Could this work to bypass the cap?

[WalterSobchak]

New York has 10?? major league teams and all have a higher profile than the rags.

Bigger than the Isles?

 

[SuperUnknown]

On the other hand, irregardless of money, a player living in Ottawa or Edmonton is never going to have the same lifestyle as a player living in New York and LA. Some players may, in fact, prefer the smaller town. But if nightlife, culture and entertainment is a priority, then those bigger cities have a big advantage. Also, keep in mind some sponsors will pay more to a player who works in a larger market because of the added exposure, That helps make the cost-of-living gap less significant.

I think the point was more to show that taxes aren't everything and while they may be a factor in the decision of a player, it definately ain't that important.

 

[Mr Sakich]

On the other hand, irregardless of money, a player living in Ottawa or Edmonton is never going to have the same lifestyle as a player living in New York and LA. Some players may, in fact, prefer the smaller town. But if nightlife, culture and entertainment is a priority, then those bigger cities have a big advantage. Also, keep in mind some sponsors will pay more to a player who works in a larger market because of the added exposure, That helps make the cost-of-living gap less significant.

if this was the nba, then I would agree with you. Most hockey players are not studio 54, silk suite wearing rap stars. Most prefer the smaller cities or the anonymety of playing in Tampa or LA.

 

[CarlRacki]

if this was the nba, then I would agree with you. Most hockey players are not studio 54, silk suite wearing rap stars. Most prefer the smaller cities or the anonymety of playing in Tampa or LA.

Like I said, some players will prefer the smaller towns. But if you don't think Gretzky loved LA or that Messier liked nothing more than whooping it up in the Big Apple or that Chicago wasn't Jeremy Roenick's kind of town, you're very mistaken.

 

[victor]

Like I said, some players will prefer the smaller towns. But if you don't think Gretzky loved LA or that Messier liked nothing more than whooping it up in the Big Apple or that Chicago wasn't Jeremy Roenick's kind of town, you're very mistaken.

That said - all things (money) being equal, and teams being profitable - do you think that Gretzky would have been traded to LA? Or that Messier would have been to NY?

 

[PecaFan]

Correction: the bigger markets will have huge advantages despite there being a cap.

Yup. They'll still be able to afford better coaches, better trainers, better and more scouts, better perks in the locker rooms, etc. It's a total myth that the current big teams are going to be devastated in the future, (which is why I'll be choked when some great team gets a top five pick this draft).

The cap will help things, but in the end, it just wouldn't matter because all the really good looking girls would STILL go out with the guys from big market teams because they've got all the money!

 

[RinkOnEStreet]

Like I said, some players will prefer the smaller towns. But if you don't think Gretzky loved LA or that Messier liked nothing more than whooping it up in the Big Apple or that Chicago wasn't Jeremy Roenick's kind of town, you're very mistaken.

Both Adam Graves and Brian Leetch made it publically known that they loved the wild and crazy life of being a New York Ranger in the mid 90's (Well, 94 anyway).

 

[shakes]

One pretty easy way to work around the cap would be to frontload contracts when you know you can afford to, in order to open up cap space later. It's not really circumventing the cap, though, it's just clever management, but I bet we will be seeing frontloaded contracts a lot more in the future.

For the sake of example, I'll use the Ottawa Senators and we'll pretend there's a cap of $38 million. Let's say they've signed all of their players except for Spezza, and their total payroll at that point is $32 million. Let's say (for example) Spezza wants a salary of $3 million for 3 years (for a total of $9 million). So if they signed Spezza to his desired contract, the Senators would sit at $35 million, $3 million under the cap. Instead of letting unused cap space just sit there (assuming paying the luxury tax is not an issue for the owner), why not frontload Spezza's contract so you can open up some capspace for the next couple years? What I mean is, instead of signing Spezza for $3m for 3 years, sign him to a frontloaded contract of $6m in the first year (thus making the Sens' total salary for that year $38m), $1.5m in the second year, and $1.5m in the final year.

So instead of committing $3m of cap space to Spezza for 3 years, the Sens just paid him the majority of his contract in the first year (when they had the extra cap space to do it), and ended up clearing up $1.5m of cap space for the next two years, which would allow them to give other players their raises or even sign a free agent. Spezza still got his $9m, and the Sens just utilized what would have probably been unused cap space in order to make extra cap room in the future.

