How the 49ers get Javon Hargrave and Sam Darnold creatively below the salary cap – The Athletic

The question posed to 49ers general manager John Lynch at the NFL Scouting Combine was relatively straightforward.

With their internal passing rush struggling, will the 49ers consider a big investment in defensive tackle in 2022?

“We will always focus on the quality of the player and the quantity,” Lynch replied. “But I think part of that has to come from player development. … You’d love to add a cornerstone for five years, but D-Line — that’s usually what happens when you pick second place and you get a guy like (Nick) Bosa or you’re paying over your ears, you know? So we have to be creative and come up with other ways.”

Less than two weeks later, it became clear that Lynch was bluffing. On Monday, the 49ers showed off in the free-agent market, agreeing deals with Javon Hargrave, the best defensive tackle available. Hargrave’s new four-year deal is worth up to $84 million over four years.

GO DEEPER

The 49ers add Javon Hargrave as the NFL’s top defense gets even better

It turns out the 49ers are willing to pay over their ears to add a cornerstone to the D-line after all.

But technically there was some truth in Lynch’s words. He mentioned the 49ers’ need to be “creative,” and they’ve certainly found “other ways” to fit Hargrave and other signings — led by quarterback Sam Darnold — into a crowded salary-cap situation.

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The team’s work is far from done — the 49ers have almost no room for the 2023 salary cap at the moment — but they’ve made some surprising splashes, and their financial gymnastics to get to that point is worth documenting .

Let’s examine how the 49ers’ chief negotiator, Paraag Marathe, has made ends meet so far.

Hargrave’s Deal: Backloading on a grand scale

The star defensive tackle’s deal is worth $21 million annually, but only $6.6 million of that counts toward the 2023 cap.

How the hell did the 49ers do that? Details below are from Over The Cap. PRTD SB stands for “prorated signing bonus” and OTH BON stands for “other bonus” money.

Javon Hargrave Contract Breakdown (OTC)

*Fully guaranteed ($100,000 of 2024 “other bonus” money is also fully guaranteed)

Marathe managed this high backlog through the dual bonus mechanism, which he had most recently utilized to keep Fred Warner’s initial financial footprint affordable during the cap-constrained 2021 cycle. Typically, contract and option bonuses are paid out to players immediately, but are prorated over up to five years for cap purposes. The 49ers applied both types of bonuses to Hargrave’s contract to maximize short-term savings.

The prorated signing bonus bills (totaling $23 million, the full amount of Hargrave’s signing bonus) are shaded blue above, while the prorated option bonus bills (totaling $6 million) are shaded green. Hargrave’s guaranteed option bonus doesn’t take effect until 2024, allowing the 49ers to dodge cap damage in 2023, when space is at its most precious.

The 49ers also have two contestable years tacked to the end of Hargrave’s deal. The first, in 2027, allows for a full five-year signing bonus vesting. The second, in 2028, will see a full five-year portion of the option bonus. Any portions of the bonuses written off beyond 2026 — a total of $7 million — are scheduled to be accelerated and capped as dead money in 2027 when the deal is voided.

Javon Hargrave’s deal brings in a $21 million AAV but a cap of just $6.6 million in the first year. (Bill Streicher / USA today)

We will discuss contestable years below as they have become important cap control tools in the ’49 contracts awarded during this cycle.

Hargrave’s 2023 base salary is the NFL veteran minimum of $1.17 million, which is acceptable for him since the $23 million signing bonus is paid out immediately. Defensive tackle base salaries will escalate in the years to come – especially in 2025 when bonus money is no longer planned.

So here’s the math: $1.17 million minimum base vet salary + $4.6 million prorated signing bonus + $750,000 total bonus money per game + $100,000 training bonus = $6.6 million salary cap for 2023 for Hargrave.

The deal includes guaranteed funds totaling $40 million, which the 49ers will pay out in full over the first two years of the contract. Their first possible escape from the contract comes in 2025, when cutting Hargrave would save the team about $8 million but still cost $18.6 million in dead money. But the 49ers don’t mind that risk, which of course comes with backloading deals, because they now need room to fit Hargrave.

Strong NLTBE incentives for Darnold

The surface terms of the quarterback’s contract — one-year, $4.5 million with $3.5 million guaranteed — are for the former No. 3 pick, who has played more than 49 in the five years of his rookie deal million US dollars, rather modest. And the 49ers needed them to make Darnold fit right into their tight cap situation.

Cancellation of Sam Darnold’s contract (OTC)

Darnold’s 2023 hit is just $3.9 million because a large chunk of his $1 million per game total is unlikely to be earned (NLTBE). Incentives are only considered likely to be earned (LTBE) if a player achieved them in the previous season, and since Darnold was injured and inactive for 59 percent of the 2022 season with Carolina, only 41 percent of his total squad bonus per game (approx. $412,000 ) is LTBE.

