As the Winter of Peyton continues with an expected divorce from the Colts (irreconcilable differences?), I have received scores of questions about the financial ramifications of such a move to the Colts. I will try to answer these both from a cash perspective and by pulling down the curtain on the closely guarded mechanics of the Salary Cap. Stay with me here...
Cash
As discussed previously, releasing Manning represents a significant and dramatic cash savings to the Colts. Were the option exercised, the team would be required to pay Manning a $28 million option payment plus a $7.4 million salary, for a total of $35.4 million in 2012. That, combined with the $26.4 million he received in 2011, would mean a combined $61.8 million over two seasons.
Salaries of $8.4, $9.4 and $10.4 million in 2013, 2014, and 2015 follow this year's salary, although none of these amounts are guaranteed.
Were Manning to be terminated -- his contract, not him -- all of these numbers would be deleted from the Colts' ledgers.
Thus, on a cash basis, the Colts would save $35.4 million in 2012 and $63.6 million over the next four years. And, as the Colts plan for the future, approximately $15 million of the 2012 savings and $23 million of the four-year savings will be allocated to the presumed top pick in the Draft, Andrew Luck.
Again, if somehow, contrary to all indications, the Colts exercise the option on Manning and draft Luck, the combined cash to the two players -- who play the same position -- would be close to $51 million paid in 2012. Paying $51 million for two players at the same position, only one of which will play, is untenable.
Cap
The Cap consequences to a Manning release are a bit more complicated.
One of the main features of Manning's contract when it was negotiated in July was a $20 million signing bonus at its inception. As per the NFL Salary Cap -- unchanged in the new CBA -- signing bonuses are prorated over the length of the contract. Thus, the Cap charge for Manning's signing bonus -- before adding any salary -- is $4 million per year every year from 2011-2015.
Remaining signing bonus proration accelerates upon release of a player. Thus, were Manning released, the entire remaining unamortized bonus -- $16 million -- would accelerate into the 2012 Cap. This charge is commonly referred to as "dead money": amounts on a team's Cap for players no longer on the roster.
During my nine years in Green Bay, I was always conscious of making sure that when our Peyton Manning -- Brett Favre -- either retired or was traded (releasing him was never a thought), the Cap acceleration of his contract would not cripple the team. There are graveyards of dead money charges above $10 million upon the retirements/releases/trades of players such as John Elway, Steve Young, Troy Aikman, Jeff Garcia, Mark Brunell, Steve McNair, etc. Favre's "dead money" charge to the Packers' Cap upon being traded to the Jets was $600,000
The Option Treatment
The Cap treatment of the option bonus, due to its timing, is rather unique. Since it is due and payable within the 2011 League Year -- the March 8th deadline precedes the March 13th 2012 League Year opening -- the option amount is prorated into 2011 as well as future years of the contract. Thus, $5.6 million - 1/5th of the $28 million option bonus -- was allocated as a Cap charge in every year of the original contract.
In the event Manning is released, the Cap charges for the option will come off the books, meaning the $5.6 million charge for 2012 will be deleted and the $5.6 million option proration amount in 2011 will then become a credit to the 2012 Cap, reducing the Colts' Cap charge on Manning by that amount.
Manning's Cap charge, if somehow the Colts exercise the option and keep him, is the following: $4 million (the amount of prorated signing bonus) PLUS $5.6 million (the amount of prorated option bonus) PLUS $7.4 million (the amount of salary) EQUALS $17 million.
So what is Manning's 2012 Cap charge to the Colts if released?
$16 million (the amount of accelerated bonus proration) MINUS $5.6 million (the amount of credited option bonus proration) EQUALS $10.4 million.
Thus, if the Colts move on from Manning, the consequences of the contract signed five months ago will be $26.4 million in cash and $10.4 million in leftover "dead money" Cap charges.
The drama continues. Stay tuned.
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However, I have been extremely disappointed with Irsay's actions and obvious lack of respect for Manning. Take Peyton Manning away and what would the Colts be best remembered for? Sneaking out of Baltimore in the middle of the night in their Mayflower moving vans. Manning brought the Colts a Super Bowl, millions of fans, tens of millions of dollars in ticket sales and hundreds of millions of dollars in merchandise sales. There is absolutely no doubt that the Colts made much, much more money off Peyton than they have paid him over the years, even including these bonuses and his existing contract. In that light, Irsay is pretty much dumping the player whom almost every fan under the age of forty identifies as the personification of the Colts (the older fans probably remember Unitas more), and I see that as a classless move. Necessary to free up space under the cap? No, not necessary. Extremely helpful, but not necessary. Irsay has lost all my respect for how he's let this drag out and for how he's left Manning hanging.
The nerve changed everything. I don't believe that he will be able to play effectively, and I don't believe that the Colts will pay him anywhere near that sort of money to stick around. His absence is almost certainly a reality.
That said, there's something very exciting in the flurry of changes. If you're going to lose arguably the best to ever play the position, at least have Andrew Luck waiting in the wings...along with one of the top picks in each round of the draft...and cash to spend.
Manning has 2 maybe 3 years left and he wants to win.
It makes no sense for him to stay in Indy. And he wont.
That sentence pretty much sums up why Manning must be released. The Colts need help at a number of positions. They need cap room to add talent. Maxing out the cap on two QBs would be irresponsible of management.