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Miami Dolphins Offseason Cap Space: Calculations and Why the Date of June 1st Matters

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A quick update of what's known about the Dolphins' 2013 cap space situation as we wait on the decision of Jake Long and other free agents.... UPDATED: After Dustin Keller signing

Ireland is being tricky with his contracts so far....
Ireland is being tricky with his contracts so far....
Steve Mitchell-US PRESSWIRE

A couple of days ago, I went over our 2013 roster in an article, "Roster Snapshot after Day 1 of Free Agency", using numbers coming from initial media reports, and came to the conclusion that based on rough estimates of what the year 1 cap hits of our 2013 free agent class so far, the Dolphins were left with roughly $23 million in cap space.

Now that the dust has settled a bit, there are 3 topics I thought should be discussed to help explain our 2013 salary cap situation.

1. During the offseason, only the 51 players with the highest cap hits count against the salary cap.

The reason behind that rule is straightforward: teams are allowed to have up to a 90-man roster in the offseason.

If all 90 contracts counted against the $123 million salary cap, that would make it almost impossible for teams to sign 90 players yet remain under the cap during the offseason. Instead of counting all 90 contracts, the NFL only counts the top-51 contracts to allow teams to sign a lot of guys on "try-out" contracts, meaning very little money is guaranteed.

So basically, as long as our top-51 salary cap hits add up to less than the salary cap, we could then sign 39 players to cheap deals without going over the cap. That's why in these calculations, I refer to only counting the top-51 cap hits. Once the regular season is about to start, and rosters are trimmed down to 53 players, all cap hits count against the cap.

2. Since I wrote my article, it was revealed that Jeff Ireland did all he could to minimize the 2013 salary cap hits.

To the surprise of many, Jeff Ireland managed to make the cap hits of our Day 1 free agent signings very, very low in 2013. How low? As detailed by Mike Florio of ProFootball Talk in this article,

From receiver Brian Hartline ($2.15 million of a five-year, $30.775 million deal) to quarterback Matt Moore ($2.5 million of a two-year, $8 million deal) to receiver Mike Wallace ($3.25 million of a five-year, $60 million deal) to linebacker Dannell Ellerbe ($2.425 million of a five-year, $35 million deal) to linebacker Phillip Wheeler ($2.4 million of a five-year, $26 million deal), those five contracts account for a total of only $12.725 million in 2013 cap space.

So that's 5 free agents signed that only counted $12.7 million total against the 2013 salary cap - or $2.5 million per free agent.

However, there's a downside to this strategy. As Florio explains...

Next year, with Hartline’s number going to $6.2 million, Moore’s moving to $5.5 million, Wallace’s skyrocketing to $17.75 million, Ellerbe’s inflating to $7.425 million, and Wheeler’s growing to $6.4 million, the combined cap numbers for the same five players become $43.275 million.

In other words, it costs $30 million more in 2014 cap space to keep those same 5 free agents next year. That's not a terrible thing since the team can deal with those larger cap hits in 2 ways.

First, team can restructure their deals by converting their salaries into bonuses that have cap hits that are pro-rated over however many years they remain on the team. For example, Mike Wallace's salary could be converted into a bonus that is paid to Wallace immediately, but instead of the entire "salary" counting against the 2014 salary cap, the "bonus" is spaced out evenly over several years. Wallace gets all the money he was promised immediately, yet the team gains salary cap space without a paycut required.

Sounds too good to be true? Well, the downside to restructuring players' contracts and converting salaries into bonuses is that it increases the potential dead-money cap hits that result from cutting players. If the team spaces out that $17 million over the length of Wallace's deal, that's cap friendly if Wallace stays on the team for several years. However, if the team wants to cut Wallace early in his deal for whatever reason, whatever salary cap hits remain from the pro-rated bonus all count against the cap the year Wallace is cut if he's released before June 1st (more on that later).

