News & Notes XLIV: Revenge of the Seth

[cptjeff]

Yeah this take is not gonna fly, we didn't inherit it from pre-cap-era CBAs, we inherited it from a cap-era CBA of 2005.

Are you sure? Has anyone actually dug up a copy of the 1995 CBA and looked? Daly is saying that the 2005 CBA inherited it from previous CBAs, and he would be in a position to know. And I can't find the 95 CBA online (though have only done a little quick googing), so it seems that wouldn't be easy to rebut.

 

[DaveG]

Found this interesting, from the Athletic's interview with Bill Daly:

What was the league’s perspective on the Carolina Hurricanes’ deferred salary with Jaccob Slavin and Seth Jarvis? Did that come across your desk?​

​

Oh, yeah. It came across my desk. I’m not going to go to the merits of deferred comp. I will say that deferred comp is specifically contemplated in the CBA and called for in the CBA that contracts can be structured this way.​

​

There are some things about the cap system that cause some interpretation to have to happen, which we shared with Carolina in advance. We shared with the union in advance as to how we were interpreting the provisions. I’m not saying that I think deferred comp is the greatest mechanism in a system like we have and maybe in the future might be addressed in collective bargaining. But we’re midterm now, so we kind of are where we are.​

​

The league doesn’t love the idea?​

​

Yeah, it throws out of whack some of the other checks and balances we have in the CBA, which forces interpretations in terms of how we allow it and what’s permissible and what’s not permissible. The original deferred-comp rules were developed in a non-cap world as opposed to in the cap world, so they kind of were inherited, and so they probably need adjustment on some basis going forward.​

​

Can it get to the point where it becomes cap circumvention?​

​

It can be, sure.​

​

Is that the fear?​

​

That’s a long-term big-picture fear, I suppose. It’s less a micro-dynamic fear particularly because, as I said, we’ve had to make interpretations which I think will continue to be binding until we renegotiate over it.​

​

Notably, the provision in the CBA was an inherited one from previous agreements without the cap, so this really is a loophole that just wasn't contemplated when designing the cap. And it does sound like the NHL will try and close it in a future CBA, so I guess we'll see whether we get whacked with a cap hit in year 9 of those deals.

I think that's going to depend on if one of the big market teams goes full Ohtani contract with one coming up. It's one thing with guys getting a bit of a bonus for a year afterward, but the second someone tries to do it where the majority or even just a large percentage of the contract is being paid out when the player isn't actively under said contract there's going to be problems. I can see say the Leafs, Rangers, or Chicago royally f***ing it up for the rest of the league.

 

[Nikishin Go Boom]

I think the league doenst like it because it messes with the escrow system with when money is paid and counted.

 

[Lempo]

Are you sure? Has anyone actually dug up a copy of the 1995 CBA and looked? Daly is saying that the 2005 CBA inherited it from previous CBAs, and he would be in a position to know. And I can't find the 95 CBA online (though have only done a little quick googing), so it seems that wouldn't be easy to rebut.

https://www.cmaxxsports.com/Misc/NHL-2005-CBA.pdf

I don't care what went before, this is what they agreed in 2005 when the cap era started and it wasn't an issue for 19 years.

 

[Blueline Bomber]

I don't think it's going to be the issue they're making it out to be. Jarvis had to defer $13 million to 8/9 years down the road to save the team 500k/year over the length of the contract.

That's not a good return on investment for either side. And while it's true the higher the deferred amount, the bigger the cap savings, it also becomes increasingly unlikely that the player is going to be OK deferring that amount.

 

[WreckingCrew]

Found this interesting, from the Athletic's interview with Bill Daly:

What was the league’s perspective on the Carolina Hurricanes’ deferred salary with Jaccob Slavin and Seth Jarvis? Did that come across your desk?​

​

Oh, yeah. It came across my desk. I’m not going to go to the merits of deferred comp. I will say that deferred comp is specifically contemplated in the CBA and called for in the CBA that contracts can be structured this way.​

​

There are some things about the cap system that cause some interpretation to have to happen, which we shared with Carolina in advance. We shared with the union in advance as to how we were interpreting the provisions. I’m not saying that I think deferred comp is the greatest mechanism in a system like we have and maybe in the future might be addressed in collective bargaining. But we’re midterm now, so we kind of are where we are.​

