The Mechanics Behind the Magic of the Chiefs' High-Dollar Offseason
The Kanas City Chiefs were able and willing to sign Patrick Mahomes, Chris Jones, and Travis Kelce to big-money extensions this offseason. This feat surprised many within the NFL community who couldn't help but wonder how general manager Brett Veach and the team pulled off their trio of deals.
There seem to be two major contributing factors to explain how Veach and the Chiefs managed to sign the three players in question without sinking their future.
1) Players were fine taking less money.
2) The Chiefs employed creative contract structures because players took less money.
Make no mistake, the Chiefs could not have done what they did without the players making some concessions. The culture in Kansas City, the players involved, and the people in charge all made this happen and let Brett Veach work with the players to get contracts inked that were more team-friendly.
These team-friendly deals manifested in an interesting way that is rarely seen in NFL contracts. Veach and Brandt Tillis, the Chiefs' salary cap analyst, were able to build contracts off of roster bonuses as the primary guaranteed-money mechanism in all three contracts. This has given the Chiefs luxuries other teams do not have with their big-ticket contracts. How does it help? Let's break it down.
Little to No Signing Bonuses
The total value of Mahomes, Jones, and Kelce's contracts combine for a total of $587 million. Only $10 million of that is signing bonus money.
It is very rare for superstars to not get signing bonuses on their new contracts in today’s NFL. Players want these signing bonuses because they are due this money pretty much as soon as possible. Who wouldn’t want $20 million deposited into their bank account right away?
I discussed signing bonuses previously in my Art of NFL Contracts series, and I went over another aspect of why signing bonuses are sought after by players: security. Signing bonuses are fully guaranteed money the team has to pay to the player, but the team can spread out the cap hits of this money over five years of the salary cap. If the player is cut before the end of their deal, the team has to pay the remaining signing bonus money in that year as dead salary cap. This, coupled with an upfront payment of the signing bonus, is why players almost always push for the max signing bonus they can get.
The Chiefs specifically could not afford to sign all three players this year if all of them requested large signing bonuses. Due to all three contracts being extensions, any new signing bonus would be added to the players' contract this year. For example, if Mahomes had asked for an $80 million signing bonus, then his salary cap hit would’ve gone up by $16 million this year. The Chiefs don’t even have $16 million in salary cap space. It was just not feasible.
So when Mahomes, Jones, and Kelce combined for $10 million in signing bonuses, it says a lot about those three players and their commitment to the Chiefs. They passed up on this upfront payment and the long-term security to leave the Chiefs in a better place financially. These players sought guaranteed money elsewhere, however, and Brett Veach obliged.
Why Roster Bonuses?
Roster bonuses were a logical middle ground for the Chiefs and the players they were negotiating with.
Teams, generally, have three main avenues of giving money to a player: signing bonuses, roster bonuses, and base salary. These are the three ways players usually receive the bulk of their contract earnings.
The main difference between these three avenues is when the player gets paid.
I went over these three concepts in Part 1 of my Art of NFL Contracts series but the shortened version is this:
Signing bonuses are paid shortly after signing a contract.
Roster bonuses are paid at a certain date for being on the roster.
Base salary is paid for being on the roster during the year.
The key mechanism to focus on is that in any given year, roster bonuses are paid before the base salary. While the Chiefs could have guaranteed the base salaries of Mahomes, Jones, and Kelce, doing it through roster bonuses gives the players money several months earlier every year. In the case of Mahomes and Jones, their roster bonuses are guaranteed a year or even two years in advance, which provides security much like a signing bonus would. Kelce hasn’t had his full contract released, but there are rumors that his contract will also be structured this way.
It was a genius move to try and meet in a middle ground with roster bonuses, and that let the Chiefs keep the first few years of each player's contract as low as they could. However, the true genius of doing this ties these roster bonuses in with the length of the contracts.
Contract Length, and Why it Matters
With total contract lengths of 12 years, six years and four years, the contracts newly inked by Mahomes, Kelce, and Jones are not short.
The length of these deals is the main reason why these contracts offer the Chiefs fantastic flexibility going forward, letting the Chiefs move money around with ease.
The general concept of restructuring contracts was talked about in The Art of NFL Contracts Part 4. However, Mahomes' contract can especially utilize this concept due to how long the deal is.
Whenever a team turns base salary or roster bonus money into a signing bonus, that money is then spread across a maximum of five years and becomes fully guaranteed. Almost all NFL contracts are not longer than seven years, so in most NFL contracts, the years for the maximum spread of this restructure quickly disappear.
However, Mahomes' contract offers the Chiefs a unique opportunity. The next seven years offer the Chiefs a maximum of five years to spread out any restructures done to Mahomes' deal. This is almost unheard of. As of now, Mahomes' deal can act as a quasi-loan for the Chiefs, offering the Chiefs easily accessible money to create cap space if needed. For example, if the Chiefs restructure the entirety of Mahomes’ $21.72 million roster bonus in 2021, they immediately create $17.38 million in salary cap space.
It is probably not advisable to restructure all of Mahomes’ roster bonus every year, as this would make later years in Mahomes' deal obscenely expensive. However, the fact the Chiefs have the option every year gives them a unique way to create salary cap space.
To a lesser extent, Kelce and Jones’ contracts can also be manipulated like Mahomes’ deal. Neither of the two players contracts has a signing bonus, so neither has long-term cap commitments. The Chiefs under Brett Veach have shown a propensity to restructure player contracts, as they showed most notably with Frank Clark and Anthony Hitchens. The precedent is there to dip into Kelce and Jones’ contracts in the future and restructure them to make salary cap room. This cap room might be needed if the salary cap does drop to $175 million next year.
Despite the uncertain future of the NFL salary cap, the Chiefs were smart in locking Mahomes, Jones, and Kelce into their deals when they did. Their contracts, while totaling a lot of money, actually left cash on the table and were team-friendly in ways the Chiefs needed. Their contracts will let the Chiefs move money around easily, depending on what money they need and when they need it, which will be very important with the future of the salary cap in question. The culture the Chiefs built, a culture where players are willing to leave some money and financial stability on the table to better the team, led to this outcome and gives the Chiefs an incredibly unique advantage. It’s a credit to all involved that the Chiefs are in this position, and it’s time for Brett Veach to continue to do his magic with this unprecedented flexibility.
