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How can the Chargers solve their 2024 cap problems?

By on May 29, 2023, 10:03am PDT +

My good buddy Kyle posted this article earlier this week: Chargers’ salary cap woes in 2024 create ‘win now’ urgency

That article inspired me to take a look at how the Chargers might address their 2024 cap challenge.

Players Currently Under Contract in 2024

The Chargers currently have 60 players under contract for 2023. Here they are, along with their current 2024 cap hits from Over the Cap:

Note that Tuipulotu contract details aren't available at OTC or Spotrac, but the rookie contract salaries and bonuses are pre-determined, so I am using the 2024 cap hit based on his draft slot. I assume this is accurate.

Accounting for the Proven Performance Escalator (PPE)

The PPE is a fourth-year salary escalator for players on drafted rookie contracts not drafted in the first round. From OTC:

Article 7, Section 4 of the 2020 Collective Bargaining Agreement

governs the PPE, establishing three levels of qualification:

  • The Level One PPE is earned if a player participates in a certain percentage of a team's offensive or defensive snaps in two of his first three seasons, or averages that percentage of offensive or defensive snaps over his entire first three years. For 2nd round picks, the average is 60%, and (as was the same in the 2011 CBA) for 3rd-7th round picks it is 35%.
  • The Level Two PPE is earned if a player participates in at least 55% of a team's offensive or defensive snaps in all of his first three seasons.
  • The Level Three PPE is earned if a player is selected to a Pro Bowl on the original ballot (not as an alternate) in any of his first three seasons.

Players eligible for the PPE will see their fourth year base salary escalate, based upon the restricted free agent (RFA) tenders for that season, as follows:

  • The Level One PPE will raise the base salary to the amount of the Right of First Refusal (ROFR) RFA tender.
  • The Level Two PPE will raise the base salary to the amount of the ROFR RFA tender, plus $250,000.
  • The Level Three PPE will raise the base salary to the amount of the 2nd round RFA tender.

OTC projects the 2024 ROFR tender at $2.992M. Thus:

  • Level 1 PPE salary is projected to be $2.992M.
  • Level 2 PPE salary is projected to be $3.242M.

I'm not going to project any of the eligible Chargers players from the 2021 draft to make the 2023 Pro Bowl, so we don't need to worry about any of them getting a Level 3 PPE salary.

The Chargers have 3 players who have earned or could earn a PPE raise in 2024.

Asante Samuel, Jr.

Samuel played 76.5% (1,045 of 1,120) of the Chargers defensive snaps in 2022 and 59.6% (693 of 1,162) of the Chargers defensive snaps in 2021.

If he plays at least 55% of the Chargers defensive snaps in 2023, he will earn the Level 2 PPE. If not, he will still earn the Level 1 PPE if he plays at least 325 defensive snaps or so in 2024 (depending on how many defensive snaps the team plays).

I assume he will earn the Level 2 PPE, increasing his 2024 salary from $1,644,948 to $3.242M. This will increase his 2024 cap hit from $2,298,211 to $3,895,263.

Josh Palmer

Palmer played 93.3% (966 of 1,263) of the Chargers offensive snaps in 2022 and 38.2% (457 of 1,196) of the Chargers offensive snaps in 2021.

He has already earned the Level 1 PPE and cannot earn Level 2. His 2024 salary will increase from $1,396,190 to $2.992M. This will increase his 2024 cap hit from $1,601,109 to $3,246,919.

Tre McKitty

McKitty played 45.1% (569 of 1,263) of the Chargers offensive snaps in 2022 and 19.8% (237 of 1,196) of the Chargers offensive snaps in 2021.

He played 32.8% of the Chargers offensive snaps in 2021 and 2022 combined, so his easiest path to earning the Level 1 PPE salary is to play 35% of the offensive snaps in 2 of his first 3 seasons, 2022 and 2023. That would require him to play 425 offensive snaps or so in 2024 (depending on how many offensive snaps the team plays).

