A CBA Math Problem

[Guiness]

I wasn't asking what was being asked on this board but rather what the owners are actually claiming.

sry. The infamous dept of 'they'

[Smidgeon]

sry. The infamous dept of 'they'

Good point. Sorry about my vague reference to "they".

[retailguy]

Look back to the question - posted most clearly in the 9th post of this thread - we're talking about player costs vs revenue.

I've read through this thread and everyone assumes that "player costs" = Salaries covered under CBA. I'm not convinced that is what "player costs" actually means. There are all kinds of player costs that wouldn't be covered under salaries. Medical costs, travel, weight room, supplements, and food immediately come to mind. I'm certain there are others, and I've probably missed some big ones too.

Those costs would be both variable, and not related to the 59.6%. Interpreting this way allows Murphy's point to stand as true and gives credence to the overall point that costs are raising faster than revenues. I have no hard facts to back up my theory, what are your thoughts?

[sharpe1027]

RG, brings up an interesting twist. Murphy's statement would be somewhat misleading and certainly open to an number of interpretations. What does that term "player costs" even mean? So many expenses could theoretically be classified as a "player expense." Grounds keeping? Yep, it is an expense to avoid injuries and to allow the players to play their best. New team bus? Player expense. etc...

Also, the nature of the "expense credit" presents an interesting dynamic. Wouldn't all teams have an incentive to maximizes their expenses up to the limit? Thus, the owners complain about rising costs, while they have little incentive to reduce the costs unless they exceed the expense credit limits.

[Patler]

These are all defined terms:

“Player Costs” means the total Salaries and Benefits attributable to a League Year for all NFL Teams under all of the rules set forth in Article XXIV (Guaranteed League-wide Salary, Salary Cap & Minimum Team Salary), but not including loans, loan guarantees, unpaid grievances attributions, and unearned incentives.

(b) Benefits. “Benefits” and “Player Benefit Costs” mean the aggregate for a League Year of all sums paid (or to be paid on a proper accrual basis for a League Year) by the NFL and all NFL Teams for, to, or on behalf of present or former NFL players, but only for:
(i) Pension funding, including the Bert Bell/Pete Rozelle NFL Player Retirement Plan (as described in Article XLVII) and the Second Career Savings Plan (as described in Article XLVIII);
(ii) Group insurance programs, including, life, medical, and dental coverage (as described in Article
XLIX or as required by law), and the Supplemental Disability Plan (as described in Article LI);
(iii) Injury protection (as described in Article XII);
(iv) Workers’ compensation, payroll, unemployment compensation, social security taxes, and contributions to the fund described in Article LIV, Section 4 below;
(v) Preseason per diem amounts (as described in Sections 3 and 4 of Article XXXVII) and regular season meal allowances (as described in Article XXXIX);
(vi) Expenses for travel, board and lodging for a player participating in an off-season workout program in accordance with Section 7(e)(iv)(3) below;
(vii) Payments or reimbursements made to players participating in a Club’s Rookie Orientation Program (as described in Section 4(n) of Article XVII);
(viii) Moving and travel expenses (as described in Sections 2, 3, and 4 of Article XLI, and Section 8 of Article XXXVII);
(ix) Postseason pay (as described in Article XLII and Article XLIII); and salary paid to practice squad players pursuant to a practice squad contract during the postseason, unless the practice squad player contract is executed or renegotiated after December 1 for more than the minimum practice squad salary, in which case all salary paid to such a practice squad player during the postseason will be counted as Salary.
(x) Player medical costs (i.e., fees to doctors, hospitals, and other health care providers, and the drugs and other medical cost of supplies, for the treatment of player injuries), but not including salaries of trainers or other Team personnel, or the cost of Team medical or training equipment (in addition, the amount of player medical costs included in Benefits may not increase by more than ten percent (10%) each League Year). Subject to the foregoing, Player medical costs shall include one-third of each Club’s expenses for tape used on players and one-third of each Club’s player physical examination costs for signed players (player physical examination costs relating to the Combine or for Free Agents whom the Club does not sign are not included in Player Benefit Costs);
(xi) Severance pay (as described in Article L);
(xii) The Player Annuity Program (as described in Article XLVIII-A);
(xiii) The Minimum Salary Benefit (as described in Article XXXVIII-A);
(xiv) The Performance Based Pool (as described in Article XXXVIII-B);
(xv) The Tuition Assistance Plan (as described in Article XLVIII-B);
(xvi) The NFL Players Health Reimbursement Account (as described in Article ____);
(xvii) The “88 Benefit” for former players suffering from dementia (as described in Article ____); and
(xviii) The NFL Player Benefits Committee (as described in Article ____).
Without limitation on any other provision of this Agreement, Benefits will not include (1) salary reduction contributions elected by a player to the Second Career Savings Plan described in Article XLVIII; (2) any tax imposed on the NFL or NFL Clubs pursuant to section 4972 of the Internal Revenue Code for the Bert Bell/Pete Rozelle NFL Player Retirement Plan, and (3) attorneys’ fees, costs, or other legal expenses incurred by Clubs in connection with workers’ compensation claims of players. Benefits for a League Year will be determined by adding together all payments made and amounts properly accrued by or on behalf of the NFL and all NFL Clubs for the above purposes during that League Year, except that Benefits for pension funding and the Second Career Savings Plan will be deemed to be made in a League Year for purposes of this Article if made in the Plan Year beginning in the same calendar year as the beginning of such League Year.

