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

[BrindAmours Army]

Hell f***ing yes. Jarvis had mentioned he didn't really care about getting the maximum pay he could, and that he just wanted to be here long term. I was hoping for 8x8 but this is fantastic with the deferred pay.

Regarding why more teams don't do this: Players would need to agree to it, and they don't have much reason to do so. They'll save a bit on taxes, but if they got the payment earlier and invested it, there's a pretty solid chance the gains would exceed the tax savings they'll get by deferring it.

Based Tulsky and based Jarvis.

 

[CanesUltimate11]

That's why I'm having a very hard time believing this.

You need to account that the player needs to agree to this method as well. It’s not simply the GM wanting to do so.

 

[tmg]

- didn’t care about getting the maximum he could
- became one of only two players active in the league to take a contract where his actual contract money is greater than his team’s cap hit times years of contract.

It looks like he took the maximum he could be agreeing to let his team break the cap rules. They wouldn’t have had the cap room to give him this much money if he didn’t and they had to pay him without a cap loophole reducing his cap.

 

[Armourboy]

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

He messed up something somewhere cause I don't think the value of that contract is 460 million

Unless that is the Ohtani one?

 

[Big Daddy Cane]

With Jarvis, it’s an 8th place Selke finish as a 21 year old winger to go along with the 67 points. I don’t know if that was a function of analytics or league evaluators gushing to traditional writers. Impressive either way.

In terms of coach’s trust, Brind’Amour deployed him as a Top 2 PK F and played him with the shutdown center, Staal, in the playoffs. It’s there.

One more step offensively and he’ll be the “there’s more to hockey than scoring” candidate for Top 10 among wingers.

 

[Rebels57]

This contracts need to be taken out of every sport that has a salary cap. It's circumvention, even if it's legal. Might as well do away with the cap if this is allowed to continue because every team will start following suit.

 

[HockeyScotty]

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.

Yeah all I saw so far was there were $29.2 million in bonuses but no details provided.

 

[StreetHawk]

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.

It seems so strange to discount deferred money and also to allow payments beyond the 8 year max term ending June 30 each year.

for escrow, which year would this deferred money apply to? The year this money is to be paid or the year in which the money is deferred from? Cause it would seem unfair that it impacts players in a season where Slavin wouldn’t have a contract given the age he will be when his deal ends and the small chance he were to continue playing.

 

[HockeyScotty]

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

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.

This contracts need to be taken out of every sport that has a salary cap. It's circumvention, even if it's legal. Might as well do away with the cap if this is allowed to continue because every team will start following suit.

This doesn't benefit everybody the same.

A player in a "no tax state" during his playing career wants as much of that $ as soon as possible. if he defers some of his income and then moves back to Canada or a high tax US state, then he gets nailed for his deferred income.

A player in a high income tax state might very much want to sign this type of deal; as long as he is willing (and able) to wait for the rest of the cash.

In a way, this strategy is kind of an equalizer to the "no tax" states.

Some teams/players will explore this as a way to help the team keep their competitive window open longer by lowering the AAV now. This at least gets the player some additional money that he otherwise would have walked away from by signing for less to help his team.

It seems so strange to discount deferred money and also to allow payments beyond the 8 year max term ending June 30 each year.

for escrow, which year would this deferred money apply to? The year this money is to be paid or the year in which the money is deferred from? Cause it would seem unfair that it impacts players in a season where Slavin wouldn’t have a contract given the age he will be when his deal ends and the small chance he were to continue playing.

Good question. Does it even impact Salaries vs HRR calculation? If it does then this could create another escrow situation if abused.

 

[mouser]

It seems so strange to discount deferred money and also to allow payments beyond the 8 year max term ending June 30 each year.

for escrow, which year would this deferred money apply to? The year this money is to be paid or the year in which the money is deferred from? Cause it would seem unfair that it impacts players in a season where Slavin wouldn’t have a contract given the age he will be when his deal ends and the small chance he were to continue playing.

Escrow is always collected in the season payments are actually made. So the year 9 bonus will be subject to escrow.

This works the same way with buyouts for example--all buyout payments are subject to escrow, even though the SPC has effectively been terminated and payments continue past the normal lifetime of the contract.

 

[StreetHawk]

Escrow is always collected in the season payments are actually made. So the year 9 bonus will be subject to escrow.

This works the same way with buyouts for example--all buyout payments are subject to escrow, even though the SPC has effectively been terminated and payments continue past the normal lifetime of the contract.

I understand with buyouts the money is paid in the season in which the player was to be paid. It’s the twice the time where there is no money going out which spreads the cap hit that there is no impact on escrow. But at least those were the years the player was to have a valid contract which the escrow applies.

