Explaining the Pittsburgh Steelers’ 2012 Salary-Cap Quandary (Part 1)

Note 1: This is the first installment of a five-part series on the Steelers’ 2012 salary cap challenges that will appear daily this week on Steelers Lounge. The initial article below provides a basic synopsis of the Steelers’ complicated salary-cap situation for 2012. Tuesday’s article will delve into specific challenges Pittsburgh’s front office faces in the upcoming offseason, but will focus on explaining why it would be false to simply conclude that the Steelers are in “salary-cap hell” even if the numbers imply that is an apt description.

The third article will examine the astute and imprudent decisions that put the 2012 Steelers in what will easily be their most challenging cap position ever. Thursday’s edition will make player-by-player financial projections on how the front office might make what will undoubtedly be difficult and some unpopular choices needed to field a roster under a tight salary cap that could potentially remain competitive in 2012, while also not creating even more dramatic cap problems for years down the road. The final article on Friday will be my first 2012 Steelers’ mock draft, which would be fruitless at this point unless also projecting who will returns from the current roster. Accordingly, that mock will also include a corresponding hypothetical 53-man roster for the 2012 Steelers.

Note 2: I am not a salary-cap expert. In fact, the only real Steelers’ salary cap expert is their chief negotiator, the brilliant 34-year-old Omar Khan, who the Steelers brought in from another organization (Saints) and has a degree in sport management. Pittsburgh is the best managed franchise in professional sports, but a valid critique of the organization is that there are too many local products who have only worked for the Steelers, naturally resulting in too much group-think at times.

Unfortunately Khan does not give public interviews on the Steelers’ finances. Thus, the person who seems to best decipher all the stipulations of the salary cap and provides exact numbers for Pittsburgh fans is Ian Whetstone, who serves as the capologist for SteelCityInsider.net. My current cap totals and some of my rudimentary comprehension of how these deals work came from Ian’s research and postings, although opinions expressed in this series are mine. A handy resource is this 2012 salaries table at Steelers Depot, although it has not been updated to include the 4-year extension signed by safety Troy Polamalu just before the 2011 season, or the in-season 2011 restructure and corresponding 1-year extension of defensive end Aaron Smith’s contract that enabled the Steelers to bring in offensive tackle Max Starks on a 1-year contract after week No. 4 this fall. Finally, the Behind the Steel Curtain blog has published several informative articles on this topic under its “Steelers Contracts and Salary Cap” thread. Most of the info on the Web on potential NFL salary caps for 2012 is being published by Steelers’ Web sites, which tells you others have looked at the team’s numbers and can easily see major problems like never before even though Pittsburgh is routinely over or near the team cap limit entering each offseason.

Note 3: At this point no one knows what the NFL salary cap will be in 2012. Due to the new CBA agreed to after the lockout being very unfavorable to the players, the 2011 salary cap (excluding benefits) was set at a maximum of $120.5 million per team, which was down from $129 million per team in 2009 when overall league revenues were considerably less. Furthermore, each franchise was allowed to use three exceptions against future caps for up to $3 million total to re-sign its own veterans to 1-year contracts without bonuses. The latter figure drops to $1.5 million for 2012, with the cap likely rising gradually on an annual basis as it has historically. Current estimates have overall team caps for 2012, including the exceptions, ranging from $122-133 million. The highest figures would be largely due to a potential new TV contract for Thursday night games over the first eight weeks of the season that would likely add $5-8 million to each franchise’s salary-cap ceiling if implemented before the 2012 season.

STATEMENT OF THE PROBLEM: Pittsburgh fans should be rooting for anything that increases overall league revenue, which would then raise team caps. Per Whetstone on Steel City Insider, the Steelers have “39 players under contract for 2012, at a total cap cost (including dead money) of about $141.4 million.” NFL teams must be in compliance with the new salary cap figure by the start of each new league season, which is generally on March 1st each year, and then have their collective 2012 salaries remain under the cap through the end of the season.

