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

[FissionFire]

So would deferred payments count against the players share of HRR for escrow? Would they be subject to clawback as well? Could see this causing escrow to skyrocket again if so which was a major issue for players before.

 

[kranuck]

Dundon is cheap.

Oh wait.

It’s 3 million.

Technically correct, but completely divorced from the mechanics of what is actually happening.

That 3.2 doesn’t exist, it never existed. People would be better served imagining that instead of a (say) 9M deferred bonus they’re getting in year 9, they’re deferring a (say) 5.8M bonus form year 1 that is getting paid out with interest in year 9. It’s only a cap discount if you only care about payment numbers and not at all about payment structure.

By deferring money, the player is taking a less valuable contract, by any reasonable definition. Of course the cap hit should be lower.

Cap circumvention by any sane definition.

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

Over 8 years, 400k annual.

 

[theVladiator]

One way to look at this is that Jarvis AAV is a better representation of Jarvis actual compensation over the 8 years of contract. The larger "total value" is a bit misleading since it includes the interest on the deferred money. Canes for essentially "borrowing" Jarvis'es bonuses for a few years, so that "extra" money isn't really compensation for his services per se, but simply interest on a loan. If Jarvis gets this money "on time", he can loan this money to somebody other than Canes, and I hope everyone agrees that the interest he gets from his investments would not count against the cap.

With that in mind, I think it's clear why this "circumvention" isn't popular. It's not all that great for the players, the interest they are getting on deferred compensation isn't all that great. It's also clear why it's happening now, with the interest rates a little higher.

 

[kranuck]

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.

No Vancouver is paying OEL varying amounts because of signing bonuses.

 

[TheBeard]

I hate this deferred stuff but tbh as a sharks fan, this is a perfect time to introduce a new way to circumvent salary crunches because we’ll need it in a few years.

 

[kranuck]

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

It’s cap circumvention.

 

[mouser]

No Vancouver is paying OEL varying amounts because of signing bonuses.

I'm pretty sure there were no signing bonuses remaining on OEL's contract when he was bought out. Believe he only had bonuses in 2020-21 and 2022-23.

 

[TheReelChuckFletcher]

I hate this deferred stuff but tbh as a sharks fan, this is a perfect time to introduce a new way to circumvent salary crunches because we’ll need it in a few years.

I remember when the Canes, during the dark time known as the Karmanos regime, had internal budgets in the years after the Stanley Cup. It's refreshing to see the Canes growing into a large-market team with large-market-worthy cap gymnastics.

 

[TheBeard]

I remember when the Canes, during the dark time known as the Karmanos regime, had internal budgets in the years after the Stanley Cup. It's refreshing to see the Canes growing into a large-market team with large-market-worthy cap gymnastics.

Being a consistent winner helps keep the stadium packed, the merch selling and the playoff revenue rolling in.

 

[MasterofGrond]

Cap circumvention by any sane definition.

No, it's not. They're providing money that is worth less to the player. It'd be insane to have it on the cap at the same number.

 

[Golden_Jet]

gonna block you rather than get in trouble for expressing my opinion of you.

Seems a bit nit picky for a block, been here 20 years never blocked anyone.
I’m assuming blocking a person, that partakes in a thread can make it confusing to follow along what some are referring to.

 

[chaz4hockey]

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

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+

Japan’s heavy tax structure will be over 50% of his contract.

- 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.

Two challenging points to your post:
1) canes did not “break cap rules”
2) With Fast’s season long injury they could have paid Jarvis more than $8m per year and still be comfortably below the cap.

 

[NotOpie]

It’s cap circumvention.

One of the key overlooked details of this situation is that Carolina's GM, Eric Tulsky, went to both the NHL and the NHLPA to ensure that everything was within the bounds of the CBA. He got the approval, likely with Slavin's deal and only expanded on it w/the Jarvis deal.

Henceforth, we will be calling our GM, The Doctor (he does have a PhD after all).

 

[Soundwave]

Couldn't a player reap large tax benefits from this, say Leon Draisaitl after he retires gets citizenship in say ... Switzerland (next door to Germany) ... he could effectively pay a shit ton less tax on that deferred salary.

