number of ideas about what the Colts should do with all the cap room that cutting Manning would afford them. It begs the question; How much cap room would that actually give us?

Let's take a look at the contract Manning signed before this season started. It was a 5 year deal worth a total of $90 million. It broke down this way:

$20M Signing Bonus (due at the time of signing)

$3M Roster Bonus for 2011 (due for being on the roster as of June 1, 2011)

$28M Team Option Bonus (due March 8, 2012 to engage last 4 years of contract)

$39M Salary over 5 years

I'll break down what that means after the jump.

First, an explanation of how deals like this count towards the NFL salary cap. Any Bonus is prorated or spread out over the life of the contract. This is true with the exception of Roster Bonuses which count against the cap in the year they are paid. If the contract is terminated, any money that has already been paid is then accelerated to the current cap year instead of being spread out over the life on the contract. On to Manning's deal. These figures are rounded for ease of reading.

I'll break it down by year:

2011 -

Actual Pay: $20M Signing Bonus, $3M Roster Bonus, $3M Base Salary
Cap Hit: Prorated Signing Bonus $4M, $3M Roster Bonus, $3M Base Salary, Prorated Option Bonus $6M
TOTAL CAP HIT $16M

2012 -

Actual Pay: $28M Option Bonus, $7M Base salary
Cap Hit: $4M Prorated Signing Bonus, $6M Prorated Option Bonus, $7M Base Salary
TOTAL CAP HIT: $17M

2013 -

Actual Pay: $8M Base Salary
Cap Hit: $4M Prorated Signing Bonus, $6M Prorated Option Bonus, $8M Base Salary
TOTAL CAP HIT: $18M

2014 -

Actual Pay: $9M Base Salary
Cap Hit: $4M Prorated Signing Bonus, $6M Prorated Option Bonus, $9M Base Salary
TOTAL CAP HIT: $19M

2015 -

Actual Pay: $10M Base Salary
Cap Hit: $4M Prorated Signing Bonus, $6M Prorated Option Bonus, $10M Base Salary
TOTAL CAP HIT: $20M

So what happens if we cut or trade Manning?

Before the Option bonus is picked up:
Remaining Singing Bonus hits cap this year ($4M/year for 4 years remaining) $16M
Minus a Refund of the ~$6M Prorated Option Bonus that was on the cap in 2011
Total Cap Hit if cut $10M

After Option Bonus is picked up:
Remaining Signing Bonus $16M, Entire Option Bonus $28M hit cap this year $44M

Two big things. First, if the option is picked up he is staying. No sign and trade here. It would be like buying a car for $44M and then giving it to the guy you are racing against. Second, cutting him before the bonus on March 8 saves us $7M in cap space this season. The thought of going out and "fixing the team" with the $28M that we aren't paying Manning can't happen. We do save some, but not enough for all the upgrades I've seen proposed. Granted, the cap hit for 2012 -2015 would be $0. A nice number for signing other players.

What happens if Manning is cut or retires after playing each of the seasons in his contract?

This scenario assumes that we have picked up the Option bonus and then Manning retires or is cut before the season listed. The number listed would be Manning's "Dead cap" amount for that year. If this cut or retirement would happen after June 1 of that year, the dead cap could be spread over 2 cap years.

2013 - $27M

2014 - $16M

2015 - $5M

This breakdown is for those folks (like me) who want to see Manning play one or two more years and then hang them up as a Colt. This is extremely expensive for one year cap hits. If they could be spread over two years, they would save money off the cap from Peyton staying on the roster, but we would still take a hit. Looks like 2 years in the magic number. Once we get past 2013, the dead money hit is less than the cost to keep him on the roster. Cutting or retirement would save the Colts cap space.


What will Andrew Luck cost against the Cap?

Looking at the deal Cam Newton got (4yrs, $22M all guaranteed) so his cap numbers are $4M, $5M, $6M & $7M for the contact. Inflating a bit for a new year, here are my guess at the cap numbers for Luck (assuming a 4yr, $24M all guaranteed contract).

2012 - $5M; 2013 - $6M; 2014 - $6M; 2015 - $7M

Seems like a bargain to me and, of course, it is with the new CBA. The money is all guaranteed so we don't have to worry about all the signing bonus stuff.

What will the salary cap number be?

The cap number in 2011 was $120M. From 2006-2010 the cap increased $7M per year. I won't assume the same growth with the new CBA, so we'll say $5M/year. That makes the estimated cap total for each year:

2012 - $125M; 2013 - $130M; 2014 - $135M; 2015 - $140M

Could both fit on the same roster without killing the cap?

Sure it could happen. Here's a look at the numbers.

2012 -

Manning - $17M
Luck - $5M
Total for QBs - $22M
Percent of Estimate Cap - 17%

2013 -

Manning - $18M
Luck - $6M
Total for QBs - $24M
Percent of Estimate Cap - 18%

2014 -

Manning - $19M
Luck - $6M
Total for QBs - $25M
Percent of Estimate Cap - 18%

2015 -

Manning - $20M
Luck - $7M
Total for QBs - $27M
Percent of Estimate Cap - 19%

While those percentages seem like a lot. My thought is that it doesn't hamstring as much as I thought it would. Especially noting that last year we spent 17% of our cap on QBs and in the Manning "Golden Years" his cap number alone averaged 14% of our cap. That's an extra 4% of the cap to have the best prospect I've seen in my lifetime backup the GOAT.

Now, would it be better for the Colts to be able to tear up Manning's deal and ink a new, incentive laden one? Hell Yes! If that happens and you are in my general vicinity, you'll get to see a fat man try to do a back handspring (not pretty). I doubt that you will see it because, if he is released, there will be someone out there offering more than just incentive laden deals.

I don't know which reports are true. I have no inside information. I do think that if Peyton had arm strength, he would have no reason to not let a video slip that proved it to the fans, the Colts and, most importantly, any other teams that might be watching.

After looking at all these numbers, I feel that if Irsay sees a workout that looks like what Adam Vinatieri says he saw a few weeks ago, there is plenty of space to make the "new era" a transitional one instead of rebuilding one.

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