The case for Restructuring Romo

[xwalker]

That is not how they sold it. They made it out to be a financial decision, not risk aversion. Whether or not the positions are valued differently or not, going from not committing to Murray to offering Hardy 13m is a big jump. I am glad they made it, but they seem to be inconsistent at every turn.

You can argue they are only signing 'value' contracts, but committing 28m to Romo, 13m to Dez and 13m to Hardy in lump sums is not using the cap effectively. That is 54m that could be cut by 20m. going year to year is also dangerous and time consuming.

I don't see the inconsistencies. They mentioned guaranteed money as an issue with Murray. The guaranteed money for Hardy is Zero.

 

[BlindFaith]

Let me help to clear this up. The bulk of Hardy contract (when he plays) can be pushed into 2016 cap. This option is available because the 578k per game bonus can be split into likely to be earned (LTBE) and not likely to be earned (NLTBE). LTBE is based on previous year games played. Since Hardy only played two games last year his LTBE for 2015 is also 2 games. Anything over that can be pushed in NLTBE and deferred into 2016 salary cap. So basically about 3 million goes into 2015 cap and 8 million goes into 2016 cap. Dallas is major beneficiary of Hardy being on league exemption list last year. The timing of deal was impeccable.

Good luck trying to convince anyone of that. I spent a whole thread on it and they still wouldn't believe it.

 

[ABQCOWBOY]

Why are they scheduled to hit like that: 17m, 8.5m and 14m?

The only explanation was a planned restructure in 2015. This the last year they can pro-rate it for 5 years and next year the savings would be minimal with a restructure.

It could be based on many variables. When other players are coming up on contracts, how much future cap is hitting, based on players who are no longer with the team, what the FA class might look like year to year. Lots of different reasons why it could be structured like that. It doesn't necessarily mean that the team was planning on restructuring Tony's contract in 2015.

 

[joseephuss]

It could be based on many variables. When other players are coming up on contracts, how much future cap is hitting, based on players who are no longer with the team, what the FA class might look like year to year. Lots of different reasons why it could be structured like that. It doesn't necessarily mean that the team was planning on restructuring Tony's contract in 2015.

Good points. Romo's base salary also continues to go up the remainder of he contract. If they restructure to push money to 2018 or 2019 and Romo plays then Dallas will be facing a big cap hit for Romo at that time.

2015
$17M

2016
$8.5M

2017
$14M

2018
$19.5M

2019
$20.5M

http://www.spotrac.com/nfl/dallas-cowboys/tony-romo/

 

[Nightman]

If they would have stayed the course they would be no better off than any other team in terms of usable cap space. That's the deal with restructuring. After a couple years you have added cap dollars that are you are now trying to subtract. Sure, they are currently operating at a disadvantage by taking the inflated cap charges right now but they have to be taken at some point. You can't possibly be on the cusp for 6 or 7 years. You just have to face facts and realize that at some point all the money pushing you have done has not given you any sort of advantage and if you ever want to be in a position to actually sign the 1 or 2 guys who can put you over the top, you can't be freeing up space that is occupied by previous sleight of hand every single offseason. You actually have to get that surplus which requires free up space without any previous - or minimal amounts of - restructures on the books.

Looking back on it, they probably would have been better off for 2014 if they had more talent on defense. That's indisputable, but it's also looking at the 2014 from a different perspective than anyone had in March of 2014. Hindsight is always 20/20. Had they restructured Carr last year his cap hit would be another $1M or so higher and the team would be facing a giant amount of dead money to cut him. Right now it's cap neutral to cut him. With a restructure last year it would be around $5M in the red. On the other hand, had they never restructured Carr in the first place the team would free up to $8M by cutting him right now.



And that's the nature of the business. If anyone had the ability to know whether or not a signing or drafted player would pan out they wouldn't need to restructure in the first place. They'd be so far ahead of every team that signing players to big contracts would be unnecessary. Their roster would be full of Richard Sherman or Russell Wilson type players on rookie contracts. They'd have to be the best team in the league every year because the'd be hitting home runs on every single pick and every single free agent bargain.