Every NFL team will sign players to futures contracts shortly after the 2012 Super Bowl, including most of the players who were on their practice squads the previous season. Teams can have up to 80 players on its off-season roster at all times, with the 51 highest salaries counting toward that team’s projected salary cap for the upcoming season. Most of the final-roster longshots signed to futures contracts will not count toward that figure, but those who fall in a team’s top 51 current projected salaries would account for a minimum of $390,000 per man, which will be the NFL league minimum salary next fall for players with no accrued NFL seasons before 2012. Further, most teams, including the Steelers, usually sign a player or two to futures contracts who have been on NFL active rosters in the past for at least a full season, and thus they will count a little more toward the cap. In other words, even when the Steelers start cutting veterans from their offseason roster and restructuring contracts of other players to free up cap space, you can assume that a minimum of $390K will be added back to their current cap total to account for the substitution for each released player.

Retaining Mike Wallace for the Long-Term Is a Necessity
The Steelers also have at least six players slated to be restricted free agents and two more who will be exclusive-rights free agents, all of whom Pittsburgh likely wants back for 2012. But the only prominent player on this list of restricted free agents is superstar receiver Mike Wallace. The Steelers obviously would ideally like to retain Wallace’s services by first tendering him an offer at the highest level (an estimated salary of $3.5 million for 2012) that would result in Pittsburgh having the right to match any external salary offers presented to Wallace or receiving a first-round draft pick from any team that signs Wallace to an unmatched offer. By tendering Wallace, the Steelers would ideally work on signing him to a long-term deal in the summer that would slightly increase his cap figure for 2012 from his initial tender offer due to a pro-rated signing bonus. However, the Steelers would be able to free up more cap space to sign its draft picks and possibly increase Wallace’s 2012 cap figure after June 1st when they can release veterans like guard Chris Kemoteau who are signed beyond 2012, but not have all the dead money owed to those players applied to their 2012 cap limit as it would if those players were released before June 1st. However, that ideal strategy would be risky in Wallace’s case. It should be noted the new CBA no longer includes first- and third-round picks as compensation for the highest tendered restricted free agents.

Over his first two seasons, Wallace ranked No. 1 in yards per reception (20.33) among all NFL players, barely edging out the Eagles’ DeSean Jackson (20.29) for that honor. Jackson has an innate ability to take short passes for long gains, whereas Wallace is best known for running past defensive backs and catching bombs from quarterback Ben Roethlisberger. Thus it may surprise some that Wallace caught 57.9% of passes targeted at him over 2009-10 compared to just 50.9% for Jackson. Still, despite ranking 5th in the NFL in receiving yardage (1,257) in 2010, Wallace’s status as a legitimate No. 1 receiver was questioned by some because his 60 total receptions ranked just 42nd in the NFL.

This fall, though, Wallace has emerged as an all-around dominant No. 1 NFL receiver, increasing his average receptions per game from 3.75 in 2010 to 5.1 in 2011, due to his catching more slants and underneath passes. However, he still averages 20.3 yards per reception. Through seven games, Wallace is on pace to finish the 2011 regular season with 83 receptions for 1,669 yards and 11 TDs. Those are not only No. 1 receiver numbers, but all-pro-type statistics.

His ability to change games instantly due to his sprinter’s speed, combined with the lessened compensation price will make Wallace an enticing restricted free agent for other franchises. What’s worse is that some team with a great deal of cap space and a need for a top receiver, such as the Buccaneers if they were not so cheap, could sign Wallace to a lucrative, front-loaded contract with an expensive 2012 base salary, making it extremely difficult for the cap-challenged Steelers to match such an offer, because that would require them to immediately clear out much more space. As you will see in part four of this series, Pittsburgh will have a very difficult time just getting under the cap before spending any extra money.