​

The league doesn’t love the idea?​

​

Yeah, it throws out of whack some of the other checks and balances we have in the CBA, which forces interpretations in terms of how we allow it and what’s permissible and what’s not permissible. The original deferred-comp rules were developed in a non-cap world as opposed to in the cap world, so they kind of were inherited, and so they probably need adjustment on some basis going forward.​

​

Can it get to the point where it becomes cap circumvention?​

​

It can be, sure.​

​

Is that the fear?​

​

That’s a long-term big-picture fear, I suppose. It’s less a micro-dynamic fear particularly because, as I said, we’ve had to make interpretations which I think will continue to be binding until we renegotiate over it.​

​

Notably, the provision in the CBA was an inherited one from previous agreements without the cap, so this really is a loophole that just wasn't contemplated when designing the cap. And it does sound like the NHL will try and close it in a future CBA, so I guess we'll see whether we get whacked with a cap hit in year 9 of those deals.

I wouldn't worry about that, league would have a hard time penalizing a team after a new agreement for a contract signed within the rules of an old CBA. It'd be like lowering a speed limit to 60 mph and then ticketing everyone who previously drove 65 mph

 

[cptjeff]

I wouldn't worry about that, league would have a hard time penalizing a team after a new agreement for a contract signed within the rules of an old CBA. It'd be like lowering a speed limit to 60 mph and then ticketing everyone who previously drove 65 mph

Uh, they have done so before with the cap recapture penalty, which penalized the extreme long term contracts intended to take players past retirement, and would not hesitate to do so again if they thought something was being abused.

 

[skipnjump]

I was partial to RBC center

me too, but probably because I worked at Centura and then RBC Centura when the arena was built and sent some of the wires that funded the building

 

[MinJaBen]

I don't think it's going to be the issue they're making it out to be. Jarvis had to defer $13 million to 8/9 years down the road to save the team 500k/year over the length of the contract.

That's not a good return on investment for either side. And while it's true the higher the deferred amount, the bigger the cap savings, it also becomes increasingly unlikely that the player is going to be OK deferring that amount.

I think the reason players might do some amount of deferral like in Seth’s case is that they are offered bigger upfront bonuses along with the deferred salary to make them whole. If he didn’t take the deferral, he probably wouldn’t have been able to get the $31M in bonuses as well. It would have been a more usual contract.

 

[Blueline Bomber]

I think the reason players might do some amount of deferral like in Seth’s case is that they are offered bigger upfront bonuses along with the deferred salary to make them whole. If he didn’t take the deferral, he probably wouldn’t have been able to get the $31M in bonuses as well. It would have been a more usual contract.

To my understanding, the deferred money is just a partial amount of the bonuses he received in years 1, 2 and 7. So rather than receiving $7 million in bonuses in year 1, he only received $4 million and $3 million was deferred (as an example, I don’t recall the actual numbers). So I don’t think he got any extra bonus money from this contract.

 

[tarheelhockey]

RIP Backyard Bistro

Will be reopening soon as The Local, and from their website looks to be a bit more of an upscale bar than what it was before. They'll still do catering for Canes game tailgates, so no worries there.

Hot take: Backyard Bistro kind of sucked anyway

 

[Navin R Slavin]

Uh, they have done so before with the cap recapture penalty, which penalized the extreme long term contracts intended to take players past retirement, and would not hesitate to do so again if they thought something was being abused.

Yes, like they've penalized the abuse of LTIR?

Is it possible? Maybe. Wake me in a decade. In the meantime, twist every loophole until quarters fall out.

 

[chaz4hockey]

FWIW: if the suggested policy of taxing equity much higher than today comes to pass, Jarvy’s approach of deferring part of his contract will work out great for him.

Markets will certainly crash but his interest generating deferral will continue to grow and not be impacted.

 

[chaz4hockey]

Ah, just what was looking for. The season begins:

https://x.com/i/web/status/1834010536310091916

 

[Anton Dubinchuk]

My opinion is that the deferred money thing is actually nothing, it's a math equation on both sides that equals out based on projected interest rates and isn't really much of a loophole or exploit.

