NHL proposal, as is, hurts Flyers

snider homer lukko

Image courtesy of Bleacher Report

On Tuesday, the NHL made a new proposal to the NHLPA in which they offered a 50/50 split of Hockey Related Revenue, down from their initial proposal of 57/43. It was seen by many to be the first step towards some real progress in coming to an agreement on a new CBA, and saving an 82-game season.

Yesterday, NHLPA Executive Director Don Fehr sent a letter to all players and agents in which he explains why he is less than thrilled with the proposal. Personally, I’m not the least bit surprised by the response. In fact, I think anyone who thought this proposal might be accepted was kidding themselves.

In addition to the NHLPA response, the NHL released the details of the proposal. Unfortunately, as one of the wealthiest organizations in the NHL, it doesn’t have the Flyers’ best interest in mind.

4. Payroll Range: 

• Payroll Range will be computed using existing methodology. For the 2012/13 season, the Payroll Range will be computed assuming HRR will remain flat year-over-year (2011/12 to 2012/13) at $3.303 Billion (assuming Preliminary Benefits of $95 Million).

• 2012/13 Payroll Range Lower Limit = $43.9 Million

Midpoint = $51.9 Million

Upper Limit = $59.9 Million

For a team that operates so closely to, and truthfully, over, the cap when you factor in Long-Term Injured Reserve, it’s pretty clear that a decrease from $70.2 million (this offseason’s upper limit) to the proposed $59.9 million is fairly substantial.

However, the proposal does state that teams will be allowed to exceed the upper limit to the previously set $70.2 for 2012-13. They specify ”a full-year” transition.

While this will result in a reduced Upper Limit for 2012/13, we have also proposed to permit the Clubs to exceed the Payroll Range this year, to a maximum of $70.2 million – which was the Cap established prior to this past summer. This will allow a Club that chooses to do so to maintain or enhance its current roster during a full-year transition period.

My concern, as far as the Flyers go, is that if it is truly only a single transition year, the Flyers will be expected to be fully compliant come 2013-14.

Since the implementation of the cap, the upper limit has gone up an average of 8.8% a season. More recently (the past 3 seasons), it’s been 7.2%. For argument’s sake, an 8% increase would take the upper limit to $64.692 million.

The Flyers currently have $57.473 million in cap payroll tied up in 16 players for 2013-2014. That leaves a meager $7.219 million left to sign, at least, six players; taking the roster to the standard 13 forwards, seven defenseman, and two goaltenders. That is an average of $1.2 million per player; which is not too terrible when you only need six guys, and some of them are sure to be at or near league minimum.

The most notable free agent after this season would be Kimmo Timonen, who would definitely be a substantial loss; but can almost certainly not return for anywhere near his current $6.33 million cap hit (nor should he). The remaining free agents are Jody Shelley, Ruslan Fedotenko, Eric Wellwood, Zac Rinaldo, Andreas Lilja, and Michael Leighton.

In 2014-2015, the Flyers have $43.413 million tied up in 10 players. If we project another 8% cap increase, that takes the upper limit to $69.867 million. The Flyers would have $26.454 million to sign at least 12 players, or an average of $2.2 million per player. Doesn’t seem too terrible right?

Image courtesy of philly.com

Image courtesy of philly.com

Unfortunately, after the 2014-15 season the Flyers have to sign Claude Giroux, Brayden Schenn, Sean Couturier, and Matt Read. Yes, you read that right; perhaps the Flyers four most valuable assets at the moment (at least in terms of production as compared to cap hit) all hit the market in the same summer. Additionally, both Andrej Meszaros and Bruno Gervais are free agents.

Giroux, Schenn, and Couturier are “only” restricted free agents, but it will still take substantial money to sign them. Jakub Voracek and Wayne Simmonds both got in the neighborhood of $4 million on their recent long term deals as restricted free agents (although Simmonds still had one year remaining).

If Schenn, Couturier, and Read were to get $4 million a piece, heck, let’s even say a very conservative $3 million a piece, that is $9 million of the $26.454. Throw in something in the neighborhood of $6 million for Giroux and all of a sudden there is only roughly $11 million left for eight players. (The proposal contains additional stipulations related to contract length, which I’ll get to shortly, which would result in shorter deals and higher cap hits.)

The cap situation could get ugly, quickly. At the very least, it would take some creativity and movement to stay compliant.

5. Cap Accounting: 

• All years of existing SPCs with terms in excess of five (5) years will be accounted for and charged against a team’s Cap (at full AAV) regardless of whether or where the Player is playing. In the event any such contract is traded during its term, the related Cap charge will travel with the Player, but only for the year(s) in which the Player remains active and is being paid under his NHL SPC. If, at some subsequent point in time the Player retires or ceases to play and/or receive pay under his NHL SPC, the Cap charge will automatically revert (at full AAV) to the Club that initially entered into the contract for the balance of its term.

Further complicating the Flyer’s future cap concerns is this stipulation which essentially takes what was known as a 35+ contract, and simply applies it to all “back-diving” contracts over five years in length. Jakub Voracek, Wayne Simmonds, Chris Pronger, and Ilya Bryzgalov would all fall under these terms.

