Restructuring Steelers Contracts

[tony hipchest]

i was wondering how a team like the patriots has $25 mil+ under the cap to re-tool go and get whoever they want in free agency, while steelers management tells us j. porter and his $5 mil was a salary cap move. indeed it was. this is the best source i have come across for the ramifications of the steelers salary cap situation.

http://www.steelersalarycap.com/arti...gContracts.htm
(scroll down to the blah blah to get to the meat and potatoes of the article)

Restructuring Contracts – Bad for Player, Bad for Team?

Written sometime in early offseason 2006.



Overall the Steelers manage their salary cap better than average, but they are not the best. Some time in the future, I will try to write more on their cap management, but for now I will focus on one aspect which the Steelers do to manage their cap – restructuring players’ contracts.



A contract restructuring creates cap space for the current year at the expense of future years’ cap space. For example, John Doe signs a three-year contract worth $9 million, which includes a signing bonus of $3 million dollars. John Doe’s cap values would be:



YEAR ONE: $635,000 base salary; $1 million prorated signing bonus = CAP VALUE of $1,635,000

YEAR TWO: $2.5 million base salary; $1 million prorated signing bonus = CAP VALUE of $3.5 million

YEAR THREE: $2.865 million base salary; $1 million prorated signing bonus = CAP VALUE of $3.865 million



(Most contract’s first year base salary is league minimum for that player…like YEAR ONE)



Now, let’s say the team in YEAR TWO needs to free up cap space. The team can restructure John Doe’s contract (with his approval). The team would reduce John Doe’s base salary for YEAR TWO to his league minimum. Then, the difference between the league minimum salary and his original salary is converted into a signing bonus, which would be prorated over the rest of the contract length. Here are the restructured cap values:



YEAR ONE: $635,000 base salary + $1 million prorated signing bonus = CAP VALUE of $1,635,000 (YR 1 already done)

YEAR TWO: $640,000 base salary + $1 million prorated signing bonus (original contract) + $930,000 prorated signed bonus (restructured contract) = CAP VALUE of $2.57 million

YEAR THREE: $2.865 million base salary; $1 million prorated signing bonus + $930,000 prorated signing bonus (restructured contract) = CAP VALUE of $4.795 million



The team reduced John Doe’s base salary from $2.5 million to $640,000, a reduction of $1.86 million. The $1.86 million was added as a signing bonus prorated over two years (length remaining on John Doe’s contract). The prorated amount for the restructured signing bonus is $930,000. John Doe is still getting the same amount of money. The team would save $930,000 in YEAR TWO, but they would have an additional $930,000 in cap space for YEAR THREE.



In order to get under the cap or to sign desired players, the Steelers have restructured quite a few players’ contracts in the past. Jeff Hartings, Travis Kirschke, Joey Porter, Aaron Smith, Marvel Smith, and Duce Staley (among others) have all restructured their contracts. As a result of these restructurings, the Steelers will have $8.244 million less salary cap space to work with in 2006.



Jeff Hartings is at risk of being cut. His current cap value is $8.13 million, which is too much. Unless he renegotiates his contract, he will more than likely be cut. If he had never restructured his contract, his cap value would have been $4.958 million. At $4.958 million, Hartings would not have been cut. By restructuring his contract, Hartings could be out as much as $4.75 million – his base salary plus bonus.



The Steelers will need to make a decision on Hartings. It is a decision which could have been avoided. If they could have managed their cap better in prior years, they would not need to make this decision.



They would also have an additional $8.244 million in cap space to work with this year.



In conclusion, restructuring contracts is bad. It is bad for the team, and could be bad for the player. Teams should only restructure contracts if there are no other options.



The Steelers are pretty good at managing their cap, but they are not perfect. Restructuring contracts is one of a few mistakes the Steelers make. They need to end the cycle of restructuring.

[Steelersfan]

Great article Tony. I've been wondering the same thing myself. The Steelers sure do need to work on that.

