League's Stance on Cap Circumvention

[Ford Prefect]

Bob MacKenzie is reporting on the most recent offer put together by the Flames for Brad Richards. The offer is believed to be a 9 year deal with 10 million a year for the first 6 years and 1 million a year for the last 3. The rationale is that he would play the first 6 years of the contract and once he's 37 or so, he'd retire for the last 3. http://tsn.ca/nhl/story/?id=370663

Isn't this the exact deal type of deal that resulted in the Kovalchuk mess last year, costing the Devils a first round pick? Isn't this the type of deal that was agreed would not be signed anymore in return for the league ignoring possible infractions on the Luongo, Pronger, etc. contracts? I'm confused, because the league took such a hard lined approach against this kind of deal, and this seemingly flies in the face of that. What's changed?

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[The Saw Is the Law]

Ummm IIRC you cant go from 10m to 1m. Biggest decrease in salary must be 50%. So from 10 -> 5 -> 2.5 -> 1.25.

But anyways they made some chances last summer, mostly that no more circumvention at 40+ age.

 

[mouser]

It's 50% of the lower of the first two years, not from year to year.

So Calgary could have theoretically offered
10-10-10-10-10-10-5-1-1

Or more likely something along the lines of:
12-12-10-10-10-5-1-1-1

Bob MacKenzie is reporting on the most recent offer put together by the Flames for Brad Richards. The offer is believed to be a 9 year deal with 10 million a year for the first 6 years and 1 million a year for the last 3. The rationale is that he would play the first 6 years of the contract and once he's 37 or so, he'd retire for the last 3. http://tsn.ca/nhl/story/?id=370663

Isn't this the exact deal type of deal that resulted in the Kovalchuk mess last year, costing the Devils a first round pick? Isn't this the type of deal that was agreed would not be signed anymore in return for the league ignoring possible infractions on the Luongo, Pronger, etc. contracts? I'm confused, because the league took such a hard lined approach against this kind of deal, and this seemingly flies in the face of that. What's changed?

Nothing's changed, we're probably not hearing the full structural details of the contract. If the deal was illegal it would be rejected when it was submitted to the league office.

 

[ponder]

The basic stance is you can circumvent the cap all you want as long as the "BS" years are in a player's late 30s, not his 40s. I do think it's a bit nuts that the league has zero problem with contracts like the Ehrhoff and Richards deals, but harshly penalized NJ for the Kovy deal, they're all similar in spirit. If they actually wanted to stop circumvention they'd put in a rule along the lines of "the highest paid year must be no more than double the lowest paid year", so a 10/10/10/10/5/5 contract would be OK, but a 12/12/12/6/3/2/1 type deal would not.

I assume something like this will be in the next CBA, but until then cap circumvention contracts are perfectly legal outside of a few minimal boundaries.

 

[Classic Devil]

The penalty the Devils got for the first proposed contract with Kovalchuk looks more and more ridiculous.

Give us our damned first round pick back.

 

[Fourier]

They have pretty much decided to let this be ironed out in the next CBA.

 

[Brent Burns Beard]

how is it BS to pay a 40- year 1-2million? its completely reasonable to pay a guy alot more in his prime then when he is 40. why the notion these are BS years?

how much is a 40 year Brad Richards worth? probably pretty close the actual dollars he will be paid that year.

i see zero problem with these types of contracts.

 

[Pinkfloyd]

how is it BS to pay a 40- year 1-2million? its completely reasonable to pay a guy alot more in his prime then when he is 40. why the notion these are BS years?

how much is a 40 year Brad Richards worth? probably pretty close the actual dollars he will be paid that year.

i see zero problem with these types of contracts.

The issue with the Kovalchuk contract is that it was until he was 44. It's not about committing the right or fair amount of money to a 40+ year old. It's that the odds are against a player playing past his 40s in the first place and adding year upon year at a reduced rate lowers the cap hit which is circumvention if the plan is for him to retire during the cheap years. Personally, I think a good solution is to allow the contract and then when the player decides to retire, retroactively look at his service and determine the difference between the contract's cap hit and what it should have been. Then the years that that player didn't play, you stick that real cap hit for that player onto the team. That'll put an end to these commitments really quick.

 

[Classic Devil]

The issue with the Kovalchuk contract is that it was until he was 44. It's not about committing the right or fair amount of money to a 40+ year old. It's that the odds are against a player playing past his 40s in the first place and adding year upon year at a reduced rate lowers the cap hit which is circumvention if the plan is for him to retire during the cheap years. Personally, I think a good solution is to allow the contract and then when the player decides to retire, retroactively look at his service and determine the difference between the contract's cap hit and what it should have been. Then the years that that player didn't play, you stick that real cap hit for that player onto the team. That'll put an end to these commitments really quick.

