Tony Romo Restructures Contract with Cowboys

I’ve talked extensively about Romo’s contract and the Cowboys options with him, but today the Cowboys finally pulled the trigger according to the Dallas Morning News. The Cowboys converted $16 million of Romo’s $17 million base salary into a signing bonus that will be prorated from 2015 through 2019. The move created $12.8 million in cap space for the Cowboys this season and will add an additional $3.2 million per year in every season thereafter. The potential dead money in Romo’s contract increases considerably with the move, essentially tying the Cowboys to Romo though the 2017 season.

The fact that Dallas waited so long to make this move makes me believe that this wasn’t something they necessarily wanted to do, but were prepared to do if the situation called for it. Dallas only had about $1.6 million in cap room as of today, which was not even going to be enough to sign their rookies this summer, let alone fit Rolando McClain under the cap, who they just agreed to terms with today. So this became a necessity. Dallas may have also wanted to sit on their cap space in free agency as a method to try to negotiate a more team friendly contract with DeMarco Murray, who eventually signed with the Eagles a few weeks ago.

Though there will be much speculation about what this means for other Cowboys possible transactions, namely looking to acquire Adrian Peterson, really all this move does is give Dallas the ability to pay for a full season of Greg Hardy.  If Hardy hits his incentivized roster bonuses his cap charge will rise considerably this winter and the Cowboys needed room for that move. More would need to be done to bring in a player like Peterson, even if he agreed to an incentivized or deferred money contract.  The Cowboys would still likely need to do something with the contract of Brandon Carr to make that happen. Carr could still be a June 1 (or I guess now a May 12) cut to help with that, but it would not help getting McClain signed now.

If Romo continues to play well there is little danger in this move. His cap hit in 2016, at $20.835 million is manageable, though the $24.7 million cap hit in 2017 is a bit more worrisome, depending on how the cap continues to rise. It is possible that when Romo reaches one of those last few seasons on the deal that Dallas can approach him about pulling a Brady or Manning and reducing his salary for the good of the team.  If Romo’s back flares up and he goes downhill then the contract becomes much more troublesome for the Cowboys.

  • Robbie C

    Has there been any more talk between Dez and the team? If he signed a long term deal, wouldn’t his cap number in 2015 be much lower, thus still opening up room?

    • NW86

      Yes, that would be the best way to open more space. I haven’t heard of any progress on that since he was tagged.

      • ViV

        Signing Dez to a long-term contract to free up cap space is really no different from restructuring Romo’s deal. They’re both a case of paying a player less today so that you can pay them less in the future.

        Now that the Cowboys have already placed the Franchise Tag on Bryant, it really doesn’t make sense to sign him to a long-term deal unless they get a sweet offer from Bryant’s party. They’re just going to offer spending a higher AAV, more guaranteed money, and commit the team well into the future. It makes far more sense to commit to 1 year of Top 5 Receiver money than to pay him 5-8 years of Top 2 Receiver money.

        You can think of the two franchise tag years like arbitration years in baseball. No team (except for the Phillies with Ryan Howard, and look how that turned out) is going to give a player the contract they would earn on the open market when they can just re-up for an affordable price on a year-by-year basis. That player has to approach the team and say, “I know I’m worth more on the open market, but I’ll take less pay to get the guaranteed money now” in order for teams to open their ears.

        • NW86

          There are two big differences between the Romo restructure and a Dez contract. One is that the Cowboys already had about $30M dead money wrapped up in Romo, now they added $16M more. With Dez they have none. The other is that Romo is 34, with multiple back surgeries already under his belt, while Dez is 26 and healthy. Which one would you rather commit to long term?

          • ViV

            What I mean is that dollars paid toward each player is no different. If the Cowboys were to sign Dez to a long-term contract, they’d have the option of giving him a low salary for 2015 to push x amount of dollars into the future; the Cowboys could also push x amount of dollars of Romo’s contract into the future. x is the same regardless of who’s older, or even who’s still with the Cowboys in 2018.[1]

            Sure, if Romo’s gone by then, it will be unpleasant to still have him cost $5.7M against the cap, but if the alternative is to have him cost $2.5M against the cap and have Dez cost an additional $3.2M against the cap, then the Cowboys will have gained ZERO dollars in cap flexibility.

            Unless Dez is going to sign to a contract figure that allows the Cowboys to get out of it at some point for less than $12.8M AAV (which obviously isn’t happening), then there isn’t an option for either of the players where they’re just paying them less money than they’re scheduled to pay them now. The only decision the Cowboys had available was whether they were willing to push money into the future, or whether they should pay it now. Whose money it actually was that they pushed into the future affected very very little.

            Beyond the mere dollars and cents of how they get written in the books, though, everything about these two players is completely different (see below).

            “Which one would you rather commit to long term?”

