A Preview of Colts Safety Bob Sanders’ Restructured Contract

Over the past week, multiple reports indicate that Bob Sanders will have to re-negotiate his contract if he intends to stay in Indianapolis. The fact that Colts team president Bill Polian and Sanders’ super agent, Tom Condon, are discussing it publicly indicates that the team and Sanders are serious about getting something worked out. Condon addressed the issue:

“The guy [Sanders] doesn’t play for three consecutive years. They’re probably not real excited about that, and they paid the other safety [Bethea], what $6.5 million, this year. Is there another team in the league that pays both its safeties more than $5 million?  The answer is no. So he (Irsay) doesn’t have to tell me anything.”

While being candid is refreshing, one would expect an NFL agent for a player as talented as Sanders to spin the situation more favorably if Bob was content with testing the open market. Nothing screams “I don’t want to go anywhere,” more than one of the league’s top agents highlighting the negatives of his client’s injury history heading into contract discussions.

Coltzilla will take a look at Sanders’ current deal and prognosticate on what his new deal could look like.

Current Contract

Just before the end of the 2007 season, with Sanders gunning for the Defensive Player of the Year (DPOY) award, the Colts offered him a contract extension through the 2012 season worth $37.5 million, with $20 million guaranteed. As with most contracts, it was not evenly split amongst the five years. In 2010, Sanders earned $3.95 million. In 2009 he earned $6.13 million — and $8.24 million in 2008. Of the nearly $20 million Sanders has received over the past three years, only about $3.5 million of his salary has been a base salary, with the rest of his money coming from bonuses. In the final years of Sanders’ current contract, he is set to make $15.82 million, including $12 million as his base salary — the remaining $4 million comes primarily from his signing bonus which will be $1.875 million in 2011 and 2012.

What does Sanders actually deserve?

The answers are likely found in the responses to three questions:

1) How much is Sanders’ talent worth if he plays a full season?
2) How much does his injury history affect the team’s willingness to gamble?
3) How do the Colts balance these competing numbers with the uncertainty surrounding a new collective bargaining agreement (CBA), that will likely include an unquantified salary cap?

Bob Sanders is one of the most dominant safeties in the NFL when healthy, but thanks to his hunger to destroy his target, he is either all there or in a full-body cast. He could well be worth $16 million if he can overcome his injuries, and secure back-to-back DPOY awards. The chance of this happening is so remote that both Sanders and the team know it is time to come to the bargaining table to rework the contract.

Sadly, Sanders in on the field so little anymore that the team does not benefit from his dominance for long stretches of the season. If he can avoid injury this year, he could be worth $3-4 million. If he is unable to play more than a couple games, he would barely be worth the veteran minimum.

What would a new contract include?

The best way to balance Sanders’ skill and proneness to injury is to fill his contract with incentives. This allows the Colts to protect themselves with a lower guaranteed salary, in the event that Sanders is unable to perform for the duration of his contract, while fairly compensating Sanders for his elite skills if he stays healthy — and becomes the final miracle needed to canonize John Paul II.

Before getting into the incentives, what would a player like Sanders likely command as a baseline? According to the now expiring CBA, a player with eight years of NFL experience would command a vet minimum of $775,000 in 2011 and $790,000 in 2012. If the contract renegotiation includes an extension, Sanders would command $905,000 in his tenth year and $920,000 in his eleventh year. These numbers are subject to change with a new CBA, but the new number should be in the same ballpark. Accordingly, a new four-year deal would cost the Colts $3.39 million in base salary.

Incentives can be as dull or as imaginative as the team and Condon decide. One incentive Sanders has had as part of his contract already is a third of a million dollars for making the Pro Bowl. To account for Sanders’ injury history, the team will likely include a “per-game” incentive to reward Bob for each game he competes in — grouping games by quarters of the season or some other breakdown is more likely.

Suppose the Colts add an additional $1.2 million in incentives for games played. If this was on a per-game basis, Sanders would make an additional $75,000 a week. If it was an another breakdown it could look like this — an additional $150,000 for competing in at least 4 games, an additional $250,000 if he makes it to 8 games, $350,000 at 12 games, and $450,000 at 16 games. In addition to this “per-game” bonus, other additions could be made for accomplishments like being named Defensive Player of the year (say $500,000).