Thats going to happen a lot.. big market teams will always continue to spend the maximum and ensure players get their money. What's the difference if you play for 8.4 million one year and then 300k the following two? You still get 9 million. then you sign another star player at 300k the first year or two and then give them their bigtime cash at the end when there is more cap room. Why do you think they want to limit the length of contracts? For this reason. You'd get teams offering 10 year contracts to people for even more maneuvering.

 

[WVP]

Thats going to happen a lot.. big market teams will always continue to spend the maximum and ensure players get their money. What's the difference if you play for 8.4 million one year and then 300k the following two? You still get 9 million. then you sign another star player at 300k the first year or two and then give them their bigtime cash at the end when there is more cap room. Why do you think they want to limit the length of contracts? For this reason. You'd get teams offering 10 year contracts to people for even more maneuvering.

This strategy should be used only if you're real close to winning it all. If it blows up in your face, it gets really ugly, ie dismantling an entire team.

 

[Jaded-Fan]

Yup. They'll still be able to afford better coaches, better trainers, better and more scouts, better perks in the locker rooms, etc. It's a total myth that the current big teams are going to be devastated in the future, (which is why I'll be choked when some great team gets a top five pick this draft).

The cap will help things, but in the end, it just wouldn't matter because all the really good looking girls would STILL go out with the guys from big market teams because they've got all the money!

Face it. The bigger markets will still have an edge, a slight edge. But in the scheme of things the new NHL will be about your front office and how good a job that it does, as well as a bit of luck thrown in. Those advantages that the big markets still have are really hamstrung in a league where no team can outspend another by more than 50%. The lowest aggregate salaried team in the entire league will still have 2/3 of the salary of the highest. No, in this environment the big markets will be very very hard pressed to compete without a good dose of smarts, the smallest markets can easily win any given year. Face it, those are the facts.

 

[shakes]

This strategy should be used only if you're real close to winning it all. If it blows up in your face, it gets really ugly, ie dismantling an entire team.

This is going to only be used for the multi million dollar type players, not the 4 liners. As soon as they realize they are getting the ass end of this deal and not the stars then the better off they will be. I'm just saying that a team like the Leafs, Avs, Rangers etc would be able to still shop for the star players. Where it blows up is if that star gets injured and you have to think they are going to allow injury exceptions to the cap

 

[SuperUnknown]

Thats going to happen a lot.. big market teams will always continue to spend the maximum and ensure players get their money. What's the difference if you play for 8.4 million one year and then 300k the following two? You still get 9 million. then you sign another star player at 300k the first year or two and then give them their bigtime cash at the end when there is more cap room. Why do you think they want to limit the length of contracts? For this reason. You'd get teams offering 10 year contracts to people for even more maneuvering.

Regardless of how the contract is structured, the paid amount will be included in the yearly cap amount. Sure, teams might play with numbers depending on their yearly salary mass, but why should it concern us overly? All teams will potentially be able to do that.

 

[shakes]

Regardless of how the contract is structured, the paid amount will be included in the yearly cap amount. Sure, teams might play with numbers depending on their yearly salary mass, but why should it concern us overly? All teams will potentially be able to do that.

Of course all teams will... like teams that could barely afford 20 million before are going to take their salaries up to 38 million plus luxury taxes... Say the Leafs want to sign Forsberg and Pronger and keep Sundin.. not only could they afford and gladly pay the luxury tax every year for these types of players but they would be able to work it so that everyone gets their money under the cap. can't very well sign them each to 6 million dollar contracts and put it all in the same cap year.

 

[Jaded-Fan]

Of course all teams will... like teams that could barely afford 20 million before are going to take their salaries up to 38 million plus luxury taxes... Say the Leafs want to sign Forsberg and Pronger and keep Sundin.. not only could they afford and gladly pay the luxury tax every year for these types of players but they would be able to work it so that everyone gets their money under the cap. can't very well sign them each to 6 million dollar contracts and put it all in the same cap year.

Some of those teams are raising above the floor pretty significantly. I think that you will be surprised how many float right up to the luxury tax level, $29 or $30 million. The Pens already have said that will be their projected payroll number next year for instance. I would not count on the Torontos of the world getting all of the avaialble talent that they want, as so many here seem to be doing. It is a new world and you actually will have to have a GM with an IQ bigger than his shoe size to compete. In fact big markets, in the short term, mostly have to be even smarter as they all have a few albatross contracts. Some teams who are markets will do well and thrive, some will not. Same with small markets. But to think that you will be able to buy your way out of mistakes as you could in the past is really whistling past the graveyard.