The bottom line is that nobody knows how things will turn out when they sign a guy or draft a guy. There's risk in every move. All teams screw the pooch at some point or another. The difference between restructuring or not is whether or not a team can take the money freed up by cutting a bad signing and use it to try and acquire a guy worth the pay. If Dallas could cut Carr right now and have at minimum $6M in cap space, would they do it? I'd have to say, "hell yes", but because they wagered on a guy producing at an older age rather than when he is in his prime, they free up nothing by cutting him unless they use a June 1st designation.

If we're going to list guys who haven't "earned their money", then we have to at least acknowledge that without signing all those contracts that turned sour the team would have the money necessary to sign guys without restructuring. Take away those missed signings and picks and what does the team have in free space or talent? Essentially, you've just stated what I have been claiming. Restructuring has been a crutch to cover for the bad decisions the team has made in the past. Seriously, take just 1/3 to 1/2 of those contracts off the books and the team probably has a cumulative $30M in space over the past 2-3 years. Turn 1/3 of those picks into just solid role players and the team is improved right now.

You can't throw good money down the drain to cover your bad spending. That's basically what restructuring every year does. You sacrifice your ability to create space to put you over the top in future years just to cover your bad decisions of recent past.

Those are solid counter points.

I guess we just have a philosophical difference.

I see restructuring and large signing bonuses as a tool to gain an advantage over teams that are too cheap to overspend. If all those bad contracts were gone and the draft picks were better, then spending 133-150% of the cap could make an already great young team even better. To me it is leaving resources on the shelf for no reason.

If the team is truly making better picks and signings then the risks with restructures should be even less. Those players will play out their full contracts unless they get injured.

 

[Nightman]

Good points. Romo's base salary also continues to go up the remainder of he contract. If they restructure to push money to 2018 or 2019 and Romo plays then Dallas will be facing a big cap hit for Romo at that time.

2015
$17M

2016
$8.5M

2017
$14M

2018
$19.5M

2019
$20.5M

http://www.spotrac.com/nfl/dallas-cowboys/tony-romo/

2018 and 2019 were 'dummy' years added to make the contract look bigger and help with pro-rated the signing bonus and any restructures. Those 20m salaries are almost guaranteed to NOT be paid. If Romo is still playing he will give some salary back like Brady and Peyton did. If he isn't playing those 20m base salaries will be off the books.

 

[joseephuss]

2018 and 2019 were 'dummy' years added to make the contract look bigger and help with pro-rated the signing bonus and any restructures. Those 20m salaries are almost guaranteed to NOT be paid. If Romo is still playing he will give some salary back like Brady and Peyton did. If he isn't playing those 20m base salaries will be off the books.

The point of having those high base salaries is that they won't end up with large amounts of dead money if Romo isn't on the team those final 2 years of the contract.. If he is still on the team and playing at a high level, then all they have to contend with is the base salary and not more re-structured bonus money that is pushed to those years.

Brady did not give salary back in his recent(December) contract re-working. They actually added to his base salary and changed the types of bonuses and guarantees.

 

[Nightman]

The point of having those high base salaries is that they won't end up with large amounts of dead money if Romo isn't on the team those final 2 years of the contract.. If he is still on the team and playing at a high level, then all they have to contend with is the base salary and not more re-structured bonus money that is pushed to those years.

Brady did not give salary back in his recent(December) contract re-working. They actually added to his base salary and changed the types of bonuses and guarantees.

I wasn't talking about Dec's deal with Brady. The 3 year extension he signed in 2013 was for 3 years and 24m. That is a gigantic paycut for one of the top QBs in the league. Dec's deal added 1m a year to his deal in exchange for taking away the guarantee for the entire 24m, again very team friendly.

 

[Hoofbite]

Those are solid counter points.

I guess we just have a philosophical difference.

I see restructuring and large signing bonuses as a tool to gain an advantage over teams that are too cheap to overspend. If all those bad contracts were gone and the draft picks were better, then spending 133-150% of the cap could make an already great young team even better. To me it is leaving resources on the shelf for no reason.

If the team is truly making better picks and signings then the risks with restructures should be even less. Those players will play out their full contracts unless they get injured.

