Over past 3 years, no one has restructured more contracts than Steelers
By Mark Kaboly
Published: Sunday, March 10, 2013
The Steelers are all in, and there doesn't appear to be an end in sight.
The team has been leading the charge of restructuring the contracts of young, high salary-cap stars to get into compliance with the recent trend of a flat salary cap since the NFL lockout 19 months ago.
It's a change in behavior, if not philosophy, for a franchise that seldom seemed to need tweaking of its financial books.
The Steelers restructured three of their top salary cap players recently — Ben Roethlisberger, Antonio Brown, Lawrence Timmons — that pushed $14 million into future years to get into cap compliance before the Tuesday deadline.
It hasn't been just the Steelers. More than 15 restructures have taken place during the past two weeks around the NFL, including seven in Dallas.
“It just seems like a lot of teams are doing it nowadays,” veteran Pittsburgh-based agent Ralph Cindrich said. “Really, it has been around since the start of free agency in 1994. There would be always a restructure of contracts in order to create cap room.”
The Steelers are among the leaders in restructuring contracts since the lockout ended in August 2011, when the cap dropped $3 million after the uncapped 2010 season.
They have reworked 13 deals — Roethlisberger three times; Timmons twice; Brown, Heath Miller, Chris Kemoeatu, James Harrison, Brett Keisel, LaMarr Woodley, Ike Taylor, Willie Colon once — that pushed $54.7 million into future years.
Andrew Zimbalist, an economics professor at Smith College in Massachusetts, said it is what organizations are faced with in a league like the NFL that has a hard salary cap.
“It is what teams have to do to hold onto their personnel and still meet the tighter cap,” Zimbalist said. “I think it makes sense in general, but I am sure some teams are encumbering themselves, and it may become difficult.”
WHAT IS A RESTRUCTURE?
Restructuring is done to create cap room for a specific season. Teams convert a large portion of that year's salary into a bonus. That bonus is then spread out over the remaining years of a player's contract, lowering the amount of money that is applied to the team's maximum payroll — or salary cap — for the upcoming season.
For example, Roethlisberger was set to make $11.9 million in salary this year. The Steelers converted $9 million of that salary into a bonus that was paid to Roethlisberger immediately in a lump sum. For salary cap bookkeeping purposes, that bonus will count as $3 million a year over the remaining three years of his contract. The move saved the Steelers $6 million in cap space this year but pushed it into the future, raising Roethlisberger's cap hit for each of the following two years.
Although popular now, this maneuver has been used less frequently in recent years because of the salary cap skyrocketing by nearly $40 million from 2005-09.
In 2010, with no salary cap, restructures weren't needed. In the several years prior to that, with the 2006 collective bargaining agreement giving more money than ever to the players, teams didn't need to resort to restructuring to create current cap room, as plenty of teams were below the spending limit.
“I don't know if it is more or less this year, but you see the same teams going through it year after year, one of which is the Steelers,” ESPN business analyst Andrew Brandt said. “Don't kid yourself. There are a lot of teams out there who are not doing it.”
THE STEELERS WAY
The question surrounding teams that restructure contracts is whether the deferred money will catch up to them, forcing them into future salary purges?
“It is hard to say if there is a way around it,” Brandt said.
So far, it hasn't caught up to the Steelers, and according to Zimbalist, it is a practice that some teams need to do.
“I think it is a prudent practice, and it is one that has been followed for a long time in the NFL,” Zimbalist said. “Given the structure of the salary cap, it makes sense for them to do it.”
The Steelers target young players they plan to keep for an extended time early in their first lucrative contract. Also targeted is the franchise quarterback because he counts the most against the cap and isn't in danger of being cut.
Still, eventually there will be dead money — money that counts against the salary cap despite the player no longer being with the team — that the organization has to address.
“If a team builds up $20 million, $30 million, $40 million of nonroster money, then they are working on a $120 million cap with $80 million or $90 million,” Brandt said. “Sure, teams can be successful because they have really good players or they don't need to build up a lot of depth, but in theory it would seem to be a big problem.”
Restructuring leads to a top-heavy roster, which puts an added importance on adequate scouting and drafting. Before Roethlisberger's deal was restructured for the third time, four players accounted for almost 50 percent of the Steelers' cap number. Now the salaries of the top five players account for more than 40 percent of the cap.
“They are trying to get as much flexibility as they can during the transition years,” Zimbalist said. “(The fact that) they are engaging in this more than they have in the past is attributable to adjustments to the ... cap.”
The other drawback is that it prevents the Steelers from signing some of their top-tier free agents and even entertain pursuing the open market; they are doing all they can to keep their own players.
The last notable free agent the Steelers landed was nearly a decade ago in Duce Staley.
“You may need to restructure like that in order to win a Super Bowl and to be in that position,” Cindrich said. “If you do, then so what? To me, if it gets you to the Super Bowl and win it, and if it works for one year, then it is worth it. The way that I look at it is, if you win a Super Bowl, then it doesn't catch up to you.”
The NFL announced last week that the salary cap will be $123 million, which is where it was in 2009 in the final capped year of the previous CBA. The cap is unlikely to climb in coming years, despite the expected influx of as much as $40 million from TV contracts in 2015. Steelers general manager Kevin Colbert said as much last year.
“It would be hard for me to believe that any team is counting on that,” Brandt said.
But it is hard to deny the results the Steelers have had on the field since going all out in restructuring: They went to the Super Bowl, won a division, made to the playoffs twice and won 35 games over the past three years.
The Steelers declined to comment, citing team policy of not speaking about organizational philosophy.
THAT'S HOW THEY DO BUSINESS
While the Steelers believe — based on recent history — that restructuring is the model that best fits their organization, others disagree with the philosophy.
Brandt spent 10 years as Green Bay's contract negotiator from 1999-2008 and is the director of sports law at Villanova and a lecturer at the University of Pennsylvania's Wharton School of Business. He doesn't subscribe to the model of short-term room for long-term consequences.
He calls it a “vicious cycle.”
“From a fiscally responsible point of view, you try not to do it,” Brandt said. “You can always justify it, as in, ‘We are going for it and trying to win now versus later.' I understand that. I am just a strong believer in a pay-as-you-go model where you are never pushing out charges to the future. I believe in protecting the future more than worrying about the present. It is a philosophical decision.”