Buyouts and Recapture Penalties

[opendoor]

Originally Posted by getbak

I think CapGeek has grossly misinterpreted how this will be done. It doesn't make any sense to penalize a team worse if a player plays 9/10 of his contract than if he plays 6/10 of it.

I believe that when the league says a team won't receive a credit for a negative cap benefit it means that if a player is traded part-way through the contract, and at the end when the recapture is calculated, one team's recapture amount is less than zero, they won't receive a cap bonus for the negative recapture.

To really get an idea of how absurd that calculator is, look at Ovechkin. He has a 13 year contract that pays $9M per year for the first 6 years, and $10M per year for the final 7 years. Using the calculator, if he retired after playing 12 years of the contract, the recapture penalty would be $2.769M. The problem is that the way his contract is structured, the Capitals never receive any cap advantage on it. After 12 years, he will have been paid $114M, and the total charged against the cap will have been $114.46M. Somehow, they would be penalized nearly $3 million despite having negative cap benefit.

How it should work is to take the total amount the player has been paid and subtract the total amount that has been charged to the cap. If there is a positive difference, the amount is divided by the number of years remaining on the contract at the time of the player's retirement, and that's the total recapture value. That number would be split proportionally between all of the teams who received some cap hit benefit from the contract.

Capgeek had the rule confirmed by the NHL. They could still be wrong, but I'd give them the benefit of the doubt.

The league wanted to declare war on long term contracts and they did it.

[Jacks]

Some of the penalties do seem silly, it would be nice if the NHL would clarify the details. Especially considering the off season trades and buyouts are affected.

[Tinordi]

Yeah the league would have likely told all teams during the heyday of the backdiving contracts that it did not consider them to be in the spirit of the CBA and that penalties would be issued on backdiving contracts in the new CBA.

That's why you don't hear any teams complaining about it too much right now because they were issued fair warning.

[Street Pharmacist]

Originally Posted by You Need a Thneed

I don't believe that these huge numbers in the last year are correct. By the last year of the contract, most of the benefit of cap reduction is gone, as the player will have played a few years for less than the cap hit to mostly even it out.

The penalty is the worst when retiring in the off season before the salary drops below the cap hit.

The ways it's being stated here doesn't make any sense. The idea is to recapture the salary cap benefit received, not to severely punish the team on top of recapturing the benefit.

It should work out that a player retiring before the final year of a contract in which he would make 1 million but his cap hit is 5 million, that his team would have a $4 million recapture penalty in the following season, no matter what the contract terms were beforehand.

It doesn't make sense to "recapture" $17 million when the difference between the salary paid and the total cap hit to date is only $5 million.

You've got it backwards I think. If you're paying him 12 million at the beginning, but his cap hit is 7, you've gained a 5M benefit. At the end it's a cap disadvantage

[You Need a Thneed]

Originally Posted by opendoor

Capgeek had the rule confirmed by the NHL. They could still be wrong, but I'd give them the benefit of the doubt.

The league wanted to declare war on long term contracts and they did it.

They confirmed with the NHL, but are now misinterpreting it. The way that they are interpreting it now makes no sense, for reasons shown above. Every time I've looked at the calculator, up until this week has shown it correctly.

To put it simply, the cap recapture clause works like this.

For a player who's contract falls under the rule, when they retire with years left in their contract - you calculate the difference between the total amount of money that they have been paid, and the total amount of salary cap hit that the team has taken for that play in the same timeframe. The difference is then split up evenly over the number of years left in the contract.

Example:

Player A signs a 10 year contract, For 8,8,8,6,6,6,4,2,1,1 million - totalling $50 million dollars - giving him a cap hit of $5 million per season.

If that player would retire after year 5 of the contract, he would have been paid $36 million, but his total cap hit during those 5 years would have only been $25 million - a difference of $11 million. That $11 million would be split up over the remaining 5 years, giving the team a recapture penalty of $2.2 million over the next 5 years.

If that same player would retire after the 7th year, we would have been paid $46 million, with a total cap hit over that period of $35 million, again, a difference of $11 million. However, now it would only get split up between three years, giving the team a recapture penalty of $3.666 million per year over those three years.

If that player retired after the 9th year, he would have been paid $49 million, and his cap hit over those 9 years would have been $45 million. A difference of $4 million. The team would get a $4 million recapture penalty for the one year.


The idea is to recapture benefit given to teams, not to penalize them.

