For Troy Polamalu, Steelers' Cash Flow Concerns Likely Culprit For Delay in Reaching New Contract

After LaMarr Woodley signed a long-term extension in early August, I tried to look ahead to how the Pittsburgh Steelers might handle the contract situations of Troy Polamalu and Lawrence Timmons by analyzing their recent cap moves. My contention was management was clearly in control and way ahead of us. With more information at our disposal now that Timmons has signed,  I'm writing this to add a little more insight to the discussion, some of which I hope you find useful.

The player personnel and salary cap managers for NFL clubs need to be highly skilled negotiators, statisticians, bankers, risk managers, modelers, forecasters, economists & delegators. Think about the decision tree: Is it better to sign Troy now or slap the franchise tag on him later this year? Well, let's look at some of the variables:

Cash on hand? Do we have enough money in the bank to stroke a check for $15 or $20mm today? Well, maybe we are already into our credit line based on recent moves. What interest rate are we paying? Rates are very low, how much can we stretch it? But, you can only go so far, even Paul Allen with a net worth of $18b is not going to want to hear from his cap manager. "Hello Mr. Allen can you deposit another $35mm in our account right away, we want to extend another contract w/ $35mm signing bonus?" click, "Hello, Hello? Shit, he hung up on me!" As you are hanging up you have to be wondering, do I still have a job?

 

 

At the end of the day, you can't restructure or sign any new contracts without liquidity. This is an advantage a team like the Jets has because their owner, Woody Johnson, is a trust fund baby from the lucky sperm club. He is an heir to the Johnson & Johnson Fortune , you know like Band-Aids & Tylenol, ever hear of those? Guys like Woody tend to be very liquid too (never had to work, only invest), that's why they can sign Santonio for $50mm / 5 years with a $2.5mm cap hit. Mike Tannenbaum & Rex Ryan know all too well that Woody will keep stroking giant checks to win that elusive Lombardi for as far as the eye can see.

Cash is king too. When was the last time a star signed a new contract or extension with no signing bonus? That would be never! So, cash-flow is the most important factor but easiest to assess, you either have it or you don't. If you don't have it, you must wait until your TV money starts rolling in or you sell a truckload of hot dogs and beer during your home opener.

Once you get past cash, the real hard work starts. There are so many things to assess, like age & injury probability. I would think they have models they use to project injury risk by age but a lot of it is still gut roll. Forecasting models are only as good as those reading the results, otherwise Al Davis & Dan Snyder would be much better at this:) Simultaneously, management is also trying to project how much the 2014 TV deals will raise the cap while keeping a close watch on the economy, ticket sales and $300 jerseys will always be related to income and employment. Some of this info is already known, in 2014 ESPN's TV deal will jump from $1.1b to $2b/yr. That alone guarantees the cap will rise $15.47mm per team in 2014.

But, when exactly does the cap reset? Does the new CBA increase the cap based on a calendar year only? I mean if TV contracts follow a calendar year, Super Bowl for 2013 season is played in 2014 right? Does that mean part of 2014 TV increases are averaged into 2013? Hell, if I know but the front office has to be aware of that. I am trying to figure this out for you but this will take some time.

Based upon the most recent safety contracts, Troy's franchise tag would be around $9mm. His cap hit this year is $8.6mm so it is basically a push from this year to next if we have to use the franchise tag his cap hit is only +$400k next year. So, what do we know about this year's signings? Well, we know this:

  • Ike Taylor: $7.25mm signing bonus prorated over 4 years ($1.8125mm/yr), $750k roster bonus & $1.25mm base salary. Total cap hit for this year works out to exactly $3.8125mm.
  • LaMarr Woodley: $13mm signing bonus over 5 years ($2.6mm/yr), roster bonus of $4mm & $1.1 base salary. Total cap hit this year exactly $7.7mm.
  • Ben Roethlisberger: $15-16mm cap hit this year before his re-structured contract. Base salary was reportedly $11.6mm & dropped to $6mm with a new cap hit of $11.32mm this year. We don't have info here but it is quite possible FO converted base salary from this year & next into signing bonus $. If that is the case they could have cut Ben a check for $11.2mm ($5.6mm from 2011 & 2012).
  • And there were others, James Harrison and Brett Keisel restructured, had to be $3mm spent on accelerated signing bonuses wouldn't you think? Hardly worth the hassle if you aren't getting into the millions.
  • Lawrence Timmons: $10mm signing bonus , $13mm guaranteed & $18mm total bonuses according to Steeler Depot? Too little info at this point but what the hell it works for us:)

So let's add this mess up.  Generally roster bonus were paid March 1 or June 1 because the league year generally starts March 1st and June 1st is a major cut date, a player can be cut by June 1st with no cap hit (assuming he has no guaranteed money left). But because this year is cut short, roster bonuses are probably already paid as we are past June 1st and a March payment would count to the 2012 cap. Again, I am just guessing here, have not had the time to read the new CBA yet. I do know one thing though which I have read for myself, signing bonuses cannot be prorated over more than 5 years for salary cap calculation. So even if you sign a six or eight year deal, all that up front $ must be accounted for within 5 years.

With that said, here is an estimate of the cash out the door since the end of the lockout. There are others but I think these are the biggest amounts:

  • Ike: $7.25mm + $750k = $8mm
  • LaMarr: $13mm + $4mm = $17mm
  • Ben: $5.6 to $11.2mm
  • James/Brett: $3mm
  • Lawrence: $10-13mm

Last three are educated guesses but we know for sure that Ben was stroked a check for at least $5.6mm if the base salary numbers (before and after) are correct.

So the grand total is between $43.6mm & $52.2mm. Now that may not seem huge when you hear the Steelers are worth $1 billion. But net worth has nothing to do with cash-flow so you have to look at revenue. Forbes latest figures indicate revenue for 2009 season (YE March 1, 2010) was $243mm. Now you can say well, Steelers are rich, and to a certain extent that is true but again you can be worth $10b but if you have no $ in the bank you still go broke. So, starting in two weeks, Steelers have to start cutting weekly payroll checks and you need a cushion for that, imagine bouncing a payroll check to Mr. James Harrison? Your life expectancy may be shortened by a few years:)

Yes, Steelers may have had big cash balances in anticipation of the lockout & they do receive pre-payments on season tickets. Notice fans are the only entity paying 100% up front. I seriously doubt ESPN or the other big 3 networks pre-pay the NFL anything but token amounts. Like everyone else, they want to pay up after they collect from their advertisers. And usually they like to hold the money as long as possible, some big companies are known to stretch their vendors 30...60...90...120 days.

So you see, with so much $ out the door already, it may have been the plan all along to franchise Troy and extend him later. Troy's cap number is already pretty high so cash-flow may be the overriding issue. On the other hand, there could be plenty in the bank and a restructure will come shortly. My guess is that Troy will be dealt with later because there is not enough dry powder left.

With that said, there are two things i am certain of: "there is only one God and I am not him" :)

(this bold quote is from a movie, can you name it?)

 

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