But dollar-for-dollar, the team with the most cap dollars "utilized" isn't necessarily the team who spends the most money. You could spend 130% of the cap by freeing up space and adding players, but if 20% of your cap charges are in the form of prorated money from previous restructures, you're not actually shelling out 130% of the cap in cash.

Given the choice of having a $9M cap charge with $2M in previously restructured money or $9M in base salary alone, what would players prefer? Prorated money inflates cap charges without inflating dollar spent. Players want dollar spent so even if you can free up space there's no guarantee that someone else doesn't structure a contract to give out more real money than you can afford to.

As for restructuring players who can play out their contracts, there's a still a limit to which this can be done without increasing risk. Tyron is probably the most perfect example of a player who can be restructured, but even he has risk. All you have to do is draw a simple graph or two. X-axis is age. On one graph you have pay (basically cap charge) as the Y-axis, and on the other you have performance.

On the age-performance graph, what is the slope of the line that indicates a players performance with increasing age? It's negative. Players perform less well at increased age, and it's pretty much universal. At some point (30 being a commonly cited age), players decline. That's a given. On the age-pay graph, what is the slope of the line that indicates a players pay with increasing age. Assuming he's a good player, it's almost always positive. Players earn more in later years than they do in earlier years because teams know they can spend more 4 or 5 years from now than they can in the next season.

Superimpose the two graphs and the natural return on a team's cap dollar in later years of a contract is less than what they pay for in terms of performance. Was DeMarcus Ware more likely to be a stud at 26, or at 32? The answer is obvious. What restructuring does is inflate the cap charge and decrease the return on cap allocation that a player provides. In 2011, Ware had a cap charge of less than $7M (they did restructure but it could have been set from the beginning) but produced 19.5 sacks. In 2014, he would have had a cap charge of $16M but was coming off a down year and only gave the Broncos 10 sacks. There's a mismatch in both seasons. You don't expect to pay $7M for 19.5 sacks, and you don't expect to pay $16M for 10 sacks. Imagine those cap figures are flipped. Teams can structure contracts however they want so it's entirely possible that Dallas take a $16M cap hit for 19.5 sacks and a $7M cap hit for 10 sacks. Would Dallas have kept Ware last year if his cap charge was $7M? Absolutely, they took a bigger hit to cut him. Would a $16M cap hit be justified by 19.5 sacks? Absolutely. Greg Hardy could make $13M if he hits how many sacks and plays in every game? 19.5 sacks is definitely worth a $16M cap hit.

Just as a result of the age/pay/performance relationship most contracts provide lesser returns in later years. Restructuring increases the cap charge without changing the returns so you're actually losing more value on a player-by-player basis. Do you get the upfront bonus in the first couple restructuring years? Yes, but you also take the lost value on the backend. Additionally, you've reduced the amount of cap space available to fix a bad signing. You've moved an additional amount of dead money to the current year which means you either have to restructure more or settle for a less player.

As I have said, it's a short-term plan in a long-term game. You widen the difference between performance and cap charge in later years in exchange for 1 or 2 players right now. How many players are actually able to put a team over? Additionally, after the first couple of years you're no better off than anyone else. You're just accounting differently. Basically, you get 1 or 2 years to reap those rewards and then you're sitting in the same position as everyone else. The key difference being, the team who restructures a player is more likely to hold on to a bad signing for a longer period than the team who does not. If there's no benefit in cutting a guy, why would you? If it's actually harmful to cut a guy, you won't.

 

[GimmeTheBall!]

No

A truly open mind.

 

[AdamJT13]

Just as a result of the age/pay/performance relationship most contracts provide lesser returns in later years. Restructuring increases the cap charge without changing the returns so you're actually losing more value on a player-by-player basis.

That's not true. The total performance is the same, and the total amount spent is the same, but the percentage of the salary cap used (the REAL "cost" to the team) is less for the restructured player because the cap increases.

If a player has a four-year, fully guaranteed contract, would you rather have his cap charges equal in all four years, increasing for all four years or decreasing for all four years? If you said anything but "increasing," then you're just costing yourself cap room -- even though the total cap and the total cost of the player are exactly the same in any of the three scenarios, the combined percentage of cap used is lowest in the "increasing" structure, and that's what actually matters as far as being able to build a team. Restructuring a player's contract does the exact same thing -- it takes the same amount of money and makes it count a lower percentage of the cap, combined, for the seasons involved.