Total salary paid under the contract - total cap hit over same period)/number of years left on the contract = the amount of recapture penalty for each year remaining on the contract.

It gets more complicated if players are traded under the contract, but it gets calculated for each team for the years played for that team.

[Robbob]

Originally Posted by opendoor

Why wouldn't a player agree to still get paid while he sits on LTIR? It's not like he actually has to do anything; it's free money.

It has to be a legitimate injury. If it isn't above board then a team could risk cap circumvention penalties. Even when Warener was thrown on the LTIR the NHL sent doctors to confirm the injury.

[You Need a Thneed]

Originally Posted by Street Pharmacist

You've got it backwards I think. If you're paying him 12 million at the beginning, but his cap hit is 7, you've gained a 5M benefit. At the end it's a cap disadvantage

Maybe that's worded poorly. The clause in question is meant to be so that if a player has been paid less then the total cap hit at the point of retirement, the team doesn't get a "negative" recapture penalty - i.e. a salary cap "bonus."

It goes only one way. If a player signs a contract for 3,7,9,9,9,5,5,1,1,1 - Totalling $50 million over 10 years (numbers aren't legal, but just to show a point), then plays only the first year of the contract, then retires, the team doesn't get the $2 million dollars bonus in Salary Cap, split up over the next 9 years.

That's what the clause is meant to mean.

[opendoor]

Originally Posted by You Need a Thneed

They confirmed with the NHL, but are now misinterpreting it. The way that they are interpreting it now makes no sense, for reasons shown above. Every time I've looked at the calculator, up until this week has shown it correctly.

You must not have checked it recently. Capgeek changed it in early March when they got confirmation from the NHL on how the rule was to be implemented.

To put it simply, the cap recapture clause works like this.

For a player who's contract falls under the rule, when they retire with years left in their contract - you calculate the difference between the total amount of money that they have been paid, and the total amount of salary cap hit that the team has taken for that play in the same timeframe. The difference is then split up evenly over the number of years left in the contract.

Example:

Player A signs a 10 year contract, For 8,8,8,6,6,6,4,2,1,1 million - totalling $50 million dollars - giving him a cap hit of $5 million per season.

If that player would retire after year 5 of the contract, he would have been paid $36 million, but his total cap hit during those 5 years would have only been $25 million - a difference of $11 million. That $11 million would be split up over the remaining 5 years, giving the team a recapture penalty of $2.2 million over the next 5 years.

If that same player would retire after the 7th year, we would have been paid $46 million, with a total cap hit over that period of $35 million, again, a difference of $11 million. However, now it would only get split up between three years, giving the team a recapture penalty of $3.666 million per year over those three years.

If that player retired after the 9th year, he would have been paid $49 million, and his cap hit over those 9 years would have been $45 million. A difference of $4 million. The team would get a $4 million recapture penalty for the one year.


The idea is to recapture benefit given to teams, not to penalize them.

Total salary paid under the contract - total cap hit over same period)/number of years left on the contract = the amount of recapture penalty for each year remaining on the contract.

It gets more complicated if players are traded under the contract, but it gets calculated for each team for the years played for that team.

That's how I assumed it worked when I first heard about it as well, but I've seen no evidence of that other than my initial interpretation of the rule. Given that the people at Capgeek have actually spoken to people involved in creating and implementing the rule I'm inclined to defer to them until there is evidence to suggest otherwise. They have good sources on these matters and off the top of my head I can't think of a CBA matter that they've been wrong about in the past.

I don't think it's absurd to think that the NHL wants to punish teams above and beyond any benefit they gained. Bettman has made it quite clear that he wanted to crush these contracts and the negotiations were largely being run by teams that aren't affected by the rule.

[Robbob]

Who would have thunk it that the NHL has some poorly worded rules in the memo of understanding. At least they contacted the NHL though.

[You Need a Thneed]

Originally Posted by opendoor

You must not have checked it recently. Capgeek changed it in early March when they got confirmation from the NHL on how the rule was to be implemented.

I checked it several times around the trade deadline at the end of March, it wasn't changed then.

Originally Posted by opendoor

That's how I assumed it worked when I first heard about it as well, but I've seen no evidence of that other than my initial interpretation of the rule. Given that the people at Capgeek have actually spoken to people involved in creating and implementing the rule I'm inclined to defer to them until there is evidence to suggest otherwise. They have good sources on these matters and off the top of my head I can't think of a CBA matter that they've been wrong about in the past.

