Contract restructures are key to the Saints salary cap, but carry some risk

Every offseason, NFL commentators and analysts look at the New Orleans Saints salary cap situation and come up with some variant of: “Well, I’d like to see the ole Saints wriggle their way out of THIS jam!”

And then the Saints front office pulls a couple of levers and makes a few restructures, wriggling their way out of that jam easily. Tens of millions of dollars in cap hits vanish into the ether, a metaphorical can kicked down the road — except the road is paying for the can.

That’s been New Orleans’ strategy for a decade with the always-rising salary cap, pushing accounting figures into future years and trusting more rises in the cap would follow to balance them out. It took an international pandemic and subsequent losses to the NFL’s bottom line to force the salary cap to stall, putting the Saints in this latest jam.

They’ve been hard at work addressing it, and they’ve already wiped out half their deficit through several contract restructures and a few cap cuts, releasing just one player who was on the field for more than 500 snaps last year (guard Nick Easton). There’s still more work to be done, though, and more restructures will follow. So how do they work?

Restructures are not pay cuts. What happens is the team approaches a player and requests they convert a chunk of their base salary and maybe a roster bonus, if they already have one, into a signing bonus. Signing bonuses are paid out to the player immediately in a lump sum, but for accounting purposes they are counted against the salary cap in each of the years remaining on their contract.

These restructures benefit the player by giving them a big check to cash now, rather than in smaller increments throughout the season later this year. It also raises the team’s future cap commitments, making it harder to get out of that contract and granting the player more job security. So if a player is older or not performing as well, teams risk tying up too many resources in a depreciating asset.

So why do teams do this? For short-term salary cap gains. Let’s use a recent example, when the Saints restructured their contracts with Cameron Jordan and Demario Davis to free up more than $13.43 million.

Jordan’s contract included an $18.9 million cap hit for 2021, which he restructured into a $9.375 cap hit. The Saints did this by converting all but $1.1 million of his base salary (nearly the veteran’s minimum for someone with his experience) and his $1.9 million roster bonus into a new signing bonus, prorated over the remaining years of his contract.

So the Saints cut his current-year cap hit in half, but he’s counting more than $22 million against the salary cap in 2022 and 2023, most of which is guaranteed. Jordan turns 32 this summer and just had his lowest sacks total (7.5) since 2016. Because of this, New Orleans would only save about $1.25 million by releasing him next year, with just $9.92 million in potential savings in 2023. He’s secured his future with the team even if he continues to decline. The Saints are betting that he’ll bounce back and justify that price tag.

As for Davis: he had a 2021 cap hit of $10.8 million and restructured it down to $6.88 million by converting his $3.6 million roster bonus and all but $1.075 million of his base salary (the veteran’s minimum, again) into a new signing bonus. His future cap hits are $11 million in 2022 and $12 million in 2023. He turned 32 in January and has played at an All-Pro level for New Orleans, but if his age starts to catch up to him and his play trails off, it’ll be tough for the Saints to move on. Releasing him in 2022 yields just about $480,000 in cap savings, while a 2023 cut would save $4.9 million. Like Jordan, he’s ensured he’ll be around for at least the next two seasons. Maybe he’ll continue to play at a high level deep into his 30’s like London Fletcher, Thomas Davis, and Ray Lewis.

So why did the Saints do this? To clear more than $13 million in negative cap space and reward two of the cornerstones they’ve built their defense around. As I just showed, there’s risk involved in these restructures. But if the salary cap rebounds from the revenue streams expected to open soon — new broadcasting contracts, the seventeenth regular season games, and the return of fans to stadiums in 2021 and beyond, once the COVID-19 vaccines have become commonplace — then the Saints will be in the clear. But as we learned in 2020, very little is certain in the NFL.

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