NHL CBA experts: Help me with a fact check for a story

[rogermexico]

Hi folks!
I'm working writing a new fiction project, that includes a character who is an ex-NHL goalie. The back story is that he was bought-out of a large contract. The story takes place in a little imaginary town in the East Kootenays, and this wealthy odd-ball ex-Goalie is one of the town characters.

I want to make sure that I've got the details of his contract buy-out straight for myself.

I've written a little summary of his fictional contract and the details around the buy-out. These details may not necessarily appear in the text, but I want to make sure that they're accurate according to the actual, real-world CBA.

Do any of the armchair cap-ologists or CBA experts on this board mind having a look and providing feedback for me? It would help me tremendously!

Here's the summary:

In the summer of 2007 Ray Gourde signed a 7 year $42.25M contract with an annual cap hit of $6.04M. The front-loaded contract paid him a real salary of $8.5M for the 2007-08 season, making him the fourth highest-paid player in the league, and the highest paid goalie.

Gourde’s contract was bought out by the team in the summer of 2009. The ordinary course buy-out left Gourde receiving 2/3rds of the remaining $25.75 over the next ten years, meaning Gourde will be on the team’s payroll (and salary cap) for $1.6995 annually until the summer of 2019.

Again, this text won't necessarily appear as-written in the story, but will be my reference piece for consistency and realism. Thanks in advance for your feedback!

[Roughneck]

The main thing would be that the signing bonus has to be paid in full, so the player would get the full signing bonus amount remaining plus 2/3s of the remaining salary.


EDIT: Though I don't remember what signing bonus restrictions were back in 07. I remember the Shea Weber contract was very signing bonus heavy to try and make it harder for the Preds to match but that wasn't until the next CBA as I recall.


EDIT 2: a cursory look at goalie salaries from the top paid goalies of the era doesn't show any signing bonuses, so they may have been limited to ELCs.

[squiggs96]

I don't know anything about the CBA, but I do know about the Kootenays. It is not called the East Kootenays. There is also no West Kootenays. The Regional District of East Kootenay is shortened to East Kootenay. There is only one of it, so it should never be pluralized to East Kootenays. However, if you refer to the East Kootenay and West Kootenay areas combined, you can call them the Kootenays.

Think of it like South and North Dakota. You wouldn't say there's a town in the South Dakotas. You'd say there is a town in South Dakota. If you wanted to talk about South and North Dakota, you could refer to both states as the Dakotas.

[rogermexico]

Originally Posted by squiggs96

I don't know anything about the CBA, but I do know about the Kootenays. It is not called the East Kootenays. There is also no West Kootenays. The Regional District of East Kootenay is shortened to East Kootenay. There is only one of it, so it should never be pluralized to East Kootenays. However, if you refer to the East Kootenay and West Kootenay areas combined, you can call them the Kootenays.

Think of it like South and North Dakota. You wouldn't say there's a town in the South Dakotas. You'd say there is a town in South Dakota. If you wanted to talk about South and North Dakota, you could refer to both states as the Dakotas.

Thank you for this!

[Robbob]

I came up with the same numbers on my napkin. Looking at Kippers contract it was very front loaded and similar to what you are doing. It had no signing bonus, so the signing bonus doesn't need to come into play.
Y1..8.5
Y2..8
Y3..7
Y4..6.25
Y5..5.5
Y6..4
Y7..3
42.25 = 6.04AAV

Burn the 2 years

5 years left with 25.75M left. 2/3=16.995 over 10 years 1.6995

[rogermexico]

Originally Posted by Robbob

I came up with the same numbers on my napkin. Looking at Kippers contract it was very front loaded and similar to what you are doing. It had no signing bonus, so the signing bonus doesn't need to come into play.
Y1..8.5
Y2..8
Y3..7
Y4..6.25
Y5..5.5
Y6..4
Y7..3
42.25 = 6.04AAV

Burn the 2 years

5 years left with 25.75M left. 2/3=16.995 over 10 years 1.6995

Yeah I used that Kipper contract as the basis. I wanted to make sure that I wasn't missing any extra variables with the numbers. Thanks!

[getbak]

To clarify: He was paid $8.5 million the first season and $8 million the second (which would leave the $25.75 for the remaining 5 seasons). Is this correct?


For the buyout, whatever is left owing over the remainder of the contract is divided by the remaining number of years on the contract, then divided by 3, and he is paid that amount each year over double the remaining term of the contract.

So, in this case, if he is owed $25.75 million over 5 remaining years, the buyout payout would be: (25.75/5)/3 per year for 2x5 years. This is $1.716... million per year for 10 years.



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The cap hit is more complicated. The cap hit in each year depends on the "cap savings" from the buyout in each year. In an unbalanced contract, that will fluctuate from year to year (until it gets to the final 5 years, when the cap hit is just the payout for those years).

In this case, over the first five years of the buyout, the cap hit is calculated by taking the player's pre-buyout salary for that year and subtracting the buyout payout for that year to determine the cap savings from the buyout. That savings is subtracted from the player's cap hit for the year to calculate the new cap hit for that year.

