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The Green Bay Packers and outside linebacker Preston Smith were able to create the rare pay cut that looks like a win for both the player and team.
According to contract details provided by Ian Rapoport of NFL Network, Smith reduced his base salary to $1 million, received a $6.5 million signing bonus and accepted the opportunity to earn $4.4 million back in incentives within his restructured deal, all things guaranteeing he’ll be back in Green Bay in 2021 but at a much lower cap number.
He was originally scheduled to count $16 million on the cap this season. The pay cut drops his number down to $8.75 million, creating $7.25 million in savings this year.
Smith, who produced only four sacks during a disappointing season last year, entered the offseason as a prime candidate to be a cap casualty, especially for a Packers team in need of creating a sizable amount of cap space. A restructured deal featuring a big pay cut was likely the only way he would have avoided being released.
The Packers got their savings and kept the player.
Ken Ingalls, a CPA who tracks the Packers cap, called the restructure a “tremendous deal” for both the Packers and Smith.
Packers Wire asked Ingalls to explain why the new deal helps the Packers and makes sense for Smith.
“Smith was due $12 million this season and if he were released he was unlikely to get this amount on the open market,” Ingalls wrote. “Instead, Smith takes an overall $4 million pay cut to stay within the Packers’ system where he can earn $4.4 million of incentives by hitting certain sack total targets. A likely 17th game gives Preston one more game to earn as much back as possible. The Packers get $7.25 million of much-needed cap savings for 2021 at the cost of only $3.25 million of dead cap created for 2022 in the restructure. The team gets 90 percent of the cap benefits as if they had released Smith AND get to keep their player likely eager to show he can be the disruptive force he was in 2019 in this defense. A true win-win.”
The Packers would have cleared $8 million by releasing Smith but also taken on $8 million in dead money on the cap. With the restructure, the Packers get $7.25 million in immediate savings but also get to keep Smith on the roster. For Smith, he’ll avoid being thrown into a flooded free-agent market with teams lacking cap space, and he’ll get to stay in Green Bay alongside close friend Za’Darius Smith with the appropriate financial incentive to play and produce at much higher levels in 2021.
In fact, Smith has an opportunity to make more money this year on the new deal than the previous one. If he gets to 14 sacks – or two more than he had in 2019 – he’ll recoup all $4.4 million in incentives and push his total salary in 2021 to $12.4 million, or $400,000 more than the $12 million he was due on the previous deal.
Smith’s cap number rises to almost $20 million in 2022, meaning he’s highly likely to be cut after this season. And while the savings will be substantial, the Packers will take on a decent chunk of dead cap – over $7 million – when they move on in 2022.
Still, the Packers clearly wanted to keep Smith at a lower cap number in 2021, and he clearly wanted a chance to stay in Green Bay. This was a best-case scenario in terms of achieving those goals.
For $8 million in salary, the Packers are keeping a player they would have had to pay $8 million in dead cap to release anyway. And even if Smith hits all his incentives, paying $12.4 million for a player with 14 or more sacks is nothing if not a bargain.
With Smith back, the Packers will return all their top pass-rushers from last season and won’t need to invest valuable resources at edge rusher. Also, Smith has experience working under new defensive coordinator Joe Barry, potentially creating the opportunity for a bounce-back season.
Smith will be properly motivated. He will know this is a de facto one-year deal. He not only has sack numbers to hit to maximize his earnings, but he needs to play well in 2021 to get another big contract in 2022.
The Packers are close to getting under the salary cap. If they wanted, the Packers are now in a position to re-work or extend deals for Aaron Rodgers, Davante Adams and Za’Darius Smith and create enough cap space to have buying power in free agency.
The team wouldn’t be in this position without the excellent work on Smith’s deal. Credit Russ Ball and Smith’s representation, who came together to create a restructure that worked for both sides. Negotiating a pay cut for a player due to count $16 million on the cap couldn’t have been easy. Ball made it happen. And both the Packers and Smith should benefit.