The Jarvis contract. Fine until a Canadian team does it.

[Akrapovince]

He's deferring 10m for 7 years. That costs money. He would have been better off just signing a traditional contract.

Nobody has done a contract like this before because it isn't an advantage. Its nothing more than a gimmick but trust Carolina to do something like this.

I think it’s no different than McDavid taking 12.5m/year when he could have asked for a max contract.

Maybe helping his team is worth the difference in salary.

 

[Chips]

I am aware. Where do you get that a Canadian team couldn't do it?

Persecution complex is all they have until the cup

 

[HugeInTheShire]

I'm not saying the punishment as stated was warranted, but you must understand how that was extremely different than this contract?

I never said the contracts were even remotely similar, I was just pointing out that last time questionable contacts were being handed out it was only the Devils that got punished. Not a Canadian team like OP states wouldn’t get away with it. In fact Vancouver put the Luongo contract through and it was fine, wasn’t until NJ did Kovy that the league said no.

 

[895]

You're the one with the financial literacy issues evidently.

If you cant seem to tell that having a lower cap hit is an advantage for the team. That is what this is about. My house is paid for and I own the value of it in physical gold. But hey, I have no financial literacy. Yep.

How are you not understanding this simple concept?

The cap hit is not any lower than it should be. It's always what it should have been.

The Hurricanes and Jarvis agreed on a 7.4m per year contract for 8 years.

Then the hurricanes said hey, why don't i invest some of that money for you and give it back to you at the end of the 8 year deal?

The cap hit stays the same because even though the absolute money of money he gets increased, the relative value of the deal did not.


That's it. It's not more complicated than that.

Your issue is that you think this was a 7.9mx8 deal that got cheated into a 7.4mx8 deal. That's not correct. It was always a 7.4mx8 deal.

Now if I was Jarvis I would not have accepted this deal. I think I can invest better than whatever the CBA adjusts it at. I want it as front loaded as possible.

This is not going to be a leaguewide issue because most players have smarter and better agents than Jarvis.

 

[boredmale]

The annual average value of the contract would traditionally be $7.9 million, but the Hurricanes will award Jarvis a deferred-money signing bonus on July 1, 2032 - the day after the contract expires - to lower the cap hit. The max-term pact includes a total of $29.24 million in bonuses.

Am I wrong ?

Can someone explain why it took lawyers this far into a CBA to do something like this ?

I am guessing that caphit will get applied to their 2032/33 season(or whatever team he plays for) which will make it hard to dump his contract if it doesn't pan out as good as hoped

 

[Frank Drebin]

I think it’s no different than McDavid taking 12.5m/year when he could have asked for a max contract.

Maybe helping his team is worth the difference in salary.

You are familiar with compound interest I’m sure

So 100k reinvested at 4% for 8 years would roughly be worth $140k at the end of 8 years

Same goes for inflation. $140k in 2032 may buy what $100k today does

Roughly 100k today's is worth the same as $140k in 2032

So lets say your employer offered you a deal, 8 years $800k total

Averages out to $100k per year
But they would pay you $205k the first year and then 85k for 7 years after that

Or they say we can pay you 8 years $840 k, average of $105k a year
But you only make $105k the first year, 85k a year for 7 years and then at the end of the 8th year you get a $140k bonus

The second scenario may seem like more money overall, and in basic terms it is but they have equal value from a wealth standpoint for you

And most people would prefer to take the money upfront to pay off a high interest car loan, mortgage etc or simply invest hoping to get better than 4%

For example, a normal person with a $400k mortgage at 5%, if they took that extra $100k and put it down on their mortgage at the beginning of their “contract “ they would owe $150k less on it at the end of 8 years. So the lower total value $800k contract is actually worth more

Tldr

Jarvis contract has the same value as an 8 year 59.6m deal it just looks like it’s worth more

 

[BagHead]

How much recapture penalties did they take on it ?


How do you know it isn't inflation adjusted ? Or something to that effect.

I'm not sure if you actually want to learn about this topic or not, but I figured I'd post this for anyone who does.

For simplicity, we'll take the $7.9 million AAV estimation over 8 years as the actual contract value. Fully paid up front (and ignoring taxes and living expenses, this is for the purpose of keeping this simple), that amount would be $63.2 million.

If Paid Up Front:
He could invest that $63.2 million in the S&P500, and expect an average annual return of about 8%. Over 8 years, his $63,200,000 would grow to $116,978,789.

If Paid at End and Inflation Adjusted:
If we simply take the same contract value and then adjust it for an average inflation rate of 3% (that's a little bit higher than the historic rate, because I'm feeling generous), his $63.2 million dollars will be handed out as $80,059,869.

tl;dr, Conclusion:
So, in this hypothetical world where everything is done as simply as possible and no taxes get paid, Jarvis is sacrificing $36,918,920 by the time his 8 year contract is done.

