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On the Grantland NFL Podcast, Bill Barnwell brought up an interesting idea.

The Eagles wound up signing DeMarco Murray to a five-year, $40 million dollar deal. Philadelphia gave Murray a $5M signing bonus, which makes the math pretty simple. A signing bonus is paid at signing, just like the name implies. However, the salary cap hit is spread evenly over the life of the contract: Philadelphia’s cap space has to include $1M in 2015, 2016, 2017, 2018, and 2019 as a result of giving Murray five million dollars at signing.

Now, if the Eagles traded Murray tomorrow, that cap hit would be accelerated. And, in fact, the team would have to take a $5M cap hit this year. This would be something of a win for the team that trades for Murray, though, as they would essentially be inheriting a five-year, $35M contract, in terms of both cash and salary cap dollars.

As Barnwell points out, here’s where a potential trade could happen. The Jaguars are flush with salary cap dollars: arguably too many, in fact. Let’s say that once Murray and the Eagles came to an agreement in principle, the parties instead decided that Jacksonville should be the team to sign Murray. And that signing bonus should be bumped up, too, to say, ten million dollars.

So Jacksonville signs Murray to a 5-year, $40M deal, with a $10M signing bonus. Then, the Jaguars turn around and trade Murray to the Eagles for X. What ends up happening is Jacksonville takes a $10M cap hit in 2015 and is out ten million dollars of real cash. The Eagles get Murray on a 5-year deal but now only have to pay him thirty million, in terms of both cash and salary cap dollars. And Philadelphia, depending otherwise on the structure of the contract, could then cut Murray without penalty at any time.

It’s a real win-win-win situation, but the key question is: What is X? If X was a 7th round draft pick, you could be sure that Philadelphia would jump at the chance to do this. If X was a first round pick, then I’m not so sure. It comes down to the question of how much is a draft pick worth in terms of both salary cap and real dollars?

That’s a really complicated question. I have some ideas, but I’d love to hear your thoughts on how to go about answering this question. And in some ways, your gut may be just as helpful as anything else. If you were the Jaguars, what’s the lowest pick you would take? If you were the Eagles, what’s the highest pick you would give?

  • Thats a really interesting question. That is a good deal of money to eat on a player. Id have to pull out my old draft charts but from a cash valuation standpoint you are asking for a great deal of value. Lets say its a 3rd round pick, where the general cost is around $600,000 guaranteed. The Jaguars would then be taking a $10.6M risk that the mid 3rd round player gives them the same value as a 10.6M gamble. Thats the cost associated with the 12th or 13th overall pick. The expected contribution of a 3rd rounder is so much lower that I cant imagine that happening.

    I think you would need to move into the first round at those dollar figures. The Eagles first rounder this year is worth somewhere in the ballpark of $7M guaranteed. That now becomes a $17M cost for the Jaguars, which brings us to the 5th or 6th pick cost. I think thats a much smaller gap to justify than say 3rd for $10M.

    From the Eagles side Id view the trade a little different. While they lose the opportunity cost of the 1st round player their total cash saved this year is the $10M that the Jaguars pre-paid plus the $4.5M signing bonus they would have paid their 1st round pick. Thats a big benefit. They save the $7M guaranteed in full. At that point the Murray deal financially becomes 5 years, $23 million (maybe a bit more if you add in the roster cost of the replacement for the lost pick which is minimum salary)which is far more in the wheelhouse of what running backs earn.

    • Dr__P

      Note the difference in Harvard draft chart and the traditional draft chart in terms of draft points.

      The traditional chart was based on past trades and ignored the players themselves. The Harvard Chart used the AV methodology of the Massey-Thayer work. MT looked at the AV for each player taken at a given draft pick. Thus, they tried to estimate the value of the draft pick with the average player taken at a given draft pick.

      One can cut out some of the math and ask a simpler question – what would you pay for the estimated future AV of a given player.

      Somehow I think the league would not take kindly to any such proposed trade in any event. Draft picks, the FA system as a whole, and the salary cap itself, are based on creating parity and to avoid rich teams being able to buy talent. The rules have gotten more complex as teams try to game out the system. These include the rules about spreading out the signing bonus.

