The Commanders $46m in current cap space, the use of void years and the April 1st trigger date

How is Washington managing its salary cap and player contracts in 2024?

A huge talking point as Commanders fans watched the 2023 season wind down to an end — and as 2024 progressed — was the fact that Washington led the league in projected available salary cap space. Fans and media alike got giddy with the possibilities.

At the beginning of March, after releasing Charles Leno and Logan Thomas, the Commanders had a league-leading estimated cap space of $91.5m.

In the days following the start of free agency, after agreements with several players had been announced, nearly every article written about Commanders cap space was quoting a figure of about $63m in remaining cap space, with OTC and Spotrac both reporting roughly the same number.

Unfortunately, this number simply wasn’t correct.

Both websites work the same way — a player’s contract is entered into the database when the site’s administrators learn the details of the contract. Sometimes this happens quickly, and other times it takes longer. During veteran free agency, players often have to fly across country to sign the new contract, so the official completion of the deal may happen a week or more after it is announced with great fanfare on Twitter.

It has now been two weeks since the start of 2024 veteran free agency, and, until yesterday, neither Spotrac nor OTC had logged enough Commanders free agent player contracts to make it possible for any casual observer to be able to estimate the team’s available cap space.

With almost no reports in the media about cap space in the past 10-12 days, it’s reasonable for most fans who keep up with cap space based on headlines to think that the Commanders still have $63m available. Of course, they don’t.

I’ve made an effort to keep my 7 or 8 Twitter followers up-to-date over these couple of weeks:

March 20th

March 21st

Where are we now?

Over the Cap has now updated its database to the point where we can talk meaningfully about estimated cap space.

$46.3m

At the moment, Over the Cap estimates that the Commanders have $46.3m in available cap space. That estimate does not account for the announced signings of CB James Pierre or C Michael Deiter, but I don’t expect either of those to be big-dollar deals that will substantially change the team’s cap space situation.

As I have discussed before, the Commanders will need about $9.2m to sign their 9 draft picks, and they will need roughly $6.5m in ‘contingency’ to sign replacement players during the season as others are injured. There is also another $2.5m in injury benefit previously reported by OTC that will reduce the team’s available cap space.

This means that the current expectation is that Adam Peters will roll over about $28m in unused cap space to 2025. Of course, this number can be further reduced if the team makes any significant free agent player signings that involve more than veteran minimum contract.

This is more available cap space than I projected after the first day or two of free agency

I’m reasonably handy at projecting first-year cap hits for contracts based off of tweeted reports from the likes of Ian Rapoport or Nicki Jhabvala.

Nonetheless, this year, for the first few deals that I guesstimated, my numbers for 2024 cap hits turned out to be consistently high, which surprised me.

Then I found out why. It’s because the Commanders have been adding void years to 3-year contracts.

The Commanders are fully committed to the use of void years

From 2012 to 2019, to the best of my knowledge, the only contract signed by the Redskins that used void years was the one for DeSean Jackson. The reason the team used void years for that contract was that Jackson was cut by Chip Kelly late in the offseason when Washington had spent nearly all of its cap space. The cap manager at the time, Eric Schaffer, added void years to Jackson’s deal to ‘fit it in’ under the cap limit.

2021
The team’s current cap manager, Rob Rogers, was hired by Ron Rivera in 2020, and he soon started using void years in contracts. I wrote an article about the fact that he built in void years to the Curtis Samuel contract in 2021 even though the team wasn’t struggling for cap space like they were when DJax was signed.

2022
In 2022, Rogers increased his use of void years, which I wrote about around this time two years ago.

Later on, when Terry McLaurin was signed to a massive extension during the 2022 training camp, his deal included a void year (2026).

2023
In 2023, Washington spent very little money in free agency, but Daron Payne’s monster deal had a void year (2027).

2024
This offseason, Adam Peters has signed over 20 free agents (including a few re-signings from the 2023 roster), but only a few of those deals have been for more than 1 year.

Despite leading the league in 2024 available cap space, Rob Rogers has again been aggressive in adding void years to some of the larger free agent contracts signed this month.

(All contract details below are courtesy of Over the Cap)

Dorance Armstrong

As you can see, Armstrong’s contract has $6m in cap space shoved into two void years (2027 & 2028). Unless he is re-signed to an extension, this $6m will become “dead cap” in the 2027 season. The use of these two void years allowed the Commanders to reduce the 2024 cap hit by $2m because the $6m in the void years would have otherwise been evenly split between 2024, 2025, and 2026 (so, $2m per year).

Tyler Biadasz

Like Armstrong, Biadasz has two void years. His void years will have a $5.4m impact on the 2027 salary cap if he’s not extended. The team reduced the 2024 cap hit by about $1.8m through the use of these void years.

Frankie Luvu

Frankie Luvu will contribute $4.6m dead cap in 2027 (absent an extension); the use of void years with this contract reduced the 2024 cap hit by about $1.53m.

