Speculation: The Budget

[mcpw]

Triggered by the following two recent posts:

I like Buff but... signing him to a long term big money contract with a team who doesn't spend to the CAP and never will is suicide.

Jets don't need to worry about cap hit, just total salary. Myers' salary starts diving after next year (when Buff kicks in)... 4, 3.5, 3.

What is known:
- Jets currently have an internal budget.
- A lot of people pointed out how the Bogosian for Myers swap helps with our budget
- Jets got Buffalo to retain salary on Stafford, although this was completely unnecessary from a cap point of view. Just budget reasons.

What is also known:
- Jets spent to the cap in 13/14.
- Jets have a pretty rich owner.

It seems to me that, while discussing future rosters and contracts, a lot of users assume that we will remain a budget team not spending to the cap, either forever, or for a very long time at least. Is this backed by any official statement or any interview? Might we hit the cap ceiling at some point if we have several Myers-type contracts? Might we hit the cap ceiling in the near future if the cap doesn't rise significantly?

Click to read more...

 

[wpgsilver]

Yo, Gin!
Capitalize that "b", homie.

 

[Aavco Cup]

Triggered by the following two recent posts:




What is known:
- Jets currently have an internal budget.
- A lot of people pointed out how the Bogosian for Myers swap helps with our budget
- Jets got Buffalo to retain salary on Stafford, although this was completely unnecessary from a cap point of view. Just budget reasons.

What is also known:
- Jets spent to the cap in 13/14.
- Jets have a pretty rich owner.

It seems to me that, while discussing future rosters and contracts, a lot of users assume that we will remain a budget team not spending to the cap, either forever, or for a very long time at least. Is this backed by any official statement or any interview? Might we hit the cap ceiling at some point if we have several Myers-type contracts? Might we hit the cap ceiling in the near future if the cap doesn't rise significantly?

If we had enough deals like Myers we could hit the cap ceiling but still stay under budget in real dollars

 

[TheDeuce]

I'm gonna be bold: The Jets can and will be a Cap Maximum team if circumstances are such that it is wise to be such a team.


Here's my thought process:

1. True North, in the first days, said the Jets would be a mid-cap team.
2. However they threw out the caveat that they would spend more if it made sense to do so. No way would they be a cap maximum team for the sake of being a cap maximum team BUT as a means to an end they'd put out the money.
3. Their original projections were in the days of 57% of HRR going to salaries. It's now fixed at 50%.
4. True North's ticket prices have gone up an average of 2.9% per year, now going on four years.


So here's what we have:

Salary cap is now 50/57th of what it was (50/57= 88% so salary expense is down 12%)

Ticket revenue is up (1.029%^4) or around 12%.

That's a 24% swing.


Throw in added concession revenues (beer prices aren't going down), the casino coming online, falling oil prices (which will help with the fuel surcharge we pay on chartered flights) and we have a recipe for a cap maximum team - or at least we have a situation where we can be a cap team and still fiscally responsible. Let's hope we use this new found power to become a perennial contender.


I'm not saying we SHOULD be a cap max team but I'm noting that we CAN be one. Enough with the 'internal budget' meme. We've not lost anyone to free agency, we've acquired the free agents we've wanted to acquire, and we've retained all the RFAs and UFAs that we need and at least a couple we don't.


Go Jets Go!




m.

 

[Aavco Cup]

And as was pointed out in another thread. Trouba's bonuses (maybe Scheifs too) put us over the cap last season. We carried a bonus overage because of it. I doubt we will be a team that starts the season at the cap though and it's probably a good thing. The Leafs spend to the cap. It's no guarantee of anything.

 

[allthisgold]

I'm gonna be bold: The Jets can and will be a Cap Maximum team if circumstances are such that it is wise to be such a team.


Here's my thought process:

1. True North, in the first days, said the Jets would be a mid-cap team.
2. However they threw out the caveat that they would spend more if it made sense to do so. No way would they be a cap maximum team for the sake of being a cap maximum team BUT as a means to an end they'd put out the money.
3. Their original projections were in the days of 57% of HRR going to salaries. It's now fixed at 50%.
4. True North's ticket prices have gone up an average of 2.9% per year, now going on four years.


So here's what we have:

Salary cap is now 50/57th of what it was (50/57= 88% so salary expense is down 12%)

Ticket revenue is up (1.029%^4) or around 12%.

That's a 24% swing.


Throw in added concession revenues (beer prices aren't going down), the casino coming online, falling oil prices (which will help with the fuel surcharge we pay on chartered flights) and we have a recipe for a cap maximum team - or at least we have a situation where we can be a cap team and still fiscally responsible. Let's hope we use this new found power to become a perennial contender.