A final aspect of typical NFL contracts is signing and roster bonuses. A signing bonus is guaranteed regardless of success, health, or team decisions concerning the player’s continued development with the team — and is prorated over the duration of a players contract. A roster bonus is due only if a player remains on the roster beyond set deadlines. Considering that Sanders has already collected $9 million in roster bonuses, it is unlikely that a short-term contract (2-3 years) would include any kind of roster bonus — but it is possible for one to be added if the contract term is extended. As signing bonuses are guaranteed, it is unlikely that the new contract will include one of any significance.

Keep in mind that regardless of the renegotiation, Sanders will receive $1,875,833 in 2011 and 2012 from the signing bonus on his current contract.

How will a new contract impact the team with the possible return of a salary cap?

The rules for incentivized contracts are hazy and confusing. Not only do incentivized contracts have special rules — minimum wage contracts also have the possibility of special exemptions on cap space. To make matters worse, previously negotiated contracts will have an impact on how mcuh a player counts against a teams cap. All fans can do is operate off of the previously published rules governing these issues.

First, the rules governing special exemptions. For a veteran who signs a minimum contract and has at least four years of experience, their contract has the potential of counting only $460,000 against the teams cap in certain circumstances. The circumstances under which this would happen are not espoused, so while this may be possible, this story will consider that eventuality unlikely.

Second, the rules regarding incentivized contracts. The rules stipulate that all incentives must be evaluated by the team and listed under two categories. The first category is likely to be earned (LTBE). LTBE incentives are considered as part of a player’s yearly salary and count against the team’s salary cap. In the event an LTBE incentive is not achieved, the team is reimbursed the following year and its value is added to the team’s salary cap. The other category unlikely to be earned (UTBE), which do not count against the team’s salary cap in a given year and are not considered part of the base salary. These types of incentives would ones for “MVP” or “Defensive Player of the Year.” In cases where a player does in fact earn one of these incentives, the team’s salary cap is docked the amount of the incentive on the next year’s cap.

For Sanders, if the team gives incentives for games played and marks them as LTBE, it will result in a bigger cap hit in 2011. If Sanders is unable to play it would offer the team a reprieve in 2010, even if he goes on to play the following season without injury. If the team is pessimistic about Sanders’ health, or gambles to save some cap space in 2011, they can list a portion of the incentives as LTBE, and risk taking a hit on future caps if Sanders outperforms their expectation.

Finally, is Sanders’ previous contract. Salary cap rules stipulate that there is no way to avoid the signing bonus owed to Sanders from the previous contract. Meaning that Sanders will get his $1.9 million a year regardless of whether he signs a new contract or leaves the team. If he gets cut, the total sum of the remainder of his previous signing bonus will count against the team’s salary cap in the year he is cut, which will likely cost the team a bigger cap hit than if they renegotiate his contract and sign him to a minimum deal with incentives. Any new signing bonus would be split over the duration of the new contract — so if Sanders signs a 4-year deal with a $400,000 signing bonus, that is $100,000 a year.

All of these elements must be considered, although a new contract is not likely to be worked out completely until the major aspects of the CBA have been fully worked out. If there is not a cap, then the team has less to worry about and can do what they please with the way the incentives are listed.

Below are two sample salary breakdowns for a 2-year and 5-year deal, including possible incentives.

(Totals in millions.  Maximum based upon a vet minimum contract over 2 years with a $75k per game bonus, $500k DPOY bonus, $250k Pro-Bowl bonus, and $250k leading tackler bonus.  Minimum based on 1 game played)

(Totals in millions.  Maximum based upon a vet minimum contract over 5 years with a $500k signing bonus, $75k per game bonus, $500k DPOY bonus, $250k Pro-Bowl bonus, $250k leading tackler bonus, and no roster bonus.  Minimum based on 1 game played)

If Indianapolis can re-negotiate Sanders down to a minimum contract instead of cutting him they will turn a $4 million loss next year into a $5.5 million investment. This is a $1.5 million gamble — which is less than his signing bonus per year — that Sanders can come back and play consistently sometime over the next two years.

If the team finds a five-year contract appealing, they can lock in Sanders for a good price through the later stages of his career, which could be useful if Sanders is even mildly productive — by his standards. From Sanders’ perspective, a long-term deal may not be as appealing as the later years do not have an appreciable gain in value —  but that is something the team could cover by writing an “out” clause, or they could give Sanders a greater base salary, or greater incentives later in the contract.

The only sure thing at this point is the process of renegotiating a contract from a very heavy base salary to one that is highly incentivized will be a complex undertaking. Needless to say, the “hairy” issue of player salaries and cap implications is becoming a veritable “Tom Brady,” with all kinds of factors that can crop up.