Explaining the details of the Patrick Mahomes extension

The ground underneath the NFL shifted more than a little on Monday, as the Kansas City Chiefs signed quarterback Patrick Mahomes to a 10-year contract extension that could pay him as much as $503 million through the 2031 season.

Everyone had expected an enormous, precedent-setting contract for Mahomes. But hardly anyone expected the total value of the deal to be quite so large, the team to commit to its quarterback for a total of 12 years or for the deal to include guarantees of up to $477 million.

How did general manager Brett Veach pull it off?

In the way we typically look at these contracts on salary-cap sites like Spotrac (from where many of these numbers come), this looks like a truly spectacular deal. The Chiefs could cut Mahomes after the 2022 season and be on the hook for just $4 million in dead money?

But that’s not how it’s going to work.

When Mahomes put pen to paper on Monday, his contract was fully guaranteed through the 2022 season. No matter what happens, the Chiefs are on the hook to pay him just over $63 million (the dead cap figure for 2020) over those three seasons. But — and this is a big “but” — if he is still on the roster on the third day of the 2021 league year (the middle of this coming March), his 2023 salary, roster bonus and workout bonus will also become guaranteed. This will increase 2021’s dead cap number from $59.6 million to $99.5 million!

With some tweaks along the way, this is the pattern the contract will follow. In essence, at the beginning of each league year, the Chiefs will have to decide if they want to guarantee Mahomes’ money for the coming season and the two seasons to follow. Each time, they’ll be making a risky decision — but that is the price they have to decided to pay in order to lock up their generational quarterback talent over such a long time.

While it’s hardly unknown for NFL contracts to contain these kinds of league-year escalators, the use of the triggers in every season of a long-term deal is unprecedented.

In his analysis of the contract extension, ESPN’s Bill Barnwell said that Mahomes gets lots of leverage from the deal’s structure.

The benefit of this sort of structure for Mahomes is to make it more difficult for the Chiefs to cut him. As an example, let’s say Mahomes tears up his shoulder in 2027 and misses the remainder of the season, and Kansas City decides that it’s better to move on. (I don’t want to live in this example, and I suspect most Chiefs fans would prefer to opt out too.) He is due $44.5 million between his base salary, roster bonus and workout bonus in 2028, which guarantees before the 2027 season begins. If the Chiefs wanted to cut him, they would still owe him all of that $44.5 million for 2028, even though he wasn’t on the roster. While $44.5 million won’t seem like an exorbitant amount of dead money by 2028, having that sort of protection gives him leverage as he ages throughout this contract.

Aside from getting their star quarterback locked up for a dozen years, the team’s main advantage to this contract is in the short term. While the two parties tore up the last two years of Mahomes’ rookie contract, his salary cap hits for 2020 and 2021 are virtually identical to those from his previous contract — even though Mahomes collected a $10 million signing bonus on Monday. This will help the Chiefs navigate their current cap crunch — perhaps even leaving room for a long-term contract for defensive tackle Chris Jones before the deadline passes a week from Wednesday — and deal with the uncertainty of the 2021 cap.

The deal contains $25 million in incentives

In addition to the $477 million that Mahomes could earn through what his agents called the “guarantee mechanisms” of the deal, the contract contains incentive bonuses of $2.5 million from 2022 onward. These are reported to be $1.25 million for being named the NFL MVP and another $1.25 million for the team reaching the Super Bowl. It is these incentives that make the reported value of the contract $503 million.

It is also reported that the contract contains a no-trade clause — although Barnwell said that in practice, it simply allows Mahomes veto power over any proposed trade.

Can the Chiefs afford Mahomes — and still compete?

You’ve probably already heard a statistic something like this one: that no team has ever won a Super Bowl with a quarterback whose compensation was greater than 13% of the salary cap. In the table above, there isn’t a single year after 2020 in which Mahomes’ cap percentage is less than that — and goes as high as 20.4% in 2027.

But in that table, I have figured the cap percentage for each of those seasons quite conservatively. I assumed the salary cap will fall to $150 million in 2021, return to $200 million in 2022 and increase by 5% each year after that. With new television contracts (and gambling revenue) on the horizon, those figures could prove to be very conservative for 2022 and beyond; Mahomes’ percentage of cap could potentially be much lower in some seasons. But even without large increases, most of the percentages aren’t outrageous.

Besides... if there’s one quarterback who can beat the historical trend, it’s likely to be Patrick Mahomes.

Will Mahomes play out the whole contract?

History suggests that these kinds of extremely long-term deals rarely last through their original length. As noted, the conditions of the salary cap could change drastically during the coming years; it’s more than reasonable to think that sometime around the midpoint of the contract, either Mahomes or the Chiefs will want to renegotiate the deal.

Much will depend on whether the team can continue to contend for a championship each season. If it can, the Chiefs will have little reason to press for a new deal. But if it cannot, they will face pressure to make a change. Since the team will face a significant dead-cap penalty if they threaten to walk away from the deal, Mahomes will hold most of the leverage. But the way the contract is structured does give the Chiefs an out — albeit an expensive one — at the beginning of each league year.

The bottom line

We’re going to be talking about this contract for a long time. If it works out the way both Mahomes and general manager Brett Veach are hoping, its unique structure will very likely serve as a model for other elite players to follow as they seek a long-term deal. If it doesn’t, it could someday become known as “Veach’s Folly.”

But that is the nature of Veach’s job: to evaluate risks and rewards, developing a strategy to continue to make the Chiefs better. Sometimes those strategies will work — and sometimes they won’t. Time will tell if this one will work as planned.