Discussion re salaries, escrow, signing bonuses cap hit etc

[Parallex]

Originally Posted by MarkGio

I don't mind LTIR, but I think it shouldn't be the full amount of salary. I think it should be capped to 975K or whatever an ELC max is. That way a team can replace the LTIR contract with someone. I mean, injuries do happen in hockey.

That's fine.

Originally Posted by MarkGio

I also don't care for the luxury tax system. Teams can inflate franchise values and stay afloat without any effort to compete.

Ok, then scale it. The bottom 10 revenue generating teams get it in order of standings so the best of them get the biggest cheque. Or you could give it to non-playoff teams (scaled again so that the playoff bubble teams would gladly take playoff revenue over luxury tax revenue) or it get's donated to bottom revenue/non-playoff team supported local charities. Or it goes to the league and used for additional marketing. Where the money goes is less important then that the teams above the line pay a penalty. A range has to exist but it should exist at a point where half the teams are somewhere above the midpoint and half somewhere below... that is not currently the case.

Originally Posted by MarkGio

I also like the contract variance because it's given some poor teams financial flexibility, such as Arizona last year with the Datsuk, and Pronger. Without that variance, some teams are essentially stuck with their bad contracts.

They should be stuck with bad contracts. Having competent contract management should be an asset to teams that have it. Don't want to be stuck with bad contracts? Then don't sign bad contracts in the first place and pay the price when you do.

Originally Posted by MarkGio

Furthermore, rebuilding teams would be in trouble to get all their prime players under the cap if there was no variance. Imagine the Flames trying to build a Cup winner while Monahan, Gaudreau, Brodie, Hamilton, etc are all in their prime years, getting paid prime-year money. They would exceed the cap.

... the Flames do have Monahan, Gaudreau, Brodie, Hamilton, are all in their prime years, getting paid prime-year money. The Flames actually have very little in the way of year to year variation. I think (at present) for their upcoming season the Flames salary exceeds the cap hit by about a million dollars. I'm talking about backdiving contracts... were you thinking I was talking about something else? The last CBA took care of a lot of it... I think they should go a little bit further in that regard.

Managers/owners are collectively overspending and the league is using the clawback to remedy that. All I'm suggesting is removing/limiting most the loopholes that managers are using to overspend. Remove the overspending and you remove the need for escrow to be so high, remove the need for escrow to be so high and you can lower the clawback to a level that the NHLPA won't be ornery about it.

[getbak]

The escalator isn't the problem. It just accounts for normal inflation. If the league and PA both agreed to stop using the escalator, it might stop the cap from rising for one season. After that, the cap would keep going up because inflation pushes revenue up. The escalator accounts for inflation ahead of the fact. If it wasn't used, the system would still account for inflation after the fact.

Not using the escalator would slightly reduce the amount withheld due to escrow, but ultimately, the entire cap structure is built on a flawed assumption. Until that is fixed, nothing else will really make a difference.


The cap structure is based on the assumption that the midpoint of the salary range will be the average team's payroll. For it to work properly, half the teams in the league need to have payrolls below the midpoint. I don't believe there has been a single season since the cap was introduced where that was the case.

In fact, I believe that in most seasons, more teams end the season over the cap due to LTIR and bonuses than end below the midpoint. If you look at Cap Friendly's archive for last season (which isn't perfect because it only show cap hits and not actual dollars spent, but it's close enough for discussion), 7 teams finished the season above the $73 million cap. Carolina was the only team below the $63.5 million midpoint.

Using Cap Friendly's numbers, the average team payroll was $71.28 million last season. That's 97.65% of the cap. To work as the system was designed, the average team payroll should be about 85% of the cap.

That's why escrow is so high. The only real way to fix escrow is to fix the way the cap is calculated.



Right now, the cap is calculated using this formula:

• Each June, the league calculates its actual revenue for the season that has just ended.
• Unless both sides agree on a different growth factor, a 5% escalator is applied to the actual revenue numbers to calculate the following season's projected revenue.
• The projected revenue is multiplied by 50% to determine the projected players' share.
• That number is divided by the number of teams in the league to determine the per team projected midpoint.
• The midpoint number is multiplied by 115% to determine the cap and by 85% to calculate the floor.

I believe the procedure should be changed to this to fix the excess escrow problem:

• Each June, the league calculates its actual revenue for the season that has just ended.
• Unless a significant new source of revenue is expected for the upcoming season, the escalator will be set to the average annual revenue growth experienced by the league over the previous 3 seasons. That escalator will be applied to the actual revenue to determine the projected revenue for the upcoming season.
• The projected revenue is multiplied by 50% to determine the projected players' share.
• That number is divided by the number of teams in the league to determine the per team projected midpoint.
• The midpoint number is multiplied by 105% to determine the cap* and there is no floor.

* If the new calculated cap is lower than the cap for the previous season, the PA can choose to keep the cap at the previous level, with the understanding that escrow will always be used to keep the players' share at 50% of actual revenue.


