Restructuring? (1 Viewer)

[krvw]

Serious question, please pardon my ignorance on this. How does the contract restructuring work?

I know it clears up salary cap space. If I understand correctly, it changes a player's contractual salary to a "signing bonus". Are signing bonuses not included in salary cap?

If it's as simple as that, then it sounds like a loophole in the salary cap rule. Am I wrong?

Also, if it is a loophole, why don't teams simply pay out in signing bonuses from the get go?

When I heard of them restructuring Drew's contract a few years back, I thought it was odd. Was it punitive? Did he get less $$ than he was contractually promised? Was he taking a salary reduction for the good of the team?

This off-season, I'm seeing a lot of restructurings. Cam, Demario, Kamara, etc.

I'm just trying to get my head around all of this and make sense of it.

Whodat!

Cheers,

KRvW

 

[soggymoss84]

Restructuring takes a player’s salary and converts it to a signing bonus. You’re allowed to spread signing bonuses over a 5 year period which is where the cap relief comes from.

Most teams don’t do it because they don’t have the liquid cash on hand to do it (Raiders), or the owners are simply unwilling to write that kind of check early in the year.

 

[sammymvpknight]

Restructuring takes a player’s salary and converts it to a signing bonus. You’re allowed to spread signing bonuses over a 5 year period which is where the cap relief comes from.

Most teams don’t do it because they don’t have the liquid cash on hand to do it (Raiders), or the owners are simply unwilling to write that kind of check early in the year.

I’d argue that the biggest reason that other teams don’t do it is because they don’t need to do it. If tge Saints don’t restructure all of their big contracts they are over the cap

 

[Saint Spud]

Serious question, please pardon my ignorance on this. How does the contract restructuring work?

I know it clears up salary cap space. If I understand correctly, it changes a player's contractual salary to a "signing bonus". Are signing bonuses not included in salary cap?

If it's as simple as that, then it sounds like a loophole in the salary cap rule. Am I wrong?

Also, if it is a loophole, why don't teams simply pay out in salary caps from the get go?

When I heard of them restructuring Drew's contract a few years back, I thought it was odd. Was it punitive? Did he get less $$ than he was contractually promised? Was he taking a salary reduction for the good of the team?

This off-season, I'm seeing a lot of restructurings. Cam, Demario, Kamara, etc.

I'm just trying to get my head around all of this and make sense of it.

Whodat!

Cheers,

KRvW

Converting the money to a bonus allows you to spread out the cap hit.

For example (and this is a crude example): if “Brew Drees” were due a $10 million base salary in 2023 but we needed space, we could give him a $8 million check upfront and then spread out that money over the next, say, 4 years. You could lower his cap number from $10 million to $4 million in 2023 ($2 million base, which was left when you subtracted the $8 million bonus restructure PLUS 1/4 of the $8 million bonus, or $2 million. 2 + 2 = 4). Then you would add $2 million to his cap number in each of the following 3 seasons.

So you’re not making the cap charge disappear. You’re pushing it into the future when a) the cap should be higher and b) you can do the same with other players to “borrow” from their deals, effectively using them as credit cards to pay off Brew Drees’ contract.

 

[krvw]

Converting the money to a bonus allows you to spread out the cap hit.

For example (and this is a crude example): if “Brew Drees” were due a $10 million base salary in 2023 but we needed space, we could give him a $8 million check upfront and then spread out that money over the next, say, 4 years. You could lower his cap number from $10 million to $4 million in 2023 ($2 million base, which was left when you subtracted the $8 million bonus restructure PLUS 1/4 of the $8 million bonus, or $2 million. 2 + 2 = 4). Then you would add $2 million to his cap number in each of the following 3 seasons.

So you’re not making the cap charge disappear. You’re pushing it into the future when a) the cap should be higher and b) you can do the same with other players to “borrow” from their deals, effectively using them as credit cards to pay off Brew Drees’ contract.

Okay, thanks for the explanations. That helps.

 

[HouseCall]

Converting the money to a bonus allows you to spread out the cap hit.

For example (and this is a crude example): if “Brew Drees” were due a $10 million base salary in 2023 but we needed space, we could give him a $8 million check upfront and then spread out that money over the next, say, 4 years. You could lower his cap number from $10 million to $4 million in 2023 ($2 million base, which was left when you subtracted the $8 million bonus restructure PLUS 1/4 of the $8 million bonus, or $2 million. 2 + 2 = 4). Then you would add $2 million to his cap number in each of the following 3 seasons.

So you’re not making the cap charge disappear. You’re pushing it into the future when a) the cap should be higher and b) you can do the same with other players to “borrow” from their deals, effectively using them as credit cards to pay off Brew Drees’ contract.

Great explanation! I hope you are a teacher of some kind and if not, the world needs more people like you, who can explain the complicated in a few digestible paragraphs!

