New HFNHL Financial Structure for 2005-06

Discussion in 'HFNHL Talk' started by HFNHL Red Wings, Mar 4, 2005.

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  1. As you are all aware, and has been discussed many times, both the leagues financial structure and the overall team competitiveness imbalance is an as much a crisis in the HFNHL as it is in the NHL.

    Unfortunately it does not appear that the NHL is going to resolve it’s issues soon and as such the Admin team has been reviewing options.

    Please understand that these changes while great news for some teams are going to be a challenge for others and we respect those differences. Our objectives/criteria in evaluating options were threefold:
    (i) Control Costs
    (ii) Increase parity in the league
    (iii) Ensure any new system does not become administratively burdensome
    Many creative options were unfortunately passed on due to administrative constraints.

    While this represents the planned approach there are a couple of caveats.
    (i) When, or if, the NHL finally sorts it’s mess out we will examine it and consider changes but only if it makes sense and is administratively feasible
    (ii) As noted later on, we are looking at a sim add-on that may make cap monitoring easier to manage and will update everyone if required.
    (iii) The approach below has some recognized loopholes. The league will monitor activity and if it is determined that certain loopholes are being overly exploited we may make amendments to close them in the future.

    Anyway, without further adieu, here are the planned 2005-06 HFNHL changes.

    1. Entry Draft
    Having an Entry Draft will be contingent on a satisfactory level of information being available (TBD). Worse case scenario is that 2005 picks will become 2006 so that teams that traded picks will not get shorted.

    2. Salary Rollback of 25%
    This would only apply to players currently under contract or are being signed to a contract that applies to the 2004/05 seasons.
    Anyone resigning RFA's and UFA's for next season will be negotiating in a post-rollback environment (i.e. minimum qualifying offers for 2005/06 season will be based on 75% of current contract plus 10% where required.)

    3. Salary Cap
    Soft cap at $40M going to a hard cap at $45.0M with a 100% luxury tax in between. The Tax money would be allocated as such:
    60% to the 5 lowest revenue teams
    30% to next 5 lowest revenue teams
    10% for teams 11-15
    Teams that do not meet an avg 70OV minimum will not be eligible to share in any luxury tax allocation.

    As the Sim does not accurately capture avg game expenses during the season (it only shows current game expenses) the following method will be used to calculate cap adherence.
    (i) There will be three check points, start of season, game 30-35, and the trade deadline but there are no penalties attached to any single checkpoint.
    (ii) Team payroll will be recorded at each check point on a
    spreadsheet and weighted average of the three will be used to determine luxury tax and
    annual excess of hard cap (plus applicable penalties) at season end.
    (iii) To avoid timing issues related to injuries impacting pro payroll and possibly close the gap with regards to teams hiding players on their farm team we will calculate payroll at these points as such - Top 21 OV
    players at 100% of salary (excluding 'dummy' types) regardless of whether they are on the farm or pro team, and all others at 10%. If there is a tie of multiple players with an equal OV for the 21st position the highest
    salary player will be used.

    Added March 11th: Maximum signing bonuses are being reduced from 50% of base salary to 25% (life of contract) and 50% of the signing bonus will be applied against the cap in year 1. These bonuses are applied against the entire year and are not transferred from a cap perspective if the player is traded during the year.
    One exclusion will be prospecting type signings defined as the signing of a player that has played less than 25 NHL games.

    Note: We are looking into a SIM add-on that may do this monitoring more efficiently and will update if there is any applicable change to the above.

    Penalties for being over the hard cap, in addition to the luxury tax, would be the forfeit of draft picks based on amount by which a team has exceeded the hard cap. These penalties are necessarily stiff to discourage teams from turning the hard cap into a soft cap.
    <$500k 4th round pick
    $500k - $1M 3rd round pick
    $1M - $1.5M 2nd round pick
    $1.5M+ 1st round pick
    *All picks will be the earliest available

    4. Revenue
    Revenue will be turned up one notch. That should raise the average revenue to approximately $33-$34M plus endorsements. This would still leave a gap that would challenge teams to manage their budgets.
    While the average is up there will be a big gap in revenues between the top end and low end teams. I think even under the $28M average revenues range anywhere from $20M to $38M depending on team performance. Hopefully the cap will increase competition and parity and thereby shrink these huge revenue spreads.

