Note from the editor: Blogging the bEast collaborated on this with Jason from OverTheCap.com, which is phenomenal new website/resource. Actually, Jason did all the heavy lifting; we just made a few tweaks. You can ask Jason questions on your team’s cap situations via Twitter. He is an absolute must follow.
Over the past week, in order to attempt to become cap compliant, the Dallas Cowboys made a number of contractual changes in an effort to maintain their roster as is, but reduce their salary cap costs via the process of restructuring a contract. In general, an NFL contract is made up of a four basic cash flows:
- Base (P5) Salary
- Prorated Bonuses
- Roster/Reporting Bonuses
- Offseason Workout Bonuses
When we look at salary cap, the three bonus categories are treated as both cash and cap charges, but the bonuses will see their cap charges spread out over the life of a contract, up to a maximum of 5 years. When a player has a high salary cap charge due to cash flows in the other three categories, a simple mechanism to reduce that cap charge is to convert the cash into a prorated bonus for cap accounting purposes.
The danger in this move is that it increases the future cap charges and also increases the amount a team has to pay in “dead money” to the salary cap if a player is released. This restructure will often effectively guarantee the player being on the roster, not just in the current season, but also in subsequent seasons. When restructuring a player’s contract you have to be well aware that players have prime years, and once they exit those prime years, decline in their level of play can happen rapidly. You then get stuck with a team full of players that have incredibly high cap charges and high dead money charges, who simply aren’t playing up to their pay scale.
This is the sort of situation that the Cowboys are going to find themselves in. The Cowboys reworked the contracts of Miles Austin, Jason Witten, DeMarcus Ware, and Brandon Carr. The moves saved Dallas $23,357,600 against the salary cap in 2013, but increased the Cowboys’ cap charges in 2014 by $5,839,500. Perhaps even more importantly, they increased the dead money charges of those players in 2014 by $23,357,600. Those 4 players will represent 4 of the top 5 cap hits on the roster in 2014 once the contract of Tony Romo voids at the end of this season. Austin will be 30, Witten 32, Ware 32, and Carr 28. Carr is the only player among the group that is in his “prime.” If Witten and/or Austin go into a sharp decline, the Cowboys are basically stuck with them, due to dead money they would incur by releasing them. Ware could be released, but the team would carry a dead money hit of $8.57 million. It would have only been $4.44 million under the terms of his prior deal.
To make matters worse, Dallas decided to franchise Anthony Spencer, which means they have now allotted over $10 million of the 2013 cap to him. This could put them in a position to have to rework even more contracts to get under the 2013 salary cap, which just means pushing more money into 2014. When you have future cap situations like Dallas’, it is imperative to be able to carry excess cap room over from one year to the next. Using the tag two years in a row on the same player just destroys that excess cap room. It’s just poor cap management.
Assuming Romo’s contract voids, Dallas is committed to $130 million in salary cap costs in 2014. They can release Doug Free and Jay Ratliff to save around $7 million, but other than Ware they have no savings greater than $2.3 million. That means pushing more money further into the future just to be compliant in 2014. Dallas already has $106 million on the 2015 salary cap for just 20 players. Now, it’s not fair to sound the alarms for a year that far in the future but they have locked themselves in to a 29 year old Carr in 2015, while a 33 year old Witten and a 31 year old Austin will count for $10.34 million in dead money, compared to just $4.07 million a few days ago. And none of this includes whatever crazy cap cost will likely exist for a 35 year old Romo.
It is one thing for a team that just made a championship game to make moves like this in hopes of maximizing their chances of getting to the next level. It is a completely different thing for a team that hasn’t made the playoffs since 2009 to do the same thing. The odds of a payoff with this strategy are slim, and Dallas is now at a financial disadvantage compared to the rest of the league after this season, pretty much locking them into high-cost players with a strong likelihood of declining skills.