CBA question regarding year-to-year cap changes

Discussion in 'The Business of Hockey' started by rec28, Mar 16, 2007.

  1. rec28

    rec28 Registered User

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    Forgive me if this has been answered elsewhere, but I can't seem to find any reference to it either here or on Google (though perhaps I'm not using the proper search terms).

    I'm trying to find out what happens with respect to existing team payroll in the event that the salary cap drops.

    For example, say a team spends to the cap in year 1, and those payroll commitments all continue though the following year (i.e. the team has zero free agents at the end of the year - I know, I know. Just bear with me for argument's sake). Year 2 rolls around and due to falling league revenues the year 2 cap has been reduced to 85 percent of the year 1 cap. As a result, the team in question is left with a committed payroll that exceeds the year 2 cap by 15%.

    Aside from salary-dump trades, are there any mechanisms built into the CBA that would allow such a team to get under the new cap? I'm thinking in terms of buyouts or an automatic across-the-board payroll reduction (to match the reduction in the cap), etc - some sort of release valve to ensure that teams don't exceed the cap solely due to year-to-year fluctuations in the cap number.

    Personally, I would be extremely suprised to find out that there are any such mechanisms, but a buddy of mine is adamant that there would be some provisions made (buyouts, etc) in the event that something like this comes to pass.

    BTW, I realize I am using grossly exaggerated figures and situations. I've been going through the text of the CBA for an answer, but my fluency in legalese is a little lacking...
     
  2. Langway

    Langway ¯\_(ツ)_/¯

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    Buyouts would be possible but that's a possibility that teams have from year-to-year regardless. I'm not aware of any other mechanisms (other than dumping salary in trades) that would give relief in this type of situation, but I'll defer to the bigger CBA gurus.
     
  3. GSC2k2*

    GSC2k2* Guest

    Such a team would have to get under the payroll cap through either buyouts or trades. End of story.

    There is no mechanism for across the board reductions. What's more, renegotiations of existing contracts are not allowed.
     
  4. Irish Blues

    Irish Blues Still on hiatus

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    If falling revenues caused a decrease in the cap that potentially put a team over based on contracts for the then-current and future years, the team would still have to get in compliance. Aside from buy-outs, trades, or assigning players to the minors, there's no other mechanisms that teams can use to accomplish this; contracts can't be restructured, cap hits can't be deferred to later years, and the team can't start the regular season over the cap.

    That said, since during the summer teams can go over the cap by 10% and guys on 2-way contracts count at a pro-rated basis proportional to the amount of time they spent on an NHL roster the prior season, they'd likely have some flexibility to work with even in the offseason while trying to get cap compliant for the regular season.
     
  5. rec28

    rec28 Registered User

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    Do buyouts count 100% against the cap?

    Edit - I think I've found the answer. Yes. Someone please let me know if I am wrong.
     
    Last edited: Mar 16, 2007
  6. kdb209

    kdb209 Registered User

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    Buyouts pay 2/3's of a players remaining salary (1/3 if the player is under 26yo) paid out over 2x the remaining term of the contract. The buyout payments do count against the cap.

    After the lockout there was a one time complience buyout period where teams could buy out a player and have it not count against the cap.
     
  7. rec28

    rec28 Registered User

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    Ah - perfect. Thank you...
     
  8. razorsedge

    razorsedge West Town Sports

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    I have more of a comment than a question, but if i'm wrong, please correct me.

    The current CBA allows the cap to increase year to year based off of the overall NHL revenue made. So now that the larger market richer teams have a lower salary expenses, their profit margins are much greater, much great than the losses of the low end teams (correct?). So the cap increases by the percentage of the revenue increase from the previous year (correct?). Now, with the money making teams increaseing their salary's and talent with free agency's, the money losing teams must increase their salary's through free agency's to stay competative (in theory), which will most likely increase the teams loss at the end of the year (possibly).

    If so, I really don't understand how the NHL can justify raising the salary cap when not all 30 teams made a profit. To me, that sounds like a flaw on the BOG's part of the CBA that will need to be reworked next time around. Am I wrong?

    One question I have is, is the cap increase based off of revenue made in only the regular season, or is it based off of regular season and playoffs? (yes/no)
     
  9. kdb209

    kdb209 Registered User

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    The Cap is working exactly how it was intended - there is cost certainty for the league. Player costs (on the whole) cannot exceed 54% (soon to be 55.x%) of Hockey related Revenues. This is exactly the linkage that the league fought so hard to get and the NHLPA vowed so hard to fight.

    Yes, the cap is a license for the Leafs (and other high revenue teams) to print money. It was not a guarantee that all teams could spend to the cap and make money. In fact, the CBA was set up with the assumption that the average team would spend to the midpoint ($36M this season) rather than the Upper Limit.

    But remember, the big spenders' team salaries are still 10's of $Millions less than before the lockout ($50M-$80M). The current environment is much more competitive for the smaller revenue teams than the one before the lockout. Instead of a payroll difference of $50M between the Haves and Have Nots, there can be at most a $16M difference.

    The Cap is based on all revenue (HRR as defined in the CBA) - regular season and playoffs.
     

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