 

[shakes]

But to think that you will be able to buy your way out of mistakes as you could in the past is really whistling past the graveyard.

That wasn't my point, but if you think teams in the big markets are not going to be at the maximum cap level year after year you are kidding yourself. A 10 million dollar difference in the new world order will get you a lot thats 2-3 highly skilled players. But I do agree that the this will only happen at a later date as teams have some big contracts to get rid of... unless in the first year buyouts don't count against the cap.

 

[Jaded-Fan]

That wasn't my point, but if you think teams in the big markets are not going to be at the maximum cap level year after year you are kidding yourself. A 10 million dollar difference in the new world order will get you a lot thats 2-3 highly skilled players. But I do agree that the this will only happen at a later date as teams have some big contracts to get rid of... unless in the first year buyouts don't count against the cap.

There is a huge difference between being able to outspend other teams by as much as 4 times ($80 million to $20 million) as opposed to the outspending teams by less than 50%. I think that your perception of what that difference will get you is very . . . . optomistic.

 

[Brewleaguer]

Boy, you just keep on flogging this dead horse, trying to engage the newer members of the Board and trying to foist this garbage on the unsuspecting despite having been proven to be incorrect time and time again.

1. In the annual audit, a free luxury suite will come up. One thing would lead to another and the entire scheme is exposed.

2. If I am counsel for the sponsor, I want absolutely nothing to do with this in negotiating the deal. It is allocating monies in respect of what is not a bona fide transaction. If you actually were an accountant (which I continue to doubt), you would also know that what you are proposing would be contrary to GAAP and put the sponsor potentially afoul of Sarbanes-Oxley and in for some jail time.

3. If you could somehow convince the sponsor to go along with this when there is nothing in it for them, they would demand that it be a condition precedent of the sponsor contract that the player enter into the other agreement on the terms you have prescribed. It comes out in the audit when the sponsor contracts are reviewed by the auditors (and I guarantee they would be audited, as they are "material" sources of revenue).

4. When the player signs for less than his apparent market value, alarm bells would go off around the league and in PA headquarters.

I realize you probably have people like me and Iconoclast and a bunch of others on ignore because we slice and dice your posts to dust, but come on.

Another twist to his idea (which I think has pretty good merit) is this.

You have team X, player Y, and sports sponsors Z (Non NHL sponsor)

Team owner X wants player Y, but doesn’t have enough headroom in a cap system (above a certain amount). Lets say they only have $3M available but player/agent wants $4M, they settle at $3.5M
Calls upon Sponsor Z and gives them a $1 ad space each year in the arena for the duration of a contract agreement, in turn asking sponsor Z to hire player Y as a business consultant to sponsor Z business. (lets say honorary position) paying player Y 500K as the sponsors consultant. Perfectly legal, and what’s there to hide if it is not apart of operating rules set forth by the NHL

 

[SuperUnknown]

Of course all teams will... like teams that could barely afford 20 million before are going to take their salaries up to 38 million plus luxury taxes... Say the Leafs want to sign Forsberg and Pronger and keep Sundin.. not only could they afford and gladly pay the luxury tax every year for these types of players but they would be able to work it so that everyone gets their money under the cap. can't very well sign them each to 6 million dollar contracts and put it all in the same cap year.

Regardless of how their contracts are structured, if the Leafs sign Forsberg, Pronger and Sundin to play together for a span of three years, each one of them earning an average of $6M, the Leafs will have spent $54M out of their total $100-110M in cap for those three years on those three players. So what? Other teams have the same option too.

As to which team will be able to afford or not this or that salary range, I don't see how it's related to this discussion...

 

[SuperUnknown]

Another twist to his idea (which I think has pretty good merit) is this.