            This question is a complete misdirection. The Cowboys do not have the option of either locking up Dez long-term or Romo long-term. The money the Cowboys were already scheduled to pay Romo was a sunk cost, and using it to inform their decisions would be wrong. The Cowboys can’t simply decide whether they want to commit to him long-term.

            In a vacuum, I am completely fine with signing Dez long-term. That’s not what this has to do with. What I’m saying is that they don’t *have to* sign Dez long-term.

            They have the option of 1) giving him $12.8M AAV for 1 year, and force him to earn everything beyond that or 2) guaranteeing him $50M+ to be spread over the life of the contract with no way to get out of the contract for less than $15M AAV. I know why Dez’s party would want option #2; what I struggle with understanding is why the Cowboys’ would prefer it.

            The only way it makes any sense to sign Dez to a long-term deal is if his side makes serious concessions that will go away once Dez is ready to hit the open market. Paying him open-market money when he’s not on the open market is … do I really need to stress over what adjective to use here? You should be seeing it for yourself by now.

            The most frequent argument I was seeing to do it was to reduce his 2015 cap cost. But to bring this post full circle, they didn’t need to shoot themselves in their own negotiating-foot to save themselves cap space in 2015. Restructuring Romo accomplished the same exact thing, with no additional downsides. This option was only unpopular because people have seen the situation through fallacies of lamenting sunk costs and thinking that money paid to old players or that players not on the roster counts more than additional money paid to young players who are on the roster.

            [1] Though the exact schedule and logistics of the pay-out would vary a bit, I never see this as affecting anyone’s argument on this issue.

          • NW86

            Just wanted to get back to this thread to say that I did read your post and I do understand the logic. This has been a good discussion. I agree that pushing dollars spent today into future cap hits has the same basic effect, no matter whose name it is attached to. This conversation basically started by someone asking about Dez, and I said that signing him to a long term deal would be the best way to open more space. Maybe I should have been more clear with the term “best”, but I just meant that he had the biggest salary this year with the most dollars that could be prorated (this is after Romo was already restructured).

            Now I did respond to your point about Romo vs. Dez because the restructures do limit you flexibility to release a player, when those prorated dollars will then accelerate onto that year’s cap number. I do think it would have been better to retain more flexibility on Romo in future years, but I understand it’s not a straight comparison because there was already some commitment with Romo and none with Dez beyond this year.
            Looking just at Dez’s current situation and your points about whether to extend him, they are all valid, but there is also the consideration of what it could cost the team to let him play out this year, then if he has another great year, extend him in 2016 at a higher price tag. So yes, letting him play out the tag is the safer option for the team. But if you have confidence that he’s going to continue to play at a high level, you might be willing to go ahead and lock him up now, even at more than $12.8M/yr, because you think that would still be cheaper than paying him $12.8M this year and then an even higher number after that. Of course, there are always the less tangible factors like how much better it would be to have a happy player who has received his extension vs. a potentially disgruntled one, but those are very hard to quantify and I don’t think there is any need for us to discuss them.
            It will be interesting to see what actually happens – either way it will come down to the July 15 deadline and then they either will or won’t get it done – I’d say it’s about a 50-50 chance right now. I do think that Dez and his agent are looking at the $16M+ that Calvin Johnson has been making for the past several years now, and even the lesser receivers that are making $12M+. They also know that the cap his been increasing quickly and they saw what Suh made on the open market this year. They probably think they could make $17-18M/yr if they make it to free agency, and while they’d take a discount from there to get that money guaranteed now, it won’t be less than $12.8M/yr. It would probably take closer to $15M/yr.

  • Sevens

    AP is coming, bet on it.

  • NW86

    We all knew a Romo restructure was coming, but I can’t believe they went that far with it. They could have restructured half that much to account for McClain and the draft class, and then worked out a longterm deal with Dez (or made some other move) in July to give room for Hardy’s contract to grow.

    Given the massive restructure, I’d say they are making room for AP. Mortgaging their future like that on Romo with all that dead money, just to pay a RB $12.75M and give up a draft pick, seems really stupid to me. Especially when they weren’t willing to pay DeMarco Murray $8M/season.

  • mike1520

    Can you reverse a Cap Hit. Lets say Hardy’s out for 8 games and we cut car. Can I Add money back to romo contract.

    • ViV

      Cap space rolls over into the next year, so there would be no need to do that.

  • Ghoston

    Looking at it Dallas is in decent shape next year cap wise. Since Smith will be the new restructure contract. and Carr should be off the books. yes Dez will be on there but they should be still in good shape for 2016 even if they sign Peterson. now 2017 it’s too early to tell but Romo is getting older they might have to keep him for that year cause I don’t see them finding a replacement. 2018 he is a goner unless they restructure again, but that year was a dummy year.