Great question today from reader Helge:
Do you guys believe the Broncos should restructure Manning's contract by converting his base salary to bonuses, and push that money into future years (by adding some dummy years at the end of his current contract)?
One downside would be a big dead money hit when Manning retires, but at that point, the next QB would presumably be relatively cheap.
Helge, it's certainly an option, but one that John Elway & Co. have likely been trying to avoid. Since Elway took over, they've done a great job of not dispersing large piles of Pat Bowlen's cash at any one time, and not mortgaging future cap space for anyone - not even the greatest free agent in history.
So many franchises during the cap era have been undone by pushing cap hits off into the future. Eventually, you have to pay the cap piper, and that's when things can get ugly.
Let's explain what Helge means by a restructuring:
Once Denver picks up its option on Peyton, he'll be due a $20M guaranteed salary in each of the 2013 and 2014 seasons.
The accounting on this is as simple as it gets, because there's no signing bonus to deal with. In 2013, he'll make $20M in salary, and his cap hit will be $20M. The same goes for 2014. There's no cap exposure from that $40M beyond 2014.
This would change if the Broncos were to convert any amount of Manning's salary to a signing bonus.
Manning's deal runs through 2016, so any amount (let's say $12M to keep our numbers round) would be spread over the four years from 2013 to 2016 in terms of the cap ($3M per year).
Denver would need to have the cash available to pay Manning the $12M bonus at the time of the restructure, and then the remaining $8M salary would be paid out evenly over the 17 weeks of the regular season.
Peyton's new cap number for 2013 would be $11M ($8M salary + $3M proration of bonus), providing the team with $9M more room to work with in 2013, while adding $3M to each of the team's 2014-2016 caps.
Sounds great, right? Well, it depends.
If Manning were to retire in a year, the rest of that $9M proration would be accelerated to the 2014 cap and be treated as dead money. Were he to call it quits in two years, then we're talking an acceleration of $6M to the 2015 cap.
Let's say you restructure Manning to help you sign a big free agent, perhaps Wes Welker. Next thing you know, someone gets hurt and needs to be replaced, or you want to add a June 1 cap casualty from another team.
Suddenly you need more room, and so you restructure Elvis Dumervil's deal, or Champ Bailey's.
The point is, things start to snowball, and then you run the risk of piling up a bunch of dead cap money in 2014 or 2015.
This is particularly worth avoiding for the Broncos not only because it's clearly what Elway & Co. have tried to avoid, but the team has a slew of young talent that will be due for hefty raises in the next year or two.
Restructuring Manning, or Dumervil, or Bailey, could potentially result in the team not having enough room to keep a young core player.
After the 2013 season, Von Miller will be eligible for a renegotation, and if his career continues on its current trajectory, we'll be shocked if in 2014 he's playing for the $3.24M he's currently due to make.
Barring injury, Von is going to command one of the richest non-quarterback contracts in the league, somewhere north of $50M in guarantees.
Could the Broncos avoid such a payday? Indeed, they could. They will have a 2015 option on him which they'd have to elect a year from now, and then they could use their franchise tag on him in 2016 and 2017.
But when you have a player of Von's talents, you're best served by keeping him happy, and going that latter route doesn't seem the Broncos/Bowlen/Elway way (sorry about that).
If you don't do right by Von, his unhappiness could infect the locker room, and also make Denver a less attractive team for free agents.
It's not just Von - Eric Decker, Wesley Woodyard, Zane Beadles, and J.D. Walton will be unrestricted free agents in a year, while Demaryius Thomas, Orlando Franklin, Chris Harris, Rahim Moore, Joel Dreessen, Jacob Tamme, and Trindon Holliday will follow a year later.
Many of these players - especially Decker, Thomas, Franklin, and Harris - will likely command big contracts in terms of both cash and cap.
Granted, just because you potentially rework Peyton's deal, doesn't mean you automatically fall into a fateful habit of pushing off cap bills into the future. The Broncos could, in theory, renegotiate with Peyton and stop there. Things don't have to snowball in the way we laid out above.
What I would suggest, is that the team reserve such a tactic in their back pocket, in case they need to sign that one last guy to round out the squad. Renegotiate as a last resort, rather than do so proactively just to create more cap room.
But remember - there's always a place to upgrade, and plenty of free agents out there to improve the team.
Whether the Broncos, Bowlen, and Elway have the discipline to stick with their cap-conscious plan remains to be seen - especially as they enter their first offseason from the vantage of Super Bowl favorites.
Thanks so much for the question, Helge, and as always, feel free to hit us up with more great queries.