Seth Jarvis had to agree to be the dope that takes the annuity when he wins the lottery instead of the lump sum. That in and of itself is a sub-optimization for him that justifies the lower cap. Yes, there's a limit to which it can be deferred (the rules about never being paid more/less than a certain percentage of any other year, etc.) and the math is a little wonky because of an "arbitrary" cut-off date (for the salary he receives June 2032 we don't care about interest rates and "deferred" payment but suddenly July 2032 we do), but the amount Jarvis is actually altering his contract in order to let us do this more than justifies the modest cap savings IMO.

It will be hard to turn this into a cap exploit of the same magnitude as LTIR because unlike LTIR, the player has to actually make financial concessions to make it work. Plus, the other limits on contract pricing already within the CBA prevent this from ever getting "ridiculous", I believe.

 

[NotOpie]

Notably, the provision in the CBA was an inherited one from previous agreements without the cap, so this really is a loophole that just wasn't contemplated when designing the cap. And it does sound like the NHL will try and close it in a future CBA, so I guess we'll see whether we get whacked with a cap hit in year 9 of those deals.

I'm with Hank....use the language in the CBA to your advantage, whether your the team or the player. The NHLPA will never agree to language that penalizes the player should the player desire the deferral. The ownership always want to win and they always want to make money. Winning for the majority means being competitive, which means icing a good team. You have to pay for good teams.

Regarding LTIR, I would think the key change to be contemplated would be to simply require playoff teams to ice a 20 man roster that meets the in-season salary cap. That doesn't mean that you can't go over the total salary cap with your roster. It merely means that if you want to ice the $10 million guy, you're gonna have to offset that with some scrub making league minimum. But if the rules stay the same, the more power to the teams that figure out how to work the system....and I'm not opposed to that at all. In the end, teams that tend to be "creative" with LTIR end up trading valuable assets to gain that flexibility. So, in the end, it works out for all....except the non-creative teams.

 

[SlavinAway]

Regarding LTIR, I would think the key change to be contemplated would be to simply require playoff teams to ice a 20 man roster that meets the in-season salary cap. That doesn't mean that you can't go over the total salary cap with your roster. It merely means that if you want to ice the $10 million guy, you're gonna have to offset that with some scrub making league minimum. But if the rules stay the same, the more power to the teams that figure out how to work the system....and I'm not opposed to that at all. In the end, teams that tend to be "creative" with LTIR end up trading valuable assets to gain that flexibility. So, in the end, it works out for all....except the non-creative teams.

If anything I'd just like to see some sort of requirement for when players are activated who went down prior to the TDL. You can't play game 1 if you weren't reactivated prior to game 82; preferably it'd be like 3-4 games but can't see them going the whole round.

 

[Borsig]

Hot take: Backyard Bistro kind of sucked anyway

No it didnt. BYB was f***ing awesome.

 

[Borsig]

How about your salary cant be over the f***ing cap at all on any game, period. Players on LTIR don't count toward cap, until they are reactivated. If they reactivate and that pushes you over the cap, then over the cap you are. None of this bullshit or monkeying around. The players regular season salary counts toward the cap in the Playoffs like the regular season. Period.

 

[LakeLivin]

I suspect a lot of the confusion around the deferred SB comes from the way it's reported. Think of it this way:

Let's say there's a contract negotiation where both parties agree in principle to $5m in salary for 5 years and a one time $1m SB up front.
The cap hit for that $26m contract would be $5.2m per year.

The team says that instead of paying you that $1m SB now, if you let us defer it to year 6 we'll up it to $1.276m (I compounded $1m at 5% interest per year for 5 years as a guess, but I'm sure there's a generally accepted accounting formula that's used). For some of the reasons outlined above, the player agrees.