You have team X, player Y, and sports sponsors Z (Non NHL sponsor)

Team owner X wants player Y, but doesn’t have enough headroom in a cap system (above a certain amount). Lets say they only have $3M available but player/agent wants $4M, they settle at $3.5M
Calls upon Sponsor Z and gives them a $1 ad space each year in the arena for the duration of a contract agreement, in turn asking sponsor Z to hire player Y as a business consultant to sponsor Z business. (lets say honorary position) paying player Y 500K as the sponsors consultant. Perfectly legal, and what’s there to hide if it is not apart of operating rules set forth by the NHL

Well when you're doing business moves, they're supposed to be valued in the books at their true value regardless of the monetary transaction. In the books, such a transaction would show up like salary to ad revenues. Anything else is twisting accounting (which if done by independant firms should not happen).

While it seems to most people around here real easy to mess up the numbers, if the accounting rules are followed, it's not. As an accountant, you need to record the "real transaction", not the apparent one. Which might mean two sets of books (internal one where the real transactions are recorded vs the one for the government where you depending on fiscal rules you may be able to show the apparent one to save on taxation). Bottomline though is that if the NHLPA and the NHL have an ounce of brains, those situations won't happen.

 

[Mess]

While it seems to most people around here real easy to mess up the numbers, if the accounting rules are followed, it's not. As an accountant, you need to record the "real transaction", not the apparent one. Which might mean two sets of books (internal one where the real transactions are recorded vs the one for the government where you depending on fiscal rules you may be able to show the apparent one to save on taxation). Bottomline though is that if the NHLPA and the NHL have an ounce of brains, those situations won't happen.

Lots of perks handed out that don't show up on accounting books for a Hockey team ..

In my example above I used the use of a Luxury suite . As long as the suite is recorded in Total Revenue the money could come from the owner to cover that and then he can let anyone he chooses use it..

I could have said that the owner allows the sponsor the right to use his personal yacht/boat to entertain their clients ..

As my Molson sponsor example he could give the them exclusive rights to be the only company to sell product at the Arena.

Often the exchange of services is used as currency and money never exchanged ..like you could have joint ventures or events with sponsors and provide all, some or none of the financing for the event for an endorsement deal in the future.

Most of this stuff is not accounting related or if it is would be recorded as such and would not require any creative accounting.

 

[bcrt2000]

Lots of perks handed out that don't show up on accounting books for a Hockey team ..

In my example above I used the use of a Luxury suite . As long as the suite is recorded in Total Revenue the money could come from the owner to cover that and then he can let anyone he chooses use it..

I could have said that the owner allows the sponsor the right to use his personal yacht/boat to entertain their clients ..

As my Molson sponsor example he could give the them exclusive rights to be the only company to sell product at the Arena.

Often the exchange of services is used as currency and money never exchanged ..like you could have joint ventures or events with sponsors and provide all, some or none of the financing for the event for an endorsement deal in the future.

Most of this stuff is not accounting related or if it is would be recorded as such and would not require any creative accounting.

I'm pretty sure that the PA went through all of this when they defined hockey revenues.

From the beginning the argument was always about what the definition of "hockey revenues" should be. The Levitt Report used the NBA's definition of basketball revenues and applied it to the NHL. Initially, the PA didn't like that because they said it ignored other revenue streams related to hockey. By the time September 2004 came, it turned into "the owners will cheat because they will hide money"-- somewhere along the line the PA forgot that they will have the luxury of defining hockey revenues with the NHL. I think when they finally went through the NHL's books and decided on what hockey revenues are, thats when the real negotiations began, because there was no reason to accuse the owners that they will cheat the players out of money since the PA had its chance to define hockey revenues.

 

[SuperUnknown]

Often the exchange of services is used as currency and money never exchanged ..like you could have joint ventures or events with sponsors and provide all, some or none of the financing for the event for an endorsement deal in the future.

Most of this stuff is not accounting related or if it is would be recorded as such and would not require any creative accounting.

Once again, no money needs to be exchanged for accounting entries to be written down. It's the value that's important. Whatever privilege is given has a monetary value, which means whatever privilege received also has a monetary value.

If I was your accountant, I would register all the transactions you've written about. They affect the value, the profits of the business.

I agree that this is a mostly recent change, but accounting is now about market value of privilege or service rendered rather than monetary compensation given.

As well, in modern accounting, you record the "essence" of a transaction. You need to verify the purpose of a transaction. For example, why was this privilege given? What did the company receive from it? What the company received will be put with a market value in the books, regardless of any money really transfered.

