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Friday, August 20, 2010

The Next CBA: Part II – The Colonel

Last Night’s “The Next CBA: Part I” discussed the verbiage in a proposed, next CBA and how it would monetize over several years.

This morning, I provide Part II of this blog beginning with discussion of the CBA’s impact on Management/The League and Players and closing with an overlay of the impact of this change on top of a current team’s salary breakdown to show how they would have to alter their contracts to meet the new CBA’s recommended changes…

Management/The League

Overall, this CBA maintains a Salary Cap that is in the same rink with current costs. Likewise, it increases or decreases at a manageably predictable amount based on periodic FYAs of revenue. And it also closes a Cap Hit circumvention loophole based on cheap, ‘throw-away’ years at contract’s end by providing team’s flexibility in the form of an FCA window for any, designated player to age 32 and limiting the years of all other players’ contracts.

An excellent way to look at how this cap works overall is to attempt to reconstruct the disavowed, 17-year Kovalchuk deal under this proposed CBA’s rules.

If tomorrow we were looking at beginning the 2012-13 season, Kovy was still his current age 27, and the New Jersey Devils still wanted an over $100M contract but at a Cap Hit under $7M in any given year to allow for room to extend Parise and Elias, here is one way to structure it. First, designate Kovalchuk the team’s FPC I. Then, between his 27th and 32nd years, give him a contract like the following with an AAV of $6.934M:

Afterwards, give him seven, consecutive two-year contracts at the NFC Ceiling up to age 42 for a total projection of $101.6M/$6.35M AAV over the course of all eight contracts/16 years. Basically, this is one year shy of the disbanded contract term, for about the same amount, but in a CBA-compliant, Cap Hit pill the NHL can swallow. While it is true his original Cap Hit is $7.23M, remember tat Elias is already 34 so has to sign to either an NFC or an LMC which is lower than he is currently making. It is designating Parise as the FCP II that will make a Cap Hit average between the two players higher than expected with the 17-year Kovalchuk contract that was stricken down. But this may even out as Kovy results to an NFC contract in follow-on seasons.

FPC I’s, II’s and III’s serve to limit the number of players making over the $6M per season mark until the 11th year this new CBA comes into effect. (Thereafter, the NFC Maximum begins under $6M.) While this might not meet the desires of the NHLPA, in comparing this to current contracts is enlightening.

There are seven teams which currently have no players awarded a contract meeting the FPC I, II or III dollar amounts (ANA, ATL, EDM, FLA, NSH, NYI and STL). This would not preclude teams from designating a player to each FPC level for RFA compensation purposes, but would also require at least one year contracted at the appropriate FPC Ceiling over the term. (EXAMPLE: For argument’s sake, we are about 60 days out from the start of the 2012/13 season with the current contract structure in place. The Anaheim Ducks determine they are declaring Ryan Getzlaf their FPC I. He is currently 25 years old, and they want to lengthen his term out to age 32 at the most financially beneficial number for which the club can sign him. They get his signature on a contract with some home town discount of ELC + $50K in his 31- and 32-year-old seasons in exchange for three, FPC I Maximum years in mid-contract. He signs for the following with an AAV of $6.061M:

This is a Cap Hit-friendly AAV that is not a circumvention of the intent of AAVs due to the closing of the loophole. It also does not preclude the Ducks from padding Getzlaf’s last two years with up to $3.672M per season in bonuses which count against the team’s Cap Ceiling, but not against the AAV. Or it could just as easily be counter-balanced by a contract Getzlaf could receive at age 33 and 34 where he could get paid a maximum of $5.925M and $5.95M – plus up to $2.019M in bonuses per year – with a more-true AAV of $5.9375M on a shorter NFC.)

There are 47 players whose current salaries fall under an FPC I, II or III designation. Minus the seven teams with no such players, the average for other organizations is only 2.04 (of three possible) players. If the CBA were going into effect for this season, only DET, NYR and SJS have four players under contract who meet an FPC monetary designation and are therefore facing an issue requiring adjustment. While adjustments are bothersome, they provide Management a measure of flexibility. (EXAMPLE: Again, if this was 2012… The New York Rangers are a team in FPC trouble. Gaborik has an FPC I salary, and Drury, Lundqvist and Redden all have FPC II-size salaries. After contracts have been re-worked, the Rangers award Gaborik the FPC I and Lundqvist the FPC II. Drury, already 32 years old, re-negotiates an NFC contract for the maximum allowed. But the Rangers, who have not gotten value for their money the last few years, want to make a change with Wade Redden. His AAV of $6.5M makes his salary in the FPC II range which has already been designated for Lundqvist. So in 2012-13, Redden plays for his previous $6.5M as a special, one-year NFC contract exception, and the Rangers do not renegotiate his contract by 15 July 2013, allowing him to gain UFA status.)

And teams also exist under current SPCs with FPC I, II or III issues based solely on the age of the player. (EXAMPLE: Buffalo would have two FPCs if the new CBA were currently in affect – Thomas Vanek is at least an FPC II at $7.142M over the next four years. But Ryan Miller at $6.25M over the next four years has two issues. Firstly, he also meets criteria for an FPC II designation, which Buffalo solves by awarding Vanek the FPC I designation and Miller the FPC II. But the goalie also will be 33-years-old in year four of his current SPC. He should not normally carry that high a contract after age 32. The Sabres, however, based on his continued, stellar performance between the pipes, seek permission for a special, one-year NFC contract exception in year four so Miller loses nothing he already contracted for. Upon completion of his current contract’s terms, he is a UFA.)