I don't think it's absurd to think that the NHL wants to punish teams above and beyond any benefit they gained. Bettman has made it quite clear that he wanted to crush these contracts and the negotiations were largely being run by teams that aren't affected by the rule.

The problem with that way of thinking is that teams get punished more for recieving less cap benefit. I find it HIGHLY unlikely that it would have been negotiated that way any one of the parties, much less approved in a vote by either side.

The way Capgeek was initially (and I've tried to explain), the math worked out completely, so that the cap hit reductions that were gained by teams would be brought to a net of zero, which makes complete sense, in that it's called a "recapture" clause.

The way it's showing now, and being talked about in this thread, the math doesn't work out to net zero. Also, the heaviest "penalties" would be reserved for teams that received the least benefit.

Here's the summary of terms, from the NHLPA website:

For all existing SPCs with terms in excess of six (6) years (“long-term contracts”), a “Cap Advantage
Recapture” provision will become applicable. Specifically, for years in which the Player under a
long-term contract is no longer playing in the League by reason of retirement, “defection” from the
NHL or otherwise (such that he is not playing and is not receiving Salary pursuant to the terms of
his SPC), any “Cap Advantage” that may have been gained by a Club during the time the Player
was playing in the League under his SPC (defined as the amount by which a Player’s actual cash
compensation exceeds his full Averaged Amount (“AA”)), both annually and in the aggregate, will be
“Recaptured,” and charged against the Club’s Upper Limit from year-to-year in equal amounts over the remaining term of the Player’s SPC.
If the contract in question is ever traded or assigned to one or more other Clubs in the League, each
Club will be subject to being charged with any and all “Cap Advantage” amounts it receives while
being obligated pursuant the contract.
The “Cap Advantage Recapture” provision will not apply to “Cap Advantage” amounts a Club may
have gained prior to trading a Player’s contract, where such trade occurred before the execution of
the new Agreement (including any binding MOU).
On a “bona fide”mid-season retirement, the Cap Advantage Recapture charge shall begin accruing
in the following League Year. The parties shall discuss the treatment of a Cap Advantage
Recapture charge in the case of a retirement “orchestrated” for the sole purpose of delaying the cap
charge to the following year

I don't think that's unclear at all. Pretty black and white to me.

[Jacks]

Originally Posted by You Need a Thneed

To put it simply, the cap recapture clause works like this.

For a player who's contract falls under the rule, when they retire with years left in their contract - you calculate the difference between the total amount of money that they have been paid, and the total amount of salary cap hit that the team has taken for that play in the same timeframe. The difference is then split up evenly over the number of years left in the contract.

Again, it would be nice if the NHL clarified the issue however Capgeek states.

Teams do not receive a credit for seasons with negative cap benefit (where cap hit exceeds salary), the league confirmed to CapGeek.com.

In your example the teams do receive credit for the negative cap hit years so clearly that is something that goes against what they are claiming to have confirmed with the league.

Edit: Unless I guess they are meaning no benefit for the lower salary compared to the cap hit in the years after retirement? I don't know.

[Jacks]

Originally Posted by You Need a Thneed

I don't think that's unclear at all. Pretty black and white to me.

In your quote it says "(defined as the amount by which a Player’s actual cash compensation exceeds his full Averaged Amount". It doesn't say anything about years when the actual cash compensation is lower than the averaged amount.

[You Need a Thneed]

Originally Posted by Jacks

Again, it would be nice if the NHL clarified the issue however Capgeek states.

In your example the teams do receive credit for the negative cap hit years so clearly that is something that goes against what they are claiming to have confirmed with the league.

This is part of what I was getting at earlier. Teams don't get credit for Negative cap hit years OVERALL. Or else, it would be possible to bank salary cap space for future years.

Frankly, I'll believe The Summary of Terms on the NHLPA's official website over some alleged statement from Capgeek (which I actually can't see anywhere on their website). On their website, the only thing that they have confirmed with the NHL is that over 35 contracts do not qualify for this new rule - i.e. The cap hit will be counted in full no matter what.

EDIT: found that quote on the Cap geek website. However, that page is older then the NHLPA Summary of terms. Personally, I would think that there was a misunderstanding on someone's part, when Capgeek asked their NHL contact, especially since the Cap Geek page was put up very shortly after the CBA was signed, and the contact certainly could have had some confusion.