(c) Salary.
(i) “Salary” means the compensation in money, property, investments, loans or anything else of value to which an NFL player (including Rookie and Veteran players and players whose contracts have been terminated) or his Player Affiliate is entitled in accordance with a Player Contract, but not including Benefits. Salary with respect to any period shall include all Salary actually payable with respect to such period under the terms of a Player Contract and all Salary attributable to such period under the terms of this Agreement.
(ii) A player’s Salary shall also include any and all consideration received by the player or his Player Affiliate, even if such consideration is ostensibly paid to the player for services other than football playing services, if the NFL can demonstrate before the Impartial Arbitrator that the consideration paid to the player or Player Affiliate for such nonfootball services does not represent a reasonable approximation of the fair market value of such services as performed by such player. The Impartial Arbitrator’s determination may take into account, among other things: (1) any actual dollar amounts the player or Player Affiliate received for similar nonfootball playing services from an independent third party; and (2) the percentage of total compensation for nonfootball services received from third parties versus the Team or Team Affiliate.
(iii) For purposes of this Article, Salary shall be computed pursuant to the additional rules below.

[Guiness]

These are all defined terms:

Ouch. Looking at that is a lot like work.

Skimming the text, it seems obvious that costs include a lot more than salary, the extras being sometimes called 'soft costs.' With a regular employee, those can often account for 30% or more of their salary, I'm no sure the same holds true when someone is making $1million/year.

However, Pbmax's post said that the salary cap includes player costs, not just salaries, so there is no need to consider them when determining if player costs are outstripping revenues - they're accounted for in the cap number.

[sharpe1027]

I think Guiness is right:

“Player Costs” means the total Salaries and Benefits attributable to a League Year for all NFL Teams under all of the rules set forth in Article XXIV (Guaranteed League-wide Salary, Salary Cap & Minimum Team Salary), but not including loans, loan guarantees, unpaid grievances attributions, and unearned incentives"

[sharpe1027]

AS to RG's point, if Murphy is using a term (player costs) straight out of the CBA, then it would be misleading to use it different than it is defined.

[Patler]

However, Pbmax's post said that the salary cap includes player costs, not just salaries, so there is no need to consider them when determining if player costs are outstripping revenues - they're accounted for in the cap number.

I'm not sure PBmax is correct about that. Benefits seem to be excluded from what the salary cap is in any year:

“Salary Cap” means the absolute maximum amount of Salary that each Club may pay or be obligated to pay or provide to players or Player Affiliates, or may pay or be obligated to pay to third parties at the request of and for the benefit of Players or Player Affiliates, at any time during a particular League Year, in accordance with the rules set forth in Article XXIV (Guaranteed League-wide Salary, Salary Cap & Minimum Team Salary), if applicable.

