Thursday, October 2nd, 2014

Salary Cap Follies

12

Larry Brooks doesn’t think the Flyers are going to have to pay for their “We didn’t understand the CBA” Chris Pronger blunder:

The Flyers will not take the hit because the CBA will be long extinct by that time, with another round of rollbacks and amnesty buyouts expected to bridge the gap between the current labor agreement and whatever comes next.

There are no guarantees, of course, but no one knows the fate of contracts that run beyond 2011-12, which is when the CBA will expire once the NHLPA exercises its pro-forma option to extend the deal through that season.

I don’t know whether Brooks is right about CBA relief or not, and I’m not sure that I care. What I care about is the way these lengthy contracts – all of them – obviously circumvent the salary cap. I don’t think the Flyers should be able to get a $7 MM a year defenseman for five years with a $5 MM cap hit. I don’t think the Hawks should get an $8 MM dollar a year winger for a $5 MM cap hit over the next seven years. Will the Flyers pay a price for their Pronger blunder? Will the Hawks come to regret the Hossa signing?

Who cares? If the Flyers pay it is six years from now. If the Hawks pay it is seven years from now. That’s too far away for a price to have any meaning. Nobody has a time horizon that long. This CBA tilts heavily in favour of the big markets without letting them cheat this way. At best, they are stealing cap space from the next decade and spending it now. At the worst, the CBA will change and they will never have to pay it back.

All that aside, Brooks drops this tidbit:

It would, however, be a shock if the league doesn’t recalibrate as part of a battle that’s certain to include a laundry list of givebacks from the union intended to shrink the cap. Indeed, several general managers have told Slap Shots they believe a rollback of up to 15 percent plus a round of amnesty buyouts will be necessary at the end of next season in order to accommodate a decrease in the 2010-11 cap that is expected to be meaningful.

This is the first I’ve seen this reported in the mainstream. It depends on where revenues next year, but if Brooks is getting good information several general managers are worried about the scenario I painted in this post. If revenues do crash, the CBA isn’t going to work very well.

A 15% salary rollback and amnesty buyouts? Paul Kelly might have something to say about that.

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Comments

12 Responses to “Salary Cap Follies”
  1. brett0410 says:

    It is virtually a certainty that the Flyers will not be on the hook for Pronger’s salary in years 6 and 7 of this deal.

    Even if the CBA does not change at all, what is to stop the Flyers from trading Pronger and a pick the day before Pronger retires to a team like the Thrashers or Coyotes? Not only would said team receive a draft pick or some sort of compensation for $5M in salary cap space, but the team will not have to actually spend a dollar to pay Chris Pronger. All the team is giving up is cap space the team is not going to use anyway.

    In reality there will probably be at least one or two financially-struggling franchises that would love to have a cap hit of $5M (with no actual salary to be paid) to artificially get them to, or slightly above, the salary cap floor. To sell the trade to their fans I am sure the team will demand a pick or a prospect from the Flyers as well, but that is a small price to pay to have, as Tom says, a $7M/yr player for a $5M cap hit for the next 4-5 years.

  2. Gerald says:

    I don’t know that I would put much stock in Brooks’ business-of-hockey commentary.

    Rollbacks are already institutionalized in the CBA in the form of the escrow mechanism. Why would anybody want to die on that hill, from either side?

    I would imagine that every GM who is well under the cap would scream at the top of their lungs in protestation of “amnesty buyouts” as well. I doubt that one would even make it out of the NHL boardroom.

    If anything, the next CBA discussions will primarily revolve around percentages, as well as some proposed tweaks to deal with various issues (perhaps even the long-term contracts). I imagine the NHLPA will take out the “input into relocation” and “relocation fees as part of HRR” concepts for a test drive as well. The idea of trading cap space and perhaps some type of borrowing from previous cap underspending for teams who have spent under the cap might get discussed. I highly doubt it will be ALL that contentious, to be frank (at least by previous standards). The union is not strong enough yet, and the league (and the PA, for that matter) will be cautious to avoid another stoppage with the recession fresh in everyone’s mind.

  3. Tom says:

    I don’t know that I would put much stock in Brooks’ business-of-hockey commentary.

    Who did? The only stock I put in what Brooks says is that I believe him when he says several GMs are telling him that something has to be done about next year. I don’t have any respect at all for hockey writers, but I have not reached the point where I believe they pretend they have sources.

    He does mix up two issues in the three paragraphs I quote. I have no idea what is going to happen with the next CBA. It is still likely to be two years away and a lot of water will flow under that bridge between now and then.

    And if Bettman really wants to keep pretending that his CBA was about helping small markets (rather than what it was) then his number one priority should be to close this long term contract loophole.