Just make all contracts 35+ contracts.

 

[Talain]

What they need to do is fix things so that every dollar spent by a team on a player ultimately must be accounted for in its cap; if a player leaves before his contract is up, then any difference between the two must be accounted for in the form of cap hits for upcoming season(s) until the difference has been repaid.

The Ehrhoff and Richards deals are just the latest in a long run of essentially cap-circumventing contracts that the league has a long established precedent of allowing. Barring a change in the rules in the next CBA, there is basically no chance at all that Richards will be eating up 6.5M of the Rangers' cap space in the ninth and final year of his contract; rather it will be some other team who will find his contract by then to be quite friendly in helping it to reach the cap floor. While the Rangers will have since signed some other big name free agent to a similar type of deal, that they will then divest themselves of in the same manner once that player's skills start to decline and is no longer with the cap hit. (Thankfully their annual UFA shopping sprees have done nothing to make them anything better than a perennial mediocre franchise that manages to secure a first round playoff exit each year).

So what the Rangers get to do is "borrow" 3.5M a year of cap space for the first five years of Richards's contract, and then if his skills have started to decline they can move him and never actually have to pay it back. (And even in the unlikely scenario that they couldn't find a taker for him they could waive him and send him to the minors at the cost of eating what little actually remained on his contract)

 

[None Shall Pass]

League's Stance on Cap Circumvention: TBA.

 

[hockeygoon15]

What they need to do is fix things so that every dollar spent by a team on a player ultimately must be accounted for in its cap; if a player leaves before his contract is up, then any difference between the two must be accounted for in the form of cap hits for upcoming season(s) until the difference has been repaid.

The Ehrhoff and Richards deals are just the latest in a long run of essentially cap-circumventing contracts that the league has a long established precedent of allowing. Barring a change in the rules in the next CBA, there is basically no chance at all that Richards will be eating up 6.5M of the Rangers' cap space in the ninth and final year of his contract; rather it will be some other team who will find his contract by then to be quite friendly in helping it to reach the cap floor. While the Rangers will have since signed some other big name free agent to a similar type of deal, that they will then divest themselves of in the same manner once that player's skills start to decline and is no longer with the cap hit. (Thankfully their annual UFA shopping sprees have done nothing to make them anything better than a perennial mediocre franchise that manages to secure a first round playoff exit each year).

So what the Rangers get to do is "borrow" 3.5M a year of cap space for the first five years of Richards's contract, and then if his skills have started to decline they can move him and never actually have to pay it back. (And even in the unlikely scenario that they couldn't find a taker for him they could waive him and send him to the minors at the cost of eating what little actually remained on his contract)

Very good points. If Richards is used in the later years of his contact to help a team reach the floor, which it seems like he might very well be doing if he's not retired, you would think the NHLPA would stand up in opposition. That's clearly taking money out of the pockets of other union members.

 

[Kimi]

By the same logic, he's giving more money to the players on the years where he's getting paid more than his cap hit.

 

[RangerBlues]

The cap serves 3 purposes.
1: It prevents the really rich teams from stacking a team.
2: It allows smaller market teams to be competitive.
3: It allows cheap, incompetent owners to still make money.

As long as it does those three main things it works perfectly.

 

[seanlinden]

Bob MacKenzie is reporting on the most recent offer put together by the Flames for Brad Richards. The offer is believed to be a 9 year deal with 10 million a year for the first 6 years and 1 million a year for the last 3. The rationale is that he would play the first 6 years of the contract and once he's 37 or so, he'd retire for the last 3. http://tsn.ca/nhl/story/?id=370663

Isn't this the exact deal type of deal that resulted in the Kovalchuk mess last year, costing the Devils a first round pick? Isn't this the type of deal that was agreed would not be signed anymore in return for the league ignoring possible infractions on the Luongo, Pronger, etc. contracts? I'm confused, because the league took such a hard lined approach against this kind of deal, and this seemingly flies in the face of that. What's changed?

Yes it is -- what changed was that they put in a rule saying that years after 40 don't count towards the cap calculation. It limited the amount of circumvention (which is why Richards is at $6.7 and a bunch of others are in the low 6s / high 5s), based on how many years before 40 that the player was planning to retire.

Obviously it's not a perfect system, but it's really not that problematic either.

