[Signing] Canes sign Jarvis to 8 yr ext worth $63.2 million with a rare 9th year deferred bonus

[nfotiu]

Originally Posted by Sylvanfan

I take it that the year 9 payment will count against overall NHL expenses that year vs overall revenue. If that's the case and every team had say 6 million in these non cap charge payments a year, it might have a minor effect on escrow. 5 years from now everyone is likely doing this and someone will become the NHL's one day getting deferred payments for a lot of years after they dtop playing.

I imagine the present value of that bonus would be divided by the contract duration and that amount would be added to each year's salary for that year.

If it works like the MLB, the team would put the present value of each year in escrow within a year or two of the service year.

There is very little difference to the team and player in paying the player 7.4m/year outright than paying a player 6 million a year and putting 1.4m/year away in an account for later.

It's hard to see a big advantage to the teams in structuring it this way. It lets the player say he is making more than he is in real money. I think that was a factor in the Ohtani deal. If the player moves to a lower taxed jurisdiction after their playing career, the deferred money will be taxed at that rate. That was likely the primary factor in Ohtani's deal as it can get him out of some high California taxes.

[Zary's-Mustache]

Originally Posted by memphusk

Here we go. I was wondering when it was going to start. Rich teams get richer.

You actually knew this was a possibility? Lol

[topfiverecords]

Oilers just offered Draisaitl $1Mx8 and $120M bonus on the 9th year.

[The Fonz]

Originally Posted by topfiverecords

Oilers just offered Draisaitl $1Mx8 and $120M bonus on the 9th year.

Was my exact thoughts when I saw this contract.

Edit: not the values, specifically. Just the loophole in general which seemingly did not exist till today.

[getbak]

Here's what the CBA says on Deferred Salary...

Deferred Salary

“Deferred Salary” means any Paragraph 1 Salary that is earned during the term of an SPC during which the services attributable to that Paragraph 1 Salary are performed, but is not paid until after the expiration of such SPC. By definition, Deferred Salary that is earned during the term of such an SPC may not be paid until after the expiration of such SPC. Player Salary denominated as “Deferred” but payable within the term of the SPC shall be counted in the League Year in which the Player Salary is paid and shall not be treated as Deferred Salary. For purposes of calculating your Club’s Actual Club Salary, Deferred Salary counts as Player Salary in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary’s present value at 1-Year LIBOR plus one and one-quarter (1.25) percent at the time the SPC is registered (unless the Deferred Salary is to be paid with interest, in which case it counts in the League Year in which the Player performs the services for which it is earned, at the Deferred Salary’s stated cash amount). Other than Deferred Salary or Deferred Bonuses as set forth below, any other compensation must be paid in the year that it is earned.

For SPCs entered into prior to the date of the CBA any Deferred Salary that will be earned for services to be rendered during the 2012-13 League Year or any subsequent League Year should be included in your Club’s Actual Club Salary at its present value as previously determined at the time the SPC was registered.

Illustration #1: A Player signs a two-year SPC for the 2013-14 and the 2014-15 League Years. The SPC provides for Deferred Salary payable during the 2015- 16 League Year that is attributable to playing services for the 2013-14 League Year. Such Deferred Salary shall be paid to the Player in the 2015-16 League Year, but for purposes of reporting Actual Club Salary, the present value of such Deferred Salary shall be included in the 2013-14 League Year (assuming it was not to be provided with interest) and shall not be included in the 2015-16 League Year.

Illustration #2: An SPC entered into in the 2011-12 League Year and expiring after the 2012-13 League Year provides for Deferred Salary to a Player to be paid in 2014-15, for playing services rendered in 2012-13. Such Deferred Salary shall be paid to the Player in the 2014-15 League Year, but for purposes of reporting Actual Club Salary, the present value of such Deferred Salary shall be included in the 2012-13 League Year (assuming it was not to be provided with interest) and shall not be included in the 2013-14 League Year.

Illustration #3: A Player is owed Deferred Salary during the 2014-15 League Year that is attributable to playing services for the 2008-09 League Year. For purposes of reporting Actual Club Salary, such Deferred Salary shall not be included in the 2014-15 League Year.

Please note that in the event of “Overage” or “Shortfall” as defined in subparagraph 50.11 (“Reconciliation and Distribution Procedures”) of Article 50, the amount of the actual deferred cash payment due (i.e., Club Obligation) relating to the League Year in which the Deferred Salary (or Deferred Bonus) was earned must be adjusted by the factor of the “Overage” or “Shortfall”. This, however, applies to the actual “deferred” cash obligation payment due only and not to the amount of Deferred Salary to be charged to Actual Club Salary pursuant to this Section.

Someone a lot smarter than me can decipher this, but as I understand it, basically it recognizes that a dollar today is worth more than a dollar in the future. To compensate for that, it uses a formula to ensure the money you have on hand today (plus any gains that money will make in future) can cover the payments you will make in the future.

If I understand it correctly, they're not really getting away with a trick here. It's essentially an agreement between the player and team to say he will defer some part of the money he earned in a given season to after the end of the contract and as compensation, the team will pay him slightly more money when they pay out that deferment.

Whether this is a good deal for the player or the team depends on how good that calculation is.

[getbak]

It looks like the Canes also did this with Slavin's contract earlier this summer...

https://twitter.com/user/status/1829890749451944137

This really illustrates how little this actually impacts the cap hit.