Keeping the cap closer to the midpoint would bring the team average closer to the midpoint. Eliminating the floor would potentially eliminate the incentive that low-revenue teams have to take on other teams' bad contracts. Using real growth numbers to calculate the escalator would hopefully make people finally stop complaining about the escalator.

[Parallex]

Originally Posted by getbak

[*]The midpoint number is multiplied by 105% to determine the cap* and there is no floor.
.

If there is no floor then there is no midpoint. And eliminating the floor flies contrary to the leagues desire for parity. The floor must stay. Frankly, I think the league, owners, and players would reject that idea.

[iggy_oi]

Originally Posted by Parallex

If there is no floor then there is no midpoint. And eliminating the floor flies contrary to the leagues desire for parity. The floor must stay. Frankly, I think the league, owners, and players would reject that idea.

I don't think the league would be as opposed to it as you think. If anything it would drive salaries down, there would always be the team's that spend to the cap, but with nothing in place to ensure a small market club has to spend a certain amount you would see a lot more teams tank to build a winner since because revenue is shared it would help them reduce losses if their attendance dipped. In those situations players would only be left with the option of underbidding an AHLer for a contract.

[Enoch Root]

Originally Posted by iggy_oi

I don't think the league would be as opposed to it as you think. If anything it would drive salaries down, there would always be the team's that spend to the cap, but with nothing in place to ensure a small market club has to spend a certain amount you would see a lot more teams tank to build a winner since because revenue is shared it would help them reduce losses if their attendance dipped. In those situations players would only be left with the option of underbidding an AHLer for a contract.

The league would be very opposed to it. In fact, that is precisely what they are opposed to.

The whole purpose of the floor is to ensure parity so that Tuesday night games in November can at least be expected to be competitive.

The other thing they don't want is the situation you mentioned with respect to revenue sharing covering their losses. They want every team carrying their own weight.

[getbak]

Originally Posted by Parallex

If there is no floor then there is no midpoint. And eliminating the floor flies contrary to the leagues desire for parity. The floor must stay. Frankly, I think the league, owners, and players would reject that idea.

Fine, don't call it the midpoint then, call it the targeted average payroll (TAP). Same difference.



If they insist on having a floor, set it to 75% of the TAP and you'd still get roughly the same range as the current system, but keeps the top end closer to the target.


Using the current system, this year's cap is $75 million and the floor is $55.4 million (a difference of 19.6). That puts the midpoint at $65.2 million.

Using my TAP system, with a target of $65.2 million, the cap would be $68.46 million and the floor would be $48.9 million (a difference of 19.56).

[iggy_oi]

Originally Posted by Enoch Root

The league would be very opposed to it. In fact, that is precisely what they are opposed to.

The whole purpose of the floor is to ensure parity so that Tuesday night games in November can at least be expected to be competitive.

The other thing they don't want is the situation you mentioned with respect to revenue sharing covering their losses. They want every team carrying their own weight.

Big market teams couldn't care less about parity and competitive balance. They make their money off playoff revenue and want to win. The cap floor was put in place to get the players to agree to a salary cap, had the league not guaranteed a minimum amount of revenue going to the players the 2004 lockout likely never would have ended.

[schooner]

I think the better analogy for escrow to those given above is municipal property taxes. Every player's contract is really just a "property assessment." For the city the total amount collected is the municipal budget. For the players the total amount paid out is 50% of HRR. Once that number is determined there is a mill rate, or ratio of every player's salary to determine take home pay (or taxes owed in my analogy). As long as you have linkage, which is required in the current system, there is no way around this.

So as far as I am concerned I have no sympathy for the players. You can come up with any number of ways to calculate it, extra take home, less take home, but the number is the same in the end.

Now who really gets screwed in the end is players with existing contracts. Every contract signed after, assuming the total is a net increase of newly signed free agents to the previous year's expiring contracts, is taking a piece of the pie from existing contracts. As I said earlier, dollar figures on contracts are just a giant ratio between every player in the system.

That's the way it is. They pretty much just have to suck it up.

[bizaro86]

Originally Posted by getbak

Fine, don't call it the midpoint then, call it the targeted average payroll (TAP). Same difference.



If they insist on having a floor, set it to 75% of the TAP and you'd still get roughly the same range as the current system, but keeps the top end closer to the target.


Using the current system, this year's cap is $75 million and the floor is $55.4 million (a difference of 19.6). That puts the midpoint at $65.2 million.

Using my TAP system, with a target of $65.2 million, the cap would be $68.46 million and the floor would be $48.9 million (a difference of 19.56).

This would probably fix the actual problem, which makes it a good idea in theory. I'm skeptical the players would think a lower cap was good for them though, even though it would probably mean they got all the escrow back, and deductions could be smaller. I think you'd want to implement it gradually so it didn't screw the FA pool in one specific year.

[Weitz]

I was listening to TSN radio this morning and they were saying that Offer Sheets could be something they fight about in the upcoming negotiations. Apparently players are upset they are not used more. So it is something there could be big talks about.