 

[knorthern knight]

Again, why not simply count the actual annual salary against the cap? That way, longterm contracts don't circumvent the cap.

 

[Burningblades]

IMO they should just move the 40+ rule to 35+ and it will be fine, front loading isn't that bad if you are fairly sure they player will play the whole contract. OR change the rule for contracts signed when they player is 35+ to any contract that goes past the age of 35+.

 

[ColinM]

The cap serves 3 purposes.
1: It prevents the really rich teams from stacking a team.
2: It allows smaller market teams to be competitive.
3: It allows cheap, incompetent owners to still make money.

As long as it does those three main things it works perfectly.

I'd say so far it has accomplished item 3 but not items 1 and 2.

 

[CC Chiefs*]

Allowing teams to circumvent the cap put us back to pre-2005. In other words the Vancouvers and NYR of the league can sign font loaded big $$$ deals and the Nashvilles can't. Not forgetting how can Kovalchuk, Luongo and several other be considered cost certainty? IMHO they should either not circumvent the cap or get rid of it.

 

[Eaglepride*]

Allowing teams to circumvent the cap put us back to pre-2005. In other words the Vancouvers and NYR of the league can sign font loaded big $$$ deals and the Nashvilles can't. Not forgetting how can Kovalchuk, Luongo and several other be considered cost certainty? IMHO they should either not circumvent the cap or get rid of it.

just get rid of it so we wont have these ridiculous discussions. NHL and NHLPA are saying its not a cirvumvention so move on.

Smart GMs have to find ways for keeping their roster together, nothing wrong with that. The Richards deal is a steal for the Rangers.

 

[josquin*]

Again, why not simply count the actual annual salary against the cap? That way, longterm contracts don't circumvent the cap.

I'm wondering this myself.

 

[RangerBlues]

I'd say so far it has accomplished item 3 but not items 1 and 2.

There are no stacked teams that dominate the league.
And considering the amount of teams throwing around money for FA this year there is competitive balance.
The cap works perfectly.
The only ones who want to change it fall under #3.

 

[hatterson]

how is it BS to pay a 40- year 1-2million? its completely reasonable to pay a guy alot more in his prime then when he is 40. why the notion these are BS years?

how much is a 40 year Brad Richards worth? probably pretty close the actual dollars he will be paid that year.

i see zero problem with these types of contracts.

The reason they're called BS years is that no one honestly believes that the players are actually going to play them. They're added onto the contract only to lower the cap hit.

Yes I am aware that Richards certainly *could* physically play those years, however do you honestly believe that an athlete who has earned well over $100 million dollars in his career will want to play for what will almost assuredly be around league minimum?

 

[Talain]

The reason they're called BS years is that no one honestly believes that the players are actually going to play them. They're added onto the contract only to lower the cap hit.

Yes I am aware that Richards certainly *could* physically play those years, however do you honestly believe that an athlete who has earned well over $100 million dollars in his career will want to play for what will almost assuredly be around league minimum?

Most likely he'll still be playing but likely not for the Ranger$; they'll either trade him to a team looking to reach the cap floor, or, if they can't find anyone to trade him to and he isn't worth the $6.5M cap hit anymore, they could bury him in the AHL (like they did with Redden) and get the cap hit off their books that way.

But it seems as long as every dollar spent on the contract is accounted for under some team's cap that the league doesn't actually have a problem with it. The rejected Kovalchuk contract took this sort of cap circumvention to absurd extremes, but more importantly it was more likely than not that he would not still be playing by the end of it (if past history is any indication, players who are still in the NHL at 44 have been the minority); meaning it was very likely that from the NHL's point of view they would be "cheated" - as more actual dollars would have been spent on the contract than cap dollars. Where as apparently the NHL doesn't seem to have a problem with big market teams like the Ranger$ "borrowing" cap dollars from future years and then having some other team be the one to actually pay it back.

When teams like the Rangers can perenially spend more on player salaries than the salary cap should allow and yet still by some alchemy remain in "compliance" with it, then the system is broken. (But as RangerBlues is a Rangers fan it figures that he would see nothing wrong with the current system.)

 

[WingsOverAvs]

The cap serves 3 purposes.
1: It prevents the really rich teams from stacking a team.
2: It allows smaller market teams to be competitive.
3: It allows cheap, incompetent owners to still make money.

I'd say so far it has accomplished item 3 but not items 1 and 2.

Nashville? Tampa? Buffalo? Phoenix? Plenty of smaller market teams have been competitive. And it most certainly keeps teams from stacking talent like they did pre lockout