I'm not saying we SHOULD be a cap max team but I'm noting that we CAN be one. Enough with the 'internal budget' meme. We've not lost anyone to free agency, we've acquired the free agents we've wanted to acquire, and we've retained all the RFAs and UFAs that we need and at least a couple we don't.


Go Jets Go!




m.

Good analysis. You do have to factor in the dropping dollar. This does have interesting effects. On the one hand it will help to reduce the growth of the salary cap (as around a third of revenue comes from Canada) and we may become eligible for revenue sharing as our official revenues are less (due to the conversion to US dollars). On the other hand we do pay salaries in U.S. dollars.

Overall though Mark Chipman stated all along if they think the team is good and can do damage then they will spend up to the cap (just not for the sake of doing it). I want the Jets to make the playoffs for many reasons and one of them is team finances. Getting some playoff dates adds legit dollars to the bottom line. Can help to accelerate the capital improvements to the building and can be used in future years for salaries.

 

[BigZ65]

If we had enough deals like Myers we could hit the cap ceiling but still stay under budget in real dollars

So, trade for everyone in the league with front-loaded deals? Can't have that divide under the new CBA, and even if you could, you'd have to pay at some point. The Jets have both short-term and long-term issues to plan for.

 

[KingBogo]

I'm gonna be bold: The Jets can and will be a Cap Maximum team if circumstances are such that it is wise to be such a team.


Here's my thought process:

1. True North, in the first days, said the Jets would be a mid-cap team.
2. However they threw out the caveat that they would spend more if it made sense to do so. No way would they be a cap maximum team for the sake of being a cap maximum team BUT as a means to an end they'd put out the money.
3. Their original projections were in the days of 57% of HRR going to salaries. It's now fixed at 50%.
4. True North's ticket prices have gone up an average of 2.9% per year, now going on four years.


So here's what we have:

Salary cap is now 50/57th of what it was (50/57= 88% so salary expense is down 12%)

Ticket revenue is up (1.029%^4) or around 12%.

That's a 24% swing.


Throw in added concession revenues (beer prices aren't going down), the casino coming online, falling oil prices (which will help with the fuel surcharge we pay on chartered flights) and we have a recipe for a cap maximum team - or at least we have a situation where we can be a cap team and still fiscally responsible. Let's hope we use this new found power to become a perennial contender.


I'm not saying we SHOULD be a cap max team but I'm noting that we CAN be one. Enough with the 'internal budget' meme. We've not lost anyone to free agency, we've acquired the free agents we've wanted to acquire, and we've retained all the RFAs and UFAs that we need and at least a couple we don't.


Go Jets Go!




m.

Couldn't agree more. It made sense in year 1 to be a mid cap team. The organization wasn't pressed internally for any more then that. True North started talking up draft and develop at the same time. The message was we won't be chasing FA's but grow our own so be patient and we will do things the right way. Along the way the HRR going to salaries dropped to 50%. Now the Jets have been a positive revenue team each year and the value of their investment has grown by more than $100 M.

I'd argue it will be impossible for the Jets to remain a mid cap team and even pretend about being a contender. The life-cycle of the team is such that their core players are entering their UFA years, their early top picks are finishing up their ELC's soon and they have some very high profile prospects with huge potential. Most teams struggle to remain under the cap, because a cap at 50% HRR doesn't really pay enough for a mature contending team as it is. To drop significantly below the cap as you become a mature contending team will signal to your customers you are in this just for the money and don't really care about winning. That can only last so long before the new shine starts to fade and people start looking for other ways to spend their money.

Bottom line Jets will have to spend to the cap to protect their investment. Besides most of the revenue to pad their pockets comes from the playoffs.

 

[allan5oh]

Chevy has done the following:

1) almost every large contract is a back rising contract.
2) traded off a ton of salary with the blockbuster
3) forced retained salary on Harrison and Stafford
4) let burmi walk two summers ago

This suggests there is on fact an internal cap. It also suggests this internal cap isn't going to disappear any time soon. We are nowhere near contender status. The draft and develop model true north put into place (don't kid yourself, it is true Norths plan not chevys) is designed so that we can be a contender team without being a max cap team.

 

[TheDeuce]

Couldn't agree more. It made sense in year 1 to be a mid cap team. The organization wasn't pressed internally for any more then that. True North started talking up draft and develop at the same time. The message was we won't be chasing FA's but grow our own so be patient and we will do things the right way. Along the way the HRR going to salaries dropped to 50%. Now the Jets have been a positive revenue team each year and the value of their investment has grown by more than $100 M.

