Breaking Down Restructuring Contracts and Why It's Damaging in the Long Run
It's a shell game that's taking place all across the National Football League.
Across the league, teams are restructuring the contracts of everyone from star quarterbacks to elite defensive players in an effort to create space under the salary cap, which Mike Florio of Pro Football Talk reports is estimated to be about $123 million this season.
The latest big name to be caught in the money shuffle is Pittsburgh Steelers quarterback Ben Roethlisberger. As Ed Bouchette of The Pittsburgh Post-Gazette reports, the Steelers and Roethlisberger have agreed to terms on a restructured deal that will give the cap-strapped Steelers some badly needed wiggle room.
Little math challenged. Ben's redone deal clears nearly $6 M in cap space for #Steelers— Ed Bouchette (@EdBouchette) February 28, 2013
Roethlisberger joins stars such as quarterback Tom Brady of the New England Patriots, and tight end Jason Witten and linebacker DeMarcus Ware of the Dallas Cowboys on the list of players who have re-done their deals recently. That list is only going to get longer as the deadline for teams to get into compliance with the 2013 cap draws near.
The thing is, these restructured deals may afford teams some cap space for now, but they're much less about solving problems than simply delaying them.
Essentially, restructuring a deal involves the conversion of a portion of a player's salary into the form of a signing bonus. The cap hit from that bonus can be amortized over the length of the contract, which in turn lowers this year's cap number.
Here's a look at a breakdown of how Brady's reworked deal, which included a three-year, $27 million extension through 2017, affects the Patriots' salary cap over the next two seasons compared to his old contract, which was signed in 2010.
As you can see from this chart and contract data provided by ESPN and spotrac.com, Brady's prorated signing bonus increased, but his base salary went way down. Adding three years to the deal also gave the Patriots more room to spread Brady's bonuses over, and the end result was a salary cap saving of around $8 million dollars over the next two seasons.
So, if cap space can be created with relative ease by simply restructuring contracts, then what can there possibly not be to like about re-doing deals this way?
Well, it's not that simple.
For starters, cap hits aren't really being alleviated so much as delayed. Every cent of that deal is still going to count against the cap at some point. By restructuring, all teams are essentially doing is putting off today's problems until tomorrow.
Hey, it works for Congress, right?
Also, any salary that is converted into bonuses becomes guaranteed money. That's one of the reasons why players are generally amenable to doing it. Tom Brady didn't drop his "take home pay" over the next two seasons from $30 million to about $17 million because he's a swell guy.
He did it, as Albert Breer of the NFL Network reported, because now his "new" five year, $60 million contract is fully guaranteed against injury.
Brady deal converts his old deal into, essentially, a five-year, $60 million contract. And all $60 million is guaranteed.— Albert Breer (@AlbertBreer) February 25, 2013
According to spotrac $33 million is guaranteed for any reason. That's of no real concern so long as Tom Brady keeps playing like Tom Brady.
However, if Brady (or any player that converts salary into bonuses in this fashion) suffers a catastrophic injury or sees a sudden decline in play then their teams are stuck with millions of dollars of "dead money" on the books.
Since the advent of the salary cap, teams have been trying to figure out ways to game the system while staying within its rules. Restructuring deals in this fashion is one of the tricks they've devised.
And they're going to keep using it. The Cowboys entered 2013 over $20 million over the salary cap. They're going to do whatever they can to get under the cap without gutting the roster, tomorrow be damned.
The problem is, it's more parlor trick than solution. When players such as linebacker Sean Lee, wide receiver Dez Bryant and linebacker Bruce Carter see their contracts expire over the next couple of years, the Cowboys are now going to have less money with which to re-sign them because of the bonuses that have been paid to Witten and Ware.
That leaves Dallas (or any team) in the position of either releasing other players or watching young building blocks they otherwise would have retained depart via free agency.
One step forward, two steps back.
At the end of the day this is a process that, for better or worse, is going to keep happening. However, it's folly to suggest that managing the salary cap in this fashion is anything more than a short-term fix for a long-term problem.
Because as often as not it creates as many problems as it solves.
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