Dallas Cowboys: Navigating The Salary Cap

I had planned, time permitting, to do these cap breakdowns towards the end of the season or in the offseason, but with the Dallas Cowboys making the news today with Adam Schefter’s report that they are $31 million over next years’ projected salary cap I figured this was a reasonable time to look at the Cowboys.

I’m going to base everything off my estimates which have Dallas with a payroll of about $145 million for 46 players next season. That number seems to mesh with most reports so it should be a reasonable starting point. It should be noted that the 46th player under contract here is Jeff Olson an injured player who will be released as soon as he is healthy enough. With the cap currently at $123 million that obviously leaves some distance between my estimates of $22 million over the cap and Schefter’s reported $31 million. So how do we account for the discrepancy?

Well first of all his information is likely from someone projecting at least 51 players, and most likely a full 53. To get from 46 to 53 we need to add 7 futures contracts which will add $2.94 million in salary. We also need to account for the 2011 draft classes “Proven Performance Escalator” which is a bump in salary to the RFA tender for those who played in either 35% of the total snaps from 11-13 or 35% in two of three seasons from 11-13. That would include RB DeMarco Murray, G David Arkin, and WR Dwayne Harris and add another $2 million if all 3 qualify, putting our number at $27 million, leaving us just $4 million short. CB Orlando Scandrick, G Mackenzy Bernadeau, and DE Justin Durant I know have escalators/incentives in their contracts. While I don’t know how much those incentives are worth I’ll give you a guess that we are looking at close to $4 million to give us the $31 million figure Schefter was given. So we are probably working with a roster that is around $29-30 million over the salary cap when the top 51 accounting takes place.

Getting around the 2014 salary cap

Sites like mine and various media reports can sometimes blow a teams’ cap situation out of proportion.  From my time working exclusively covering the Jets salary cap I saw this occur twice, once in 2009 and again in 2013. While the 2013 situation was not great it was never as overblown as portrayed by a salary cap sheet. In 2009 the salary cap situation was actually fine. What occurs is that teams often have contracts that are designed to be restructured or terminated to aid a teams’ salary cap. That does not show up in a static chart.

The one contract Dallas has that is designed that way is Tony Romo’s. Romo has a salary cap figure of nearly $21.8 million in 2014, but the contract contains two “empty” proration years in 2018 and 2019 that were there to absorb restructured dollars. This is no different than Joe Flacco’s contract with the Ravens containing two option bonuses for cap purposes, except for the Ravens their salary cap will look fine on paper because they chose to use options in the initial deal. Dallas never does that and instead makes their situation look worse than it is.

It is basically a given that Dallas will reduce Romo’s base salary in 2014 from $13.5 million to $955,000 and convert the remainder to a bonus. That will free up $10,036,000 in salary cap commitments and reduce his cap figure to $11,737,000. That’s the intended value for Romo’s contract and will shave $10 million off Dallas’ $30 million overage. The team will also carry over around $2 million in cap space so we are looking at a team that is $18 million over prior to free agency.

The Cowboys have one major problem moving forward and that is the lack of cap relief the team can find by releasing players. While Romo fits the intended restructure category, the team has nobody in the intended release category. My estimates only have 8 players that would save Dallas more than $995,000 in cap room via release. These include starters Dez Bryant, Barry Church, and DeMarcus Ware. The following would be the releases:

 

Name

Savings

Net Savings

Phil Costa

$1,500,000

$1,080,000

Jeremy Parnell

$1,500,000

$1,080,000

Mackenzy Bernadeau

$1,425,832

$1,005,832

Justin Durant

$1,250,000

$830,000

Kyle Orton

$995,000

$575,000

Total

$6,670,832

$4,570,832

 

The net savings, after factoring in costs of replacements, are just $4.6 million. We mentioned that Bernadeau likely has an escalator worked into the Schefter estimate so we’ll call this $5.5 million in savings. That brings Dallas to approximately $12.5 million over the cap. I think it’s also safe to say that if the Schefter figure includes Arkin’s and Harris’ PPE that neither will happen due to playing time so we are around $11.1 million.

I know some will discuss the additional savings that could be realized with the June 1 designation, but a June 1 cut stays on the books until June 1 at the full cap charge. That designation will only be used to create functional cap room during the season and is only going to be used on players whose dead money and salary cap charge are essentially equal. The only real candidate for this is Doug Free whose $3.5 million dollar salary guarantees early in the League Year, but with Brian Waters contract expiring Free should have a role in 2014 either at Guard or Tackle especially since he has played so much better this season.  Miles Austin is another candidate but they don’t actually have a need to cut him until after June 1.

The first restructure will probably be that of CB Brandon Carr. Carr has a $12.2 million dollar cap charge in 2014 with a $7.5 million base that makes up a majority of the charge. With a conventional restructure they can save $4,908,750 in cap space. By adding a voidable season, which is likely what they would do, they will save $5,236,000.

Fitting the Romo restructure category will be that of newly extended LB Sean Lee. Lee has a $5.5 million base salary in 2014 with empty proration years in 2018 and 2019. These seasons are just waiting to have money pushed into them. By reducing his salary to $730,000 and prorating the remainder they will create $3.816 million in cap room while adding $954,000 to the next four years. This puts Dallas in a position where they are approximately $2 million over the cap with three restructures (two of which were planned on signing) and five cuts.

Going forward Dallas is going to have a very difficult decision to make regarding DE/OLB DeMarcus Ware. Ware will be 32 years old in 2014. He is the lone Cowboys whose release or trade saves significant money- $7.4 million. Ware’s cap figure in 2014 is $16 million and then $17.5 million in 2015. These are very difficult cap numbers for 32 and 33 year old pass rushers. Julius Peppers has that kind of figure this season and won’t be back in Chicago next year. The going rate for older rushers is around $5 million a year. Ware will earn $27 million in cash in 2014 and 2015.

The reality is Ware really needs to have his contract ripped up and to take a paycut that makes him the highest paid older player rather than one of the highest paid player, but Dallas’ negotiations throughout history would give them almost no leverage to even push it. It would require a complete philosophical change. Most likely they will look to restructure his contract, which in my mind would be a disaster, but I don’t see them going another route.

If the Cowboys go all in with Ware and reduce his salary to the minimum they can save $8,471,250 against the salary cap even if they do not add void seasons to the contract.  The problem with that move is it pushes Ware’s salary cap figure to $20.3 million in 2015 with a whopping $13,789,000 in dead money if they need to release him. Is that worth doing?  Probably not and the team needs to avoid touching that deal if at all possible.

The team is probably best suited to first restructure the contract of Jason Witten and reducing his base salary from $5 million to the $955,000 minimum. This creates $3,031,500 in cap space which should be enough to at least get Dallas to be cap compliant. Witten will be 32 next season but his cap charges, even if he begins to decline, are more reasonable at 33 than Ware’s would be.

The other move would be to work with Austin on his contract. Personally I don’t believe Austin is worth the headache. He’s missed a few games this season and has slid down the depth charts. Austin really should be by ace in the hole. I cut him in June and free up $5.5 million to move the Cowboys to around $6 million in cap space which I can use for the rookie class when they sign in June and July.

If something disastrous happens I can then work with Ware but Ware is a deal Dallas should only touch as a last resort. The door needs to be open to take him off the roster in 2015. There are also a few other small deals that Dallas could terminate to gain a few hundred thousand here and there.

Where Will Dallas Stand

What works to Dallas’ favor in all of this is that the only starters who are free agents next season are G Brian Waters and DT Jason Hatcher. The team won’t have the money to go into free agency and replace them with starters, but you can find rotational players that may fit in the limited budget. These are also draftable positions, specifically on the offensive line where many teams find first year starters.

Dallas starting lineup would have an average age  of about 27 years with the offense being the problem unit, featuring four players over the age of 30. If Romo and Witten can continue to perform age should not be a primary factor of weakness in 2014. Basically what this amounts to is that the team in 2014 will look almost identical to the team in 2013 and 2012.

2015 Salary Cap Outlook

By reworking the contracts of Romo, Carr,  Witten, and Lee we added $5,785,000 to the 2015 salary cap. That’s not too bad, but the roster at this point is in shambles and our top 5 players now account for nearly $76 million in cap commitments. The team will already have $9,086,200 in dead money on the books via the June 1 release of Miles Austin and Doug Free’s contract voiding.

Not including the 2014 draft class, Dallas would have around $109 million in salary cap commitments in 2015 with just 22 players under contract. One would assume that the team would invoke the option on starting Tackle Tyron Smith, which would be equal to the 2014 Transition tag. In 2013 that was $8,709,000 so we’ll assume $8.7 million for 2014 as well.  I think it’s safe to assume two players from the 2012 draft class will earn the PPE adding around $1.3 million in cap to our total giving the team $119 in cap committed to 23 players.

Not among those 23 players is superstar WR Dez Bryant who will end up being the recipient of the Franchise tag, which should be valued around $10.6 million. Seven draft choices from 2014 should cost around $6 million in 2015 cap dollars. This brings Dallas to a fair estimate of 31 contracts of $135.6 million. If the remainder of the offseason roster is filled with players earning the minimum the salary cap will stand for Dallas at $144,300,000.

2015 Problems

We just navigated 2014 which seemed to be even worse so why is this different?  Assuming the Bryant and Smith moves and one 2014 rookie starting the team would be looking at returning just 12 or 13 starters from the 2014 team.  Of these starters Romo will be 35 while Ware and Witten will be 33. Neither Carr nor Lee would be youngsters anymore at 29 years old.  These 5 players account for $74.3 million in cap charges and there has to be real questions about how much further can you push on with the same group.

Romo would carry a $27.782 million dollar cap charge in this scenario.   The team could save $12.824 million in a restructure which virtually guarantees Romo will be QB through 2017 as his 2017 dead money would rise to $14.636 million if cut. Even at 38 years old he would still cost $8.921 million to part ways with.

Releasing Ware saves the team $12,186,000, which is why I would not want to touch his contract in 2014. He needs to go in 2014 to allow the team to move forward.  There really are no other options. Through all the restructures we had to use for 2013 and 2014, Carr is already going to cost $11.36 million to release in 2016. I can’t go further in on a cornerback about to turn 30.   Same goes with Witten.

2015 and Beyond

Most likely, barring a salary cap explosion in 2015, those two moves will give Dallas a few million to work with to fill all their open roster spots with players other than rookies. The two franchise type players will need to be signed to long term contracts with low cap charges in the first two years to help deal with some of the issues in 2015 and 2016.

Dallas is not going to trot out 10 rookies to start for the team if at all possible especially with Romo still at the helm.  That is going to require significant creativity to do. They have to avoid doing anything with Ware, unless it’s a major paycut, and the desire to rework Carr’s deal another time. I would imagine the end game is something similar to what we saw in New York in 2013 with a slew of minimum salary benefit contracts filling out the roster.

By 2016 the team should move into full turnover mode with Romo being the last man standing from the old guard. Witten and Carr will combine for over $14 million in dead money in 2016, which should mark their fourth year in a row with well above the average dead money on their salary cap, but it should help them avoid the one mega season of dead money that has hit some other squads.

Can They Survive the Cap

In terms of success this is really a two year window for Dallas. They will cruise to a division title in 2013 because the NFC East is so bad. At this point it’s about gearing up for the playoffs. It is why if they are really considering a trade to upgrade a position it makes sense to do as long as they realize it is a one year commitment and they will move on next year. This is the best chance Dallas will have and you have to do everything you can to make it happen. If Dallas believes Maurice Jones-Drew can help them win its worth the $2.2 million carryover loss they would have.

2015 is really the year for the massive shakeup which Dallas will probably piece together over a few years rather than just one massive dump in a single season.  By then many of the playmakers they have will probably be too old to make the same type of contributions that they are making now. But Dallas should be able to navigate 2014 without too much issue contractually. The problem is if everyone gets older a year earlier than expected. That is what is happening in New York in 2013 as they hung on one year too long with an overpriced veteran group. If 2014 ends up being a poor season on the field it will be a bleak outlook for the future because the team is still going to be stuck in neutral when it comes to making big additions over the next two seasons due to cap constraints. For better or worse they have to win with this group.

 


 

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