Slavin deferred $4.55 million by two years and it only reduced the cap hit by $65,000 or $520,000 over the total length of the contract.


Of course, the first ones through the door push the boundaries to see what they can get away with. It's the ones who follow that start to push things to the limit. So, we'll see where this goes in the future.

[Ped]

No surprise it came from Tulsky, to try it out. But eventually a GM is going to try to convince a player to take a ton later, knowing that he will probably be fired by the time the bill comes due. It's just getting the owner to sign off on it.

[The Cobra]

Originally Posted by nfotiu

I imagine the present value of that bonus would be divided by the contract duration and that amount would be added to each year's salary for that year.

If it works like the MLB, the team would put the present value of each year in escrow within a year or two of the service year.

There is very little difference to the team and player in paying the player 7.4m/year outright than paying a player 6 million a year and putting 1.4m/year away in an account for later.

It's hard to see a big advantage to the teams in structuring it this way. It lets the player say he is making more than he is in real money. I think that was a factor in the Ohtani deal. If the player moves to a lower taxed jurisdiction after their playing career, the deferred money will be taxed at that rate. That was likely the primary factor in Ohtani's deal as it can get him out of some high California taxes.

Also Othani is making about $50M per season in endorsements, so he hardly needed the money.

The biggest difference is it gives the appearance of the player making more money.

I believe the present day value of Omani’s contract is about $460M, about $240M less than the stated value of $700M.

[The Cobra]

Originally Posted by getbak

It looks like the Canes also did this with Slavin's contract earlier this summer...

https://twitter.com/user/status/1829890749451944137

This really illustrates how little this actually impacts the cap hit.

Slavin deferred $4.55 million by two years and it only reduced the cap hit by $65,000 or $520,000 over the total length of the contract.


Of course, the first ones through the door push the boundaries to see what they can get away with. It's the ones who follow that start to push things to the limit. So, we'll see where this goes in the future.

You can do as much deferred as you want. The cap hit will be based on preset value, which is the real value of the contract.

You could do the whole contract as deferred. The cap hit would be the present day value of the contract divided by the number of years of the contract.

[The Cobra]

Originally Posted by getbak

Here's what the CBA says on Deferred Salary...




Someone a lot smarter than me can decipher this, but as I understand it, basically it recognizes that a dollar today is worth more than a dollar in the future. To compensate for that, it uses a formula to ensure the money you have on hand today (plus any gains that money will make in future) can cover the payments you will make in the future.

If I understand it correctly, they're not really getting away with a trick here. It's essentially an agreement between the player and team to say he will defer some part of the money he earned in a given season to after the end of the contract and as compensation, the team will pay him slightly more money when they pay out that deferment.

Whether this is a good deal for the player or the team depends on how good that calculation is.

That is exactly right. It’s not a trick to lower cap hit. The cap hit is the true value of the contract.

[All In Good Time]

Warning
Foil hat alert
Interesting how this became a thing right when the oilers need to extend Bouchard draisaitl and McDavid
The league loves them and are doing everything for them

[Ped]

Yes, Tulsky is totally doing this for the Oilers.

[All In Good Time]

Originally Posted by Ped

Yes, Tulsky is totally doing this for the Oilers.

Ha ha
I never said that. But typically you miss the meaning

[Jay Random]

Originally Posted by All In Good Time

Ha ha
I never said that. But typically you miss the meaning

Your words meant that, or else they meant nothing at all. Pick one.

[The Cobra]

Originally Posted by topfiverecords

Oilers just offered Draisaitl $1Mx8 and $120M bonus on the 9th year.

And that cap hit would be the present day value of that contract divided by 8.

It’s not $1M.

That would a terrible deal for Draisaitl. The present day value of that contract would be about $60M, so the cap hit would be about $7.5M. I am just estimating values here

In other words, from Draisaitl’s point of view, he left a ton of value in the table.

[The Cobra]

Originally Posted by All In Good Time

Warning
Foil hat alert
Interesting how this became a thing right when the oilers need to extend Bouchard draisaitl and McDavid
The league loves them and are doing everything for them

It’s not a thing that artificially lowers cap. This will not help the Oilers or any team.

[sureLoss]

$15.67 million is deferred until 1 day after the 8th year expires.

You can see why from a players perspective it is not done often. Instead of getting their money up front, they are delaying payment to the future.

https://twitter.com/user/status/1830017157671059779

[Ped]

Originally Posted by All In Good Time

Ha ha
I never said that. But typically you miss the meaning

You either meant that, or you meant when the current CBA was signed, the Oilers somehow knew a blueliner with 7 career games would become a PPG player and need an extension.

No one in the NHL has that kind of foresight, and especially not Oilers management.

[Locke]

Originally Posted by sureLoss

$15.67 million is deferred until 1 day after the 8th year expires.

You can see why from a players perspective it is not done often. Instead of getting their money up front, they are delaying payment to the future.

https://twitter.com/user/status/1830017157671059779

Huh...back-diving contracts...where have I seen this movie before?

[topfiverecords]

Originally Posted by The Cobra

And that cap hit would be the present day value of that contract divided by 8.

It’s not $1M.

That would a terrible deal for Draisaitl. The present day value of that contract would be about $60M, so the cap hit would be about $7.5M. I am just estimating values here

In other words, from Draisaitl’s point of view, he left a ton of value in the table.

It wasn’t meant to be taken so serious.