After the false alarm on Tuesday that indicated Pittsburgh Steelers restricted free agent wide receiver Mike Wallace had signed a five-year, $42 million contract, I received a few emails asking if I thought that total amount stated in that report sounded about right for Wallace, should that wind up indeed being the deal.
The best answer I have to this, that I have tried to get across in several recent post, is to stop trying to concentrate so much on total value and instead concentrate more on guaranteed amounts and structure in regard to the Steelers salary cap situation and how they like to do these deals.
If you look at the contract that wide receiver Vincent Jackson signed earlier this offseason with the Tampa Bay Buccaneers, you see that he signed a five-year deal worth $55,555,555 million. The real numbers in that deal though are in the first two years as Jackson did not receive a signing bonus, but did receive fully guaranteed base salaries in 2012 and 2013 of $11 million and $13 million respectively to go along with a 2012 roster bonus of $2 million. That means that Jackson was guaranteed $28 million of the $55,555,555 million. In 2014, 2015 and 2016, Jackson has non-guaranteed base salaries of $10 million, $9,777,777 million and $9,777,778 million, respectively. Notice I said, non-guaranteed. After two seasons, if Jackson is not living up to his money, the Buccaneers can easily release him with no salary cap liability whatsoever, because there was no signing bonus included in the deal. In essence, this was a two year deal that averages $14 million a season. The average of course goes down the more he plays past the first two seasons. The Buccaneers effectively front loaded his deal and that is because they had a tremendous amount of cap space to work with this year and presumable next year as well. Keeping Vincent in year three is not a problem as they can easily turn a good chunk of that $10 million base salary into a signing bonus and lower his cap hit in 2014, especially if they feel he has at least two more years in him. We shall see.
To show the difference in guaranteed money from one wide receiver to another this offseason, the Philadelphia Eagles signed wide receiver DeSean Jackson to a five-year deal totaling out at $47 million, that could total out as high as $51 million, should he hit all of his bonuses and escalators along the way. When you look closer at the numbers though, you see that this Jackson received a $10 million signing bonus to go along with a $750,000 base salary and a $250,000 workout bonus in 2012. All of that is fully guaranteed. In year two of the deal, DeSean receives a $6.75 million base salary, of which $4 million is fully guaranteed. The other $2.75 million is guaranteed for injury only. In addition, he will receive a $250,000 workout bonus, which you might as well call guaranteed. In year three of the contract, the Eagles receiver will receive a base salary of $10.25 million, of which only $250,000 is fully guaranteed. Another $250,000 of that $10.25 million is guaranteed for injury only. The contract stipulates that those two guarantees go away though should he get his workout bonuses in both 2012 and 2013. The base salaries, performance escalators and workout bonuses that remain in the contract are not guaranteed and thus really are fluff until he hits them. So assuming DeSean stays healthy this season and hits his workout bonus next offseason, he was basically guaranteed about $18 million, $10 million less than Vincent received.
Now, is the back end of the contract important? Sure it is, because the player intends on getting all of that money. On the flip side, the team hopes the player is still producing enough to make that money paid over the course of the deal a good value, plus not eat them alive as far as hits against the salary cap in a certain year, especially considering most of these deals, unlike the one Vincent signed, have amortized signing bonuses involved. In the case of DeSean, and his paltry $10 million signing bonus, he only has a $2 million a year amortized schedule against the cap. His base salaries in the final two years of the deal are $9.75 million and $8.25 million. In each of those two years he can also earn a $250,000 workout bonus in addition. Although unlikely, he can earn up to another $1 million in incentives in the fourth year of his deal as well, which means the most that he will count against the cap in 2015, if my calculations are right, is $11 million, and the most he can count in the final year of his deal is $10.5 million, as those numbers include the $2 million in each year of the amortized signing bonus. The Eagles can also very easily cut him prior to him earning his workout bonus in year four and only suffer a $4 million dead money hit as a result. That is an easy out should DeSean cause them problems or suffer an extreme drop-off.
Now as I pointed out a few days ago in the case of Wallace and the Steelers, structure is everything when it comes to him, mostly because of the limited cap space the Steelers have in 2012 combined with what the perceived limited cap space there will be in 2013 due to the expected flat cap. There is only so much money they can give him as a signing bonus, because of this. This is why I explained in that post about the option bonus in year two of a potential deal with him, which is essentially like a second signing bonus. Wallace and his agent Bus Cook are likely pushing hard for around $28 million, give or take, guaranteed. There is no way the Steelers can give him anywhere near that amount upon signing a new deal, as it creates an instant $5 million amortized schedule per year on a five year deal, should that signing bonus amount be $25 million. Realistically, a $15-18 million signing bonus is likely what the Steelers are shooting for with an option bonus in the second year of the deal from anywhere around $7-10 million. Throw in a $1 million base salary in year one and a year two base salary of $2 million, both of which can be fully guaranteed, and you have your guaranteed money now around $25-31 million, with the $31 million really being an extreme amount. The last three years of base salaries of the contract, which are not likely to be guaranteed, have to crafted in a way to not create an exorbitant cap hit when the amortized portions of both the signing bonus and the option bonus are added to it. Usually year three, or at the very latest, year four, of a five year deal is when you are most likely to see the highest cap hit take place, especially in the case of the Steelers with Wallace. The Steelers also likely want to give themselves some sort of an out after year three as well and suffer as little as possible in the way of a dead money hit. Remember, that in year two and on of the deal, if Wallace is given a high end $18 million signing bonus and a $10 million option bonus I spoke of above, that it comes with a high end $6.1 million amortized schedule. That is of course if the extreme amounts in the example above are used, and I would be surprised if that happened. That would mean should the Steelers want to release him prior to June 1st of 2015, he would have a $12.2 million dead money hit. See the problem with those high end numbers in my example? Vincent, who I broke down above, cost the Buccaneers nothing to cut after year two and DeSean, who I also mentioned above, will only cost the Eagles $4 million to cut after year three.
Now the Steelers could try to lighten the load of the guaranteed money up front a bit by putting in a roster bonus of say, $2.5 million or so in year three of the deal, but that money takes away from the guaranteed money wanted by Wallace up front. A six-year deal, should they opt to go that way, only helps the option bonus amortized schedule really. Sure it can help out by presenting a fatter looking total value of the deal, but the average year amount, which I constantly warn everyone against looking at, likely remains that of a five-year deal, or close to it.
So to the questions I received about total value on if a five year deal of $42 million is realistic, in my opinion a deal, if reached, could realistically land anywhere between the $40-50 million range, of which $20-25 million would be guaranteed. If you split the difference of that you get $45 million, which averages out to be just under the cost of the wide receiver franchise tag. I think that is a good deal for both Wallace and the Steelers from both a guaranteed money and a salary cap perspective. $50 million I would think would be the max on a five-year deal.
The only question I can\’t give an answer to, is whether or not this is a deal that Wallace will accept. He can take his chances and play one season for the $2.74 million restricted tag and risk getting injured, or he could sign on the dotted line and get roughly $20-25 million guaranteed. Not knowing what type of insurance he might have to protect him or what he and his agent are really looking for in guaranteed money, adds to the cloudiness. I will end here by saying what I have said all offseason, and that is that I think he has a new deal in place by the start of the regular season. As of today we have 46 days left until my prediction is wrong.
Thank God training camp is finally starting.