Seems a bit unfair for the players in that year 9 to be impacted when the player may not have a valid contract in. (Slavin more so that Jarvis due to age but never know about injuries).

 

[Mr Positive]

It's not some cheat. No player wants deferred salary. The longer you wait on getting cash the less you can work with it and the more value is lost to inflation

 

[Blackhawkswincup]

I am sure some NHL owners will refuse such deals, but others may be gleeful to use it going forward

Seems an odd thing to allow from NHL POV as it is in all spirits cap circumvention

 

[mouser]

I understand with buyouts the money is paid in the season in which the player was to be paid. It’s the twice the time where there is no money going out which spreads the cap hit that there is no impact on escrow. But at least those were the years the player was to have a valid contract which the escrow applies.

Seems a bit unfair for the players in that year 9 to be impacted when the player may not have a valid contract in. (Slavin more so that Jarvis due to age but never know about injuries).

Buyout payments are spread out over 2x the number of years remaining. For example Vancouver is paying OEL $2.416M / year through 2030-31, even though the contract was scheduled to expire after 2026-27.

 

[uncleben]

I am sure some NHL owners will refuse such deals, but others may be gleeful to use it going forward

Seems an odd thing to allow from NHL POV as it is in all spirits cap circumvention

It's not cap circumvention if it's explicitly allowed in the CBA, though

 

[shaner8989]

How does the deferred salary lower the cap hit?

 

[HockeyScotty]

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.

Using this as a benchmark, Slavin's deal "saved" $522,000 against the cap by deferring $4,550,000 for 2 years.

If Jarvis' deal saved $3.2million of AAV (as has been reported) then it is some combination of over SIX TIMES the value in deferral in time/money. So it could be over $20 million in bonuses that are deferred for 2 years or over a longer time period.

 

[mouser]

How does the deferred salary lower the cap hit?

Because the cap hit of the deferred salary is calculated at Net Present Value (NPV) in the contract year it is earned in.

Simple example, let's say I offered you the choice of $1 today, but if you wait two years I'll give you $1.10 instead. The contract would show you're being paid $1.10 in two years, however there will only be $1 of AAV cap charges--the NPV of $1.10 in today's money.

 

[HockeyScotty]

Because the cap hit of the deferred salary is calculated at Net Present Value (NPV) in the contract year it is earned in.

Simple example, let's say I offered you the choice of $1 today, but if you wait two years I'll give you $1.10 instead. The contract would show you're being paid $1.10 in two years, however there will only be $1 of AAV cap charges--the NPV of $1.10 in today's money.

I reversed calculated the discount rate applied to the Slavin contract and it was 5.91096%

Not sure what the NHL is using for their yield curve or index/margin rate because the CBA once referenced LIBOR (which is no longer available)

 

[Gregor Samsa]

So why does the whole deferred money and creative accounting thing exist for contracts? Why can’t it be a simple “player x is signed for y amount of money for __ years at a rate of z AAV”?

 

[Pavel Buchnevich]

My only thing is this, if you are approving this contract as a league now you cannot punish anyone else that does it before you outlaw it in the next CBA.

 

[Father Roy Richards]

He messed up something somewhere cause I don't think the value of that contract is 460 million

Unless that is the Ohtani one?

Yeah sorry was linking to details on the Ohtani one since no one has broken down the Jarvis one in such detail. Obviously could be very different but Chris Johnston mentioned the Ohtani contract so thought it could be interesting

 

[StreetHawk]

Buyout payments are spread out over 2x the number of years remaining. For example Vancouver is paying OEL $2.416M / year through 2030-31, even though the contract was scheduled to expire after 2026-27.

I meant that the cash is paid to OEL and others in the years they were due to be paid. Like 3 years left of cash payments which impact escrow but years 4-6 it’s just a cap charge and no cash implications.

 

[Lunatik]

This contracts need to be taken out of every sport that has a salary cap. It's circumvention, even if it's legal. Might as well do away with the cap if this is allowed to continue because every team will start following suit.

It can't be circumvention if the CBA literally states it's allowed, which it does.

 

[mouser]

I meant that the cash is paid to OEL and others in the years they were due to be paid. Like 3 years left of cash payments which impact escrow but years 4-6 it’s just a cap charge and no cash implications.

No. There is cash paid in years 4-6 and escrow withheld.

In a buyout the player receives 2/3rds of their remaining salary, to be paid equally over a period twice the length of the remaining contract. Any signing bonus payments are not discounted in a buyout and are paid fully according to the original SPC payment schedule.