It's reported as the player receiving a $26.276m contract which includes a $1.276m deferred SB. But while $1.276m is the deferred payment, it was only $1m that was actually deferred, with the extra $276k being the difference in the value of receiving $1m now vs. 5 years down the road (let's call it interest). The cap hit on this new contract would be $5.2, same as if they didn't defer the $1m SB. The $276k "interest" part of the new SB payment doesn't contribute to the team's cap hit at any point, and even though the $1m part is paid in year 6, w.r.t. the salary cap, the league averages it over the 5 years the player is active, so it is accounted for.

tldr: the deferred SB payment can be thought of as being comprised of 2 parts, the amount of the SB actually deferred and "interest" that was added on to make up for not paying the SB earlier. The amount actually deferred is included in a team's cap hit over the time the player is active, the "interest" part isn't, nor should it be.

I don't think the deferred SB thing is much of an issue, either. I posted the above over on the main board, and to tldr that post, I suspect a lot of the confusion stems from not distinguishing between the deferred SB payment (which is what's reported) and the amount of the SB that is actually deferred (which is less, and the important part).

 

[SlavinAway]

How about your salary cant be over the f***ing cap at all on any game, period. Players on LTIR don't count toward cap, until they are reactivated. If they reactivate and that pushes you over the cap, then over the cap you are. None of this bullshit or monkeying around. The players regular season salary counts toward the cap in the Playoffs like the regular season. Period.

They'll never go for this as this isn't even the way it works now. The way they do the accounting on accrual of cap space and how much TDL acquisitions count sort of prevent this. That whole section would have to be re-worked in the CBA and it doesn't sound like anyone is concerned enough about to go through that trouble.

 

[CanesUltimate11]

If anything I'd just like to see some sort of requirement for when players are activated who went down prior to the TDL. You can't play game 1 if you weren't reactivated prior to game 82; preferably it'd be like 3-4 games but can't see them going the whole round.

This is what I'd like to see. If you are not on the active roster for game 82 then you miss some amount of round 1. Be it the whole series or only a few games.

 

[tarheelhockey]

No it didnt. BYB was f***ing awesome.

I’m not trying to shit on people’s preferences, to each their own.

 

[NotOpie]

If anything I'd just like to see some sort of requirement for when players are activated who went down prior to the TDL. You can't play game 1 if you weren't reactivated prior to game 82; preferably it'd be like 3-4 games but can't see them going the whole round.

NHLPA will never go for this. If a guy is legitimately hurt and he comes off right before or right after the playoffs start, that player is going to want to play. The union will have none of the idea that healthy players have to wait once "declared" healthy.

Like I said, manipulating LTIR is actually pretty interesting. There are so many facets and directions it can take.

 

[cptjeff]

NHLPA will never go for this. If a guy is legitimately hurt and he comes off right before or right after the playoffs start, that player is going to want to play. The union will have none of the idea that healthy players have to wait once "declared" healthy.

Like I said, manipulating LTIR is actually pretty interesting. There are so many facets and directions it can take.

Think about Kucherov. Do you think there is any chance that he wasn't perfectly physically able to play in game 82? Yeah, there's usually a little time between game 82 and game 1, but not that much. If you're on LTIR, it's long term, and the odds that if you're able to go in game 1 but not actually able to go in game 82 coming off a long term injury are so small that you can treat them as zero.

But you can't play those players in game 82. Or game 70. What if a LTIR player is approved for play after the trade deadline and the team doesn't have the space to activate them? They're forced to sit out, exactly as they would be if you restrict them from the playoffs. That scenario is vastly, vastly more likely than just magically happening to be approved for play exactly in time for the playoffs. And it has now happened multiple times. Players who are able to play are held off the roster in order to manipulate the cap.

So yeah, I'm entirely in favor of making them sit out a series. That isn't to penalize the player, it's to penalize the team. If the team still goes on a deep cup run, the player still gets to take part. And in that scenario, where healthy players are held off the roster for LTIR, should be HEAVILY penalized on top of that. I'm talking loss of draft picks and whatnot. That means you have to make sure you're only using LTIR for genuine long term injuries and aren't just putting players who should be on the normal IR there for cap manipulation.

Of course, my ideal system is to just get rid of the accrual system altogether. It's really strange, artificial bullshit to try and make the deadline more exciting, but just make the roster have to adhere to the cap every night of the season. Games in the first week of the season count just as much as game 82, why are they played under effectively different salary caps? And if you do that, you can force playoff rosters to be cap compliant as well.