Nick Allegretti

• 2027 dead cap hit: $2.356m
• 2024 savings due to void years: $710,000

Aggregate impact of these 4 contracts

The dead cap that will hit the Commanders 2027 salary cap line from the team’s 2024 free agent signings will be about $18.36m.

The 2024 cap savings that results from the use of void years on these 4 contracts amounts to about $6.04m. The team will enjoy the same “savings” against the 2025 and 2026 caps.

As you can see, the team isn’t using void years as a way to wedge in contracts under a tight cap. If you took the $6m in 2024 cap savings away from the current estimated cap space, the Commanders would still have over $40m at the moment, and the projected rollover to 2025 would still be over $20m.

So, why are the Commanders committing to the use of void years, and what does it mean for cap management?

Back in 2022, Bobby Gould wrote a pretty good explanation of why an NFL team would take this approach. Let me quote heavily from his article:

Many readers may be familiar with the concept of the “time-value of money,” but for those who aren’t, it’s a fairly simple idea: A dollar now is worth more than it will be at some future time. In a general economic sense, this is true because factors like inflation and cost of living increases are constantly, slowly driving down the value of any individual sum of money.

[T]he 2023 cap is expected to grow to around $223M, about a 7% increase, which is …taking into account the massive new TV deals signed by the league, one that can be expected for the next decade or so.

[A] contract dollar in 2021, in effect, cost a team 14% more than that same dollar would have had it been pushed into 2022. And, it cost 22% more than it would have pushed in 2023. If we assume another 7% escalation to the 2024 cap, the cost of that 2021 dollar increases to 30% higher. That, in effect, means that if we can juggle around the cap hits for a player over a sufficiently long horizon, say 4 or 5 years, we can dramatically drive down the actual value – in cap terms – of what they are being paid.

Follow this philosophy across an entire roster, with an eye towards optimizing it, and it’s easy to see how it could functionally create another $15-20M in effective cap space in a single year.

At this point, I hear a[n]…objection: “Now you’re just spending like a kid with a credit card. Eventually those payments are going to catch up with you.” But, unlike credit card payments, borrowing from future cap dollars doesn’t accrue interest. In fact, it’s just the opposite, the longer you push those payments out, the less – in practical terms – you end up having to pay. Remember, that 2021 dollar is going to cost you around $.70 in 2024. In many respects, it would be foolish not to push those payments out as far as you could.

This piece should not be taken as a defense of spending wantonly on expensive free agents – I’m still a huge advocate of a value-based approach – however, it should be considered a defense of teams fully utilizing the accounting tools in place to optimize their cap resource in order to field the best teams they can.

It’s clear that Rob Rogers believes in this concept; it’s also clear that he sold Ron Rivera on the idea, and that now he has a free hand under Adam Peters to continue with it.

What does this mean for the Commanders “dead cap”?

A commitment to the use of void years means a commitment to lots of dead cap on the books. Look at this chart:

This may cause a number of Commanders fans to panic. If dead cap is bad, why would the team deliberately create so much of it? This is over $35m in dead cap in just two years!!

Washington is carrying a $4.8m cap hit this season from the Curtis Samuel contract that reduced the 2021 cap hit by $1.6m.

Is this kind of salary cap management a good idea?

Well, it appears that Adam Peters has signed off on it, and I’ll direct your attention to the long quote from Bobby Gould’s article above for the argument in favor of it.

I’d like to address two ideas here:

#1 – ‘backloaded’ or ‘frontloaded’ contracts

For years, I’ve read commentary from Hogs Haven members and elsewhere that extols the idea of using up available cap space now and saving more for later.

I think that this is partly because individuals often find it easier to simply pay bills immediately, while there is cash in the checking account, as opposed to planning to pay it later and risk either losing track of it or not having enough money when it’s time to pay the bill.

NFL teams are a different sort of entity, and salary cap is managed differently. Remember that there is time value to cap space. Spending it later creates advantages for roster building, and the ever-increasing salary cap makes it possible for teams to continually push cap hits into the future.

Also, there is no “use it or lose it” feature to the NFL salary cap. Any unused cap can simply be rolled over, increasing the amount of cap space available in future years.

#2 – good and bad cholesterol

Cholesterol rose to prominence many decades ago as being bad for your health. When I was a young man, we were all being told to avoid cholesterol if we wanted to live long and healthy lives. Cholesterol was related to obesity, heart disease and death. It was bad. Very bad.

Nowadays, there is a more nuanced view of cholesterol. My girlfriend is a nurse, and she taught me about “good” (HDL) and “bad” (LDL) cholesterol.

The idea of “dead cap” suffers from the same kind of misunderstanding that I had about cholesterol when I was young.

See, “dead cap” comprises two components in NFL salary cap management, and the two components are very different:

Guaranteed money paid to players who are no longer on the team – this is “bad” dead cap. It represents a failure to properly evaluate a player and structure an appropriate contract. When Landon Collins was released by Washington, he had a lot of guaranteed money left on his contract, and that money was paid to him after he had been released and was no longer playing in burgundy & gold. That was a very bad use of cap resources.

