I have this dream that one day Steelers fans will cease from looking at a players Salary Cap figure, conclude that figure is what he makes that season and then decide if his play meets that figure’s worth.
Alas, it will probably never happen. Most fans do not understand the NFL salary cap and most who have no understanding, also have no desire to gain one. And that’s ok.
However, if you are going to take a hard stance on player worth, you should know what goes into a Player’s Cap Charge.
Take for example the most recent target of many Steelers fans’ perceptions of NFL contracts and their cap implications: Lawrence Timmons.
Timmons IS NOT scheduled to make $15 million plus in 2016, contrary to what many believe. His total compensation will be $8.75 million. That’s still a lot, but it’s right in line with the other top ILBs in the league as you can see below in a screen shot table from Over The Cap that differentiates Cap Figure from Cash Expenditure for 2016.
I should first explain that the annual cap figure for a player consists of his base salary, plus any bonuses due, plus any bonus proration scheduled to be accounted for in that given year. It’s understanding how bonus proration works and how it is applied that is key to understanding how teams manipulate their cap each season.
A player is not going to willingly agree to push his earnings into a future year when he can be cut at any time and end up having to forfeit those earnings. In order to create space teams use accounting loopholes put in place by the CBA. Key among them is bonus proration.
If you have no desire to know why $8,381,250 of Timmons’ past (this is the key and operative word) earnings count on the 2015 salary cap, stop reading. But, if you do have a desire to know how NFL contracts are frequently structured and restructured to “kick the can down the road”, read on. It should be pretty simple to understand by the end of this.
Timmons was originally signed to a contract in 2011 that paid him a $10 million signing bonus that day. The contract structure spread out his bonus proration, the amount of money actually hitting the cap in a given year, into a 5 year schedule at $2 million per year. That $2 million represents a portion of that bonus being accounted for each year of the first 5 years of his contract.
Timmons was asked by the Steelers to restructure his contract in 2012 in order to create more cap space for the 2012 season.
A restructured contract is fairly simple. The team takes a large portion of that player’s scheduled compensation and converts it to a signing bonus, that is also paid on that day. They can then spread that “bonus” over the remainder of the player’s contract, for a maximum of 5 seasons. The player gets a big chunk of money up front and the team gets cap room. Everyone wins, but the downside is it creates larger cap hits in subsequent years. This arrangement shifts current cap dollars into future years, those dollars are still paid out in the current season and every dollar must eventually be accounted for on a balance sheet.
Lamarr Woodley hasn’t been paid a dollar by the Steelers since 2013, but still counts for over $8.5 million this year because of these kinds of accounting loopholes available in the salary cap structure.
Screen shots of Timmons Contract Details and Cash Earnings taken from Spotrac.com:
Timmons’ 2012 restructure converted $6.425 million of his scheduled 2012 salary into a signing bonus, lowering his base salary for that year to $700,000 and adding $1.285 million to his bonus proration for the next 5 seasons, pushing his bonus proration figure to $3.285 million for that year ($2 million[2nd year of signing bonus] plus $1.285 million[1st year of 2012 restructure bonus] in new proration).
In 2013 Timmons was asked again to restructure his deal. The Steelers converted $7.125 million in roster bonus and scheduled salary into a signing bonus, spreading that bonus proration over the remaining 4 years of his deal, adding $1.78125 million in bonus proration to each of the succeeding 4 years. This pushed his total bonus proration figure to $5.06625 million each year ($2M[SB #3] + $1.285M[2012 Rest. #2] + $1.78125M[2013 Rest. #1]).
This year, 2015, the Steelers AGAIN asked Timmons to restructure his contract. They converted $6.63 million into a signing bonus and spread that hit over the remaining 2 years of his deal, thus pushing his bonus proration for 2015 to $8.38125M ($2M[SB #5 & final] + $1.285M[2012 Rest. #4] + $1.78125M[2013 Rest. #3] + $3.315M[2015 Rest. #1].
Most people are visual by nature, so let me explain it this way.
In 2016, as previously mentioned Timmons salary, and total compensation is $8.75 million. His deal also has $6,381,250 in scheduled bonus proration remaining.
The team cannot restructure him again as they are out of future years on which to push the cap hits from said restructures. Their options are 1.) to accept Timmons’ $15M cap hit, 2.) cut him and see $8.75M in cap relief, but $6.38125M in dead money or 3.) to extend him. I believe it will be choice number 3; a contract extension.
Incidentally, no team is going to trade a high draft choice for a 30 year old linebacker with only 1 year remaining on his deal, unless said player is a perennial All Pro or said owner’s name is Al Davis. Mr. Davis passed away 4 years ago, and those kinds of possibilities went with him.
I hope you found this interesting or that at the very least, it answered some questions about how NFL contracts are accounted for on the salary cap.