The Danger of the Contract Restructure

The other day ESPN’s Chris Mortensen tweeted about how the NFL doesn’t really have hard cap like people think because of the ability to go “cash over cap”, meaning the ability to spend a large portion of cash dollars in one year but because of proration minimal cap dollars.

https://twitter.com/mortreport/status/306752633803243520

So that got me thinking that this might be a good topic for a post with all of the contract restructures going on.  The point that Mortensen misses is the fact that in the NFL at some point the bill becomes due. This isn’t a game where you can sit over the cap and use mid level exceptions to bring in competent veteran players. Essentially what happens to a poorly managed team is they either get stuck with significant amounts of “dead money” for cutting players or get stuck with “dead weight” players who must be kept on the team because of the high dead money charges associated with those players because the team went “cash over cap” at some point in the prior few years.

Currently I have $124.6 million in dead money around the league accounted for in 2013. That is an entire teams salary cap of just dead money. And I know there is more I just haven’t been able to accrue it all or discover all of it from last season as I work through the early days of the website. Last season the New England Patriots carried around $22 million in dead money because of poor roster decisions. They are still paying off Chad Ochocincos cap money.  That’s a great team but don’t you think if they had a little more money to spend maybe they would have gone that one extra game?

Let’s look at the New York Jets. That is my team and I know their cap as well as anyone with the exception of those who  work for the team. The Jets did what Mortensen is talking about in 2011. They went heavy “cash over cap” after back to back championship appearances to take another run at it. What happened?  The team bombed and finished 8-8. In 2012 the Jets had to be more fiscally responsible due to dead weight players such as Bart Scott and Calvin Pace, who could not be removed from the team due to cap considerations. Had the Jets not “gone for it” in 2011 those players would have been gone a year before. As soon as the cap allowed those two were released.

Restructures are part of the NFL. The tricky part is to not abuse the restructured deal. For those newer to the salary cap a restructure is essentially shuffling of money in a contract to lower the cap charge in the present.  Normally what happens is you convert a large portion of a players base salary into a signing bonus that is then prorated over the remainder of the contract. Some teams, like the Jets, will get players to agree to a lower salary via a pure paycut by guaranteeing a future years salary, but most go the bonus route.

The most recent trick that teams have begun using is the addition of voidable years onto the backend f a contract. That allows a team to push prorated money into years when the player will be a free agent. Sounds great, except when the player becomes a free agent all that money accelerates onto the salary cap. So the Dallas Cowboys, who have begun to extensively use this mechanism, are now locked into $8.181 million of dead money for Tony Romo if they cant extend him before 2014 due to these void years. And what does Dallas have to show for that?  No playoff wins and bad losses in week 17 to miss out to their hated NFC East rivals?

I think there is a limit to restructuring contracts to keep them reasonable for a team. With the exception of the QB position no player should ever be restructured more than once over the course of their contract. The career of the NFL player is too short and in most cases they will not have the impact needed to make a true difference in the outcome of the season. Once you do it you need to shelve it. Each restructure  more or less adds another season in which you are forced to keep a player and it is rare that teams hold onto players beyond their rookie deals for another 4 or 5 years unless money forces them to keep them forever.

The most active teams in the last few days in terms of restructures have been the Steelers, Cowboys, and Saints.  All three have basically become “serial offenders” of the restructure game and every year are faced with cap issues. Of the three Pittsburgh is the best managed and does not go the route of the voidable years which makes them much more responsible. That being said they have players at this point who are being restructured every season. They have tried to be very careful with doing it only with players that they think are long term contributors but they have some older players this year where they may feel the need to make more moves. The Saints are backloading contracts at the start and just going deeper and deeper seemingly afraid to break up a team that won a Super Bowl in 2009 and hasn’t come close since. Dallas pays high at the start of a contract with huge signing bonuses and still has the need to restructure contracts far out into the future. Clearly it hasn’t worked.

At some point the philosophy becomes a problem which is why the cap works in the league despite Mortensen’s claim. The Steelers have almost $120 million committed to the 2014 salary cap already. That’s not awful until you realize its only for 32 players. They have a little flexibility if they don’t go deeper but that’s not a good situation. He Saints have 45 players under contract at a payroll of just over $130 million and little room to go unless they want to push more into the future for players like Drew Brees who already have huge hits on the books. Come 2015 they have $97 million in salary cap tied up in 17 players.

And then there is Dallas. Dallas is in so deep on their players its ridiculous. They have $134 million set for the 2014 cap and that is assuming that Tony Romo is off the team at an $8 million dead money clip. Clearly Romo is going to be part of the team which is just going to push the number higher. Sure they will cut Doug Free and Jay Ratliff to get cap compliant at some point which will lead to a dead money charge of $11 million for two guys who have contributed nothing since being signed to overpriced contracts by the Cowboys owner.

Teams that consistently go “cash over cap” are not going to be able to escape a hard cap. It will always catch up with you. If a team is able to get to the Super Bowl and win that elusive championship maybe the fall wont be as hard but only 1 team can win it and most teams that consistently restructure year after year will likely be disappointed when its time to pay back the cap and they have no rings to show for it.

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  • NW86

    Great article, and it’s good to see some of the numbers for 2014. As a Steelers fan, I’m not too excited about their cap situation, but at least many of their large contracts will drop off in the next 2 years. They had legitimate reasons to start the restructure snowball in 2011 when they were trying to keep a superbowl winning team together. It’s nice to see that, despite the fact that they’ll be in another tight situation next year, other teams out there who have had less success are in even worse shape.

    This is something that a lot of teams have had to do since the new CBA, with a lower cap in 2011-2013 than there was in 2009-2010. Up until that point the cap grew every year, but suddenly those teams with a lot of big-time players already under contract had to scramble and find creative ways to try to keep their teams together. It will take some of those teams several years to crawl out of the position where they are still accounting for cash spent years ago.

  • Pingback: Random notes around the NFCE: The Cowboys’ restructured deals, – Blogging the bEast()

  • 33

    Does the cap increase in the next several years? If so, how does this play into the process of cap planning?

    • http://www.nyjetscap.com/ Jason Fitzgerald

      Thats a really great question. If you check out the Q&A post I put on the site I touched on answering it there, but it certainly plays a role. The problem right now is that its expected to be flat.