And being "forced" to hang onto a guy because his contract has been restructured is just foolishness. If a team is dumb enough to do that, it's not because they restructured that contract, it's because they mismanaged their money elsewhere.

 

[Nightman]

That's not true. The total performance is the same, and the total amount spent is the same, but the percentage of the salary cap used (the REAL "cost" to the team) is less for the restructured player because the cap increases.

If a player has a four-year, fully guaranteed contract, would you rather have his cap charges equal in all four years, increasing for all four years or decreasing for all four years? If you said anything but "increasing," then you're just costing yourself cap room -- even though the total cap and the total cost of the player are exactly the same in any of the three scenarios, the combined percentage of cap used is lowest in the "increasing" structure, and that's what actually matters as far as being able to build a team. Restructuring a player's contract does the exact same thing -- it takes the same amount of money and makes it count a lower percentage of the cap, combined, for the seasons involved.

And being "forced" to hang onto a guy because his contract has been restructured is just foolishness. If a team is dumb enough to do that, it's not because they restructured that contract, it's because they mismanaged their money elsewhere.

That is why I don't understand taking this huge hit on Romo's contract this year.

28m is 19% of a 148m cap

Worst case scenario with a Romo restructure would be 19m in Dead Money in 2017 when the cap should be at least 155m. That would be 12%.

 

[Kaiser]

That is why I don't understand taking this huge hit on Romo's contract this year.

28m is 19% of a 148m cap

Worst case scenario with a Romo restructure would be 19m in Dead Money in 2017 when the cap should be at least 155m. That would be 12%.

The only time the franchise had a true catastrophe was when Troy Aikman retired and the team took a huge cap hit that actually was the "cap hell" people always post about. I don't think they are missing out on any players by not restructuring Romo, but taking the big cap hit this year means you minimize the chance that Romo has a freak injury and it cripples the franchise.

Another factor is that because the team has drafted well, you have a bunch of young players who are playing well on their rookie contracts like Martin, Fred, etc. Its better to work off the cap hit for Romo now instead of later on when the young players drafted in the last four years take up more cap room.

I think they resign Dez, structure Carr down and still end up restructuring Romo - but only for something like 5MM rather than the full 17MM.

 

[Nightman]

The only time the franchise had a true catastrophe was when Troy Aikman retired and the team took a huge cap hit that actually was the "cap hell" people always post about. I don't think they are missing out on any players by not restructuring Romo, but taking the big cap hit this year means you minimize the chance that Romo has a freak injury and it cripples the franchise.

Another factor is that because the team has drafted well, you have a bunch of young players who are playing well on their rookie contracts like Martin, Fred, etc. Its better to work off the cap hit for Romo now instead of later on when the young players drafted in the last four years take up more cap room.

I think they resign Dez, structure Carr down and still end up restructuring Romo - but only for something like 5MM rather than the full 17MM.

But Romo's contract is already guaranteed. They are going to have pay for it now or later. Paying all of it now does not really accomplish anything. We are talking about an extra 3.2m a year, but that 13m in cap space could be vital this year.

We could re-sign McClain, add a swing OT or CB, pay for Hardy's deal, add a WR5/KR. Worst case is they roll over 7m if they don't spend it and that pays for the restructure in 2016 and 2017.

 

[Kaiser]

But Romo's contract is already guaranteed. They are going to have pay for it now or later. Paying all of it now does not really accomplish anything. We are talking about an extra 3.2m a year, but that 13m in cap space could be vital this year.

We could re-sign McClain, add a swing OT or CB, pay for Hardy's deal, add a WR5/KR. Worst case is they roll over 7m if they don't spend it and that pays for the restructure in 2016 and 2017.

I think we can still do all the moves you listed with the moves on Dez, Carr and a bit of Romo's deal. If you do the full restructure and Romo has a freak injury ending his career in 2015 you have 25 Million in dead money after the restructure instead of 15 or so.

I'm not arguing the point, I just get the idea of managing against catastrophe. I pay for Earthquake Insurance that I hope I never use.