The benefit of accepting large cap hits early in a contract is that it lowers the cap hits later if the player is cut, so by pushing cap hits into the future, it makes the dead-money cap hit of cutting Wallace and other free agents even higher. The risk of that happening is small since most of the players Ireland has signed are young and therefore should be expected to remain on the team for several years, but that is the risk teams take on by pushing cap hits to the future through restructurings.

The other option for the team to get room in 2014 is to roll-over a significant portion of our 2013 salary cap if we don't spend it all this year. It's a situation to be mindful of given that our 2014 class of free agents includes players like Randy Starks (currently on a 1 year franchise tag), Paul Soliai, Reshad Jones, Chris Clemons, Koa Misi, Ritchie Incognito, John Jerry, and Davone Bess.

So you shouldn't be worried about the 2014 salary cap situation, since the team has 2 ways of coping with the large increases in cap hits, but you should be aware that contract restructures could be required prior to us re-signing some of our impending free agents next year.

3. Some of you may recall that after news broke that the year-1 cap hits of our free agent signings were very small, I (MartinH04) excitedly posted that the Dolphins must have $30 million in cap space - up from my previous estimate of $23 million in my article. It turns out, that estimate was correct...but only if it were June 1st, not March 14.

After I wrote that article, we learned that not only had Ireland done a great job in keeping the 2013 salary cap hits low, but Ireland had also decided to designate Karlos Dansby and Kevin Burnett as "Post-June 1st" releases. That means they technically count against our salary cap until June 1st, at which point they come off the books. So where does that leave our cap space right now?

Total Players Under Contract for 2013: 59 (including players likely competing for practice squad spots plus Dansby and Burnett, who still count against the cap due to being designated "Post-June 1st releases")

Total Cap Commitments in 2013: Roughly $110.73 million + Dead Money

Dead money from cut players: $3.19 million

Cap Space Remaining: $123 million in 2013 cap + $5.3 million in 2012 cap rollover - Dead Money - Value of top-51 highest cap values =

= $123 million + $5.3 million - $3.19 million - $107.58m million = $17.25 million (Updated to include Dustin Keller)

That's basically the same as my estimate from 2 days ago, excluding the amount used to sign Keller, despite the fact that the free agents we signed had lower than expected year 1 cap hits, since both Dansby and Burnett still count against our cap. After June 1st, however, assuming no signings are made between now and then, our cap situation improves.

Total Players Under Contract for 2013: 57 (no longer including Dansby and Burnett)

Total Cap Commitments in 2013: Roughly $96.56 million + Dead Money

Dead money from cut players: $5.67 million

Cap Space Remaining: $123 million in 2013 cap + $5.3 million in 2012 cap rollover - Dead Money - Value of top-51 highest cap values =

$123 million + $5.3 million - $5.67 million - $94.13 million = $28.50 million as of 6/1/2013, updated to include Dustin Keller's contract

So the decision to designate Dansby and Burnett as "Post-June 1st releases" temporarily "deprives" the team of 2013 cap space, since Dansby and Burnett still count against our cap, but after June 1st, $10+ million in cap room is freed up.

The reason why teams do this is because if a player is released after June 1, only the yearly pro-rated bonus will count this year in as a dead-money cap hit, and the remainder of that pro-rated bonus will count as a dead-money cap hit the next year. Since Burnett and Dansby had 2 years left on their deals, rather than count the full $4.8 million in dead money from cutting Dansby and Burnett against the 2013 salary cap, the cap hit is spread out over 2 years, so more cap space is freed up in 2013 (after June 1st) compared to releasing the two linebackers immediately.

Ireland willingly gave himself around $9 million less in cap space that comes from cutting the linebackers until June. In exchange for temporarily sacrificing $9 million in cap space until June, he regains that $9 million in cap space plus $2 million "extra" in cap space from June till the end of the regular season due to only taking on half of the dead-money cap hits that come from cutting the linebackers.

And that's why, right now, the team has just over $17 million in cap space, after signing Keller, but if it were June 2nd, we'd have over $28 million in cap space. Good stuff.