It's not illegal, or even unethical, to sign for less money than you're worth. Most likely, he wanted to sacrifice money to take a team-friendly deal in an effort to win a Cup. If he wants to earn as much money as possible, though, he's doing it wrong.

You are familiar with compound interest I’m sure

So 100k reinvested at 4% for 8 years would roughly be worth $140k at the end of 8 years

Same goes for inflation. $140k in 2032 may buy what $100k today does

Roughly 100k today's is worth the same as $140k in 2032

So lets say your employer offered you a deal, 8 years $800k total

Averages out to $100k per year

But they would pay you $205k the first year and then 85k for 7 years after that

Or they say we can pay you 8 years $840 k, average of $105k a year

But you only make $105k the first year, 85k a year for 7 years and then at the end of the 8th year you get a $140k bonus

The second scenario may seem like more money overall, and in basic terms it is but they have equal value from a wealth standpoint for you

And most people would prefer to take the money upfront to pay off a high interest car loan, mortgage etc or simply invest hoping to get better than 4%

Tldr

Jarvis contract has the same value as an 8 year 59.6m deal it just looks like it’s worth more

lol Looks like you beat me to it while I was typing.

 

[Akrapovince]

You are familiar with compound interest I’m sure

So 100k reinvested at 4% for 8 years would roughly be worth $140k at the end of 8 years

Same goes for inflation. $140k in 2032 may buy what $100k today does

Roughly 100k today's is worth the same as $140k in 2032

So lets say your employer offered you a deal, 8 years $800k total

Averages out to $100k per year

But they would pay you $205k the first year and then 85k for 7 years after that

Or they say we can pay you 8 years $840 k, average of $105k a year

But you only make $105k the first year, 85k a year for 7 years and then at the end of the 8th year you get a $140k bonus

The second scenario may seem like more money overall, and in basic terms it is but they have equal value from a wealth standpoint for you

And most people would prefer to take the money upfront to pay off a high interest car loan, mortgage etc or simply invest hoping to get better than 4%

Tldr

Jarvis contract has the same value as an 8 year 59.6m deal it just looks like it’s worth more

I’m not denying the fact that inflation is eating away at the contract value over time.

I’m saying he would rather pay the price of having inflation eat away at his earnings, and likes his “real” inflation adjusted dollar amount enough that it merits his team that he just signed a long term contract to having a cap benefit.

Maybe his best deal was 56 over 8 years without the deferral, so he took the deferral anyways to help the team. (Still sucks not getting money up front to invest immediately) but maybe he cares about a cup more.

I assume his accountants and agent and even himself also know what compound interest and inflation is, and there’s more to this than we know. We don’t know what a non-deferred contract would look like or offered, so we cannot say he lost money by doing this is my point.

Sure, in a vacuum you are right. One contract is better than the other, and I never disagreed with that. And again, I’ll even add on that for whatever he loses in inflation is doubled by what he loses in not being able to invest the money earlier. But that is not the point I’m making.

 

[Frank Drebin]

I’m not denying the fact that inflation is eating away at the contract value over time.

I’m saying he would rather pay the price of having inflation eat away at his earnings, and likes his “real” inflation adjusted dollar amount enough that it merits his team that he just signed a long term contract to having a cap benefit.

Maybe his best deal was 56 over 8 years without the deferral, so he took the deferral anyways to help the team. (Still sucks not getting money up front to invest immediately) but maybe he cares about a cup more.

I assume his accountants and agent and even himself also know what compound interest and inflation is, and there’s more to this than we know. We don’t know what a non-deferred contract would look like or offered, so we cannot say he lost money by doing this is my point.

Sure, in a vacuum you are right. One contract is better than the other, and I never disagreed with that.

I imagine the contract was explained to him, his eyes glossed over on the details and at the end he said "sure buddy where do I sign"

 

[Golden_Jet]

Nobody has done a contract like this before because it isn't an advantage. It’s nothing more than a gimmick but trust Carolina to do something like this.

Slavin and Doan have done it.

 

[Frank Drebin]

Slavin and Doan have done it.

* in any meaningful way

Doan probably did it because the Coyotes couldnt afford to pay him

 

[Derailed75]

What is this based on?

Most Canadian teams FO are bad at managing their caps and building playoff winning hockey teams, therefor fans of Canadian teams need a reason for this and determine the real issue is not that they are just mostly poorly run franchises but that the league (which is really made up of the owners, for those of you that don't know sports league commissioners work for the owners not run the owners) are the real reason that the Canadian teams are held down.

 

[stl76]

I imagine the contract was explained to him, his eyes glossed over on the details and at the end he said "sure buddy where do I sign"

View attachment 906936

Bullshit.

Jarvis is not an idiot. He, his agent, the NHLPA, and the NHL all signed off on this. This was not just the team pulling a fast one on a hapless NHL player.

Everyone thinks they can beat a guaranteed high yield savings account return on investment until it’s a bear market. There is something to be said of the lack of risk on Jarvis’ end and I would be shocked if Jarvis and his team did not look at longer term factors like current vs future possible interest rates when making this decision.