 

[joseephuss]

That is why I don't understand taking this huge hit on Romo's contract this year.

28m is 19% of a 148m cap

Worst case scenario with a Romo restructure would be 19m in Dead Money in 2017 when the cap should be at least 155m. That would be 12%.

So you are opposed to paying 19% for a guy who is playing this year, but are okay with paying 12% for a guy no longer on the team?

 

[Nightman]

So you are opposed to paying 19% for a guy who is playing this year, but are okay with paying 12% for a guy no longer on the team?

Yes and that is the worst case scenario. Spreading the cap hit out longer while the cap goes up is the better play.

Have you ever used a credit card? You take a vacation and you are still paying for it after you get back home. Except this credit card is not only interest free, but it pays you a cash back.

 

[Hoofbite]

That's not true. The total performance is the same, and the total amount spent is the same, but the percentage of the salary cap used (the REAL "cost" to the team) is less for the restructured player because the cap increases.

My position on performance is that a higher level of play justifies a higher cap charge, and given that players decline over time it's ridiculous to think an older version of a great player will be more likely to justify a high cap charge than the younger version of the same great player. It's a pretty widely accepted position that you don't pay for age and you don't pay for past performance, but that's essentially what restructuring does. You take a higher charge at an older age, which is when the natural course of a player's career suggests that he won't be as productive.

As for the percentage of the salary cap a player takes up, I'm not sure why that's even something worth discussing. There is no set percentage of cap space that any player should occupy, and contracts aren't negotiated based on what percentage a player should occupy. Additionally, whatever percentage a player occupies in later years as a result of the total cap increasing will always be higher for the restructured player than what the same player would have occupied without restructuring.

If a player has a four-year, fully guaranteed contract, would you rather have his cap charges equal in all four years, increasing for all four years or decreasing for all four years? If you said anything but "increasing," then you're just costing yourself cap room -- even though the total cap and the total cost of the player are exactly the same in any of the three scenarios, the combined percentage of cap used is lowest in the "increasing" structure, and that's what actually matters as far as being able to build a team. Restructuring a player's contract does the exact same thing -- it takes the same amount of money and makes it count a lower percentage of the cap, combined, for the seasons involved.

Fully guaranteed multi-year contracts don't exist, but if such a contract did exist the percentage of cap used would be the same regardless of how it was structured. If a fully guaranteed contract for 4 years paid $50M and the total cap space over those 4 years was $600M, it doesn't matter in what way you structure it in terms of the percentage of cap used over the 4 year period.

Percentage-wise, $50M of $600M is the same no matter how you want to split it up.

And being "forced" to hang onto a guy because his contract has been restructured is just foolishness. If a team is dumb enough to do that, it's not because they restructured that contract, it's because they mismanaged their money elsewhere.

The only way you can say it's foolish is if you believe teams make roster moves entirely independent of the potential dead space a move would make. That's just not true. You'd also have to believe that Brandon Carr would still be on the roster right now if the team were able to free up $8M by cutting him, as they would be had they never restructured his contract.

While $8M could certainly give you the level of play that Carr has provided, the fact that there's next to no cap space created by cutting him means that the team would have to utilize more cap space to replace his level of play than they would just by keeping him. Keeping him is the cheapest option they have right now, and it's entirely because they restructured him. Furthermore, had they not restructured him it's questionable that he is on the roster for 2014 because they could have taken the $6M in dead space it would have created and signed a guy with the $6M in space that cutting him would have freed up.

Dead money is absolutely a deterrent to releasing a player. I'm not sure how anyone could think otherwise.

 

[Austin 3-16]

Antonio for my money has two good years left on that back, pay him now! Restructure and you'll be paying him in rehab later on.

 

[joseephuss]

Yes and that is the worst case scenario. Spreading the cap hit out longer while the cap goes up is the better play.

Have you ever used a credit card? You take a vacation and you are still paying for it after you get back home. Except this credit card is not only interest free, but it pays you a cash back.

We are talking about percentages, so the cap going up doesn't matter. Paying a guy 19% of the cap for actually playing and maybe even playing at a high level is better than paying a guy 12% of the cap who may no longer be on the team.