    The big problem will be next year if revenues are a disaster. There may not be enough liquidity to sign free agents and fill out rosters if the cap falls too far. Escrow doesn’t solve that problem. Gary’s CBA doesn’t work very well if revenues fall.

  4. Gerald says:

    Who did? The only stock I put in what Brooks says is that I believe him when he says several GMs are telling him that something has to be done about next year. I don’t have any respect at all for hockey writers, but I have not reached the point where I believe they pretend they have sources.

    I didn’t mean to imply that you did, although i can see where you would have thought that.

    for me, it depends on whether one considers hearing something from one’s media peers to be from “a source”. I DO believe that one has been done (“a source with knowledge of the matter”).

    The big problem will be next year if revenues are a disaster. There may not be enough liquidity to sign free agents and fill out rosters if the cap falls too far. Escrow doesn’t solve that problem. Gary’s CBA doesn’t work very well if revenues fall.

    I know we went around the horn on this in February, but I don’t see the same problem as you do, short of the cap space falling so catastrophically low that it could not even accommodate minimum level salaries.

  5. Kel says:

    short of the cap space falling so catastrophically low that it could not even accommodate minimum level salaries.

    And even then, teams still have the option to bury some contracts in the minors. Furthermore, teams wanting to reach the floor without spending the money may be willing to take on some big front-loaded contracts with cheap remaining years.

  6. Dennis_Prouse says:

    Did I just see “Brooks” and “mainstream” in the same sentence? Brooks was a constant source of bad information and laughable predictions during the lockout, and little has changed since. He’s the louder, more obnoxious cousin to Al Strachan.

    There seems to be this myth that countless teams are well below the cap, and I’m just not sure how accurate that is. Last year, there were only four teams who ended the year with significant cap space, i.e. $10 million – $12 million — Coyotes, Kings, Predators and Islanders. That’s it. There were then a group of teams with about $5 million or so in space, which strikes me as prudent, and a whole bunch of others snug up against the cap. (Calgary ended the year with $6,000 in cap room, enough to pay a minimum wage player for one game.) Heck, even the Oilers had less than $2 million in cap space, a team whom you might expect would have a lot.

  7. Gerald says:

    There seems to be this myth that countless teams are well below the cap, and I’m just not sure how accurate that is.

    You are right that there is a myth in general, Dennis. However, it is also true that nearly all teams have ample opportunity to begin every off-season with a substantial amount (tens of millions)of cap space. Most, if not all teams have salary commitments in the twenties of millions for 2010-11 as of now.

  8. Robert Cleave says:

    <iMost, if not all teams have salary commitments in the twenties of millions for 2010-11 as of now.

    Not even close to the truth. 6 teams have salary cap commitments below 30 million for 2010/2011 as of now. Only Anaheim, Atlanta, Colorado, Dallas, the Islanders and St. Louis meet that criteria, and that’s before NY signs Tavares. There are 9 teams with salary cap numbers for 10/11 already over 40 million. In other words, 80% of teams are already in for 30 million or more.

  9. Tom says:

    And even then, teams still have the option to bury some contracts in the minors.

    Kel, this is true, but not a good answer to the problem. The teams still have to pay out the money and it hurts the product.

    However, it is also true that nearly all teams have ample opportunity to begin every off-season with a substantial amount (tens of millions)of cap space. Most, if not all teams have salary commitments in the twenties of millions for 2010-11 as of now.

    If this was even remotely correct there would be no problem. So far teams have signed fewer than half the players they will need for 2010-2011 and committed more than a billion dollars. The average team has 11 players signed and $35.8 MM committed.

  10. Gerald says:

    My bad for going to capgeek and just looking at a few random teams.

    That being said, is 11 players signed for $35.8 mil on average a “problem”? Even if the cap drops precipitously to $50 mil, that leaves an average of $15 mil in cap space per team. By my account, that still makes my “tens of millions” statemetn correct.

    Like i said, if we go into the great depression, we are all screwed, including the NHL. Short of that, the only players who are disadvantaged are those unfortunate enough to be FA’s at this point in history and the few teams who are well into the 40′s.

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  1. [...] From Tom Benjamin, who thinks all long-term, cap-dodging deals are bad form: What I care about is the way these lengthy contracts – all of them – obviously circumvent the salary cap. I don’t think the Flyers should be able to get a $7 MM a year defenseman for five years with a $5 MM cap hit. I don’t think the Hawks should get an $8 MM dollar a year winger for a $5 MM cap hit over the next seven years. Will the Flyers pay a price for their Pronger blunder? Will the Hawks come to regret the Hossa signing? [...]

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