I'd argue it will be impossible for the Jets to remain a mid cap team and even pretend about being a contender. The life-cycle of the team is such that their core players are entering their UFA years, their early top picks are finishing up their ELC's soon and they have some very high profile prospects with huge potential. Most teams struggle to remain under the cap, because a cap at 50% HRR doesn't really pay enough for a mature contending team as it is. To drop significantly below the cap as you become a mature contending team will signal to your customers you are in this just for the money and don't really care about winning. That can only last so long before the new shine starts to fade and people start looking for other ways to spend their money.

Bottom line Jets will have to spend to the cap to protect their investment. Besides most of the revenue to pad their pockets comes from the playoffs.

And that is a solid point. True North can only rely on the multi-year commitments for so long if they don't have a properly maintained product on the ice. Franchise value has gone up so much since 2011 - and that's without playoff revenues. Spending some money on talent that leads to a deep playoff run pays for itself with direct playoff revenue (ticket sales, concessions, etc) PLUS it adds value to the franchise. Double dipping!

I forgot two factors in my quick 'n' dirty analysis but I think they offset. The dollar declining hurts a bit but that's offset by the mechanisms the League has in place but what offsets it even more is the new TV deal. The Jets didn't have that in 2011 when they declared themselves a 'mid-cap' team.




m.

 

[KingBogo]

Chevy has done the following:

1) almost every large contract is a back rising contract.
2) traded off a ton of salary with the blockbuster
3) forced retained salary on Harrison and Stafford
4) let burmi walk two summers ago

This suggests there is on fact an internal cap. It also suggests this internal cap isn't going to disappear any time soon. We are nowhere near contender status. The draft and develop model true north put into place (don't kid yourself, it is true Norths plan not chevys) is designed so that we can be a contender team without being a max cap team.

But at some point even a draft and develop team need to pay their players or they walk away in their primes. If you don't you are just drafting and developing for other teams.

Getting Myers front-loaded contract was no doubt partly money motivated, which will help with the bottom line. But it doesn't change the fact that a cap of 50% HRR is barely enough to keep a contending team together. IMO the Jets are 2 years away from being a cap team or it will become obvious they aren't serious about contending...just milking.

 

[allan5oh]

As far as hitting the cap last season, they actually spent much less than the cap.

 

[mcpw]

1) almost every large contract is a back rising contract.

15/16 16/17:
Pavelec cap hit +850k
Stuart ch+75k
Wheeler ch+200k
Little ch+300k
sum: ch+1.425M
Traded for Myers ch-1M
total: ch+0.425M

16/17 17/18:
Stuart ch-875k
Wheeler ch+200k
Little ch+300k
sum: ch-375k
Traded for Myers ch-1.5M
total: ch-1.875M

Hmm. The three large and back rising contracts were Kane, Bogosian, and Byfuglien.

2) traded off a ton of salary with the blockbuster
3) forced retained salary on Harrison and Stafford

yes

4) let burmi walk two summers ago

...and in that very season, we spent over the cap.

This suggests there is on fact an internal cap. It also suggests this internal cap isn't going to disappear any time soon.

Well. I'm not sure.
Point 1): I don't think handing out back-rising contracts necessarily means that you're a budget team forever. It could mean that you're a budget team now, but not in the future, am I correct?
Points 2 and 3): yes, we are a budget team now. Saved roughly a million this season. Saved 450k next season. Doesn't tell anything about a possible 16/17 budget.
Point 4): I don't see a connection here. How is letting Burmistrov walk, and the Jets being a budget team now and in the future related?

Edit:

As far as hitting the cap last season, they actually spent much less than the cap.

That's correct. Quickly looked at the numbers, roughly 4.5M.

 

[allan5oh]

If there was a lifting of the internal cap it would be a ways down the road. You can build a contending team without hitting the cap, but I doubt you can keep it together.

 

[Hunter368]

If there was a lifting of the internal cap it would be a ways down the road. You can build a contending team without hitting the cap, but I doubt you can keep it together.

Agreed

I've seen no evidence that were a team willing to spend like the big boys. We will see this up coming summer/year.

 

[allan5oh]

Also the big boys are spending quite a lot above the cap in actual dollars between diving contracts, LTIR, signing bonuses, and elc bonuses. We are a far way from that

 

[Jets]

I have a different take on the internal budget. I think they fully intend to spend to the cap if necessary to retain their own guys, but they aren't going to throw out big money at free agents or take on a bad contract in a trade. As far as locking up their own homegrown assets though, I can't see how they wouldn't be opening the wallets. They aren't going to want to be the Oakland athletics or the Minnesota Twins who end up feeding the rest of the league talent they can't retain once the players get good.

