Understanding the impact Tkachuk's bonuses will have on the deadline & next season

[sureLoss]

As we approach the trade deadline, I think it is important for some fans to understand how Tkachuk's performance bonuses are going to impact the cap space the Flames have at the trade deadline and next season.


First a primer on the information shown by CapFriendly



The most important numbers are:
Projected Cap Space - how much cap space the Flames are projected to have at the end of the season.
Current Cap Space - the projected total full season cap hits the Flames can add today without having to move salary out
Deadline Cap space - the projected total full season cap hits the Flames can add at the deadline without having to move salary out


It is important to understand that as the season progresses and salaries are paid out, teams can acquire players at less than their full season cap hit. For example, a player with a $1 mil full season cap hit can be acquired for picks at the half way point of the season with only $500k cap space.

This is how teams with cap space (and not using LTIR) can acquire players with much larger full season cap hits. At the trade deadline approximately 21.5% of a player's full season cap hit remains.


This is all great and looks extremely promising. According to CapFriendly the Flames can bring in $5.314 mil at the deadline without needing to move anyone out! That means they can add Wayne Simmonds or Kevin Hayes at the trade deadline without needing to move salary out!

Well technically they can, but it is complicated by the performance bonuses Matthew Tkachuk is going to earn by the end of this season.



What you need to know about performance bonuses for this topic

1. Tkachuk is expected to max out and fully earn his $850k Schedule A performance bonuses
2. While there are other Flames who could potentially earn performance bonuses, only Tkachuk has a realistic chance of earning them
3. The CapFriendly numbers from earlier don't include any performance bonuses. It is really difficult for CapFriendly or any other NHL Salary Cap tracking website to keep track of performance bonuses as they are earned, but maybe a future feature update will allow them to do so.
4. If at the end of season, the Flames don't have enough cap space to accommodate Tkachuk's $850k performance bonuses, the outstanding balance gets rolled over to next season.

The CBA allows teams to exceed the salary cap by 7.5% for potential performance bonuses (known as the Bonus Cushion) because it is not practical to assume all potential performance bonuses will be achieved. However, if at the end of the season, a team does not have enough cap space to cover the performance bonuses actually achieved by players, the excess gets rolled into next season and counts against next season's cap.


This means that if Treliving "goes ham" at the deadline and uses all his remaining cap space without any consideration of Tkachuk's performance bonuses this season, the Flames will have $850k less cap space to work with in the 19/20 season while needing to re-sign Tkachuk, Rittich, Bennett, and fill any other holes in the roster.

If the Flames only have $400k in cap space at the end of this season, the Flames will have $450k less cap space to work with the 19/20 season as the bonus overage rolls over to next season.



What does CapFriendly's numbers look like if you do account for Tkachuk's bonuses 100% counting towards this season?
If there is to be no bonus overage to roll over next season:
Projected Cap Space - $292,848
Current Cap Space - $633,369
Deadline Cap Space - $1,361,473

This means without deferring any of Tkachuk's performance bonus to next season, the Flames can actually only acquire $1.36 mil in full season cap hit at the deadline without moving any salary out.


Conclusion
How to handle Tkachuk's performance bonuses become an interesting choice for Treliving at the deadline. Essentially Treliving has to choose whether to defer all or some of Tkachuk's bonus to next season's salary cap so he can be a bigger player at this season's trade deadline at the cost of cap space for next season. For every $1 of Tkachuk's bonus the Flames defer, they can potentially add ~$4.65 in full season cap hit at the trade deadline. Deferring all of Tkachuk's $850k bonuses to next season means an extra ~$3.95 mil in "Deadline Cap Space"


Of course there are other tools for Treliving to use, such as moving some big salaries out or getting the other team to retain salary. Just want this out there because the numbers CapFriendly is showing has some consequences and as the trade deadline approaches fans need to understand this as they think about trade scenarios.




Notes:

• Flames will also likely want some cap space left over after the deadline so that they can still do some call ups if they have injuries between the deadline and the end of the regular season. So expecting them to fully utilize any cap space at the deadline is not wise. They need some breathing room.
• There is an assumption that the cap space will remain relatively the same from now until the deadline. If the Flames have to use more cap space for call ups, injuries, etc, they will have even less space to work with at the deadline.
• While I am pretty confident that no other Flames will reach their performance bonuses, I haven't researched it fully. I could be wrong about that.
• I am not saying that deferring all or some of Tkachuk's bonus is the right move or wrong move. That is up for debate.
• There is still a slim chance that Tkachuk, for some reason, he doesn't earn all his bonuses (assuming all his performance bonuses are based on minimum values allowed by the CBA). He has already earned $212.5 k for scoring 20 goals and he just needs to reach 3 of the following to max out: 35 assists, 60 points, .73 points per game, top 3 forwards in +/-, top 6 forward for ice time. All of which he is really likely to get.

tldr: In order to take full advantage of the $5.3 mil deadline cap space as shown by CapFriendly, the Flames will have to take a $850k "cap penalty" to
the 2019/20 season

[taxbuster]

Thanks, sureloss.