[Textcritic]

Originally Posted by Weitz

I was listening to TSN radio this morning and they were saying that Offer Sheets could be something they fight about in the upcoming negotiations. Apparently players are upset they are not used more. So it is something there could be big talks about.

Leon Draisaitl is understandably pissed that he likely has to continue playing in Edmonton.

[Hockey Fan #751]

Originally Posted by Weitz

I was listening to TSN radio this morning and they were saying that Offer Sheets could be something they fight about in the upcoming negotiations. Apparently players are upset they are not used more. So it is something there could be big talks about.

What could you do, though? Increase the compensation? That would make teams more likely to match but it would also make teams less likely to offer one.

Decreasing the compensation might work in terms of getting teams to offer them out but then again matching would be almost a certainty in those cases.

I guess the other thing you could do is make it player roster compensation like it used to be (such as when Brendan Shanahan was signed by St. Louis and the Devils were awarded Scott Stevens). This would decrease the likelihood of teams offering as well, I think.

[Weitz]

Originally Posted by Textcritic

Leon Draisaitl is understandably pissed that he likely has to continue playing in Edmonton.

Glad to see you can discuss something without talking about Edmonton.

Originally Posted by Hockey Fan #751

What could you do, though? Increase the compensation? That would make teams more likely to match but it would also make teams less likely to offer one.

Decreasing the compensation might work in terms of getting teams to offer them out but then again matching would be almost a certainty in those cases.

I think they were alluding to some concessions the players made and got offer sheets in return, but there is some sort of collusion going on that limits their use. I couldn't really tell if the guy (Cullen?) was speculating or actually had some information he knew.

But you have had guys like Kucherov who had to be signed when the team did not have the cap space to do so, and no one signed him. I don't know if TB could clear the space needed to match in a week.

[Hockey Fan #751]

Originally Posted by Weitz

I think they were alluding to some concessions the players made and got offer sheets in return, but there is some sort of collusion going on that limits their use. I couldn't really tell if the guy (Cullen?) was speculating or actually had some information he knew.

But you have had guys like Kucherov who had to be signed when the team did not have the cap space to do so, and no one signed him. I don't know if TB could clear the space needed to match in a week.

That could also speak to teams not wanting to give up multiple high draft picks, particularly in a league where you truly need those picks as good players on entry-level deals to build a competitive team around your higher-priced talent.

[Resolute 14]

lol. Cullen is crying collusion because everybody looked at the disaster the Penner offer sheet turned into and decided that the option of massively overpaying players in exchange for giving up too many draft picks was a bad decision? Can definitely see the players wanting to modify that to make it more useful for them, however.

Brings up the important question though. We now have three things we know the players want. So what are they going to offer up in return? Knowing Don Fehr, "nothing". Which is why we'll have another lockout.

[Weitz]

Originally Posted by Resolute 14

lol. Cullen is crying collusion because everybody looked at the disaster the Penner offer sheet turned into and decided that the option of massively overpaying players in exchange for giving up too many draft picks was a bad decision? Can definitely see the players wanting to modify that to make it more useful for them, however.

Brings up the important question though. We now have three things we know the players want. So what are they going to offer up in return? Knowing Don Fehr, "nothing". Which is why we'll have another lockout.

He never said collusion, I was just postulating.

[Parallex]

Originally Posted by Resolute 14

So what are they going to offer up in return?

What did the owners offer up in return for getting what they wanted with the last CBA? If we're heading into another lockout/strike then it's because one side isn't happy and they're not going to want to substitute one form of unhappiness for another. So yeah, if the next labour impasse is player initiated then they're going to want concessions from the league just like the league wanted concessions from the players last time out.

[iggy_oi]

Originally Posted by Resolute 14

Brings up the important question though. We now have three things we know the players want. So what are they going to offer up in return?

They are going to offer up the owners not losing revenue by a work stoppage. There may be other areas they can address, but it's not like they are going to show their hand and say we'll give you this that and the other. The biggest leverage that the players have is the tens of millions of dollars the league's owners stand to lose by any portion of the season being cancelled. Yes the players lose their money too, but they may consider things like more offer sheets, escrow and playing in the Olympics worth more to them than half a years' salary. Other than escrow, these demands don't really cost the league money, even the escrow is more of a risk factor than a direct cost to them, so they will need to consider whether or not they are worth the lost revenue from a half season long lockout.

[Fighting Banana Slug]

More offer sheets and Olympic participation don't cost the league money? Disagree.

I really don't see much of substance that either side should be complaining about. Re-up for another 5 years and don't f this up!

[Parallex]

Originally Posted by Fighting Banana Slug

More offer sheets and Olympic participation don't cost the league money? Disagree.

... they don't cost the league money. I don't see how you could disagree.

More Offer Sheets will distribute the money differently among the players but the revenue split will remain the same and Olympic participation doesn't decrease the number of gates.