    • I don’t think you should be adding the $10M and $7M together; while you have to pay for a first round pick’s salary, the cost/benefit analysis there is positive. Teams would pay $7M for first round picks every time. The real question is how much more valuable than $7M is the average first round pick.

      As far as your Eagles point, I think we also need to look at this over many years, not just the first. I’d say in Year 1, the Eagles definitely get the benefit of the trade. So the analysis needs to look at the life of the deal; inherent in this structure is that the “Jaguars” team is going to be a loser in Year 1.

      The other tricky part is cap dollars are not the same to every team. Some teams will willingly not spend to the cap, and not just for the express purpose of rolling over those dollars. I assume in that case it’s really just a cash issue.

      • I think the hard part in doing it is that most teams are going to look at the cash component of the deal. One of the big problems in the old CBA and why teams were starting to not want those top picks was not just the cap commitment but the large cash commitment that went with it. That would be a mini fortune in real terms to pay for a draft pick.

        My feeling is both teams would have their own hypotheticals to evaluate it. Id imagine the Eagles outlook is very short term (similar to the Saints recent parting of 1st rounders for Harvin and Graham). Id guess you would get about $3M in cap savings in each of the next two years on Murray. Id factor in those cap savings from my draft pick too because Im quickly reinvesting that money in free agency to improve my team in the short term. Id think their tradeoff is the value of Murray and a $4-5M player versus Murray and a 1st round pick(or whatever pick we consider), unless the proposed trade is just desperation for a team that cant afford the player. Thats the kind of trade the Saints just made with Miami where they got really creative with the cap because New Orleans absolutely could not fit Ellerbe under any restructured contract he would agree to unless Miami ate both cash and additional cap this year. I wouldnt see the purpose for the Eagles if they are sitting on cap space for no reason.

        I think from the Jaguars side you get into what you said- whats the cost worth of the additional risk. My guess is we can use something like this to get an estimate (and clearly see how the NFL has slotted their bonus money)

        http://overthecap.com/drafting-decisions-salary-cap-part-ii/

        Though thats just a 5 year outlook (graciously borrowing your own work there 🙂 ) It clearly shows that you can pay a premium for the expected return in those mid 1st-2nd rounders. A longer term outlook might be something like http://overthecap.com/drafting-decisions-and-the-salary-cap/ I think as long as your price meets the anticipated value (or upside value if the team is very risk averse) they strike the trade for that figure, unless they do just have money to throw around in which case they would just amass picks if possible.

        Similarly on the trade front Id expect even more veteran trades for draft picks next season if any teams begin to panic on the cash minimums. Im sure the Jets would much rather take a Peterson at $13 million than risk having to cut another $1 million to a Santonio Holmes type

    • Andrew Healy

      Real quick, I think Philly’s third-rounder would be about a fair price for the Jaguars taking a total of $10M off the Eagles’ cap. I get about 8.1 points of value above replacement for $10M of cap space (again using my methods from the 3/13 article at FO, based on Chase’s estimates). That’s equal to about the last pick in the second round, by Chase’s chart. Chop off a little b/c the Jaguars may value space less and the dollars have some value beyond the gap, and third-rounder is reasonable. It might go for less with teams seeming to undervalue cap space.

  • Justin Scaife

    I’ve wondered if something like this might make the Adrian Peterson situation go smoother. Peterson is asking to renegotiate his deal to get $25 million guaranteed over the next three years. The Cardinals appear to want him, but they’re hesitant to give him that much money. A solution that would appear to make everybody happy would be for him to sign a new contract with the Vikings for the guaranteed money he wants, with something like $6 million as a signing bonus. The Vikings would still pay $7 million less than if they kept him, and the Cardinals would be on the hook for a more reasonable 3 years $19 million guaranteed. The only thing I could see to stop this trade is Zygi Wilf, who probably wouldn’t want to write a $6 million check to a player just so he can trade him.

