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The complications of “simple restructurings”

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Every year, multiple players receive the opportunity both to help the team and, immediately, to help themselves.  It’s called a “simple restructuring,” with a large chunk of salary for the coming season converted to a signing bonus — giving the team cap relief and the player a large check with his name on it.

The player gets the same dollars for the year.  He just gets the money faster, which in turn essentially guarantees that the player will be on the team for the coming season.

But there’s a catch.  Actually, two of them.

As mentioned by Nick Wright of 610 SportsRadio in Houston during my weekly 8:00 a.m. ET visit with him and John Lopez, restructurings drop a player’s cap number in the current year — but increase the cap number in future years.  For Texans receiver Andre Johnson, who restructured his contract in 2011, 2012, and 2013, the end result is a $16 million cap number in 2015, which could prompt the Texans to move on (if Johnson and the Texans find a way to work out their differences in 2014).

The other complication of a simple restructuring comes from the amount of money a player who retires would have to repay.  For Johnson and Cowboys quarterback Kyle Orton, taking one for the team in the past has made it harder to walk away in the present, since that chunk of cash converted to a signing bonus gets added to the total bill that the team can tender to the player who decides to call it a career.  (Bonus forfeiture also becomes more costly is the player is suspended under the substance-abuse or PED policies.)

So beware, NFL players, of that simple restructuring.  Like so many other things that seem to be too good to be true, taking a big chunk of money now could create some unexpected costs down the road.

That doesn’t mean players should refuse to do them.  But ut’s important that players understand their options when agreeing to a restructuring.  For some players, extra terms or compensation could be justified when accepting a higher cap number in future years and/or narrowing the window for a decision to retire.

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13 Responses to “The complications of “simple restructurings””
  1. thestrategyexpert says: Jul 11, 2014 9:36 AM

    On the one hand I’d like to see a simpler financial reward system for logic and fairness purposes, but on the other hand this complex and screwball system of compensation makes it more interesting for the smart teams to benefit. I like the idea that a team that doesn’t understand how the money part works can find great disaster. That way they get what they deserve instead of the glory that belongs to the winners that did a good job instead. Screw the losers, after all it’s only a game right?

  2. ridingwithnohandlebars says: Jul 11, 2014 9:37 AM

    Johnson will have a cap number of $16 million in 2015 so you say the Texans might move on because of that. But how much of that $16 million is his actual salary for 2015 and how much will be from those previous “simple restructurings” that will count against the salary cap even if he is released by the team?

  3. doubleplay43 says: Jul 11, 2014 9:52 AM

    Why dont you factor in the time value of money in taking millions up front at the risk of “losing” millions on the back end then, Florio?

  4. danind says: Jul 11, 2014 9:55 AM

    thestrategyexpert says:
    Jul 11, 2014 9:36 AM
    On the one hand I’d like to see a simpler financial reward system for logic and fairness purposes, but on the other hand this complex and screwball system of compensation makes it more interesting for the smart teams to benefit. I like the idea that a team that doesn’t understand how the money part works can find great disaster. That way they get what they deserve instead of the glory that belongs to the winners that did a good job instead. Screw the losers, after all it’s only a game right?
    —————–

    are you really naïve enough to really think that teams don’t completely, fully understand the cap?? wow.
    every team has a cap specialist. the only people that don’t understand the NFL cap is the people that are commenting on online articles.

  5. maddoc2054 says: Jul 11, 2014 9:59 AM

    to quote Bill Colian, “The cap does not forget and the cap does not forgive!”

  6. jklecko77hof says: Jul 11, 2014 10:10 AM

    “Why dont you factor in the time value of money in taking millions up front at the risk of “losing” millions on the back end then, Florio?”

    Yes. It’s called interest. Money today is worth more than money in the future. Econ 101.

  7. 1phillyphan says: Jul 11, 2014 10:18 AM

    The whole system is geared the greedy owners. If a player doesn’t play the way the owners like..or if he is getting older/slower and he is still under a CONTRACT. The owners ask ( more like threaten) the player to restructure their already set in stone contract. Or they can just cut him w/o haven’t to honor the contract. But, if a player plays better then what the team is paying him and he wants a raise for out performing his contract..he is evil, not a team player, greedy ect. Sure the owners have gotten creative with signing bonus’s, back loaded contracts ect. The next time the NFLPA does their contract ( or strikes cuz its coming again) they need to address this. The NFL is made by the players, not owners. The owners make hundreds of million dollars a year. So instead of making their product more available by not lowering tickets prices but, just keeping them the same….or spreading their new wealth with their star players…What they do is just want more. They should have contracts more like the NBA. Andre Johnson has been the face of the Texans for yrs. He is a Hall of Fame player for them. He has taken pay cuts 3 times ( even though he should have gotten raises those yrs) to help the team add better players to win. He deserves to play for a winner and compete for a ring. He is right to not want to be part of a re build again. The Texans should honor him as he has them by giving him what he asks. Trade him.

  8. notthetroll says: Jul 11, 2014 10:49 AM

    It’s an ebb and flow based on a team’s chances of making the playoffs in a given year. Clearly the example of Orton is a good one for the point of the article from the players perspective. He did stand in the corner while the paint was being applied to the floor.

  9. FinFan68 says: Jul 11, 2014 11:10 AM

    1phillyphan says:
    Jul 11, 2014 10:18 AM
    The whole system is geared the greedy owners. If a player doesn’t play the way the owners like..or if he is getting older/slower and he is still under a CONTRACT. The owners ask ( more like threaten) the player to restructure their already set in stone contract. Or they can just cut him w/o haven’t to honor the contract. But, if a player plays better then what the team is paying him and he wants a raise for out performing his contract..he is evil, not a team player, greedy ect.
    ~~~~~~~~~~~~~~~~~~~~~~~~~~
    There is no such thing as “outperforming his contract”. Players are expected to play their best when they sign the contract. No player offers to give money back if they suck for a year or are injured. Sure there are times when a guy deserves a raise but he has some leverage when his contract is up. He loses that leverage by signing an early extension or restructure.

  10. losingisnotanoption says: Jul 11, 2014 11:21 AM

    Thanks for the public service message.

    Now we all know that players are making a mistake to take big wad of cash now instead of a big wad of cash later.

    I wish I had that problem.

  11. tremoluxman says: Jul 11, 2014 12:04 PM

    Shorter version: The NFL and owners have players by the short hairs no matter what.

  12. snowbdr says: Jul 11, 2014 3:50 PM

    I would love to be prepaid a few million dollars at some point in the last few years. If they just put it in an index fund they would have made out like bandits after returning the money and then declaring the loss against any revenue earned this year. Sweet deal!

  13. wyrdawg says: Jul 12, 2014 1:15 AM

    Cowboys quarterback Kyle Orton, taking one for the team in the past has made it harder to walk away in the present, since that chunk of cash converted to a signing bonus gets added to the total bill that the team can tender to the player who decides to call it a career.

    PERFECT example!

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