CBA Question

Ford Prefect

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Mar 2, 2002
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Under the new CBA, are teams allowed to include cash considerations in a trade? The reason that I am asking, is that I'm wondering if that is what Lou Lamereillo might be planning. For instance, he may take a team such as the Pens that have tons of cap room and send them Mogilny and Malakhov (as well as cash considerations) as well as a high pick or two in return in for maybe some joutneymen players or marginal prospects they can send to Albany. NJ has incentive cause they get cap relief and may be able to keep Gomez and Gionta, whereas the Pens gain some draft picks without really having to increase their payroll. Whether it gets endorsement from the NHL is another question, but are these trades possible under the new CBA?

N.B. You can substitute Pit with Washington, or any other team with a lot of cap flexibility. I'm not asking about them being ideal trading partners, just whether or not the mechanics are sound
 

Ted Hoffman

The other Rick Zombo
Dec 15, 2002
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Under the new CBA, are teams allowed to include cash considerations in a trade?

No - Article 50.8(b) specifically prohibits this.

I'm actually working on a FAQ for the CBA to go on my website - but it's not ready just yet. When I have it done, it'll go up here as a sticky and then as people ask more questions, I'll edit accordingly.
 

SJeasy

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Feb 3, 2005
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I read through article 50 and did not find any reference to revenues affecting escrow when calculating the quarterly adjustment. Did I miss something?
 

kdb209

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Jan 26, 2005
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I read through article 50 and did not find any reference to revenues affecting escrow when calculating the quarterly adjustment. Did I miss something?

You appear to be correct - all of the adjustment's seem to be based on aggregarted Actual Club Salaries and the Adjusted Midpoint (which is based on the previous season's HRR).

This is odd, since last year their were reports that the escrow %-age was adjusted down during the season, because actual revenues were exceeding the estimates.
 

Ted Hoffman

The other Rick Zombo
Dec 15, 2002
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I think it was because while escrow was being withheld, it was already clear that the money was going to be returned to the players and the NHL and NHLPA agreed to reduce the percentage of withholding for future escrow during the year to prevent a massive repayment to the players.
 

SJeasy

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Feb 3, 2005
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I think it was because while escrow was being withheld, it was already clear that the money was going to be returned to the players and the NHL and NHLPA agreed to reduce the percentage of withholding for future escrow during the year to prevent a massive repayment to the players.

The question then becomes one of whether they would make the same move again if circumstances warranted even without justification in the CBA.
 

RTWAP*

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The question then becomes one of whether they would make the same move again if circumstances warranted even without justification in the CBA.

I wonder how many of these side agreements will happen during the course of this CBA to fix or fine-tune it.

Anyone have any suggestions for things they would like to see fixed?

Personally, I would like to see a new rule for UFA eligible players. If a team signs a UFA to a one-way contract for less than $750,000 then that player does not need to pass through waivers on a recall.

The intent of the rule would be to allow teams to have a little depth on the farm without worrying about losing it (and paying half the cost) on recall. The PA doesn't like team's burying players but if the player has already reached UFA status and choses to sign for near-minimum with a deep team then he knows he's a depth player. If the other option is $150,000 in Europe then I'm sure he'd rather make $750,000 splitting time between the AHL and NHL.
 

Captain Ron

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I read through article 50 and did not find any reference to revenues affecting escrow when calculating the quarterly adjustment. Did I miss something?

Well last year they were going on a blind budget and didn't really know how much in revenue the league would actually make. Going forward it seems the league is adjusting the escrow account based on the previous year's revenue. So the only way it could be a problem is if the revenue for the league dropped in the subsequent season.

But you have to also take into account that at the beginning of the season all possible performance bonuses are taken into account when calculating the "Aggregated Adjusted Midpoint of the Team Payroll Range" . So this would inflate during the first 3 quarters of the season how much salary was actually being given to the players since the actual salary paid out to those players would probably be considerably less. As the season goes along and those bonuses are no longer achievable they will no longer be included in the "Aggregated Adjusted Midpoint of the Team Payroll Range". But since the league has already collected an escrow percentage on an amount that was never actually paid.....it gives the league a buffer zone.....in case there is a marginal decrease in league-wide revenue for the current season. If as the season was in progress the league believed there would be a considerable drop in revenue from the previous season they would probably meet with the heads of the NHLPA to discuss increasing the escrow account beyond just the excess of the "Aggregated Adjusted Midpoint of the Team Payroll Range".
 

kdb209

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Jan 26, 2005
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Well last year they were going on a blind budget and didn't really know how much in revenue the league would actually make. Going forward it seems the league is adjusting the escrow account based on the previous year's revenue. So the only way it could be a problem is if the revenue for the league dropped in the subsequent season.

But you have to also take into account that at the beginning of the season all possible performance bonuses are taken into account when calculating the "Aggregated Adjusted Midpoint of the Team Payroll Range" . So this would inflate during the first 3 quarters of the season how much salary was actually being given to the players since the actual salary paid out to those players would probably be considerably less. As the season goes along and those bonuses are no longer achievable they will no longer be included in the "Aggregated Adjusted Midpoint of the Team Payroll Range". But since the league has already collected an escrow percentage on an amount that was never actually paid.....it gives the league a buffer zone.....in case there is a marginal decrease in league-wide revenue for the current season. If as the season was in progress the league believed there would be a considerable drop in revenue from the previous season they would probably meet with the heads of the NHLPA to discuss increasing the escrow account beyond just the excess of the "Aggregated Adjusted Midpoint of the Team Payroll Range".


