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Basic Contract Restructure
One of the most common tools for an NFL front office to navigate the salary cap, a basic restructure of a player’s contract allows the team to lower the cap hit in the year of the restructure by converting a base salary or roster bonus into a signing bonus. This frees room under the salary cap for the team for the coming year, but also guarantees the money for the later years of the contract, thereby making the player harder to cut.
When a team restructures a player’s contract, they convert some salary or roster bonus into a signing bonus that is paid out immediately. For example, when the Buffalo Bills signed Charles Clay to a 5-year, $38 million contract in the 2015 offseason, they included a $10 million roster bonus to be paid in 2016. The purpose of this bonus was to make the deal nearly impossible for the Miami Dolphins to match, as Clay had been placed under the transition tag and the Dolphins had the right to match the contract. When the 2016 offseason began, the Bills restructured Clay’s contract, turning that roster bonus into a $10 million signing bonus.
Clay’s original contract included a $10 million signing bonus, which prorated into cap charges of $2 million per season. In 2015, then, the prorated signing bonus only counted for $2 million against the cap. Once the roster bonus was converted, the prorated cap charge rose to $4.5 million per year for the final four years of the deal, as the restructure converted the $10 million roster bonus into a prorated bonus charge of $2.5 million per year that was added to the original payments. Therefore, Clay’s prorated bonus counted for $2 million against the cap in 2015, and then for $4.5 million each year for the remainder of the contract.
Restructuring a player’s contract gives the team short-term relief from the cap. However, the move pushes guaranteed money down the road and increases the dead money charge if a player is released later in their contract. The New Orleans Saints are an infamous culprit of pushing money down the road like this, as they consistently restructure players’ contracts to free space in a given year, only for the guaranteed money to be pushed into later years of a contract and eat up cap space at a later date. General Manager Mickey Loomis consistently inhibited his ability to upgrade the roster in a given year because of large amounts of guaranteed money that had been pushed ahead.
One such example of a contract whose guarantees have been pushed well ahead is Cowboys’ QB Tony Romo, whose contract is seen below:
Looking at Romo’s prorated bonuses through the length of his former contract, it’s clear the Cowboys have restructured his contract multiple times. For example, they converted $12.5 million and $16 million of base salary into signing bonuses in 2014 and 2015 respectively. These add guaranteed money to later years of the contract, making the dead money charge if Romo is released in 2017 (his age 37 season) $19.6 million, which renders Romo essentially uncuttable until 2018 or 2019 when the savings would finally outweigh the dead money.
Restructuring contracts is a common practice in the NFL to increase short-term cap relief at the expense of increasing guaranteed money commitments in the future.
All contracts from overthecap.com