 

[Chrispy]

- 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.

1) This deal would be $7.9M AAV without the deferred money.
Carolina currently has $7.35M in space on CapWages but is also listed carrying 13 forwards plus Jarvis (14 with Fast, see below).

Send down any one of Nadeau, Jost, Lemieux, or Robinson and Carolina can fit an $8M Jarvis contract.

This is also before officially moving Jesper Fast to LTIR as he is undergoing neck surgery and will be out for the 24-25 season. The $80.643 payroll on CapWages includes Fast's $2.4M.

Carolina would have the cap room to sign Jarvis to the $7.9M AAV if the reduced cap hit is denied. And they could go higher if needed because of Fast.

So if skirting the current cap ceiling is the issue, Carolina has space either way.

 

[chaz4hockey]

Canes now have Svetch, Aho, Jarvis and Slavin locked up from ‘28-‘29 through ‘31-‘32 at reasonable cap hits now and in particular the future when the cap goes up significantly.

Smart moves by their management.

 

[Nikolajs Sillers]

Looks like just lazy GM not trying to explore all possible options in all situations.

 

[Big Daddy Cane]

It’s 3 million.

$30 mil in signing bonuses over the contract. $13.05 mil (presumably) already paid for 24-25 to this Summer’s signees and re-signees before accounting for Jarvis.

That’s not how a cheap owner operates. The skeptics in Quebec got it wrong.

 

[DownIsTheNewUp]

I think people are making a bigger deal about this than it really is. At the end of the day it isn't really making a difference in what the player makes, which is why the CBA would allow for it.

Let's say a player gets a $10mil signing bonus on day one of the contract. It counts as $10mil on the cap spread over the life of the contract. He sticks it in an account that earns some interest and in 8 years that account is worth about $12mil.

What happens in the deferred scenario is the team says we'll pay you a signing bonus but instead of paying now we'll pay you at the end of the contract. We'll keep the money in our account earning interest for 8 years and then pay you $12mil. That costs the team $10mil in today's money so the CBA allows it to count as $10mil, just like in the first scenario.

Same cap hit and player has the same money in pocket in the end.

 

[HockeyScotty]

I think people are making a bigger deal about this than it really is. At the end of the day it isn't really making a difference in what the player makes, which is why the CBA would allow for it.

Let's say a player gets a $10mil signing bonus on day one of the contract. It counts as $10mil on the cap spread over the life of the contract. He sticks it in an account that earns some interest and in 8 years that account is worth about $12mil.

What happens in the deferred scenario is the team says we'll pay you a signing bonus but instead of now we'll pay you at the end of the contract, we'll keep the money in our account earning interest for 8 years and then pay you $12mil. That costs the team $10mil in today's money so the CBA allows it to count as $10mil, just like in the first scenario.

Same cap hit and player has the same money in pocket in the end.

Great explanation

Couldn't a player reap large tax benefits from this, say Leon Draisaitl after he retires gets citizenship in say ... Switzerland (next door to Germany) ... he could effectively pay a shit ton less tax on that deferred salary.

Precisely; which is why Deferred Salary under this scenario can help "high tax jurisdictions" compete under the Salary Cap with "low tax jurisdictions".

No way a guy in Florida/Texas/Nevada/Tennessee/Washington would agree to defer salary/bonuses as he wants as much of it tax free as possible.

 

[DingDongCharlie]

I don't like that this feels like circumventing the cap. If we do similar with Draisaitl, the league better not take issue.

 

[Drumman44]

This is like the Keith and Hossa contracts and is going to have to be either explicitly allowed or explicitly outlawed.

 

[PensandCaps]

Why haven’t other teams done this?

Because this requires the player to take less money. Because they get the money later.

 

[Tryamw]

Had no idea you could defer money and it’s insane the the richer teams never use it.

But players would much rather $$$$ today instead of tomorrow..

 

[hamzarocks]

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.

How did you determine a discount rate to bring down the NPV of the Y7 lump sum bonus payment of 4.55M to 4.03?

Is there a standard rate used by NHL for cap purposes on deferred payments based on year of payment (PV table type thing)?