    • Right, Peterson is a pretty good example. The question becomes, how much is $6M in cash savings and $2M in cap savings over the next 3 years worth to Arizona? A 4th? a 3rd?

  • Kibbles

    In 2007, after Jake Plummer announced his plans to retire, Denver traded him to Tampa Bay. Tampa essentially “bought” the right to go after a pro-rated portion of Plummer’s signing bonus on the deal they inherited, eventually recovering about $3.5 million in cash from him and turning the entire trade into a baseball-style cash-for-picks swap. It’s the only such example I know of in the NFL.

    I don’t believe there were any cap ramifications, but I could be wrong about that. I’m also struggling to find out just which pick was traded via Google, but I’m pretty sure it was either a 6th or a 7th.

    • Plummer was a 7th round pick. IIRC the way the trade worked was if Plummer was on the active 90 man roster the Friday before the draft the Broncos got a 4th otherwise it was a 7. The Bucs received the money and should have received a cap credit as well, but that was getting close to those lockout years so Im not sure if they ever did.

      • Kibbles

        I had remembered it as a 7th, but Google was remarkably unhelpful on the details. Thanks for filling in the gaps, Jason.

  • Roger Kirk

    Would this amount to buying a draft pick for $10M? Is that legal? Would the commissioner be within his hazily defined rights in voiding such a trade?

  • David

    So, a thought experiment on how to evaluate this:

    What is the ‘real’ difference to the Eagles between the two hypotheticals – for purpose of this, let’s take them as 5 years, 30MM, 10MM signing bonus, or 5 years, 30MM.

    For ease of discussion, let’s assume that the base salary is even across the five years (it isn’t), and that somehow the salary cap is flat across the five years (it isn’t)

    So, the Eagles save 10MM in cash, day one, and 2MM per year against the cap, until they have to cut Murray, at which point the rest of the hit accelerates onto the cap in that year.

    I assume that the 10MM cash saving on day one is worthless – from the owners’ perspective, a salary cap ensures that money paid to players is always less than the money received from owning the team, so cash is irrelevant (this is probably not true, but I’m going to assume it anyway)

    Next, how much is the cap relief worth, in terms of draft picks? Effectively, it’s allowing the Eagles to sign an extra player (note – this isn’t entirely true given roster limits, but let’s ignore those, as well…) for a salary of up to 2MM. That’s significantly more than a veteran minimum, but certainly isn’t superstar money. As it’s only a single year deal, the best comparison is probably a veteran, coming to the end of their career. A potentially helpful comparison is Anquan Boldin – his cap numbers (http://overthecap.com/player/anquan-boldin/1360) are around 2MM per year (complicated by signing bonuses of ~6MM). He cost the 49ers a 6th round pick.

    So, roughly speaking, the Eagles owe the Jaguars a sixth round pick for each year of the deal. So five sixth rounders (which the draft parity chart tell me are worth 27-15 points, depending on where in the draft they are, so that’s ~100 points, giving me the 4th pick in the 4th round).

    This analysis ignores the benefits of cutting Murray before the five years are up, since if the Eagles cut him in year 3, they effectively realise 6MM in cap relief for that year, but nothing in years four and five. I’m going to go ahead and assume that 2MM per year over three years comes out as about the same as 6MM for one year (based on my hamfisted assumption earlier that five 6th round picks are worth one 4th round pick)

    So, to take on 10MM of Murray’s signing bonus, given that the Eagles are picking 20th, the Jaguars should be asking for a 4th & a 5th

  • Andrew Healy

    It comes down to the question of how much is a draft pick worth in terms of both salary cap and real dollars?

    I tried to answer this in a relatively simple way a week-and-a-half ago: http://www.footballoutsiders.com/stat-analysis/2015/trade-cost-benefit-analysis

    Building on some of your stuff from a couple of years ago, I got that $11.6 million in 2015 cap space (what Philly gave up in the Bradford trade) was worth about a late second-round pick. For a team with tons of cap space, it would be somewhat lower.

    Very neat idea. It really is a win-win-win (no matter what).