Historically, the Steelers have waited until late in the summer to begin negotiating with its top restricted free agents or its marquee veterans slated to be unrestricted free agents after the upcoming season on long-term extensions. But the Steelers’ front office must desperately try to extend Wallace on a long-term deal after the 2011 season. Yes, this will provide Wallace an advantage in negotiating leverage, but the franchise still has the upper-hand because as a third-round pick, Wallace will have earned a paltry $1.7 million over his entire first three seasons, making him the best bargain in the NFL over that span. Plus, there is no guarantee that another franchise will give up a first-round pick to attempt to sign Wallace to an expensive contract (although it is likely at least one would) and he is seemingly very happy in Pittsburgh, where he plays with a franchise quarterback and his childhood best friend, Keenan Lewis, is on the roster. Most important, since his success is predicated so much on raw speed, Wallace and his agent must realize that he is a torn ACL in 2012 away from never getting a huge payday without a new contract and possibly a torn Achilles away from seeing his career end.

Thus, assuming Wallace avoids major injury for the rest of this season, it would be prudent for both sides to work out an extension in February that would give Wallace a large enough signing bonus to secure his status as a multi-millionaire for the remainder of his life and allow the Steelers to lock up their No. 1 receiver at a hometown, sign-early discount that does not strain their 2011 cap, with the larger base salaries coming later in the contract.

The Steelers failed to get such a discount in inking a 6-year, $50 million extension before this season with linebacker Lawrence Timmons, who was slated to be an unrestricted free agent after 2011. Wallace has been a better and considerably more consistent player, as well as a more intricate part of his team’s success over his first 2.5 seasons (2009-11) than Timmons was over his first four seasons (2007-2010). In fact, 2010 was Timmons’ only great season (team-high 135 total tackles on a dominant defense) since he hardly played as a rookie, was a part-time No. 3 inside linebacker in 2008 and a mediocre (78 total tackles) first-year starter in his injury-plagued 2009 season.

However, there are several differences that should lower Wallace’s price in comparison. First, as an early first-round pick, Timmons was already financially secure for life after signing a rookie contract in 2007 that was slated to pay him between $12-15 million through 2011, meaning he could have potentially risked playing through 2011 as a contract year without fear of injury ruining his financial future. Without a new contract from the Steelers or another team that includes a nice signing bonus, Wallace would justifiably have those concerns in 2012, especially during preseason workouts since his one-year contract would not be fully guaranteed.

Second, even though he is also a fast-twitch player whose game is predicated on his amazing closing speed and ability to shadow most backs and tight ends in coverage, Timmons would still have an easier time returning from a potential major lower-body injury than Wallace, whose status as a top receiver is almost entirely based on raw speed. Moreover, such an injury would not reduce the worth of a linebacker on the open market as significantly as a receiver.

Finally, the Steelers had just signed linebacker LaMarr Woodley to a $61.5 million, 6-year extension, thus likely increasing the value of Timmons’ deal in the process since they were drafted together in 2007. The Steelers have a history of paying top salaries to many of their great linebackers compared to league averages (e.g., Jack Lambert, Greg Lloyd, Jason Gildon, Joey Porter, James Harrison, etc.).

But the largest contract any wideout ever received from the Steelers was Hines Ward’s 4-year-deal before 2005 that was worth up to $25.8 million, including a $5 million signing bonus and roughly $10 million in guaranteed money. That was a reward for a four-year stretch where Ward averaged 95 receptions per season, had at least 1,000 receiving yards each year and established himself as easily the best blocking receiver in the NFL for what was then a predominately run-oriented office. The second largest total contract signed by a Pittsburgh receiver was the 5-year, $24.5 million extension Ward signed in early 2009, which came after he had helped Pittsburgh win its second Super Bowl in four seasons. However, even if he plays out the duration of that contract with the Steelers, Ward will not receive anywhere near the total amount from the cap-strapped Steelers, particularly since that second contract included just a $3,050,000 signing bonus, which makes Ward a prime candidate to be restructured significantly or (God forbid) released this off-season.

