Confirmed Signing with Link: [CAR] F Seth Jarvis signs extension with the Hurricanes (8 years, $7.420087M AAV; deferred salary in 9th year)

[tmg]

Slavin’s contract, when announced, was said to be 51,690,000 over 8 years for an aav of 6,461,250 (which would be the actual mean).

Puckpedia now has it as 6.40 aav. So they’re shaving like 61 grand cap per year if that’s accurate. But news reports at publish time didn’t say the aav was reduced. I guess the only real difference other than magnitude is that the press knew about it at announce time this time. They didn’t then.

 

[Lunatik]

I know that, but the “rich” teams could’ve been doing this for nearly 20 years.

I'm sure they've tried but didn't find guys willing to defer.

Players and agents aren’t overly fond of deferring money which is why contracts are so front-loaded.



It’s not that surprising.

Front-loading a contract is a way of putting more money in the hands of a player while keeping a lower AAV.

Players and agents willing to defer are few and far between.

The only time it really works as an advantage for the player, is taxes.

Using the Ohtani contract with teh Dodgers for example, Without deferring money, he'd be paying about $10m per year in state taxes on a 10 year/700m, instead he's gonna make $2m per year for the next decade and defer 68m per year and pay probably less than 250k in state taxes. If he moves to a state with no state tax when that contract expires, he'll only have to pay federal taxes on it and gain about $65m+

 

[HockeyScotty]

Did the Doan and Slavin deals have an actual cap benefit, or were those ones all about delaying actual cash payout and/or player income tax implications?

I feel like someone would have raised some kind of concern when CapFriendly was around that there were contracts where the average annual value wasn’t actually the total committed salary divided by the total number of years.

From Daily Faceoff:
It’s been erroneously reported that Slavin’s eight-year deal has a $6.461 million cap hit, but it is actually going to be $6.396 million per year. It’s almost as if Slavin’s deal was Carolina’s trial balloon.

 

[Blueline Bomber]

I hope the Leafs do this with Marner. Sign him to a 5 year contract and give him a boatload the year after it expires

They’d have to convince Marner to be OK with getting paid in year 6 instead of getting the contract front-loaded (as is the norm). And good luck with that.

 

[HockeyScotty]

With the Colorado Avalance working a big Mikko Rantanen extension, the recent hiring of the former NHL's VP of Central Registry as Assistant GM, and the pattern of players there taking less to remain competitive; I think we are going to see another one in this ilk but with more $ very soon.

 

[Mrfenn92]

 

[super6646]

Carolina are a bunch of sneaky bastards. That’s why I love them

 

[HockeyScotty]

Theoretically though, shouldn't the NHL then do that calculation for each year of the contract to determine the NPV at signing if they are doing this for the deferred salary? Seems a bit odd to do a NPV calculation for that final SB payment past June 30, 2032 (last business day of the 8th year). I mean, Ryan Johansen got an even $8 mill per season, but NPV would clearly indicate that with each passing year, that $8 mill is worth less and less compared to the day he signed the contract.

SportsNet is reporting a $7.5 mill cap hit, which would be $60 mill total. So, that final SB in year 9 must be a large amount to get a $3.2 mill discount in today's value.

Using a 9.5% Discount Rate (the "imputed" interest rate; based on 1% over Wall Street Journal Prime Rate) then the July 1 2032 bonus would be approximately $6,614,000. If they used the US T-Bill rate of 5.5% + 1% margin then it would be $5,296,000. Who knows what index they are using as a benchmark but probably somewhere in that range and there could be other variables not known.

Discounted to NPV or "todays value" that would be $3.2m that was reported as part of the contract ($63.2 million was reported) but the AAV is only based on $60m/8 years = $7.5m AAV during the 8 contract years.

It feels like the $3.2m should at least carryover into the 2032-33 season just as other ELC/Veteran deals do or they can elect to charge it to the 2031-32 season if they have space; but since the current CBA doesn't seem to carve that out; I guess it's fair game until it "it's not".

 

[frederixx]

His ceiling is a sam reinhart/willy nylander (pre 94 and 98 pt years)/dylan larkin etc

8 years hes likely worth around 8.5M-9M

Getting at 7.5M should be a very good surplus contract for the next 8 years.