 

[KingBogo]

Agreed

I've seen no evidence that were a team willing to spend like the big boys. We will see this up coming summer/year.

There has been no evidence yet because we haven't had to yet. But now we will have to. We will have to to keep some combination of Buff, Ladd, Frolik, Stafford and several other FA's. Meet the contract demands of guys like Trouba and Scheifele, and then MP, Little and Enstrom. And what if Ehlers actually becomes the Elite player we hope, or any other of the deepest prospect pool in the NHL. By the 16/17 season we will be pushing the cap or have started the process of divesting ourselves of the talent needed to contend. It will be interesting to watch.

 

[Puckatron 3000]

I agree with the speculation that the international budgie has exploded the blasting cap.

Proof:

"Budget" is french for budgie, right? Just making sure I got the gist of this thread right.

 

[Aavco Cup]

Agreed

I've seen no evidence that were a team willing to spend like the big boys. We will see this up coming summer/year.

I think we're better off. No Clarkson type contracts. Cap flexibility is more important. The real test as someone mentioned is if all the young guys pan out and we become contenders can we keep them together as they come into the high earning years.

 

[Gil Fisher]

I'm pretty sure their internal budgeting process includes an amount for capital expenditures (arena improvements). They have been considerable lately too. They have been reinvesting every dollar. If there was a period of time where they required to spend near or at the cap to challenge for a cup, it could come out of the capex spend.

 

[KingBogo]

I think we're better off. No Clarkson type contracts. Cap flexibility is more important. The real test as someone mentioned is if all the young guys pan out and we become contenders can we keep them together as they come into the high earning years.

Not counting the young guys. To keep this team together in 16/17 will necessitate us spending to the cap. Other then Pavs and a couple guys at the bottom of the roster (Thorburn, Stuart, Clitsome) most of our players are under paid for the roles they play. The market place will correct this by 16/17. Conservative additional salary costs based on new contracts: Buff will be + $2-3 M, Ladd will be + $1-1.5 M, Frolik + 1 M, Stafford + $2 M (Sabres no longer retaining 1/2). Assuming best case scenario bridge deals: Scheifele + $2 M, Trouba $2.5 M, Lowry $1 M, Hutch? The young guys coming in on their ELC will be pretty much a wash with Hali, Galiardi, Slater, Peluso going out. As currently constructed this team will easily push the cap. Then over the next couple years after that will be big pressures with MP and Little's new contracts, Scheifele and Trouba off their bridge deals. Ehlers and the other top prospects coming off their ELC's. It this team develops like we all hope it is easily a cap team.

 

[Aavco Cup]

Not counting the young guys. To keep this team together in 16/17 will necessitate us spending to the cap. Other then Pavs and a couple guys at the bottom of the roster (Thorburn, Stuart, Clitsome) most of our players are under paid for the roles they play. The market place will correct this by 16/17. Conservative additional salary costs based on new contracts: Buff will be + $2-3 M, Ladd will be + $1-1.5 M, Frolik + 1 M, Stafford + $2 M (Sabres no longer retaining 1/2). Assuming best case scenario bridge deals: Scheifele + $2 M, Trouba $2.5 M, Lowry $1 M, Hutch? The young guys coming in on their ELC will be pretty much a wash with Hali, Galiardi, Slater, Peluso going out. As currently constructed this team will easily push the cap. Then over the next couple years after that will be big pressures with MP and Little's new contracts, Scheifele and Trouba off their bridge deals. Ehlers and the other top prospects coming off their ELC's. It this team develops like we all hope it is easily a cap team.

All the more reason to be cap flexible......some tough choices need to be made somewhere down the line. I think Chevy understands it quite well after what happened to Chicago after their first cup.

 

[Analyst365]

Agreed

I've seen no evidence that were a team willing to spend like the big boys. We will see this up coming summer/year.

Nah the big boys wouldn't be handing out thanks for coming out contracts to guys like Thorburn and Stu ...

 

[KingBogo]

All the more reason to be cap flexible......some tough choices need to be made somewhere down the line. I think Chevy understands it quite well after what happened to Chicago after their first cup.

Except the Hawks positioned themselves as best they could and won a second cup straddling the cap line. They didn't gut their roster like they would have had to to become a mid cap budget team. Even staying at the cap takes hard choices. Being a mid level budget team with the talent we currently on the roster and coming through the system means giving it away to those that are willing to pay the costs to contend. My main point is if you are stock piling talent and you want to seriously contend you eventually have to pay for it.