Given that the team has not made any moves to threaten McKitty's role as TE3, combined with the possibility that new OC Moore will utilize more 2 TE formations, I assume McKitty will earn the Level 1 PPE.

This will increase his 2024 salary from $1.25M to $2.992M. This will increase his 2024 cap hit from $1,460,154 to $3,202,154.

This really makes one question the "Proven Performance" part of PPE. Ironically, earning this increase may make it less likely he makes the 2024 final roster. More on this later.

Player Decisions

Roster Exclusions

I don't think any of these players will make the final 53 man roster this year (2023), meaning they will not remain under contract for 2024 when they are waived:

  1. Edge Brevin Allen
  2. DB Tyler Baker-Williams
  3. C Johari Branch
  4. CB Cameron Brown
  5. WR Terrell Bynum
  6. IDL Jerrod Clark
  7. RB Elijah Dotson
  8. ILB Nathan East
  9. TE Michael Ezeike
  10. Edge Andrew Farmer
  11. S A.J. Finley
  12. RB Tyler Hoosman
  13. IDL Terrance Lang
  14. ILB Mikel Jones
  15. T Nick Melsop
  16. CB Tiawan Mullen
  17. IDL C.J. Okoye
  18. TE Stone Smartt
  19. T Andrew Trainer
  20. CB A.J. Uzodinma
  21. C Isaac Weaver
  22. WR Pokey Wilson

While some of them could be re-signed to the offseason roster in 2024, I will be surprised if any of them ultimately makes the final 2024 53 man roster, so I am going to ignore them for this exercise.

Dicker In, Hopkins Out

I expect Dicker will beat out Hopkins in the 2023 PK camp competition, which means Hopkins will no longer be under contract for 2024, and the dead money associated with his contract will hit the 2023 cap. So he should have no effect on the Chargers 2024 salary cap.

Dicker is an Extended Rights Free Agent (ERFA) after the 2023 season, so the Chargers will be able to re-sign him for the minimum salary for players with 2 credited seasons, which is $985K in 2024.

I am going to assume a best case scenario for the Chargers with Hopkins. I assume another team will need a PK late in the 2023 preseason, enabling the Chargers to trade Hopkins for a 2024 7th round draft pick. More on draft picks later.

Allen Over Williams

It seems to be generally accepted that either Allen or Williams will have to go after the 2023 season. Assuming they both generally remain healthy and maintain their 2022 level of play in 2023, I prefer Allen, and I think the team will agree and keep him. I also think it is more likely they can trade Williams, since he is about 2.5 years younger than Allen.

As an aside, I wrote a fan post about Allen earlier this year: Chargers 2023 Roster Thoughts: WR Keenan Allen. I think many fans don't realize just how well he performed last season after he got past his hamstring injury. See that post for details.

I am going to assume the team trades Williams for a 6th round pick. A team that trades for Williams will inherit his current contract with 1 year remaining with a 2024 cap hit of $20M. Right now, that would rank as the 14th highest 2024 cap hit among WRs, but I expect there will be a number of WR contracts signed by then that will push that down the list. The acquiring team could also opt to extend his contract and lower that 2024 cap hit. He will turn 30 in October 2024, so I could see a team extending him 1-3 years. That said, the combination of his age, injury history, and 2024 cap hit will presumably limit how much a team will be willing to pay in a trade, which is why I am going with a 6th round pick.

Per OTC, this will leave the Chargers with $12.46M in dead money against the 2024 salary cap.

Bosa Over Mack

As with Allen and Williams, it seems to be generally accepted that either Bosa or Mack will have to go after the 2023 season. Bosa is more than 4 years younger, and there is much more of a 2024 cap benefit in moving Mack, as shown here (data from OTC):

Assuming they both generally remain healthy and maintain their 2022 level of play in 2023, this is a no-brainer. I am going to assume the team trades Mack, since there should always be a market for a great edge player, even at age 33. However, I expect that age will limit the return in a trade to a 5th round pick.

As shown in the table, this will leave the Chargers with $15.27M in dead money against the 2024 salary cap.