It's on pair with good potential young forwards that just signed a long term contract

Suzuki
Slafkovsky
Caufield
Kyrou
Thomas
Byfield
Etc.

I like Jarvis, but I really don't see him being worth 9m with his numbers. 7.5m is more than fair

 

[mouser]

Under the current CBA, nope, that money simply never counts against the cap.

I have a feeling that the next CBA will change that, especially if lots of teams start doing this.

For clarity, the year 9 deferred money counts against the cap. But the cap hit is included in years 1-8 with a discount adjustment for NPV.

 

[HockeyScotty]

I also wonder what risks the player takes with deferred bonus. Is it a "roster bonus", where he has to be medically cleared to be on the active roster: what if he is LTIR-retired by then? Is it insurable just as other compensation is?

How will this get affected in the US if policy changes to tax "unrealized earnings"?

Everytime there is a novel approach there are going to be a multitude of rebound affects and changes to close a loophole.

Kudos to Carolina and Jarvis for pushing the envelope!

For clarity, the year 9 deferred money counts against the cap. But the cap hit is included in years 1-8 with a discount adjustment for NPV.

Reading through what is being posted about factual cap implications, it does not appear that this is the way it will be treated. He has $60 million in earnings that are subject to the AAV calculation during the 8 years and thus his cap hit is $7.5m per season. His "year 9" bonus has not been published yet, but it is valued (based on NPV) at $3.2m in today's money; however it does not get included in his cap hit; otherwise it would be $7.9m AAV.

 

[Blueline Bomber]

I also wonder what risks the player takes with deferred bonus. Is it a "roster bonus", where he has to be medically cleared to be on the active roster: what if he is LTIR-retired by then? Is it insurable just as other compensation is?

How will this get affected in the US if policy changes to tax "unrealized earnings"?

Everytime there is a novel approach there are going to be a multitude of rebound affects and changes to close a loophole.

Kudos to Carolina and Jarvis for pushing the envelope!

The biggest risk for the player is that they’re simply leaving money on the table by deferring it this way.

Say the bonus for Jarvis is $3.2 million at year 9. If he got that bonus on year 1 instead, he could invest that $3.2 million and have it become much more by the time year 9 rolls around. I’m struggling to see why a player would opt for the deferred payment outside of simply doing it to help the team manage their cap.

 

[Peasy]

I hope the Leafs do this with Marner. Sign him to a 5 year contract and give him a boatload the year after it expires

You think Marner would agree to receiving money a year later?

Funny...

 

[HockeyScotty]

The biggest risk for the player is that they’re simply leaving money on the table by deferring it this way.

Say the bonus for Jarvis is $3.2 million at year 9. If he got that bonus on year 1 instead, he could invest that $3.2 million and have it become much more by the time year 9 rolls around. I’m struggling to see why a player would opt for the deferred payment outside of simply doing it to help the team manage their cap.

Yeah I get that; but the Canes are giving him a $5-6 million bonus in year 9; it is only being "valued" at $3.2m in today's money. They couldn't offer him an additional $3.2m in bonus inside the 8 years as it would blow their cap this year.

I totally understand the "now vs later" aspect and benefits/drawbacks to the player; that is the "easy" part.

What I am wondering is what other implications are there that this form of bonus/deferred comp could have that isn't obvious today. As in, what situation could arise that gives him $0 of that "bonus"?

 

[Father Roy Richards]

For the record since everyone including Chris Johnston mentioned the Ohtani deferral, here's how that was calculated by the league

 

[DaveG]

The NHL has had a salary cap since 2005. How in the world did it take GMs 19 years to figure out this loophole?? Something seems off here.

I mean, it didn't. The real surprise is that this wasn't common use after the Doan signing by the friggin Yotes of all teams

 

[9911]

Yeah, it's just time value of money, but it will be interesting to see how they calculate the "value" which applies to the cap which could be quite different than the actual dollars eventually paid.