The formula for Darnold’s financial footprint: $2.45M base salary + $1M signing bonus + ~$412K LTBE roster bonus per game + $50K training bonus = Salary cap reached $3.9 million in 2023.

But it took more than that for the 49ers to get Darnold, who played the best football of his career in six games to wrap up the 2022 season, to sign with them. His contract also includes bonuses of up to $7 million based on game time, playoff qualification, QB wins and passer rating. The exact incentives aren’t public yet, but since they don’t count towards the cap, we can conclude it’s NLTBE since Darnold didn’t hit it last season.

Sam Darnold has $7 million in potential incentives in his one-year deal. (Nathan Ray Seebeck / USA Today)

Nonetheless, Darnold signed a deal with that pretty heavy incentive package that can push the value of his deal to $11.5 million for the season. That suggests he believes the grades are achievable. The 49ers will pay a cap on any NLTBE incentives in 2024 that Darnold could hit in 2023, but the team is certainly ok with that — Marathe’s main job was keeping the QB’s price down that year.

So a heavily NLTBE-incentive based deal for Darnold did the trick of being attractive enough for both Darnold and the 49ers thanks to the fact that so much of it bypassed the 2023 cap.

Pinch pennies in 2023 by maximizing empty years

As the 49ers push the salary cap lines, every dollar counts — and the team seems to have taken that focus to a new level this offseason.

All teams must be below the cap by the start of the new league year on Wednesday, and Hargrave’s money actually pushed the 49ers over the limit on Monday. So the 49ers reshuffled cornerback Charvarius Ward’s deal to go under again Tuesday morning.

Let’s sketch Marathe’s mechanism here. The 49ers reduced Ward’s 2023 base salary from his original amount of $13.5 million to his veteran minimum of $1.08 million. They had already added two invalid years to the original contract, but added another Tuesday in 2027 so they could maximize the prorated length of the ward’s newly converted $12.4 signing bonus.

Restructuring of the Municipality of Charvarius (OTC)

Ward now has two amortized signing bonuses hitting the 49ers’ books. The year in which only his original bonus hit was is shaded blue above. The year only for its new bonus to hit is shaded orange. The years when both of Ward’s bounty are scheduled to arrive are shaded green.

Proportions spread across the empty 2025-2027 years are expected to accelerate, to cap as a lump sum of $12.3 million in dead money in 2025 — unless the 49ers renew Ward before his contract expires after the 2024 season. If so, they’d be able to make Ward’s deal contestable in future years to keep at least some of the cap hits going forward — when, in theory, the team will have more room to spend (thanks to rising NFL revenue, which is the cap grown significantly over the past two years and is expected to continue growing).

Notably, the 49ers – for the first time – applied the same voidable year strategy to smaller and shorter contracts.

Take offensive lineman Colton McKivitz’s new two-year deal, which includes a $730,000 signing bonus.

Colton McKivitz void year mania

The 49ers found it necessary to add four contestable years so they could prorate McKivitz’s signing bonus toward the cap over a full five-year term. That’s $146,000 per season. Without contestable years, McKivitz’s signing bonus bill would have totaled $365,000 in both 2023 and 2024. That makes it only $146,000 per year. That’s a $219,000 savings on the 2023 cap for the 49ers.

Marathe’s strategy for the Tashaun Gipson Sr. security contract, just a one-year deal, could be even more extreme.

Tashaun Gipson Void Year Mania

The 49ers added four contestable years to the short contract to ensure just $200,000 of Gipson’s $1 million signing bonus would cap in 2023. That’s $800,000 in short-term savings.

Along with the $219,000 they saved through contestable years on McKivitz’s deal, the 49ers saved $1.19 million in 2023 salary caps across two short-term contracts. From afar, this appears like a nominal amount. But it’s also an unexpected amount. And we can surmise that Marathe is struggling to structure multiple deals like this for a reason. The 49ers try to squeeze every ounce of efficiency out of the spending money they have.

It appears that at least one more contract reshuffle will be required for the 49ers to complete their offseason deal. Nevertheless, it is clear that Marathe wants to operate as sustainably as possible overall. Pushing too much money into the future can have painful repercussions, as evidenced by teams like the Rams, who have had to drop several prominent players to reach the cap.

The 49ers’ creative way of staying financially prosperous seems to come through tiny contract details. The strategic selection of fractions of the 2023 cap payments and pushing them back has indeed helped create enough space for at least one splashy signing so far.

It’s also sparked intrigue over how the 49ers might shuffle money and spend next.

(Top photo by Sam Darnold and Javon Hargrave: Damian Strohmeyer/Associated Press)