Understanding Contract Restructures & Pay Cuts In Relation To The Steelers Salary Cap
This time of year I always get quite a few questions and comments about the Pittsburgh Steelers salary cap situation. Many are confused as to what a restructured contract is, and many view it as a pay cut. In light of the most recent restructures that the Steelers have done, I thought now would be a good time to try to help clarify a few things in relation to that topic.
Let us start with the contract that LaMarr Woodley, who was the first player announced as having his contract restructured, signed before the season started last year. The contract was a 6 year, $61.5 million deal with a $13 million signing bonus. The breakdown of the original contract numbers are in the top table below. Now that $13 million signing bonus was paid to Woodley when he signed the contract, but teams are allowed to stretch out signing bonuses on the books for the life of the contract, but no longer than 5 years. That is what the $2.6 million is listed for in the signing bonus column for years 2011-2015. Remember, that money has already been paid to Woodley. You also see the base salary schedule for each year as the contract was structured. Call it a weekly paycheck or a yearly salary if you choose. The Woodley contract was structured with roster bonuses in the first and second year of the contract. Those are generally paid on either March 1st or June 1st depending on how it is set up in the contract. The last column, the total cap charge, is what the Steelers will be charged salary cap wise for that specific year. So if you follow me so far, you can understand that Woodley was paid $18.1 million last season. His $1.1 million base salary, the $13 million signing bonus and his $ 4 million roster bonus. That bought him a bunch of groceries.
LaMarr Woodley Original Contract Numbers
|Year||Base Salary||Signing Bonus||Roster Bonus||Total Cap Charge|
So let us now move to the upcoming 2012 year. Woodley was scheduled to earn a $3.4 million salary and was due a $5.5 million roster bonus. His 2012 salary cap charge was scheduled to be $11.5 million as the Steelers still have to account for the $2.6 million proration part of his $13 million signing bonus that they have already written the check for.
Now for the restructure that they just did on his contract. Many times people will wrongly interpret that as a pay cut. It\’s not. What the Steelers did is they turned $2.7 million of his $3.4 million base salary he was due this year and combined it with $5.5 roster bonus he was due into another signing bonus for him. They cut him a check for $8.2 million when that happened. Now being as they paid that out as a signing bonus, they can prorate it out for 5 years as far as salary cap accounting purposes go. So that breaks down to another $1.64 million for years 2012-2016. You add that $1.64 million onto the already stretched out original signing bonus money and you get a total proration amount of $4.24 million in years 2012-2015 and just $1.64 million in the final year of his contract in 2016. Now Woodley has received all of his second year money up front except for his new base salary of $700,000 which he will receive throughout the 2012 season.
LaMarr Woodley Contract Numbers After Restructure
|Year||Base Salary||Signing Bonus||Roster Bonus||Total Cap Charge|
If you are scoring at home and understand what I have laid out above, you see that Woodley has already pocketed $26.3 million of his $61.5 million contract before taking a snap in the second year of the deal. After he is paid his $700,000 base salary this year, he will have pocketed an even $27 million through the first 2 years of his 6 year contract.
Would you rather get paid up front, or would you rather wait? You can see why players are eager to run to the office of Omar Khan to do restructure and it is a wonder they don\’t pull a hamstring while running there. Sorry, I just had to fit a hamstring wise crack into this Woodley post. If you read this LaMarr, I still love you. So do not get caught up in the proration columns, this is money that has already been paid out that needs to be accounted for in the books.
Now let\’s hypothetically say that the Steelers want to cut Woodley before the 2013 season. They do not have to pay him his remaining $34.5 base salaries listed for years 2013-2016 because that is not guaranteed money. They do however still have to account for the remaining prorated signing bonus money for years 2013-2016 that they have long paid out though and that charge escalates when a player has his contract terminated. If the contract is terminated before June 1st, the remaining prorated signing bonus all escalates into a 2013 dead cap charge to the Steelers of $14.36 million. Should they terminate his contract after June 1st, they will be charged the $4.24 million as dead money they already had on the books for 2013 and the remaining $10.12 million of the proration escalates into a 2014 dead money cap charge. This is what makes the June 1st date such a hot topic during the offseason as it allows teams a little cap relief in the initial year that a player\’s contract is terminated.
Restructures are normally done on your marquee players on your roster who have high base salaries and usually 3 or more years left on their contract so that the proration can be stretched out for accounting purposes. This is why you have now seen Woodley, Lawrence Timmons and Ike Taylor already restructured. I still expect Ben Roethlisberger and possibly even James Harrison and Heath Miller as future candidates should the Steelers need the cap room later down the line. I should note that only Woodley and Timmons of the bunch listed so far in this post had roster bonuses due, so the restructure of Taylor was merely turning base salary into signing bonus money.
I have had a few questions about Harrison and what it would cost to release him because of his 2012 cap charge of $9.03 million. He has $9.03 million remaining in salary bonus proration that would escalate should his contracted be terminated prior to June 1st. Funny how the two amounts match. Basically there is not anything gained from cutting him if he can walk on two legs.
Now for the flip side. Let\’s take Casey Hampton and his $4.89 base salary he is scheduled to make in his final year of his contract. He has a cap charge of almost $8.0567 million because he has a final year of his signing bonus proration of almost $2.167 on the books. That money has long been paid out to Hampton and that will be charged to the Steelers 2012 salary cap whatever happens to him. Included in that $8.0567 million cap charge is a $1 million workout bonus he is due. They will likely approach Hampton about his $4.89 base salary and ask him to lower it tremendously or be cut. If they terminate his contract they only save that base salary amount as it is not guaranteed. They can possibly save the $1 million workout bonus as well, but I do not know when that is scheduled to be paid. Regardless, he will be one of the few players that will likely be asked to take a pay cut or be cut. Hines Ward was also another candidate for this to happen to, but if the report Friday night by Jason La Canfora ends up being true, they will terminate his contract and save his $4 million base salary this year. He has two years left of proration on his contract still and that equates to a $1.2 dead money charge they will be facing in 2012 if released before June 1st. That means the true cap savings on Ward will be $3.41 million in 2012 if released before June 1st.
Linebackers James Farrior and Larry Foote are also in their final years of their contracts and may be approached to take flat out base salary cuts or be released as well. Foote is really a prime candidate for this as his base salary is actually slightly higher than that of Farrior and of course Foote is a backup.
I hope that clarifies everything for you as far as restructures and pay cuts go in relation to the salary cap.