Restructuring NFL Contracts

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Restructuring NFL Contracts
by Jason Fitzgerald
Posted on June 26, 2023

I thought it might be interesting to start digging a little deeper into the pros and cons of restructuring contracts in the NFL. While restructuring contracts has gone on forever it has only been since 2020 that it has become more of a leaguewide phenomenon- only 42% had a restructured contract between 2017 and 2019 while the number is about 73% since then- so I wanted to look at some recent trends in the data and see if there are any conclusions we can maybe draw from it.

So the first thing to understand is what exactly a restructured contract is. A restructured contract is a contract where a team converts salary to some type of prorated bonus to create cap room in a given season. For the purposes of this exercise I am not including option bonuses since this is to focus more on changes from the initial contract structure, though I believe as more teams use the option at signing it will become more important to look at in the future. In general, a restructured contract “kicks the can” down the road when it comes to salary cap charges and I think it would be important to look at the impacts of this on current and future seasons.

For each team I went back and looked at the amount of cap room that was created via restructures in a season. I then subtracted from that total a team’s cap room at the end of the year to really focus on the utilization of restructures for immediate team needs versus teams being proactive and just having a safety stock of cap space. To normalize the numbers across seasons I divided that room created by the unadjusted salary cap for the year to determine the restructure utilization ratio.

What is the Driver of Contract Restructures

This was probably the clearest thing to come out from the data. Teams that make the playoffs the year before lean harder into the restructures. 78% of playoff teams have a restructure utilization over zero. For the non playoff teams that number is 54% and they are far less aggressive in what they do. Here are some summary numbers:



The reason for the large disparity in average and median numbers for the non playoff teams is because of the Saints who are basically outliers for non playoff teams (probably the NFL in general) due to their salary cap issues. If we broke the groups up into quartiles the top quartile would be at 12% for the playoff squads and 6% or so for the non playoff teams which again helps illustrate the Saints impact on the average.

Do Restructures Work?

I wanted to first look at playoff teams here and I guess the answer is maybe. If the goal is simply to return to the playoffs in the following season there is some positive outcomes in the year that a team makes a restructure.



In the cases so far we have seen a higher percentage of teams making the playoffs in back to back seasons when the teams are more aggressive with restructured contracts compared to those who are a bit more complacent with their salary cap situations. That said what percentage of those teams who qualified actually improved their playoff position?



Finally, what if we just look at regular season improvement?



I think ultimately the numbers suggest that leaning heavily into the restructures is not going to make a difference in improving from the prior season but does seem to give some teams more firepower to make a run in the playoffs.

As for the non-playoff squads here are the percentages of teams making it the next year.



And here was the improvement data.



Are there long term implications?

Since this as a leaguewide mechanism is more recent our data slows down even further but if we look at how teams shifted from their record in the pre restructure season to the post restructure season we can see some negative effects in our playoff teams who went a bit more “all in”.



Here are the numbers for the non playoff teams



There also is a bit more of a trend regarding future dead money with the teams who are more “all in”. Restructuring contracts adds more dead money to the bill when it comes time to release the player. While the “proper” use of the restructure is to use it with a player you don’t anticipate releasing the fact is the end for great players in the NFL comes rapidly and often out of nowhere. The restructures make it more painful when the releases do occur.

Here is a breakdown of how the dead money, as a percentage of the salary cap, looked in the year after the restructure utilization.



While these figures are often not directly attributed to restructures the year before I think they do a good job of describing where the state of the team is when they decide to pull the trigger on the big restructures. It is hard to justify this type of approach two years in a row, especially since few teams actually improve, so most begin the process of pulling back to avoid going off the rails in the future. All of this leads to those drop-offs we often see in the most aggressive teams.

Conclusions

This reminds me a bit of when I looked at dead money a few years ago and came to the conclusion that some dead money is not a bad thing and in most cases is a good thing. I think the same holds true here when we look at restructured contracts. In a league where everyone is restructuring to maximize cap room teams should strongly consider making some restructures to maintain their position relative to other teams in the NFL rather than getting passed over by teams willing to move a little bit of money each season. You want to maximize your ability to take some risks every year…within reason.

I do think it is important to separate playoff and non playoff teams when crafting strategies year over year. For those teams who made the playoffs there may be some payoff by going “all in” and getting hot at the end of the year and making a big run, but long term it seems to create more of a one year window as the roster drops off more and more. Being conservatively optimistic is probably the better choice and keeping things reasonable when it comes to kicking the can.

For the non playoff teams going wild probably has little benefit and probably is not going to have that fairy tale Super Bowl ending of the Rams. Even for the non playoff teams that made it when they had a high restructure utilization rate it was basically one and done in the playoffs in the wildcard round. For most this is also a situation where being conservative pays off but again unless you are a team like Chicago with unlimited cap room creating some space is a good thing.

My feeling is if you want to maximize risk and reward you should be using somewhere between 5 and 8% of that years salary cap limit. That seems to maintain your maximum cap position during free agency and for extensions without the exposure to the more likely comedown a year later. As a rule of thumb restructuring QB contracts and contracts of offensive linemen is probably far less risky than a cornerback or wide receiver who seem to tail off much faster. Most players should only be restructured on the front end of the first veteran contract.

One thing to keep in mind is that the salary cap should increase by a much larger than expected amount next season which may allow teams to be a bit more aggressive than usual with less threat of dead money hitting the cap as hard as it does now. That may create a small window for teams to really manipulate some things at least until contracts catch up somewhat with the growth in the salary cap.

As for who has used the restructure process the most over the last three years here are the results of teams utilization of restructures and their average win total from 2020-2022. The Saints are not on this because they were so far away from everyone else that I cut them off. You can check out my Twitter feed to see them included.



As for this year there are currently 24 teams utilizing restructures. The team with the most is the Saints who are currently at 30.4%, not adjusted for unused cap room since we are in the middle of summer, of the cap in 2023. The other teams with a heavy use are Miami (23%), Dallas and Jacksonville (both 21%), Green Bay (20%), Tampa (19%), and the LA Chargers (18%). Of those teams Dallas and Green Bay will likely wind up with much lower utilization ratios as their cap room was created to wait until they had June 1s, trades, etc…occur. The other teams are average in current cap room except the Buccaneers who are just trying to stay afloat with the cap in 2023.