[You Need a Thneed]

Originally Posted by Jacks

In your quote it says "(defined as the amount by which a Player’s actual cash compensation exceeds his full Averaged Amount". It doesn't say anything about years when the actual cash compensation is lower than the averaged amount.

You're missing the following few words "Annually and in the aggregate" - meaning the total amounts paid to a player over the length of the SPC to that point.

[Jacks]

Originally Posted by You Need a Thneed

You're missing the following few words "Annually and in the aggregate" - meaning the total amounts paid to a player over the length of the SPC to that point.

Oops, sorry missed that. Maybe they'll clarify this off season.

[opendoor]

Originally Posted by You Need a Thneed

I checked it several times around the trade deadline at the end of March, it wasn't changed then.

It was changed on March 6th:

https://twitter.com/capgeek/status/309422496212475904

I've checked it several times since then and it has always been as it is now. I doubt they would've changed it back and forth several times since then.

The problem with that way of thinking is that teams get punished more for recieving less cap benefit. I find it HIGHLY unlikely that it would have been negotiated that way any one of the parties, much less approved in a vote by either side.

The way Capgeek was initially (and I've tried to explain), the math worked out completely, so that the cap hit reductions that were gained by teams would be brought to a net of zero, which makes complete sense, in that it's called a "recapture" clause.

The way it's showing now, and being talked about in this thread, the math doesn't work out to net zero. Also, the heaviest "penalties" would be reserved for teams that received the least benefit.

I guess I'm just willing to accept the interpretation of a site with a history of being on top of these matters and who have said they've actually spoken to the NHL on the matter rather than my own personal interpretation. They've clearly had sources on these matters in the past so I'm confident what they're saying is true. The only room for error would be if they misinterpreted what their source said, which is certainly possible, but you'd think that'd be something they'd get straight.

Though even just taking the language at face value, I'm not sure it's totally clear. If the NHL wanted to recapture only the aggregate advantage then why would they have used the phrase "both annually and in the aggregate"?

[Bend it like Bourgeois]

Originally Posted by opendoor

Though even just taking the language at face value, I'm not sure it's totally clear. If the NHL wanted to recapture only the aggregate advantage then why would they have used the phrase "both annually and in the aggregate"?

Really interesting debate.

An argument for recapturing the annual could be that the teams have presumably used that space. Eg if a player received 8m on a contract with an AAV of 5, the team got a 3m benefit that only existed in that year, that they are assumed to have used. That the $ may even out later doesn't undo the advantage they received.

[You Need a Thneed]

Originally Posted by Bend it like Bourgeois

Really interesting debate.

An argument for recapturing the annual could be that the teams have presumably used that space. Eg if a player received 8m on a contract with an AAV of 5, the team got a 3m benefit that only existed in that year, that they are assumed to have used. That the $ may even out later doesn't undo the advantage they received.

I would argue that the recapture clause does now ensure that the advantage is undone. Under the previous CBA, as we all know, contracts were signed that appeared to make use of a loophole, so that teams could sign players and pay them more than their cap hits, over the whole length of their contract.

However, now teams will have to take the penalty back at some point - with no way out of it. Right now, all of these players with the backdiving contracts are in the years were they are paid more then the cap hit. However, as time goes on, there will be a mix of players for whom their salaries are higher than their cap hit and for whom it is the other way around. As this happens, overall, there won't be much benefit to teams to do this any longer.

The interesting thing I think of, is that, if Kiprusoff retires, his contract might be the only contract in NHL history to have successfully circumvented the cap - instead of merely shifting cap room into different years.

[powderjunkie]

I'll be shocked if common sense does not prevail here...the whole not including negative credits thing doesn't make sense.

[ricardodw]

so rather than taking a huge cap hit down the road each team will have a chance to buy these guys out at no cap penalty.

The players make out like bandits --- Richards gets paid 12M for his playing (82+20) 102 games in 2011-12 and 7M (12M prorated for 48 games) for 56 games in 2012-13
as a Ranger and then gets paid 14 instalments of 1.714M/year , another 24M.

That will mean he gets 43M for playing 158 hockey games (playoff bonuses not worth counting)..... that's $272,151 per hockey game

he scored 116 pts... over $370,000 per point


Glen Sather and Jay Feaster should not be allowed to manage a gas station never mind a NHL team.