Even if he gives the Steelers a hometown discount, Wallace’s deal should be worth near the amount of both Ward contracts above combined, with more guaranteed money. Hypothetically, the deal could be a 5-year contract for $45.2 million with a guaranteed $18 million signing bonus, the latter of which would mean $3.6 million would be applied to the Steelers’ cap each season for Wallace’s signing bonus assuming he plays out the duration of his contract from 2011-15, or the remaining amount would be applied to the team’s cap at some point if he does not. For example, this hypothetical contract could be structured for Wallace to receive base salaries of $700,000 in 2012, $3.6 million in 2013, $4.9 million in 2014, $5.3 million for 2015 and $5.8 million in 2016. The rest of the money would come from potential (non-guaranteed) but likely-to-be earned roster bonuses of $1.2 million for 2012, $1.5 million for each the 2013, 2014 and 2015 seasons, and a $1.2 million bonus in 2016.

Other RFAs May Play Increasingly Important Roles for the 2012 Steelers
Wallace is the only consistent starter among the team’s upcoming restricted free agents. However, the other five restricted free agents have all already made significant contributions to the Steelers’ successes in recent years, with some of them likely being granted more important roles in 2012 due to the probable departure of other higher-priced veterans, such as nose tackle Casey Hampton. Those five (TE/FB D.J. Johnson, OG Ramon Foster, OG-C Doug Legursky, S Ryan Mundy and CB Keenan Lewis) will all likely be tendered at the lower level with right of refusal, which should be somewhere around $1.2 to $1.3 million per player for 2012.

There is a chance Lewis could be tendered at a higher salary ($1.8-$1.9 million) to guarantee the Steelers a second-round pick if he signs with another franchise. However, that is less likely, because the Steelers would still receive a third-round pick in return if they elect not to match a contract for a player who is finally showing promise, but has never been a regular starting cornerback and is slated to be an unrestricted free agent after 2012.

The Steelers may also be able to lower the 2012 cap figures for some of those restricted free agents if they are signed to manageable multi-year contracts, although a portion of the signing bonuses for those deals would still be prorated back into the player’s 2012 cap hit. For example, if the Steelers sign Legursky (a nice sixth man C-G, who is serviceable as a starter) to a modest 3-year extension for say $3.3 million, his base salary for 2012 could be reduced to as low as $700K, although his cap figure would be higher (e.g., $950K) due to the prorated portion of his signing bonus ($750K?) that would be applied to 2012. The Steelers should be able to tender their two exclusive-rights free agents, RB Isaac Redman and NT Steve McLendon, at around $600K per player to retain their services for 2012, and neither can be eligible for unrestricted free agency before 2014 unless released.

However, assuming that all eight players above are tendered at some level (a strong probability) and that none sign extensions before those tenders that could lower their 2012 cap figures slightly (with the exception of Wallace), the addition of tendering contract offers to those eight players (even before they are signed) will add roughly $11 million to the Steelers’ 2012 salary cap. Moreover, that figure does not include any additional money applied to the 2012 cap that might be needed to lock up Wallace long-term.

At that point, the Steelers would have 46 players under 2012 contract from their current 2011 active roster or injured-reserve list (assuming no other current team members are released or pending unrestricted free agents are extended), accounting for around $152.5, a figure which includes the little dead money on the Steelers’ 2012 payroll. Add in one hypothetical player with one accrued NFL season signed to a futures contract ($465K) and four more at the league minimum and the Steelers would add slightly more than $2 million to their cap figure, which would project to be around $154.5 million for their top 51 players.

A slightly optimistic salary cap projected limit for 2012 would be an increase to $127.5 million per team, plus the three exceptions for up $1.5 million total. The Steelers would obviously use the latter to assist in re-signing some of their veterans to 1-year contracts (e.g., NT Chris Hoke, QB Byron Leftwich, P Daniel Sepulveda, QB Charlie Batch?), but that slight cap increase would not go into effect until those unrestricted free agents are re-signed, which likely would not happen until after the Steelers have cleared considerable cap space and probably not until after the draft for most of these players unless they garner and are seriously considering signing external offers in free agency. Starks, cornerback William Gay and Sepulveda are the three most likely potential unrestricted free agents who fit that description.