Broad Street Hockey wrote a great piece on this rule yesterday. I particularly like this point of theirs:

If the NHL’s proposed “Wade Redden rule” is intended to screw a team like the New York Rangers, this can officially be called the “screw you, Paul Holmgren rule.”

For Voracek and Simmonds, who will only be 29 and 30 at the end of their deals respectively, it is less of a concern, but the Flyers cannot be rid of these cap hits “regardless of whether or where they are playing”.

This means that until Pronger is 42 (which we already knew, due to his 35+ contract), and Bryzgalov is 40, the Flyers are stuck with their cap hit; even in the event of retirement. (Which is why Pronger “can’t” retire.)

The Flyers could trade any or all of these players to other teams, but as it is noted, if said players were to retire the cap hit would fall back to the team that gave them the contract. Hello Mike Richards and Jeff Carter and James van Riemsdyk.

It’s pretty apparent that these stipulations put a whole lot of risk on teams that dealt with, and continue to deal with, contracts of great length.

The good news is, as our own Marc Siciliano pointed out on Twitter, “the Pronger deal is no longer an incredibly dumb one, just an average dumb one.”

• Money paid to Players on NHL SPCs (one-ways and two-ways) in another professional league will not be counted against the Players’ Share, but all dollars paid in excess of $105,000 will be counted against the NHL Club’s Averaged Club Salary for the period during which such Player is being paid under his SPC while playing in another professional league.

Also being called “the Wade Redden rule”, thanks to the Rangers sticking Redden and his $6.5 million contract in the minors to rot, this stipulation prevents rich teams like the Flyers from sending bad contracts to the minors.

Ed Snider rarely, if ever, cares about “real dollars”; he cares about “cap dollars”. He wants to win. He will pay Michael Leighton and Matt Walker and Randy Jones a lot of money to play in the AHL. As long as it never hits the Flyers’ cap, he doesn’t care. In fact, this would mean Matt Walker’s $1.7 million contract would hit the Flyers’ cap this season.

The Flyers would no longer have the ability to wave their magic wand and make bad contracts disappear.

6. System Changes: 

• Maximum contract length of five (5) years.

I mentioned above that I would get to the proposed point which would make it difficult to sign players to “cap friendly” deals. The Flyers will not be able to lock Giroux up for life like they tried to do with Richards and Carter.

Image courtesy of philly.com

A maximum contract length of five years will result in higher cap hits. Mike Richards and Jeff Carter only signed their sub-six million dollar deals because they got 12 and 11 years respectively. If Giroux (and Couturier, and Schenn, and Read, and…everyone) can only get five years, he is going to get more money in the short term.

So the future cap situation is clouded even further.

6. System Changes: 

• Limit on year-to-year salary variability on multi-year SPCs — i.e., maximum increase or decrease in total compensation (salary and bonuses) year-over-year limited to 5% of the value of the first year of the contract. (For example, if a Player earns $10 million in total compensation in Year 1 of his SPC, his compensation (salary and bonuses) cannot increase or decrease by more than $500,000 in any subsequent year of his SPC.)

While this stipulation should not effect the Flyers’ cap in any way–meaning this will not inflate cost at all — it does take away one of the Flyers’ biggest advantages in signing free agents. The Flyers would be unable to flaunt their money, and offer players front-loaded deals.

It’s simple, if two teams offer you the same contract in terms of total dollars and length, but one team offers you most of those dollars in the early years, you take the front loaded deal. A dollar today is worth more than a dollar a year from now.

Never again will you see an offer sheet like with Shea Weber. Ed Snider and Paul Holmgren will not be able to strong arm poor teams anymore.

Undoubtedly, the specifics of this proposal will change, in fact, the NHLPA is expected to counter later today. While there are certainly some interesting–and, probably, effective, as far as maintaining league wide financial health– aspects to the proposal, it also would severely impact the Flyers and their ability to operate as they have the past seven seasons.

The Flyers would be forced to become compliant with a reduced Upper Limit in one year’s time, while having to sign four of their brightest young stars, not to mention one of the game’s best players.

They are effectively being punished for their four existing “back-diving” contracts by turning them into what is essentially a 35+ contract. Two of which are extremely risky (Pronger and Bryzgalov).

They can no longer rid themselves of bad contracts by burying them in the minors.

Lastly, they lose a lot of their free agent bargaining power by being limited to contracts of five years, which will drive up cost and further complicate their cap, and by not being able to front load the contracts.

It’s a good first step for the league, but it’s a bad one for the Flyers.

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  • Bob H

    Just to widen the scope, the proposal pretty much penalizes any team that tries to look for loopholes in existing CBA language and which tries to circumvent them with the longest possible terms.

    Did the Flyers, or any other team for that matter, know that this expired CBA would lead to discussions and proposals that would jeopardize what they’ve done already? Of course not. But if any team actually tries to work within the existing language instead of always looking to exploit, wouldn’t future problems be prevented in case of another lockout, or a simple old expired CBA that’s renewed with different language?

    • http://www.flyersfaithful.com/ Kevin Christmann

      I agree Bob. At this point it almost seems like a split between the rich owners and the poor owners, in that the poor are sticking it to the rich.

      To your latter point, I think those that are exploiting would argue they are working “within the existing language”. They just are also “looking to exploit”.

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