 

[Gary]

One pretty easy way to work around the cap would be to frontload contracts when you know you can afford to, in order to open up cap space later. It's not really circumventing the cap, though, it's just clever management, but I bet we will be seeing frontloaded contracts a lot more in the future.

For the sake of example, I'll use the Ottawa Senators and we'll pretend there's a cap of $38 million. Let's say they've signed all of their players except for Spezza, and their total payroll at that point is $32 million. Let's say (for example) Spezza wants a salary of $3 million for 3 years (for a total of $9 million). So if they signed Spezza to his desired contract, the Senators would sit at $35 million, $3 million under the cap. Instead of letting unused cap space just sit there (assuming paying the luxury tax is not an issue for the owner), why not frontload Spezza's contract so you can open up some capspace for the next couple years? What I mean is, instead of signing Spezza for $3m for 3 years, sign him to a frontloaded contract of $6m in the first year (thus making the Sens' total salary for that year $38m), $1.5m in the second year, and $1.5m in the final year.

So instead of committing $3m of cap space to Spezza for 3 years, the Sens just paid him the majority of his contract in the first year (when they had the extra cap space to do it), and ended up clearing up $1.5m of cap space for the next two years, which would allow them to give other players their raises or even sign a free agent. Spezza still got his $9m, and the Sens just utilized what would have probably been unused cap space in order to make extra cap room in the future.

A team could have a very legit chance at a cup every 3 years if they used this system. Just imagine-Boston for example (Cause I know more of them then other teams) signed Thornton for $10 mill and 2 more seasons at $1 mill. Then they signed Samsonov for $6 mill and 2 more seasons at $1 mill. Boynton $6 mill and 2 more at $1 mill, Rayzor at $6 mill and 2 more seasons at $1 mill...that's 28 million in 4 players, and use kids for the rest. Next year sign another 4 star players the same way and by year 3 you'd have 8 star players making $8 million and you could afford to have a dynasty-type team for 1 season. Interesting post fisher.

 

[SuperUnknown]

A team could have a very legit chance at a cup every 3 years if they used this system. Just imagine-Boston for example (Cause I know more of them then other teams) signed Thornton for $10 mill and 2 more seasons at $1 mill. Then they signed Samsonov for $6 mill and 2 more seasons at $1 mill. Boynton $6 mill and 2 more at $1 mill, Rayzor at $6 mill and 2 more seasons at $1 mill...that's 28 million in 4 players, and use kids for the rest. Next year sign another 4 star players the same way and by year 3 you'd have 8 star players making $8 million and you could afford to have a dynasty-type team for 1 season. Interesting post fisher.

Your numbers aren't really good though.

First, your 4 players for 28 million leave about 7 million for the other 20 players (average of $350k each). This means you pay the rest of your team the league minimum, which is not possible in real life. As well, on the 4th year, you're going to run into major problems since you're probably not going to have room to do the same thing over again (since with your acquisitions, your average salary for the other players won't be $350k each). Add to this if you do that you can't trade those players (otherwise you have paid the bulk of the contract for nothing). Plus, you don't form a "dynasty-type" team over 1 season. Adding a ton of talent in 1 year is a recipe for disaster.

 

[quat]

Realistically, the sponsorship deal would be added incentive for the player who is being courted by a team that's offering a salary comparable to what others are willing to give. In this instance, however, a sponsorship deal could also be negated if the player is already being subsidized by a competitor. Yet, sponsors that generally support teams (rather than players) likely wouldn't be a competitor and
may not be opposed to help a team court a star player (especially if the sponsor(s) is/are are locally based). It's a plausible scenario I would think.

I get what you're saying here. I think this would be one way the league as a whole would benifit by putting the star players on a bigger stage, as they wouldn't necessarily have to worry about the salary escalation. That said, I'm not sure that really fits in with circumventing the cap. Helping a player earn money through sponsorship is legal... I'm sure it would be, and has been to a degree, what all hockey cities have sold as a reason to join their teams.

This sounds to me like it falls in the catagorie of "lifestyle" choices a player makes when choosing what team to play for (as a UFA). Going to a rabid hockey market might get you more money in sponsorship deals, but it might also give you less ice time, or be a less than desirable location to raise a family, etc. etc.

This whole thing sounds like it would be very good for the players and very good for hockey as a whole, so I don't really see why this would be called circumventing the cap.