Through this projection, the Steelers would need to reduce their projected 2012 payroll by roughly $27 million by March 1st by releasing veterans and restructuring the contracts of other players that would lessen their salary-cap figures for the 2012 season. I will project how they could do this daunting task on a player-by-player basis in Thursday’s article in this series. First, though, I will explain in tomorrow’s article why the term “salary-cap hell” does not accurately describe the Steelers’ situation; because they will largely be able to control who will be on their 2012 roster, which should still be a playoff-caliber team, albeit one with less proven players, especially amongst reserves. Wednesday’s installment will analyze the specific transactions and strategies that put the Steelers in a salary cap quandary for 2012, pointing out the good (e.g, re-signing cornerback Ike Taylor as an unrestricted free agent at a major hometown discount of roughly $7 million per year), suspect (e.g., extending linebacker Lawrence Timmons on a $50 million contract a year before he was eligible for unrestricted free agency) or just unwise (re-signing kicker Shaun Suisham – a career journeyman who has never been consistent – to a 4-year deal worth $6.35, including a guaranteed $1.35 million signing bonus, in what was a tight salary cap for the 2011 Steelers at the time). Finally, please remember our first Steelers’ 2012 seven-round mock draft will be unveiled on Friday, along with a ridiculous-early projected 53-man roster.

This entry was posted in 2011 steelers, Analysis, Cool Stuff, Defensive Line, Draft, Free Agency, Front Office, Offensive Line, Offseason, Wide Recievers. Bookmark the permalink.
  • Cols714

    Are Steelers fans the only one that do this? Instead of being excited that we are 5-2 with a huge three week stretch coming up and plenty to talk about we are going to talk about the 2012 salary cap and the 2012 draft?

    I’m sure it will be a good read and all but can’t the doom and gloom ever stop?

    • Aaron

      I can see your point, but I think it speaks more to an expectation of continued excellence.  We don’t want one good year, but rather 5 and 10 year stretches of putting out solid-great football teams.   

      • Cols714

        Yeah I’m just being cranky. I know.

        To me the biggest failure was letting Starks go. But other than that it seems like the other decisions made by the FO were completely defensible. I don’t fault the Colon injury, which was totally unrelated to his achilles, to the FO. He looked like their best OL before he got injured. Timmons and Woodley are good to great players at key positions so signing them works for me. Polamalu is great so signing him works as well. Ike Taylor has looked fantastic this season so that is another good move. Gay has been pretty good so I don’t see what to complain about there.

        I guess the complaints amount to we should have cut or figured out how to make Smith take less money and held onto Starks. This I agree with. Smith could have been cut if he refused to restructure his contract and the team would have been OK. And signing Kemo to a deal worth more than zero was also a mistake just because he pretty much stinks. Everything else seems like magical thinking. Would the team have liked to sign Timmons and Woodley for less? Of course. Could they have? Considering the Steelers’ track record of not overpaying their players, I’m guessing no. And also considering their track record of keeping the guys they want to keep, I’m guessing that they’ll figure out a way to keep Wallace around for a while.

        And as for 5 and 10 year stretches of putting out solid-great football teams, I think this 1992-present run has been pretty fantastic and the team shows no signs of slowing down. The guys we are going to lose, Smith, Farrior, Ward all have their replacement on the roster. It looks like Hampton is about done as well and that’s a bigger hole that will have to be filled.

        • Aaron

          Yeah, there is certainly plenty of room for criticism on the handling of the offensive line.  For the most part, however, I think the F.O has handled things pretty well – especially with regard to some of the older players and their playing time.  The past couple drafts may prove to be incredibly important as far as filling out a roster with quality depth.  This will be made all the more important, in light of the salary cap article, by the fact that I would expect a number of veterans to be released/restructed substantially next year.  I wonder what the future holds for McLendon?  If he can step up and be a solid starter, the future certainly looks bright with all the young guys stepping up

        • Mike L

          The only MLB signed recently to a better deal than Timmons is Patrick Willis, out of 6-8 large contracts being #2 is pretty good.  Woodley’s contract is slightly better than Hali’s contract because it has less signing bonus making it more manageable.

