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.
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.
|Age||Active||Inactive||220+ yards||200 + yards||Adj. Yards >6.5|
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.
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.
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.
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.
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.
In this restructure we are converting just $7 million to a bonus.
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.
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:
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.
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.