Claude Giroux’s current contract expires, and he will become a restricted free agent, after the 2013-2014 season. Many Flyers fans fear the possibility of an offer sheet especially after signing Shea Weber to an offer sheet this past summer.
In the expired Collective Bargaining Agreement (CBA), a player could not sign a contract extension until they were in the final year of their contract. I don’t expect this stipulation to change, so come July 1, 2013, when the new League Year begins, Giroux will officially be eligible to sign a contract extension with the Flyers.
I don’t think the Flyers’ front office wants to risk an offer sheet any more than the fans do. So I would expect the Flyers to move quickly in re-signing him. Which begs the question…what is it going to cost?
One of the biggest changes in the newly agreed to CBA are the restrictions on contract variance from year to year. In simpler words, there are further restrictions around how much a player’s salary can change from one year to the next.
Additionally, contracts are now capped at seven year lengths, or eight for teams re-signing their own players.
It’s hard to predict the financial approach–and therefore the final cap hit– they will take with Giroux, as there are a number of factors which are unknown.
1) How many years will give him? Under the new CBA they are allowed to offer as much as eight. However, they would then open themselves up to the possibility of recapture penalties for anything exceeding six years.
2) Will they front-load the contract at all? While the “back-diving” contracts have all but been eliminated, the Flyers could still try to entice Giroux with more cash in the early seasons. But, any cap savings they see in early seasons of the contract may potentially have to be repaid in later years as a recapture penalty if the unimaginable happens and Giroux retires early.
Let’s take a look at a few scenarios for Giroux.
With the salary cap next year being set to $64.3 million, the most that Giroux could take home in a given season is 20% or $12.86 million (assuming that stipulation does not change from the expired CBA).
It could only decrease by 35% at a time, and never drop below, 50% of 12.86 or 6.43. If the Flyers wanted to opt for a front-loaded contract, with maximum decreasing salary, it would result in a cap hit of $7.475 million at a maximum length of eight years since it is a re-signing.
If the Flyers opted for max dollars in the first two seasons, and tapered off as much as possible from there, it would produce a cap hit of $8.279 million.
Now, a $12.86 million single season salary is unprecedented for the Flyers. Shea Weber would have taken home $14 from the Flyers if Nashville declined to match the offer sheet; but other than that, no Flyer currently made more than $10 million in a single season. Both Danny Briere and Ilya Bryzgalov made $10 million in salary in their first seasons with the Flyers. It is worth noting that both of those players were unrestricted free agent signings…which is a different animal than signing your own players to a contract extension.
With a $10 million first year and reducing as much as possible from there, it would result in a $5.813 million cap hit.
With a $10 million in the first two years and reducing as much as possible from there, it would result in a $6.4375 million cap hit.
Recent history, however, has shown the Flyers steering away from dramatic front loaded contracts with their re-signings.
Scott Hartnell’s six year extension starts at $6 million and ends at $3. His salary never varies more than $1.75 million from his cap hit.
Wayne Simmonds’ six year extension is actually back-loaded. Starting at $2.8 million and moving to $5 million. His salary never varies more than $1.175 million from his cap hit.
Jakub Voracek’s four year extension is also back-loaded. Starting at $3.5 million and moving to $4.5 million. His salary never varies more than $750k from his cap hit.
Braydon Coburn’s four year extension starts at $4 million and never goes above $5 million. His salary never varies more than $1 million from his cap hit.
Obviously, taking a more even approach in which the salary barely varies from the cap hit, you can ultimately end up at any cap hit your heart desires; while never really having to worry about contract variance or anything of that ilk.
My initial reaction, is that the $8.279 number is too high, while the $5.8125 number is too low. But the market is a giant question mark right now. Nobody knows what the seven (or eight) year contract restrictions will do to cap hits. If players sacrifice term, they are going to want more money (at least for the players elite enough to have asked for, and gotten more than eight years).
For what it’s worth, Zach Parise’s cap hit of $7.538 million–signed this past offseason as the prized free-agent forward–is 10.7% of the $70.2 million cap. If we apply that to next year’s $64.3 million cap, that comes to $6.9 million.
Mind you, that cap hit comes as an unrestricted free agent, which is very different than signing your own restricted free agent (RFA). I would typically not expect a RFA to command the same price.
However, that also came on a 13 year deal; something that Giroux will be unable to ask for. So he must be compensated for it.
To look at a restricted free agent example, Sidney Crosby signed a 5 year contract at an $8.7 million dollar contract, after only his third season, while an RFA. He was also coming off of two 100 point seasons as well as a 72 point effort in 53 games. At the time, the salary cap ceiling was $56.7 million, so Crosby accounted for 15.3% of his team’s cap space.
On a $64.3 million cap, that would equate to $9.866 million. But again, Sidney Crosby at that time is very different than Claude Giroux right now; both in terms of the players as well as the state of the NHL. You can’t simply compare apples to apples when looking at 2013 as compared to 2007, especially while in two different CBAs.
So where does that leave us? Truthfully…it’s very cloudy. The free agent market coming out of the last lockout was pretty crazy as team’s had no baseline for contracts in a salary cap world. This time, teams now understand the salary cap world, but the landscape has changed. Their tools (the contracts), have been taken away and now they’ve got to learn to work with different tools.
Giroux’s play this season will go a long way in determining when, and for how much, he signs. If he is one of the league’s top five players again, it’s going to take a pretty penny to sign him.