          Ted, would trading up in the 1st round give more or less cap relief?

          • Tedk58

            No, trading up in the first round would create more problems, although not as much as in years past due to the new rookie salary cap. That is why, in the past, teams did not want to pick in the top 5 unless they were getting a surefire top player, and teams at the end of the first round had trouble trading back into the second round. Yes, you could sign a late first-round pick for 5 years, but you saved a lot of cash on the early second-rounder.

            That said, we will target impact players in the first round and trade up if needed, or consider trading down if we do not think we would get great value at that spot. However, we usually get great value in the first round, and I currently think two OGs top our early list at this point.

        • Ted

          I agree with most of what you wrote as you will find out (with detailed analyses) over the next few days.

      • Ted

        Bingo. Fortunately, the Steelers’ front office (like most of their hardcore fans) always manage the salary cap to both give them a great chance to win now but also remain competitive for future years, without going to extremes (all in to win now or give up the present for the future). However, they definitely leaned more toward “win it now” for 2011 than ever before, and I think that was the right strategy when you look at the ages of so many of this team’s key defensive players.

    • Ted

      Actually, I am doing this series to show that it is not all doom and gloom for 2012. The #s imply that, but the Steelers are the only team in the NFL without any of its opening-day starters from 2011 slated to be UFAs this offseason. In other words, some good players will be gone. But the front office will determine who stays and goes. A lot of other teams will be at the market’s mercy on keeping their best players.

      You make a good point on when it is is being published, but it took time to do (not all done yet either) and info could change by next week.

  • Mike L

    There is a 14 milion dollar disparity between Whetstone’s 141 million and SB nation’s 127 million.

    • Tedk58

      SB Nation’s Table, while it provides a lot of great info that helped educate me on the cap and I used as my No. 1 basis for estimating next year’s NFL team cap ceilings, is missing several players currently under contract for the 2012 Steelers or has their contract expiration date wrong: For example, J. Scott is signed through 2012 ($2.2 million base next year, with $500K prorated signing bonus on the books regardless if he is cut or restructures) and he was not on that list. Suisham signed a four-year deal through 2014. His ridiculously high salary, which included a $1.3 signing bonsus (the Steelers only real questionable FA move last year bc of the amount) is not included in that chart.

      I do not know Ian Whetstone personally and have no idea how a diehard Steelers fan and professional artist (interesting combo) becomes an NFL capoligist. But when it comes to keeping up with and breaking down Steeler contracts, he is the best on the Web by far, which is why Wex made him the capologist for Steel City. Thus, I went with Ian’s #s and imagine they are as accurate as any published by any media outlet.

  • Pingback: Steelers Face Tough 2012 Offseason Decisions, But Are Not in “Salary Cap Hell” (Part 2) | Steelers Lounge

  • Pingback: Explaining the Pittsburgh Steelers’ 2012 Salary-Cap Quandary (Part 1) | Steelers Lounge

  • Anonymous

    Is there any chance of going really big on Wallace, something like 8 year, 60 million, 20 guaranteed?

    • ted

      That would be a bargain for Wallace considering Santonio re-signed with the Jets for nearly $10 mill per year and $20 million in guarantees. Plus, do the Steelers want to offer an eight-year contract to a speedster whose career could be severely limited if not ended by one hard hit to the lowe-body?

  • Pingback: Examining the Steelers’ Philosophical and Pragmatic Moves and Non-Moves that Will Make Getting Under the 2012 Salary Cap Both Challenging and Risky (Part 3) | Steelers Lounge

  • Pingback: Projecting Salary Cap Cuts and Moves for the 2012 Pittsburgh Steelers (Part 4) | Steelers Lounge

  • BeasleyRockah

    Calling the Steelers the best run organization in pro sports wreaks of bias.  They are a great organization, but THE best?  Really?