 

[Golden_Jet]

* in any meaningful way

Doan probably did it because the Coyotes couldnt afford to pay him

I was just commenting on this.

Nobody has done a contract like this before because it isn't an advantage

Informing you, that yes it has been done, nothing more.

Why did we need a new thread for this.

 

[Brookbank]

Can you explain the “until a Canadian team does it” part?

What’s the basis for you claiming that a Canadian team would be punished for this same contract?

If I recall Luongo and the Canucks were the first to get bent by recapture.

I was just commenting on this.

Nobody has done a contract like this before because it isn't an advantage

Informing you, that yes it has been done, nothing more.

Why did we need a new thread for this.

Doan was a 1 year deal.

 

[Golden_Jet]

If I recall Luongo and the Canucks were the first to get bent by recapture.


Doan was a 1 year deal.

Ya still counts, not sure it would be much more term at 39-40 years old.

 

[Brookbank]

To all the experts, what I am saying is, if the deal is indexed to inflation or he's somehow getting paid for loss of interest earned, then he's not losing any time value of money on the deferred bonus. Which is why he might have done it.

 

[Golden_Jet]

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

forums.hfboards.com

 

[Svechhammer]

This has been explicitly allowed by the CBA since coming out of the 2004-05 lockout and Carolina isn't even the first team to use it. At the end of the day, they're saving about $500k per year in cap space to defer $9m to after the contract runs out. Now, I do think if this starts to pick up, you'll see the deferred amount be a cap penalty in the year it is paid, but as it is right now, the payment the Canes make will not count.

Now, if suddenly if you see 3 or 4 more players on the team start to take similar deals with upwards of $50m being paid outside salary cap with $2.5m-$3m in cap savings every year, then I do think the league will step in to close that loophole.

 

[Forge]

If I recall Luongo and the Canucks were the first to get bent by recapture.

Why are we treating recapture penalties as if they are disciplinary? Wasn't it just ostensibly balancing the books? Evening out the hit on the cap with the money that was paid out?

The devils were actually disciplined by the league for giving Kovy his original contract even though other guys were signing "similar" deals. The league made up a line for contracts when the deal was signed and decided the devils were on the other side of it and actually disciplined them

 

[Nogatco Rd]

If I recall Luongo and the Canucks were the first to get bent by recapture.

Are you arguing that’s unfair?

What does this have to do with Jarvis?

 

[EXTRAS]

OP got that love to identify as a victim rizz.

 

[Michel Beauchamp]

Mark Stone going on LTIR at the TDL and playing game 1 of the playoffs 3 years in a row

He probably was as king about this part : "Any Canadian team trying to pull what Vegas has would forfeit a draft pick."

 

[stl76]

To all the experts, what I am saying is, if the deal is indexed to inflation or he's somehow getting paid for loss of interest earned, then he's not losing any time value of money on the deferred bonus. Which is why he might have done it.

Salary that is deferred in this way will accrue interest according to the dailyfaceoff. Maybe a more actively managed portfolio could gain more than whatever interest the deferred salary would accrue, but there are all sorts of fees and risk that come with that.

What if Draisaitl was hypothetically willing to defer $33.6 million of that contract to be paid out over the 40 years after the deal expires?

...To bring in another $80 million over the first eight years of the next deal makes him more than financially secure for future generations of Draisaitls – and the deferred $33.6 million, which is accruing interest the entire time, is not just gravy but also idiot-proof savings.

More from that article:

Of course, there is risk here. This type of contract structure requires understanding from Jarvis and his agent, Gerry Johannson of Edmonton-based The Sports Corportation, on a varying number of topics including investment vehicles, tax structures and elements, plus a healthy risk profile on things such as escrow rates, the possibility of a buyout or trade that could change every calculation. So, this was a mature conversation that evolved over the last two months to the point where everyone is comfortable, and Johannson and the NHLPA believe this is good for Jarvis – not just the Hurricanes. This deal was the brainchild of GM Eric Tulsky and his staff, which includes Darren Yorke, Aaron Schwartz and now Tyler Dellow, and there is risk for Carolina too, but it can be minimized or eliminated with returns on investment of the deferred money.

Sources: Hurricanes and Seth Jarvis agree to $63.2 million contract with unique deferred structure

The Carolina Hurricanes and restricted free agent Seth Jarvis have agreed to terms on a new eight-year, $63.2 million contract,...

www.dailyfaceoff.com

 

[Stephen]

I imagine the contract was explained to him, his eyes glossed over on the details and at the end he said "sure buddy where do I sign"

View attachment 906936

I don't understand why he did this. Presuming he's still earning big bucks on his next deal, isn't he going to get hit with a massive tax bill in the years when he gets paid his deferred money and new dollars? Multimillionaire problems for sure, just doesn't seem to make that much sense.