Unprorated signing bonus paid to players who are no longer on the team — this is “good” dead cap, and it includes cap hits carried in void years. This kind of dead cap is just an accounting entry. The money was paid to the player back when he signed the contract; the cash went into the player’s bank account years ago. All we’re doing now is making a general ledger entry in the accounting system. This kind of dead cap hit is planned by the team when the contract is signed, and is always accounted for by the salary cap manager. If it was called “unprorated signing bonus”, no NFL fan would even care about it. The problem is that it got mislabeled as ‘dead cap’ many years ago, so fans who aren’t CPAs tend to react to the label and get unhappy when they see a lot of it next to their favorite team’s name.

Bad dead cap (guaranteed money) takes away from the team’s ability to build the roster because the money (cash and cap) is being paid to a guy who isn’t on the roster (and may be playing for another team). A current high-profile example of this kind of bad dead cap is the $39m in guaranteed money that Russell Wilson is due from the Broncos this season. That represents money that Denver can’t use to add other players to their roster.

Good dead cap (unprorated signing bonus) is just a matter of timing. The player got paid years ago, but the money is being charged to the cap now. Back in 2021, Curtis Samuel got cash payments of $13.4m from the Washington Football Team, but his cap hit was only $3.8m that season. That allowed the team to use nearly $9m difference between cash payment and cap hit to sign other players that year and in the two years that followed. Now, $4.8m of that cap savings is being charged to the 2024 salary cap. It feels like that should be a bad thing, but Bobby Gould’s article tells us that these 2024 cap dollars are worth only 70% of the 2021 cap dollars that they replaced. Moreover, the team has used the same contract device to lower the ‘24 salary cap by $6m, pushing cap hits out to future years. Washington is actively taking advantage of the time value of cap space that Bobby Gould discussed in his article two years ago.

A footnote: April 1st trigger date

In an abrupt change of topic, I want to compare the contract notes from Daron Payne’s 2023 free agent contract and Dorrance Armstrong’s 2024 free agent contract:

Daron Payne:

If on the roster on the 3rd day of the league year in 2024 Payne will receive an additional $1 million of guarantees in 2024 and $9 million of his 2025 base salary will be fully guaranteed. If on the roster on the 3rd day of the 2025 league year, another $4 million is fully guaranteed.

Dorrance Armstrong:

If on the roster on April 1 of 2025 Armstrong’s 2025 salary will be fully guaranteed.

Obviously, the front office of every team faces critical roster decisions every year. This year, for example, the new league year began on March 13th. On March 16th (the 3rd day of the 2024 league year) Daron Payne got an extra $10m in guarantees. This probably wasn’t a tough call, but for a different player or a different situation the decision could have been quite critical. This year, for example, if Russell Wilson had been on the Broncos roster on the 5th day of the league year (18 March), his 2025 salary would have become guaranteed, which created some urgency for the team to make a decision about him before that date.

Next year, both Payne and Armstrong will secure added guaranteed money by simply being on the roster; however, Payne’s money gets locked in in mid-March, while Armstrong’s money doesn’t get locked in until April 1st.

The advantage of this change, from the team’s standpoint, should be obvious. If the team is in any doubt about the player’s future with the team, then the April 1st date allows the GM to get all the way through the first wave of free agency and still have time to make a decision before veteran offseason workout programs begin.

Contrast this to the language in Daron Payne’s contract, in which a decision has to be made while the front office is in the midst of its most hectic week of the year as it negotiates with free agents. In fact, only three days into free agency, the GM may not yet be sure about the current player’s future with the team.

This small change that involves moving the contract trigger date back about 2 weeks is subtle but smart contract management. I’ve read that this is a practice that Peters brought from San Francisco. It seems almost insignificant before you stop and think about it, but when you realize the impact it can have on the timing and urgency of multi-million-dollar decisions, you realize that this small break from NFL convention is pretty damned smart.

What lies ahead?

Over the Cap currently projects the Commanders to have about $100m in cap space available in 2025, once again making many fans giddy with the possibilities.

Of course that number is for a roster of only 30 players currently under contract for ‘25. Adam Peters’ heavy reliance on one-year contracts for this year’s free agent signings means that the Commanders will have the opportunity to re-make the roster again next year.

We can’t forget that the team will be adding nine draft picks to the roster in about a month. If all 9 make the team and stick to the roster in 2025, they will reduce that $100m in estimated ‘25 cap space by around $21.67m, dropping the available cap space to around $78m for a roster of 39 players.

Projections of the 2025 cap will, of course, be highly fluid as such projections are every year. The point is not to project the cap space that will be available, which is a fruitless effort at this point in the year, but to say that the roster that Adam Peters is in the midst of assembling for 2024 is really just a bridge to 2025 and beyond. The foundation is being laid right now, but roster construction will truly begin with this year’s draft and continue in a major way for at least one or two more offseasons. The team’s approach to cap management is a major element of the success or failure of the roster-building efforts.

It should be fun to watch.