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So, let's say in your situation, the player's contract was set up to pay him: 8.5, 8, 8, 7, 7, 2, 1.75 over the full 7 seasons. The cap hit for that contract would have been $6.036 million per year.

For year 3, the first buyout year: Base salary is $8 million. Buyout is $1.717 million. That makes the savings: $6.284 million, which would actually give him a negative cap hit for the first year of -$0.248 million.

For the following 2 seasons, the cap hit would also be reasonable: $7 million - $1.717 million is a savings of $5.283 million, and a cap hit of $0.753 million.

The next 2 years would be the killers though, as the savings would be minimal and the team would have to carry nearly the full cap hit.

The final five years would just be the buyout amount for the cap hit.


If the contract was structured differently, the calculations would work out differently.

[rogermexico]

This is amazing getback, thanks so much!

Originally Posted by getbak

To clarify: He was paid $8.5 million the first season and $8 million the second (which would leave the $25.75 for the remaining 5 seasons). Is this correct?

Yes, that's what I was thinking. I want it to be one of those front-loaded contracts, like Kipper's, from that CBA period.

For the buyout, whatever is left owing over the remainder of the contract is divided by the remaining number of years on the contract, then divided by 3, and he is paid that amount each year over double the remaining term of the contract.

So, in this case, if he is owed $25.75 million over 5 remaining years, the buyout payout would be: (25.75/5)/3 per year for 2x5 years. This is $1.716... million per year for 10 years.

Ok, awesome.

The cap hit is more complicated. The cap hit in each year depends on the "cap savings" from the buyout in each year. In an unbalanced contract, that will fluctuate from year to year (until it gets to the final 5 years, when the cap hit is just the payout for those years).

In this case, over the first five years of the buyout, the cap hit is calculated by taking the player's pre-buyout salary for that year and subtracting the buyout payout for that year to determine the cap savings from the buyout. That savings is subtracted from the player's cap hit for the year to calculate the new cap hit for that year.

---------

So, let's say in your situation, the player's contract was set up to pay him: 8.5, 8, 8, 7, 7, 2, 1.75 over the full 7 seasons. The cap hit for that contract would have been $6.036 million per year.

For year 3, the first buyout year: Base salary is $8 million. Buyout is $1.717 million. That makes the savings: $6.284 million, which would actually give him a negative cap hit for the first year of -$0.248 million.

For the following 2 seasons, the cap hit would also be reasonable: $7 million - $1.717 million is a savings of $5.283 million, and a cap hit of $0.753 million.

The next 2 years would be the killers though, as the savings would be minimal and the team would have to carry nearly the full cap hit.

The final five years would just be the buyout amount for the cap hit.


If the contract was structured differently, the calculations would work out differently.

This is super helpful. I want to know the cap hit as well as the actual salary owing, so I will use the structure you've got here and your cap number.

One of the story elements I want to play with is that this guy lives in relative obscurity in this little town, but every now and then some tourist or someone passing through recognizes him, and the first reaction is always "Oh my god, I can't believe the team still has to pay you so much!" So I like the idea that there are some really painful buy-out years for the team that knowledgable fans would really resent.

Thanks again!

[GGG]

One issue is that it’s pretty unlikely that the contract would be bought out with 5 years left on it. If you look at Neals deal Ownership was reluctant to by him out.

[Robbob]

Originally Posted by getbak

For the buyout, whatever is left owing over the remainder of the contract is divided by the remaining number of years on the contract, then divided by 3, and he is paid that amount each year over double the remaining term of the contract.

Where did you find that calculation. Capfriendly and other sources I have read say the cost of a buyout is 2/3 (assuming the player is 26+) of the remaining salary paid over 2 times the term left.

You are right that the cap hit is calculated each year based on a bunch of things.

[getbak]

Originally Posted by Robbob

Where did you find that calculation. Capfriendly and other sources I have read say the cost of a buyout is 2/3 (assuming the player is 26+) of the remaining salary paid over 2 times the term left.

It's different ways of saying the same thing.


Total Remaining Salary x 2/3 = Total Buyout Value (25.75 x 2/3 = 17.167)
Remaining Years x 2 = Buyout Term (5 x 2 = 10)

Total Buyout Value / Buyout Term = Annual Payout (17.167 / 10 = 1.717)


Since there's a 2 on the top and bottom of the equation, they cancel out and leave you with...

Total Remaining Salary / (Remaining Years x 3) = Annual Payout (25.75/15 = 1.717)

[Robbob]

I see the error I made, multiplied by .66. Needed to throw a couple more 6s in there.

[Robbob]

Originally Posted by GGG

One issue is that it’s pretty unlikely that the contract would be bought out with 5 years left on it. If you look at Neals deal Ownership was reluctant to by him out.

Dare to dream though. I know it was a compliance buyout, but Rick Dipiero is getting 1.5m until 2029. He was bought out in 2013.