 

[SWJJ]

It's not automatically spread over 5 years, it is spread over the life of the contract. That's why Loomis Adds "void years." If a player has 3 seasons plus 2 void years, they can spread the cap hit over the 5 seasons, that's where "dead money" comes from. If we void those years, we dont have the player anymore, but we have cap hits on the void years.

 

[fishing4food]

Great explanations on restructuring contracts . I know that in 2024 the Saints will be $105,185,054 over the cap. That's allot more contracts to work out. Is the best winning model for the Saints organization continuing forward?

 

[SWJJ]

Great explanations on restructuring contracts . I know that in 2024 the Saints will be $105,185,054 over the cap. That's allot more contracts to work out. Is the best winning model for the Saints organization continuing forward?

That number includes a $60M cap hit from Michael Thomas which will be greatly reduced when he signs his restructured contract. It also includes some from other guys that may not still be on the team if they dont restructure (like $18M for Peat.)

 

[Covington Saint]

Serious question, please pardon my ignorance on this. How does the contract restructuring work?

I know it clears up salary cap space. If I understand correctly, it changes a player's contractual salary to a "signing bonus". Are signing bonuses not included in salary cap?

If it's as simple as that, then it sounds like a loophole in the salary cap rule. Am I wrong?

Also, if it is a loophole, why don't teams simply pay out in signing bonuses from the get go?

When I heard of them restructuring Drew's contract a few years back, I thought it was odd. Was it punitive? Did he get less $$ than he was contractually promised? Was he taking a salary reduction for the good of the team?

This off-season, I'm seeing a lot of restructurings. Cam, Demario, Kamara, etc.

I'm just trying to get my head around all of this and make sense of it.

Whodat!

Cheers,

KRvW

you go to the gas station, bring a snickers bar to the counter. You say, you bro, i wanna give you $3 cash now and eat 95% of the candy bar and put the remainder in a zip loc bag and put it on the shelf and i come back 3 years from now and i'll give you a nickel and the sale will be finalized for the books.

 

[guillermo]

I’d argue that the biggest reason that other teams don’t do it is because they don’t need to do it. If tge Saints don’t restructure all of their big contracts they are over the cap

I think teams are starting to do this more, just look at the contract renewals before yesterday. I think the saints may have started a trend that will be more common around the league.

 

[saintfan1972]

Hence the term kicking the can down the road.

 

[livefromDC]

I’d argue that the biggest reason that other teams don’t do it is because they don’t need to do it. If tge Saints don’t restructure all of their big contracts they are over the cap

It's very purposeful. If the salary cap is $100 million this year and $120 million next season, it makes absolute sense to maximize your cap space per player.

Let's say Brees is due $12 million in salary this year. That's 12% of your salary cap this year. Turn $2 million of that into a salary cap and the rest into a signing bonus ($10 million), he gets all $12 million he's due. However, it's smart for the salary cap. Spread the bonus hit over life of the contract or voidable years (let's say 3). The cap hit this year is now $5.34 million or 5% of your cap this year. So now you have a larger percentage of your cap available to keep other good players or go get a coveted player.

But I know what you're saying...but now you have a cap hit for future years, Ohnoooeez! With every year, that cap hit depreciates BECAUSE the salary cap will continue to increase. In this example, Brees' cap hit it the next year is $3.33 million, but he's not on the team. That $3.33 million would have been 3.33% of this year's cap. But guess what happens next year? It's only 2.77% of the cap because the cap is now $120 million. The team realizes a net cap percentage saving by pushing the money out a year. By pushing it out 2 years they get another one. The last $3.33 million counts against the following year's cap. Let's say the cap goes up to $130 million. It's now only 2.56% of the cap.

Paying players NOW is cheaper than paying players next year. That will always be true as salaries continue to increase. The only caveat is that you have to pay the right players (Cam Jordan...not Junior Galette). But that caveat is true if you take the cap hit all in one year or not.

You're not kicking the can down the road. You're kicking CAP percentage savings down the road. Everyone is looking at the number, the Saints are looking at the percentages. The math checks out but the NFL is run by former jocks and written about by former English majors who know basic addition better than percentages, LOL.

 

[dvdman]

It seems like more teams are restructuring this offseason then in the past.

 

[HouseCall]

Hence the term kicking the can down the road.

That term is intended to have an ominous, almost malicious meaning and I don’t know if it really factors into what Loomis is doing.

In my experience, that term was typically used by politicians as an analogy towards their political opponents shifting a responsibility or consequence to their opponents or successors. There’s a can in your yard - rather than pick it up, you kick it down the road and it’s now someone else’s problem.

Loomis and Hartley seem to have adopted this practice and don’t seem to be shifting or revert int back to more traditional cap management practices. So this is essentially the Saints cap management philosophy and not some desperate scramble to get under the cap (though there is obviously mandated deadlines to do so).

Loomis isn’t going anywhere anytime soon. The league will expand the cap long as revenue grows and salaries grow (which they typically do). So Loomis if Loomis is kicking a can - he’s kicking it into the lot next door that he also owns, and the lot next to that and so on and so on.