Curious then: so by *when* does he have to make that decision (formally)?


Obviously, he can do what he thinks he "needs" to do at the deadline, but at some point he has to declare how he is treating the bonuses. At what point in time does that have to occur? (Say, after the Flames with the Cup? or before they start the quest...? or before July 1 and Free Agency)


Clearly there is some allowance for timing, as teams really don't know until the last day of their playing year how much they will need to use for bonuses.

[sureLoss]

Originally Posted by taxbuster

Thanks, sureloss.



Curious then: so by *when* does he have to make that decision (formally)?


Obviously, he can do what he thinks he "needs" to do at the deadline, but at some point he has to declare how he is treating the bonuses. At what point in time does that have to occur? (Say, after the Flames with the Cup? or before they start the quest...? or before July 1 and Free Agency)


Clearly there is some allowance for timing, as teams really don't know until the last day of their playing year how much they will need to use for bonuses.

Treliving doesn't need to declare anything. The league will do a final calculation at the end of the playoffs. If there is a bonus overage, they will automatically roll over the amount to next season.

[transplant99]

Outstanding work....on top of everything else you do.

Huge props.

[taxbuster]

Well that's interesting...if a team does this over and over and over (think Oilers?), they could actually exceed the cap every year and eventually grind their "future" cap total down to ... nothing? Yikes!


(I'm a tax guy...we are always thinking about the ways in which the Feds "grind down" allowances to companies...this seems like an interesting opportunity for Chia! Ha ha.)


Thanks - being the "cap guy" at an organization like the Flames seems like one VERY interesting position. Lots to think about, lots to play with.

[Aarongavey]

Is stone on LTIR?

[calumniate]

Brings back memories of that Keenan era where we could only dress 12 players? Lol

[Kovaz]

Originally Posted by taxbuster

Well that's interesting...if a team does this over and over and over (think Oilers?), they could actually exceed the cap every year and eventually grind their "future" cap total down to ... nothing? Yikes!


(I'm a tax guy...we are always thinking about the ways in which the Feds "grind down" allowances to companies...this seems like an interesting opportunity for Chia! Ha ha.)


Thanks - being the "cap guy" at an organization like the Flames seems like one VERY interesting position. Lots to think about, lots to play with.

Thing is you can't roll over the same bonus overage twice, so it doesn't really accumulate like that. IIRC bonuses can only be on ELCs, over 35 contracts, and contracts after a major injury (?). So it's difficult to have more than 1-2 bonuses active at a time, and outside of a player who's amazing in year 1 of an ELC you don't generally get a player hitting bonuses in consecutive years.

[Classic_Sniper]

Has anyone found out anything regarding Michael Stone’s LTIR cap relief? The guy has met the minimum required time and games. I woul think this would give team some additional cap relief this season.

[Imported_Aussie]

Originally Posted by Classic_Sniper

Has anyone found out anything regarding Michael Stone’s LTIR cap relief? The guy has met the minimum required time and games. I woul think this would give team some additional cap relief this season.

LTIR allows you to exceed the cap by up to that player's cap hit while he is injured. Only going to apply of capped out, and in that case, all bonuses rolling into next year

[sureLoss]

LTIR doesn't help with bonus overage. You can't use LTIR relief to absorb a performance bonus because the way LTIR relief works is that a team has no actual cap space left.

Being on LTIR at the end of the season automatically means all of Tkachuk's performance bonuses will roll over to next season.

Anyways it seems like the Flames think Stone might come back before the trade deadline if they are already thinking about a conditioning stint in Stockton for him.

[Classic_Sniper]

Originally Posted by sureLoss

LTIR doesn't help with bonus overage. You can't use LTIR relief to absorb a performance bonus because the way LTIR relief works is that a team has no actual cap space left.

Being on LTIR at the end of the season automatically means all of Tkachuk's performance bonuses will roll over to next season.

Anyways it seems like the Flames think Stone might come back before the trade deadline if they are already thinking about a conditioning stint in Stockton for him.

Wouldn’t his LTIR relief help cover other salaries though? For example, an expensive trade deadine acquisition.