[Black@Gold Forever32]

Very interesting and lots of really good info. Alot of solid points made in that article. I agree the Steelers need to stop restructuring so many contracts. It catches up to you sooner or later.lol

[tony hipchest]

if you all liked that, you will love this. its a very long, detailed, in depth analysis of the steelers situation going into the future. i dont know who this dude is but he sure does the research and knows his shit. he wrote this in early january and was pretty much spot on with every steelers off season move to this point. heres a snipet:

http://www.steelersalarycap.com/arti...Projection.htm

(quite a bit of informative info going into the future. warning: this stuff is deep and complex. if youre into the capology and business side of the nfl, this is a must read)

After the disappointing season, some may feel the team needs some new faces. Perhaps they would be right. I do not know. I do know that any teams looking to sign free agents better be ready to pay a pretty penny for their services. According to Adam Schefter’s (an NFL analysis working on the NFL Network – NFL Total Access) recent article, many teams will have mucho cap space (reportedly eight teams with $30 million under and an additional eight teams $20 million under).



In addition, due to the relatively high increase in the 2006 salary cap, many teams had adequate salary cap space to offer extensions to the players they wanted. This will take away from the number of free agents on the market.



More available money and less available players probably means more money in the pockets of those players who are available. (An unofficial list of UFA, ERFA, RFAs from theredzone.com)



So, maybe the Steelers need some roster changes, but from a salary cap point of view - this is not the right time to bring many new faces!



As many Steelers fans know, the Steelers historically have not been very active on the free agent market. Instead, they have built their teams through the draft.



What’s it all mean? Despite the disappointing season, I do not foresee the Steelers signing many free agents.

[DIESELMAN]

Great articles and yeah this guy knows his shit. We definitely need to quit restructuring, its good for the moment but bad in the long run. Everybody does it though, the one thing in our favor is we don't dip into FA that much. Draft is much better, less money for rookies and you can figure out a player in a shorter period of time to see if hes going to be worth keeping around. FA's for the most part are a gamble, most of them are coming off of peak seasons only to watch them come down the other side of the hill at your expense.

[tony hipchest]

the thing that gets me is you would think players like essex, kemoeatu, okolbi, colon, starks, and philip could be developed into an effective starting line and prevent paying 20-25% of the cap to the front 5, alone.

through the pats 3 sb runs they never had to devote that much to the line (much of the time they plugged in rookies and no names) and san diegos young line is signed for the long term and doing fine even when they plug in players or rookies.

back ups ross and vincent did great with a rookie qb and a 60-40 run scheme in 05. yet our back ups (and even starters) suck when we go to a more passing oriented offense such as last year or in 03.

this tells me the coaching staff and their offensive philosophy hasnt been drafting and developing well rounded players.

grimm and cowher being gone seem to support this. we still dont know if any of the above mentionned linemen drafted are starting material in the nfl.

[DIESELMAN]

Maybe the new coaching staff can get better results. Whether anyone wants to admit this or not, there must have been some controversy in the locker room, with favorites being played over better qualified starters. Players see that stuff, it gets in their heads and can develop negative attitudes. Who knows....we got new blood now, so lets just see what the winds of change bring.

[SteelersfaninPhilly]

What’s it all mean? Despite the disappointing season, I do not foresee the Steelers signing many free agents.


This is different from any other year how?

[BlitzburghRockCity]

What’s it all mean? Despite the disappointing season, I do not foresee the Steelers signing many free agents.


This is different from any other year how?

Ok this is scary, you and I agree twice in the same week


The Steelers have made a living out of restructuring deals ever since Cowher started in 92, and more than likely far beyond that (without actually going to to look it up). It's a process where once you start doing it, you almost can't stop until those players who you restructured either leave the team or they sign a more long term cap friendly deal. Most players never care about getting their contracts restructured because they just get all their money upfront for that year and a smaller game check each week but they don't lose anything.

Sure sooner or later something will always bite you in the ass, but to date we've kept a TON of good players and signed a ton of good ones too using our cap philosphy so I wouldn't expect it to change in the future much unless they have a complete change in philosphy, and with the Rooney's being our owners, I wouldn't expect that to happen.

Just me

[Steelersfan]

We all know how the Steelers have worked every year. I think the point is how is it the Pats can be good every year and still have $24 mill in cap room and we have so little? All this tells me is we can do better and those articles tell us how. When we have to restructure contracts just to be able to sign our draft picks something is wrong.