Actually the "Adjusted Midpoint of the Team Payroll Range" does not change during course the season. It is just the Midpoint based on the previous years HRR plus the 5% (or other) inflation factor.


(iv) For each League Year, the Escrow Percentage shall be calculated upon the commencement of the NHL Regular Season, and shall be subject to adjustment three (3) times during the course of the NHL Regular Season, at the end of the first-quarter, second-quarter, and third-quarter of the NHL Regular Season. Subject to paragraph (iii) above, the Escrow Percentage shall be calculated as follows:

(A) Upon the commencement of the NHL Regular Season, the "first quarter" escrow withholding (i.e., for the period between the commencement of the NHL Regular Season through the end of the first quarter of the NHL Regular Season) shall be calculated. The total aggregated amount of all NHL Clubs' Actual Club Salaries at the commencement of the NHL Regular Season shall be compared to the aggregated Adjusted Midpoint of the Team Payroll Range, as calculated in accordance with Section 50.5(b) below.​

Section 50.5(b):
(b) "Lower Limit" and "Upper Limit." For each League Year there shall be a "Lower Limit" and an "Upper Limit" at or between which each Club must have an Averaged Club Salary. The range between the Lower Limit and Upper Limit shall be known as the "Team Payroll Range" (the "Payroll Range" or "Range").

(i) The Upper and Lower Limits of the Team Payroll Range shall be determined in accordance with the following formula:

Preliminary HRR for the prior League Year multiplied by [x] the Applicable Percentage (as defined in Section 50.4(b) of this Agreement), minus [-] Preliminary Benefits, divided [/] by the number of Clubs then playing in the NHL (e.g., 30), shall equal [=] the Midpoint of the Payroll Range, which shall be adjusted upward by a factor of five (5) percent in each League Year (yielding the Adjusted Midpoint) until League-wide Actual HRR equals or exceeds $2.1 billion, at which point the five (5) percent growth factor shall continue unless or until either party to this Agreement proposes a different growth factor based on actual revenue experience and/or projections, in which case the parties shall discuss and agree upon a new factor. If a significant (i.e., $20 million or more) one-time increase or decrease to League-wide revenues (e.g., by reason of the addition or loss of a national television contract or the scheduled opening of one or more new arenas which is expected to result in a significant increase in League-wide revenues) is anticipated in the next League Year, the parties will endeavor to estimate the expected increase or decrease and incorporate that estimate into the above-stated formula for calculating the Adjusted Midpoint.
After adjustment for the revenue growth factor, the Payroll Range shall be constructed by adding $8 million to the Adjusted Midpoint to establish the Upper Limit, and subtracting $8 million from the "Adjusted Midpoint" to establish the Lower Limit.​

The "total aggregated amount of all NHL Clubs' Actual Club Salaries" may change over the course of the season, but not by a lot, and it is more likely to increase, than decrease - the Long Term Injury Exception effects Averaged Club Salary, not Actual Club Salary - both the Injured player and any replacements both count in Actual Club Salary.

The credit for unacheivable bonuses does not effect Actual Club Salary, instead they are compensated for seperately in the escrow percentage calculation 50.4(d)(iii):

(iii) The parties will jointly assess, at the commencement of the NHL Regular Season, and at the end of each quarter, the amount of withholding of Performance Bonuses that will be prudent to reserve based upon the likelihood they will be earned.
 

Captain Ron

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You are correct kdb209......But the league can also implement a "catch-up payment". Where if at the beginning of the first quarter the projected actual salaries are below the "Adjusted midpoint of the payroll range" no escrow withholding would be necessary. But if at the end of the 1st quarter the actual salaries did in fact exceed the midpoint the league would withhold that difference from future payments to the players.

(B) At the conclusion of the first quarter of the NHL Regular Season, the total aggregated amount of all NHL Clubs' Actual Club Salaries at that point shall again be compared to the aggregated Adjusted Midpoint of the Team Payroll Range, as was done at the commencement of the NHL Regular Season, in accordance with subsection (A) above, and the amount of the Escrow Percentage for the second quarter shall be adjusted, as necessary. The calculation of the Escrow Percentage for the second quarter shall take into account any "catch-up payments" that may be necessary by taking the amount of the estimated Overage, on an annualized basis (less any amounts escrowed in the League Year to date), as a percent of the estimated Actual Club Salaries that remain to be paid for that League Year. The Escrow Percentage for the upcoming quarter shall be adjusted accordingly to take into account any such "catch-up payments" required.


Illustration: On October 1, the aggregated Actual Club Salaries are $890 million, which is $10 million below the aggregated Adjusted Midpoint of $900 million. No escrow is required for the first quarter. At the end of the first quarter, the aggregated Actual Club Salaries are $930 million, which is $30 million above the aggregated Adjusted Midpoint of $900 million. Since three-quarters (3/4) of Actual Club Salaries remain to be paid (or $697.5 million) and the Overage is $30 million, the Escrow Percentage is $30 million divided by $697.5 for the remainder of the League Year, assuming no further changes for the remainder of the League Year.
(C) At the end of the second and third quarters of the NHL Regular Season, the process described in subsection (B) above, including the determination of any "catch-up payments" as may be required, shall be repeated in order to calculate the Escrow Percentage, if any, for the next upcoming quarter of the NHL Regular Season.
 

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