    5. One time dispersal draft
    Just prior to the 2005-06 waiver draft a dispersal draft will need to be held where teams still over the $45.0M will have to `release' players to get under the cap.
    I suspect this will only impact 3 or 4 teams and even then there is sufficient advance warning to make the necessary trades.
     
    Last edited by moderator : Mar 11, 2005
  2. Wildman

    Wildman Registered User

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    Drew,

    I am just wondering if the admin group would consider allowing teams that signed its own UFA this past season to trade. We currently have a rule that does not allow till all star break.
     
  3. Ville Isopaa

    Ville Isopaa Registered User

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    Is it possible for all teams to have an average of atleast 70OV next season? We lifted it from 66 to 68 for this season and some teams seem to be in trouble of making the 68OV minimum. The dispersal draft will definetly help, but will it be enough or will it force the teams in danger to go out in the FA's and raise the salaries. I might be out in the wild with this as I haven't made any calculations on league averages, but it just struck me as a possible problem.

    Does anyone have any idea on what the current average is for teams?
     
  4. In response to your two questions ...

    1. The no-trade UFA restriction was put in place to insure that teams were just not hording players. We had encountered issues where the UFA period was almost a non-event and yet teams that had resigned their UFA's were trading them before the new season even started. This restriction was designed to ensure UFA's were being resigned in good faith instead of GM's just hording tradeable assets.
    To the extent you believe something has changed that makes this restriction no longer relevant please explain and then it can be better determined if change is required.

    2. You are correct that this year's minimum is 68OV and is not changing in terms of minimum required to avoid draft pick penalties (not that has been discussed anyway). It was, however, felt that as far as allocating luxury tax money to teams goes a higher level of competitiveness needed to be achieved. I.e the team competed in good faith and was 'unlucky' and therefore is entitled to some compensation.
    This way, in the event that a GM was not competing in good faith and was more interested in a higher draft position by only meeting the 68OV minimum they would not be rewarded with BOTH a better draft position and extra cash.
    That said, please keep in mind that the 70OV will only be relevant for the 2005/06 season so there is plenty of time and with the 25% roll back and slight increase in revenue more options should be opened to even the poorest teams in terms of the quality of player then can afford to trade for or retain.
     
  5. Ville Isopaa

    Ville Isopaa Registered User

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    thanks for clearing that up. It sounds reasonable to have the limit at 70OV for that reason.
     
  6. Wildman

    Wildman Registered User

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    As i far as I am concerned, the UFA I signed was based on their market value and in some cases I overpaid for them. I don't understand why we restrict these free agent and allow to trade UFA that were signed over the summer.

    I think the law applied well when teams were given a discount for signing their own free agent but I don't see much difference in terms of salaries between signing your own free agent and signing in the open market.

    My other point is that the player agent has an option to ask for no trade clause but in my case none of the players has no trade clause.
     
  7. Hossa

    Hossa Registered User

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    Completely agree on this. I know there were some UFAs signed last summer that I offered just as much money for as the team that signed him. I lost out, but within weeks, that newly-signed UFA was dealt to a team worse than me. I thought it was pretty rediculous. Presumably the reason he didn't sign with me was because my team was inferior, but nobody would ever be able to sign another UFA if they turn around and trade them to one of the league's very worst before a month even goes by.
     
  8. Vaive-Alive

    Vaive-Alive Registered User

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    The rule should remain the same.

    Gents,

    The rule was put in place to ensure that there would be a free-agent market - period. Before we implemented the rule, many teams would resign their potential UFAs before the UFA deadline to ensure they did not lose trade assets. That had the effect of destroying free-agency. On far too many occassions, those teams that had shored up their potential UFAs would unload them in the offseason to a few select teams that happened to have the return trade assets they were interested in. In otherwords they would resign players they had no intention of playing, and then shop them to whomever they pleased. In the interest of having a free open market for players, the rule was implemented and it has been successful for the past two years. There have been many more quality free agents available for ALL teams to bid on. Obviously teams have been limited by money in terms of what free agents they might successfully win, but at least they were not limited by their trade assets. With the revised economic structure of our league in place, we hope that more teams are able to bid - and bid with intelligence... - on an excellent variety of free agents. To change the no-trade rule for resigned potential UFAs would cripple the free-agent market and be counter-productive to the positive changes for UFA bidding anticipated in the new economic system.

    Kruegs
     
    Last edited by moderator HFNHL Commish: Feb 14, 2007
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