Like if it is a signing bonus, but not paid until year 9, that's 9 years worth of TVM/NPV discounting to assign a "today's value" on that signing bonus... it could be very significant depending on what NHL's accountants think is a reasonable/defendable discount rate.

Take an 8 year $10M/year contract with a $10M signing bonus achieved at day 1 but only paid at year 9.

You'd think the cap hit would be $90M/8 years or $11.25M/year AAV.

But if they apply NPV to it @5% it would be something like (8x10M) + (10M discounted back 8 years at 5% = $6.7M in today's value), so the cap hit would be $86.7M/8 = $10.84M AAV

It's not huge, but it certainly helps.

I hope the oilers do something like this for Draisaitl! C'mon Jackson, you've got an MBA don't you?

The Oilers will try this with the Draisaitl contract but will ultimately be penalized a 3rd round draft choice for their tomfoolery. Good thing we picked up that 3rd in compensation for Holloway.

 

[mouser]

Reading through what is being posted about factual cap implications, it does not appear that this is the way it will be treated. He has $60 million in earnings that are subject to the AAV calculation during the 8 years and thus his cap hit is $7.5m per season. His "year 9" bonus has not been published yet, but it is valued (based on NPV) at $3.2m in today's money; however it does not get included in his cap hit; otherwise it would be $7.9m AAV.

Total payment over Slavin's contract is $51.69M. Which would be a $6.461M AAV.

Per reports the year 7 bonus of $4.55M is being deferred to year 9. This causes the NPV of the year 7 bonus to be $520k lower, for a total of $4.03M against the cap.

The total valuation of the contract is thus reduced to $51.17M, which comes out to a $6.396M AAV.


The Jarvis contract will follow a similar principle, we need to know which years the money is being deferred from to determine NPV.

 

[tmg]

I mean, it didn't. The real surprise is that this wasn't common use after the Doan signing by the friggin Yotes of all teams

I doubt the Yotes used it to shave against the cap - I think they were operating closer to the cap floor than the ceiling. People probably just saw it as deferring actual cash for them (and perhaps tax benefits for Doan) and not the cap circumvention tool the Canes are using it as now.

 

[HockeyScotty]

Total payment over the contract is $51.69M. Which would be a $6.461M AAV.

Per reports the year 7 bonus of $4.55M is being deferred to year 9. This causes the NPV of the year 7 bonus to be $520k lower, for a total of $4.03M against the cap.

The total valuation of the contract is thus reduced to $51.17M, which comes out to a $6.396M AAV.

This is the Slavin deal; have you seen any details on the Jarvis one yet?

 

[Father Roy Richards]

I mean, it didn't. The real surprise is that this wasn't common use after the Doan signing by the friggin Yotes of all teams

It's not really a loophole, it's just another way of asking a player to take less money. In Ohtani's case there were tax implications, so maybe some teams/players will try and take advantage of that?

All of the money paid to Jarvis will be factored over the 8 years of the contract, the fact that the deferred money is calculated lower today for cap purposes is because the deferred money has less present day value by being deferred

 

[Michoulicious]

I wanted Jarvis so bad that year at the draft, always knew he was going to be one of the steals of the draft.

Could have been a Leaf as well. Canes are thankful to Lamoriello/Dubas for that!

 

[kranuck]

Players wanting their money

But if a guy is already rich then why wouldn’t he take more money later in exchange for letting his team be comically over the cap now?

Drai/McDavid have already finished up massive deals. Why not set themselves up for a few rings while the rest of the league gets completely screwed.

I’m done with the NHL the minute a team saves even a million with this garbage.

 

[mouser]

This is the Slavin deal; have you seen any details on the Jarvis one yet?

My bad, grabbed the wrong contract. It will follow the same principle. We just need to know which year(s) the money is being deferred from. The earlier in the contract the larger the NPV effect will be.

 

[tmg]

But if a guy is already rich then why wouldn’t he take more money later in exchange for letting his team be comically over the cap now?

Drai/McDavid have already finished up massive deals. Why not set themselves up for a few rings while the rest of the league gets completely screwed.

I’m done with the NHL the minute a team saves even a million with this garbage.

Isn’t Carolina saving 3.2 million with Jarvis? Or is your threshold a million per year?