While standardizing monetization of contracts, the system as written here also allows Management flexibility to solve some Cap Hit issues in terms of renegotiating players contracts. That may be an issue with the NHLPA (although we should remember all contracts were re-written after the 2004-5 Lockout and this proposal is not callig for something that radical)…

The Players

This CBA maintains a Salary Cap, the very presence of which some members of the NHLPA will be against. If they are, however, it must be under the assumption that the League has unlimited resources, which is not the case. But two things should come to mind in a player's favor.

Firstly, unless you are an FPC I, II or III, your salary will never decrease over the length of the contract from your Year 1 salary. If you are in the vast majority of players not awarded an FPC contract, you can also look forward to a raise every one, two or three years when you renegotiate.

And second, a desire for transparency in League profits will be provided through calculation of the FYA that is shared with the NHLPA annually.

Having only three FPCs per team can look and feel like a Cap within a Cap. But if you were trying to apply this CBA to today’s salary structures, the fact remains that only three teams currently have more than three players that meet an FPC designation.

Several others, however, have the issue of too many players meeting FPC I or II designations. They include: BUF (Vanek, Miller); CGY (Iginla, Bouwmeester); CHI (Kane, Toews, Campbell); DET (Zetterberg, Lidstrom); NYR (Drury, Lundqvist, Redden); PHI (Briere, Timonen); PIT (Malkin, Crosby); SJS (Thornton, Marleau, Boyle); and VAN (the Sedins). Some of these issues can be solved by either designating one player the team’s FPC I (EX: the Sedins) or allowing a short term contract to expire into free agency (EX: Thornton). But others require more drastic measures, such as the Wade Redden issue mentioned above.

And another healthy number of teams have term issues per the structure of the new CBA above: CBJ (Nash turns 32 at year 7); DET (Datsyuk turns 32 at year 1, and Zetterberg turns 32 at year 4); MIN (Koivu turns 32 at year 5, and Backstrom turns 32 at year 2); MTL (Gomez turns 32 at year 5); NJD (Elias is currently age 34 so should have an NFC); NYR (Redden is already 33 so should have an NFC); PHI (Briere and Timonen are already over 32 so should have NFC’s); TBL (Lecavalier turns 32 at year 3); VAN (the Sedins turn 32 at year 4); and WSH (Ovechkin turns 32 at year 10). By the terms of the CBA spelled out, all of these players could receive a one-year, non-FPC extension after age 32 and then become a UFA.

As a whole, we have 28 players with contract issues if all of the proposed CBA went into effect today. (In the 2012-13 season, there would still be 25.) But this 2.6% of the league represents the highest paid portion and stands as both motivation for all players and an actual, upwards draw on salary floors. So if I am in the NHLPA, I might ask for a one-time CBA exception to designate up to two players per team who would otherwise be an FPC but who will not count against the three-FPC designations in order to make sure management must live with the contractual decisions already made. The NHLPA would likely have support along those lines from such teams as CHI, DET, NYR, PIT, SJS, VAN and WSH. But because compromise requires something from everybody in return, Management/The League may well allow the decision on those two players, but require the total salary value not to bust the Cap, and for all players after those two to fall under the boundaries of new CBA, requiring renegotiation of every other, non-FPC contract to no more than one, two or three years in length as appropriate.

Also in the players’ favor is the fact that UFA status comes quicker for between 84% and 97% of players. And players would be able to negotiate for up to 34% of their highest salary in the contract period as bonuses to be paid by the club at a Cap, but not AAV, hit.

How Would This Affect An Entire Team?

In order to illustrate how these changes would affect an entire organization, I overlaid the new CBA's structure onto the Toronto Maple Leafs' current salaries to illustrate restructuring issues this recommended CBA causes. Here is how they look:

By the size of their contracts, Phaneuf and Giguere would be designated as FCPs. Here I designated them the lowest FCP level I could in order to maintain flexibility to sign a top line forward to an FCP I contract if so desired.

In bold red font you can see there is a problem for the terms of Kessel, Komisarek, Armstrong and Orr. Since no player would be eligible for an FCP exception, they can be awarded one, additional year at current contract terms and then become UFAs. The one year exception would completely cover Armstrong and Orr’s current SPC but still fall short on the other two by one season. The Maple Leafs also could not seek an exception to allow those players' contracts to remain on the books for the time indicated because neither player has an FCP.

Also in red is Mike Brown’s salary. He is signed for the next season at $537.5K, but the LMC requires he receive no less than $700K.

Tyler Bozak and Luke Schenn’s SPCs call for close to or at the maximum you can currently get on an ELC with all bonuses. These exceed the new CBA’s requirements. Both players can be awarded a maximum ELC of $950K. If they are also given the maximum bonuses possible, then they can receive an additional $323K per ELC year. This chart shows their ELC only and their $323K bonuses in the “Carry Over Bonus Penalty” column as it counts against the total Cap Hit but not the Player’s AAV.

In both the Cap Over/Under Pre- and Post-Training Camp cases, the new structure for the upcoming year would have the Maple Leafs under the Cap Ceiling by $2.163M. The team under the current CBA has $2.026M in Cap Space.


In overall affect, the proposed CBA maintained the Cap and solved the Loophole issue while still providing flexibility for Management/The League and Players alike. And it did so with relatively little difference in final dollar impact to the Cap Hit. It is, as a solid compromise would require when something is not ‘broke,’ an evolutionary change instead of a revolution.

Weigh in. Give your opinions about a new CBA. Let's hear your voice before we are up against a deadline with no resolution and another Lockout loms. There does not need to be one with a little compromise and adjustment.

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