(a) Subject to the adjustments and credits set forth below, the amount of the Salary Cap for each NFL Team in years that it is in effect shall be (1) in the 2006 League Year, $102 million; (2) in the 2007 League Year, $109 million; (3) in the 2008 League Year, 57.5% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year; (4) in the 2009 League Year, 57.5% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year; (5) in the 2010 League Year, 58% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year; and (6) in the 2011 League Year, 58% of Projected Total Revenues, less League-wide Projected Benefits, divided by the number of Teams playing in the NFL during such year. Notwithstanding the preceding sentence or anything else in this Agreement, there shall be no Salary Cap in the Final League Year.

The actual dollar amount of the Salary Cap shall not be less than the actual dollar amount of any Salary Cap in effect during the preceding League Year, provided, however, that at no time shall the Projected Benefits, plus the amount of the Salary Cap multiplied by the number of Teams in the NFL, exceed 61.68% of Projected TR. See Appendix O.

This last section is interesting. Assuming that Murphy is correct, and Player Costs (Salary + Benefits) are increasing faster than revenues, the old CBA seemed to anticipate the problem and provide a limit at 61.68% of Total Revenue.

[Guiness]

This last section is interesting. Assuming that Murphy is correct, and Player Costs (Salary + Benefits) are increasing faster than revenues, the old CBA seemed to anticipate the problem and provide a limit at 61.68% of Total Revenue.

Yet another number, 61.68%. How does that figure in, and how does it relate to the 59.6% number we always hear? Does this imply that the benefits portion is the 'extra' 2.08%?

[sharpe1027]

The way I read it is that the 61% is in place because the dollar amount of the cap cannot be less than a previous year (subject to a maximum of 61%). The projected player benefits are still included in the player costs and therefore are part of the salary cap figure.

[Patler]

The way I read it is that the 61% is in place because the dollar amount of the cap cannot be less than a previous year (subject to a maximum of 61%). The projected player benefits are still included in the player costs and therefore are part of the salary cap figure.

If you follow the definitions through, "Salary Cap" includes "Salary" which specifically excludes "Benefits". The annual definitions for the calculation of the "Salary Cap" also excludes "Benefits".

What makes you say that player benefits are part of the cap figure?

[sharpe1027]

If in any League Year the total Player Costs for all NFL Teams
equals or exceeds 56.074% of actual Total Revenues

“Player Costs” means the total Salaries and Benefits attributable
to a League Year for all NFL Teams under all of the rules set forth in Article
XXIV

Therefore, it seems that the cap is based upon the player costs, which includes benefits. Now, the individual term "Salary" might exclude benefits, but that does not necessarily mean that the Salary Cap excludes them.

What is the context of the exclusion you are referencing? There are so many different uses of the terms that it is confusing.

[Patler]

Therefore, it seems that the cap is based upon the player costs, which includes benefits. Now, the individual term "Salary" might exclude benefits, but that does not necessarily mean that the Salary Cap excludes them.

What is the context of the exclusion you are referencing? There are so many different uses of the terms that it is confusing.

Copied from the CBA:

“Salary Cap” means the absolute maximum amount of Salary that each Club may pay

“Salary” means the compensation in money, property, investments, loans or anything else of value to which an NFL player (including Rookie and Veteran players and players whose contracts have been terminated) or his Player Affiliate is entitled in accordance with a Player Contract, but not including Benefits.

"Salary" does not include "Benefits". "Salary Cap" is the maximum "Salary" a club can pay. Therefore, "Salary Cap" does not include "Benefits".

[sharpe1027]

Copied from the CBA:

"Salary" does not include "Benefits". "Salary Cap" is the maximum "Salary" a club can pay. Therefore, "Salary Cap" does not include "Benefits".

I see your point. The Salary Cap does not appear to include benefits; however, there are separate limitations and trigger points (minimums and maximums) regarding "player costs," which do include benefits.