Contract Actions

I am going to project two contract extensions during the 2024 offseason, doubling down on the two big choices I just addressed. Trust me when I tell you that the team either has to execute these or similar extensions and/or a couple big restructures, or it must add another significant cap casualty.

The team needs the biggest impact contract changes to try to extend the "win now" window with Herbert, which is what influences my thinking on this.

Justin Herbert Contract Extension

At least this one won't be controversial.

Another generally accepted premise is that the Chargers will sign Herbert to a contract extension this offseason. I certainly expect that. That should lower his 2024 cap hit, which is currently set at his 5th year option amount of ~$29.5M.

OTC claims that his extension could reduce his cap hit by ~$22.76M, to just ~$6.75M. I was skeptical, so decided to look at recent examples of QBs who were drafted in the first round, had their 5th year option exercised, and then signed big contract extensions after their 3rd seasons that lowered that 5th year cap hit. Here are the most recent 5 QBs who met the criteria:

There is no clear pattern here. I'm inclined to throw out the two biggest outliers, Goff (what were the Rams doing?) and Mahomes (extraordinarily team friendly contract). I'm also inclined to ignore Watson, since the 5th year option value for Herbert and these other QBs were so much higher, giving their teams more room to work with.

That leaves me with Murray and Allen, who are also the two most recent examples. Murray's 5th year option amount was almost identical to Herbert's, and he and Allen both ended up just over $16M. So I'm going to assume Herbert's contract extension leaves him with a 5th year cap hit just above theirs, at $16.5M.

Keenan Allen Contract Extension

I talked about extending Allen this offseason in my fan post about him earlier this year. The team chose to restructure him instead. If they were to extend him in the 2024 offseason, I could see something like this:

This is a screen shot of a tool at OTC, but the tool is not really designed for projecting a contract extension signed next year rather than in the current year. Here it shows no signing bonus, because adding one would automatically prorate it over all 5 seasons, including 2023. I'm assuming the extension is signed after the 2023 season, so that doesn't work. Instead I pro-rated a $20M signing bonus over the 2024-2027 seasons (i.e., $5M each season) and used the non-prorated bonuses column for that. I also assumed non-guaranteed roster bonuses of $5M and $10M in 2026 and 2027, respectively.

The general parameters of this contract extension are as follows:

  • 3 year, $80M extension
  • $20M signing bonus
  • Total of $60M guaranteed - the signing bonus, full salaries in 2024 and 2025, and ~60% of 2026 salary

This structure guarantees he would not be released until after the 2025 season at the earliest:

  • After the 2024 season:
    • The team would take a $46.9M dead cap hit in 2025 by releasing him, which would not make sense, given his 2025 cap hit to play would be just $25M.
    • He could be traded with a dead cap hit in 2025 of $15M, clearing $10M in 2025 cap space
  • After the 2025 season:
    • The team would take a $21.9M dead cap hit in 2026 by releasing him, which would only clear $8.1M in 2026 cap space.
    • He could be traded with a dead cap hit in 2026 of $10M, clearing $20M in 2026 cap space
  • After the 2026 season, the team would take a $5M dead cap hit in 2027 by releasing or trading him, which would clear $30M in cap space.

So it seems likely this would keep him with the Chargers through the 2026 season. Even though it is a 3 year, $80M extension, it's really more like a 2 year, $50M extension with a $30M team option for 2027.

I'm sure many here will not like making this commitment to keeping Allen through his age 34 season, but, remember, I am assuming he maintains his 2022 level of play in 2023. If he does that, considering how the WR contract market is likely to accelerate over this time period plus his obvious chemistry with Herbert, I think it is a reasonable risk. Personally, I hope he spends his enitre career with the Chargers.

Joey Bosa Contract Extension

I think the team needs one more contract action to clear at least $10M. I don't like the idea of restructuring again, since that would stand to make 2025 and perhaps 2026 more painful. So I will assume that Bosa has a great season in 2023, and the team decides to give him a 3 year extension. Here is one way to do it: