Backloading Contracts and Mortgaging the Future

When teams sign a player to a certain contract value they have a general expectation of return based on that salary figure. The salary cap numbers, however, can be manipulated pretty easily as some teams will create an incredibly low cap figure early in a contract only to see that contract explode in later years even though the cash component of the contract will always remain as is.  I’ve always been of the opinion that the more cap that you can eat early in the contract the more flexibility it gives you in the future when player’s performances decline. With all the talk of restructures of contracts and their impact on the future I wanted to explore just how much teams are backloading or frontloading those deals to have that cap flexibility. Continue reading Backloading Contracts and Mortgaging the Future »

Cowboys Lead the Way with Injury Lost Cap Dollars

Each year teams set their salary cap for hopes of maximizing their roster efficiency in a given year. Injuries can throw all the planning a team makes out of wack, putting millions upon millions of dollars on the sidelines and leaving a team thin with talent. So what teams are being impacted the most by injuries as they take the field today?  Read on… Continue reading Cowboys Lead the Way with Injury Lost Cap Dollars »

@ZackMooreNFL Projects Dez Bryant’s Contract

If you enjoy the analysis in this article, please e-mail Caponomics @ gmail.com to join the e-mail list.

As of right now, Dez Bryant will be playing for the Cowboys on the $12.823 million franchise tag and would lose about $754,000 for each game he misses were he to hold out. After speaking with the great @Jason_OTC, the Wizard of OTC, he stated that it sounds like Bryant is looking for a deal worth $16 million per season and that his guess is that Bryant is looking for a deal worth $16 million per year, plus $50 million in guarantees, but he’s not sure on the length of the contract.

Continue reading @ZackMooreNFL Projects Dez Bryant’s Contract »

Cowboys 2015 Salary Cap Outlook

Estimated 2015 Cap Space: $18.5M ($143M cap limit)

Roster Overview

Players Under Contract: 56
Pro Bowlers: 6
Unrestricted Free Agents: 14(7 with 50%+ playtime)
Draft Selection: 27

Salary Cap Breakdown

Cowboys 2015 salary cap

Cowboys 2015 Offensive spending

Cowboys defensive spending

Free Agents to Re-sign

The number one priority for Dallas this offseason should be keeping Dez Bryant on the roster. Bryant is a rare talent and not the type of player you would expect to fall apart after signing the big contract. His resume is far superior to the Mike Wallace types who have fluctuating numbers. Bryant has some off the field issues that may be hanging over his head that can make the deal difficult and I feel as if league wide there is less of a push towards firm guarantees which is also going to make this more complex. His numbers are not that far off from where Calvin Johnson’s were a few years ago so Bryant is going to shoot for the moon and likely end up with the franchise tag…The Cowboys will need to bring back one of their right tackles and my assumption is it will be Jeremy Parnell who is younger than Doug Free and should be cheaper. There is more risk involved with Parnell who has a smaller body of work, but cost will likely dictate the decision….Not surprisingly the Cowboys did not pick Henry Melton’s option, but I believe there is still a fit there at the right price. If Melton believes he can get $5 million or more Dallas will likely look elsewhere, but if it’s less they should talk.

 Free Agents to Let Walk

Dallas ran DeMarco Murray into the ground in 2014 and got great value out of the position because of it. The odds of that value ever being realized again are slim once you sign him to a contract extension.  With so many teams having cap room I have to think someone will overpay thinking they can get one season out of Murray in 2015 similar to what he gave Dallas in 2014.  With so many other options available in free agency and the draft the better value is found elsewhere…The fact that Dallas allowed Free’s contract to void indicates to me that he will not be brought back. The market rate for Free is likely in the $4-4.5 million range which should be too expensive…Rolando McClain came out of nowhere to have a good season in 2014, but the team already has Sean Lee under contract and McClain may also come with eventual suspension concerns if he slips up. I guess this decision is primarily based on cost. McClain should not have much interest around the NFL because of his prior two stints in the NFL, so the Cowboys might let him go for now and then call him back if the market is lukewarm…Anthony Spencer has not produced much for the Cowboys for some time and expecting him to get back to being a top pass rusher is unrealistic.

Contracts to Modify

The first significant move of the Cowboys offseason will probably be converting most of Tyron Smith’s $11.039 million salary into a signing bonus. That will create over $8 million in cap space which Dallas will need for free agency. This is a very low risk restructure and one that no one should have issues with…I know there will be temptation to restructure the contract of Tony Romo. His cap charge is the highest in the NFL at $27.773 million, but another traditional restructure of his contract is playing with fire.  You can read my extended thoughts on Romo’s contract, but the short version is unless he just defers money into 2016 for cap purposes they should stay away…Brandon Carr carries an $8 million salary and a $12.7 million cap charge. His signing has been one of the worst recent signings for Dallas and cutting him saves virtually nothing against the cap. They need to get him to agree to a paycut that reduces his cap charge by a few million…Dallas already reworked the contract of Dekoda Watson.

Players to Consider Releasing

If Carr is not open to a renegotiation that Dallas should designate him a June 1 cut. If the team did that Carr would open up $8 million in cap room in the summer which would effectively offset the cap charge he will leave the team next season…Releasing reserve lineman Mackenzy Bernadeau saves the team $1.5 million in cap space.

Offseason Plan

For the first time in recent memory Dallas is out of the salary cap hole and back in a spot where they can pick and choose much more freely with what they do with their contracts rather than being forced into it the way they had been in recent years. Their main priority this offseason should be to continue that trend and gain even more flexibility in the future.

I know it is going to be very tempting for the Cowboys to go all in by gaining the maximum cap relief possible by restructuring the Romo deal, the Carr deal to some extent, and even getting a few dollars here and there with players like Jason Witten. That gives them the room to franchise Bryant and bring in some impact players on defense. That completely defeats the purpose of what they began to accomplish last season.

I know it is very easy to look at last season and say that one more big piece will make it work this year, but what is making things tick for Dallas really has been the development of their younger players, specifically on the line, while getting some good value on some low cost signings. The Dallas big ticket players of the past are not the type of players that got them to the divisional round of the playoffs and they need to keep focused on that.

The two positions I would look at in free agency are running back and defensive tackle, which are both traditionally not high pay positions. I don’t believe going after Adrian Peterson is in their best interests if he comes in at a number above $6 million, but we know that they will be linked to him if he is released. The Cowboys can certainly target a number of DT’s if Melton comes in too high. But beyond trying to find some bargain bin talent they should move into the draft to continue to rebuild the team.

With the offensive line seemingly in place and a decent group of receivers this would be the time for Dallas to focus on the defensive line and secondary to continue stockpiling cheaper talent at somewhat expensive positions. I think everyone knows Romo won’t last forever but if they can maintain a strong offensive line while building a good defensive line and secondary they should be well prepared for life after Romo when they have to slot a younger QB in his place or even as he declines as a player. I think this will give them the best chance to maximize their opportunity in 2015 while keeping their future more flexible if things don’t go as planned this season.

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Looking at Restructuring Tony Romo’s Contract

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Recently there has been a lot of talk about the Cowboys restructuring the contract of Tony Romo for salary cap flexibility. Romo has the highest cap charge in the NFL in 2015 at $27.773 million and bringing that figure down would make it easier for the Cowboys to re-sign Dez Bryant, one of their lineman, and either re-sign DeMarco Murray or acquire Adrian Peterson. I wanted to look at some of the ins and outs of restructuring a contract and what is best for the Cowboys to do with Romo this season.

Comparable Situations

It’s important to note that a restructuring is not a new contract. It is simply a way of changing the way the money is accounted for against the salary cap. Usually it means taking the player’s salary and turning a majority of it into a signing bonus that is spread out over the remaining years of a contract.  Every restructure will make it more damaging to release a player in the future. With that in mind Dallas needs to first determine what they believe are the true remaining seasons for Romo, who will be 35 years old in 2015 and has a bad back.

Romo has been very productive the last two seasons and has averaged 251 yards, 2.17 touchdowns and 0.63 interceptions per game. Among 33 and 34 year old quarterbacks since 1990, those numbers rank, at the worst, in the top 15 of the last 25 seasons and in some categories he is top 5. I want to use this group of players to help decide when I will most likely have to part ways with Romo in the future.

While we can look at statistical projections, the fact is that the contract parameters are already complete so our most important item is to identify the point at which Romo will not be productive enough to be on the team. We’ll look at that a few ways.

Our group of players will include all players who averaged at least 200 or more yards per game average over their age 33 and 34 seasons since 1990 (25 total players) and we will track the performance of those players in the table below. The Active column represents the players still getting reasonable game action and the Inactive column are the players who have been cut, hurt, or demoted and rarely play. The 220+ and 200+ yard columns are the percentage of the remaining active players who threw for at least this many yards. The final column looks at the percentage of players that produced an AY/A of 6.5. The numbers are adjusted to take out active players who were not old enough to qualify.

AgeActiveInactive220+ yards200 + yardsAdj. Yards >6.5
3588.0%12.0%50.0%77.3%59.1%
3663.6%36.4%64.3%85.7%64.3%
3768.2%31.8%60.0%66.7%60.0%
3857.1%42.9%58.3%66.7%41.7%
3910.0%90.0%50.0%100.0%50.0%

What this chart tells me is that age 35 is the last season where I should expect a productive QB. At 36 and 37 we begin to move more into the territory where our expected return (inactive plus ineffective) is making the turn towards non-productive.  Still I can hold out hope through 37 that we have a reasonable chance of being productive. Essentially you don’t wan’t to run too high of a risk in this age 37 season if you can afford it. By 38, 43% of the original group dropped off and looking at the adjusted yards from the remaining group, over 60% are not going to really qualify as higher level players. Essentially their yards are more meaningless than what we are seeing at age 37 and there is approximately just a 25% chance of having a productive player at that age. Age 39 is essentially a void year.

The Current Contract

Romo has 5 years remaining on his contract. $15 million is (or will soon become) guaranteed and the remainder of the contract is not guaranteed. The prorated charges represents charges from a $25 million signing bonus paid in 2013 and bonuses from restructurings in 2011 and 2014 that added bonus money to be paid in the 2011, 2012, and 2014 seasons. The dead money represents all remaining prorated money in the contract plus any remaining guarantees. These are the costs of releasing Romo prior to June 1. A post June 1 keeps only the current years charges on the books while all remaining prorated money would hit the following season.

AgeYearBaseProratedCapDeadSavings
352015$17,000,000$10,773,000$27,773,000$44,908,000-$17,135,000
362016$8,500,000$9,135,000$17,635,000$19,135,000-$1,500,000
372017$14,000,000$7,500,000$21,500,000$10,000,000$11,500,000
382018$19,500,000$2,500,000$22,000,000$2,500,000$19,500,000
392019$20,500,000$0$20,500,000$0$20,500,000

This is a contract clearly designed to run no later than age 37, which works in line with our look at comparable players above. Age 37 year provides an out at $10 million in the event that things take a turn for the worst in 2016. Provided that the team would have no more than one other major release that season they could absorb a $10 million cap hit and remain near the league average for dead money in a given year.

So let’s look at what we can do with the contract from this point forward

The Max Restructure:

In a maximum restructure we are reducing Romo’s base salary to the absolute minimum and converting the balance, $16.03 million, to a signing bonus.

AgeYearBaseProratedNew ProratedCapDeadSavings
352015$970,000$10,773,000$3,206,000$14,949,000$45,938,000-$30,989,000
362016$8,500,000$9,135,000$3,206,000$20,841,000$31,959,000-$11,118,000
372017$14,000,000$7,500,000$3,206,000$24,706,000$19,618,000$5,088,000
382018$19,500,000$2,500,000$3,206,000$25,206,000$8,912,000$16,294,000
392019$20,500,000$0$3,206,000$23,706,000$3,206,000$20,500,000

This maximizes our savings in this year by giving Dallas over $12.8 million in additional cap space, more than enough to franchise Bryant and use their existing space for other needs. The tradeoff here is that we have now eliminated our escape route in 2017 and left ourselves with a much bigger number in 2018. A $24.7 million cap charge in 2017 for a 37 year old is extremely high even if we assume a rising salary cap.  That would possibly leave Dallas in a bind again scrambling for cap room and not a lot of leeway in asking for a pay cut.

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Second Restructure Option

In our second restructure scenario rather than going for the maximum conversion we’ll take a middle of the road approach and just convert $12 million of Romo’s salary into a bonus.

AgeYearBaseProratedNew ProratedCapDeadSavings
352015$5,000,000$10,773,000$2,400,000$18,173,000$44,908,000-$26,735,000
362016$8,500,000$9,135,000$2,400,000$20,035,000$28,735,000-$8,700,000
372017$14,000,000$7,500,000$2,400,000$23,900,000$17,200,000$6,700,000
382018$19,500,000$2,500,000$2,400,000$24,400,000$7,300,000$17,100,000
392019$20,500,000$0$2,400,000$22,900,000$2,400,000$20,500,000

Again I don’t think this is a great option because we are still setting ourselves up for what could be a bad situation in 2017.  This is better than the first option, however, and would free up $9.6 million.

Third Restructure

In this restructure we are converting just $7 million to a bonus.

AgeYearBaseProratedNew ProratedCapDeadSavings
352015$10,000,000$10,773,000$1,400,000$22,173,000$44,408,000-$22,235,000
362016$8,500,000$9,135,000$1,400,000$19,035,000$24,735,000-$5,700,000
372017$14,000,000$7,500,000$1,400,000$22,900,000$14,200,000$8,700,000
382018$19,500,000$2,500,000$1,400,000$23,400,000$5,300,000$18,100,000
392019$20,500,000$0$1,400,000$21,900,000$1,400,000$20,500,000

Of the options so far I think this is the most reasonable. We created $5.6 million in cap space and done a better job normalizing the cap charges moving forward. Though the $14.2M dead money figure is high, I can live with it as long as I assume no other major mistakes on the roster.

A Different Option

So far we have worked in the parameters of a traditional restructure where we convert base salary to a bonus. But why do we need to do that?  Romo’s original deal is unique in that his age 36 cap charge is relatively low with a salary of just $8.5M. We can take a portion of salary that is set to be earned in 2015 and push it to 2016. First we will look at a $6 million carry forward.

AgeYearBaseProratedCapDeadSavings
352015$11,000,000$10,773,000$21,773,000$43,408,000-$21,635,000
362016$14,500,000$9,135,000$23,635,000$25,135,000-$1,500,000
372017$14,000,000$7,500,000$21,500,000$10,000,000$11,500,000
382018$19,500,000$2,500,000$22,000,000$2,500,000$19,500,000
392019$20,500,000$0$20,500,000$0$20,500,000

This is definitely a good option for the team. We save $6 million this year and put it off to the following season, which have just about normalized our cap charges.  I don’t have to touch his dead money in 2017 so my emergency exit button is still intact and in 2018 there is almost nothing left if I’m lucky enough that he made it there.

This is really the ideal way to work within this contract and maintain flexibility. If the number in 2016 looks a little too high there is some wiggle room to include a small bonus as well, such as a $3 million signing conversion:

AgeYearBaseProratedNew ProratedCapDeadSavings
352015$10,000,000$10,773,000$600,000$21,373,000$46,908,000-$25,535,000
362016$12,500,000$9,135,000$600,000$22,235,000$25,535,000-$3,300,000
372017$14,000,000$7,500,000$600,000$22,100,000$11,800,000$10,300,000
382018$19,500,000$2,500,000$600,000$22,600,000$3,700,000$18,900,000
392019$20,500,000$0$600,000$21,100,000$600,000$20,500,000

It’s pushing us a little higher in 2017, but it’s not impossible to deal with and it’s better than some of the initial restructures that we looked at.

These are the types of constructs I want to work with. There are plenty of ways we can go but I want to negotiate as much as I can the reallocation of my 2015, 2017, and 2017 base salaries rather than just converting bonus money. I can work a bit with guarantees to make sure the absolute earnings stay the same and in most cases any deferred money would need to be paid the next March as a roster bonus, but I need to minimize any impact to the 2017 and especially 2018-19 seasons.

I do get a good deal of questions about the “Tom Brady” option, but I don’t see that as viable here. There is too much money already in this contract for Romo to just walk away from it. That contract is not a reasonable option for any player to consider. When Romo turns 37, if he is still playing at a decent level, the sides can probably have that type of discussion and the above deals won’t prevent that discussion from taking place, but that is years away from being a relevant discusion.

We’ll see what the Cowboys do but there should be plenty of avenues to realize $6-$7 million in savings this year without really wrecking the salary cap in the future.

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