[Robbob]

Also, and I don't know what their bonus structure is like, but Andersson, Valimaki, Kylington and Mangiapane have bonuses they might need to be accounted for. Valimaki being a 1st rounder probably has the biggest potential bonus.

[DeluxeMoustache]

To me, you take Tkachuk’s full cap hit this year. Next year’s cap situation is ugly.

From CapFriendly, it looks like there is approximately 12.5 million to sign the roles with these cap hits:
Tkachuk (RFA) - 925 (excl bonuses)
Bennett (RFA) - 1.9

Hathaway - 850
Prout - 800

Smith - 4.25
Rittich - 800

If Rittich keeps playing like this, then keeping the total G cap hit around 5 is potentially in the cards, with a 1-2 M backup.

Hathaway and Prout are replaced by other cheap contracts

That leaves an incremental 3 M, plus the amount the cap increases for the team, as incremental salary for Bennett and Tkachuk.

Presumably the Flames need to find around 8-9 Million for Tkachuk and Bennett.

That’s what makes Neal’s 5.75 brutal. (Also carrying 1.5 for Brouwer, which freed up one winger slot, which you can argue Neal filled).

Also I don’t like Ryan’s 3.15 for a 32 year old who was coming off a 1 year 1.4 contract. Too much for a 4th liner, even if he does win some draws.

I guess this is why people are talking about the future of guys like Brodie, Hamonic and Frolik. That’s a shame because all 3 are value for money. Any two of the three have cap hits on par with Neal plus Ryan.

Stone also represents 3.5 on the IR which to me, if he is healthy, probably has to be expendable.

Anyways, the Flames have to find money next year, so deferring cap hit doesn’t seem ideal to me.

[EldrickOnIce]

I would not expect Mangiapane to bonus much on his 0-0-0.

The other two could possibly be eligible for ice time bonuses?

LTIR is horribly misunderstood, as far as most of us go.

[getbak]

Originally Posted by Classic_Sniper

Wouldn’t his LTIR relief help cover other salaries though? For example, an expensive trade deadine acquisition.

LTIR can only be used if replacing an injured player forces you to exceed the salary cap. So far this season, none of the Flames injury replacements have had cap hits that put the team over the cap.

Unlike real cap space, LTIR can't be banked from earlier in the season to be used later.


The only way Stone's cap hit could help with acquiring a more-expensive player at the deadline would be if Stone suffered a setback in his recovery and they could get LTIR relief for the full remainder of the season.

[FlamesAddiction]

Originally Posted by DeluxeMoustache

Anyways, the Flames have to find money next year, so deferring cap hit doesn’t seem ideal to me.

Totally agree. After this year, that is when the cap is going to get tough to manage. It's better to take the full hit this year IMO, even if it means that we cannot fit in any playoff rentals.

I am all for getting rentals in theory, but I also don't think we need any that badly.

[Matty81]

If Tkachuk earns 850k in bonuses doesn't that just reduce the current cap space to 1.3 Mil (and whatever that pro-rates to)?

I get the pro rating but don't understand how if they have 2.4 Mil in space now an 850k bonus leaves them with just 292k in space.

Is that because you are projecting non schedule a bonuses >850k as well?

[sureLoss]

Originally Posted by Matty81

If Tkachuk earns 850k in bonuses doesn't that just reduce the current cap space to 1.3 Mil (and whatever that pro-rates to)?

I get the pro rating but don't understand how if they have 2.4 Mil in space now an 850k bonus leaves them with just 292k in space.

Is that because you are projecting non schedule a bonuses >850k as well?

You are confusing what the numbers represent and that is understandable because the names CapFriendly uses can be confusing.


Projected cap space: This is how far below the $79.5 million salary cap the Flames will finish the season with based on the information they have.

Current cap space: "The current cap space is the total sum of full cap hit values that can be added to the teams roster to remain compliant below the cap ceiling at seasons end." - direct quote from CapFriendly.
In other words current cap space is the full season cap hits the team can add because it is day x out of a 186 day season and those full cap hits will be prorated to the projected cap space that CapFriendly has calculated.


So CapFriendly shows the Flames with a projected cap space of $1,142,838 and if you subtract Tkachuk's bonuses you get $292,848.

$292,848 in projected cap space was equivalent to $633,369 yesterday in what CapFriendly calls "Current Cap Space" and equivalent to $1,361,473 in what CapFriendly calls "Deadline Cap Space"

[FanIn80]

Since the end of season projected cap space is usually significantly less than the deadline cap space, I always assumed it was because the end of season space accounted for bonuses, whereas the deadline space did not.