Why was the team/player option eliminated?

Discussion in 'Fugu's Business of Hockey Forum' started by achtungbaby, Apr 15, 2011.

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  1. achtungbaby

    achtungbaby Registered User

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    I confess, I can't even remember if the NHL used to have this at all. I'm completely ignorant on this one and am too lazy (at work as well) to spend the time looking it up.
     
  2. kdb209

    kdb209 Registered User

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    SPCs under the old (pre-lockout) CBA permitted both Player and Team options. These options were grandfathered in under the new CBA.

    The new CBA did away with them to simplify how cap hits are calculated and to avoid possible cap circumvention.

    Cap hits are calculated based on contract averages - total of salary and potential bonuses divided by the number of years.

    How do you calculate that average if an SPC has team or player options (or both for different amounts), unconditional or conditional based on performance, with or without payments due in lieu of exercising?

    The transition rules of Exhibit 16 defined how the grandfathered options were handled.
     
  3. achtungbaby

    achtungbaby Registered User

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    It doesn't count against the cap that year unless the said team or player (or both) agrees to pick up that extra year, no? Would this really affect that many teams? They could have easily made the cutoff date somewhere before the UFA date on July 1st and the end of the regular season couldn't they?

    I must be missing something I'm not thinking of. I can't see how cap circumvention comes into play here.

    Is it these long term contracts that lower cap hits?
     
  4. kdb209

    kdb209 Registered User

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    It allow a team to shift around cap hits, defeating the purpose of averaging the cap hits.

    Hypothetically, a team (with cap space available in the first two years) could sign a player to a $15M/3 yr SPC - $9M,$5M, and $1M(option). Rather than having a $5M/yr cap hit, it would have $7M, $7M, $1M - giving the team a $5M/yr player for a cap hit of $1M in the third year.

    Now, it could be possible to come up with a set of complicated rules, similar to the cases covered in Exhibit 16, to handle all of the possible cases (team/player/both, unconditional/conditional, vested/unvested, in lieu payments, etc) - but there would still likely be cases open to abuse. There is a difference between applying a set of rules to (a small number of) existing contracts and allowing for new contracts to exploit those rules.
     
    Last edited: Apr 16, 2011
  5. achtungbaby

    achtungbaby Registered User

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    It could be player option as well though. What player would agree to a $1 million dollar option year? Even if it was only a team option, why would a player sign the said deal?
     
  6. mouser

    mouser Business of Hockey

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    Having player or team options opens up all kinds of abusive loopholes for the cap system if you don't factor the option years into the player's cap number.


    Simple example:

    Player A sign a 5 year $20m deal that pays him 3/3/4/4/6

    Player B sign a 5 year $20m deal but it's a 4 year base contract that pays 3/3/4/4, with a player option for 6 in the fifth year.

    If you don't account for the option, player A's contract has a $4m cap hit each year for five years. Player B's contract would have a $3.5m cap hit the first four years, then $6m in the fifth year when the cap is larger and the proportional impact on the cap lower.


    There's a lot of room to craft contracts like this where Player B is almost guaranteed to activate the option year. It's cleaner for the NHL to simply ban option years than have to police which contracts are trying to abuse the system as we recently observed with the Kovalchuk fiasco.
     
  7. Mayor Bee

    Mayor Bee Registered User

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    Give a GM or an agent an hour with a new CBA and see how quickly loopholes are identified and exploited. It took exactly one year of the NFL's now-expired CBA to basically blow up the idea of the franchise tag, and it didn't take long for the NBA to take a decent CBA and turn it into a land mine for themselves through extraordinarily complicated exceptions and options.
     
  8. kdb209

    kdb209 Registered User

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    It would obviously be a team option. From the p.o.v. of the player, it would be no different than signing a front-loaded 3 yr $15M SPC.
     

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