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

[Based Anime Fan]

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

Not even that, the Devils were punished for breaking the 'spirit' of the CBA; nothing was actually illegal about the contract.

You can't break a non-binding or even non-existant entity, but somehow the Devils did, and the league didn't like it.

Magically after double hip surgery and a year of recovery. Very magical

Also magically not playing good before that...

 

[HockeyVirus]

Also magically not playing good before that...

Apparently it is difficult to play well with two hips requiring surgery who knew?

 

[mouser]

Not even that, the Devils were punished for breaking the 'spirit' of the CBA; nothing was actually illegal about the contract.

You can't break a non-binding or even non-existant entity, but somehow the Devils did, and the league didn't like it.

New Jersey signed Kovalchuk to a contract through age 44, which the arbitrator ruled the Devil’s couldn’t reasonably have expected the player to actually fulfill. Highlighting that the contract Included a “disincentive” to continue playing the final four years of the contract at age 41-44 with $500k salary each year.

Hence the arbitrator ruled the contract was a de facto cap circumvention attempt by New Jersey.

 

[Golden_Jet]

Leafs aren't stashing players there to bring them back. No one sent there has played another NHL game

So even worse then

Magically after double hip surgery and a year of recovery. Very magical

After magically waiting until the season started to get the surgery

 

[MasterofGrond]

Excited to patiently explain first year college finance to this board every 6 weeks for the rest of my life

 

[HockeyVirus]

So even worse then

You think players going on LTIR for career ending injuries is worse than stashing players on LTIR for a few months to circumvent the cap? Maybe in hater land

 

[Golden_Jet]

You think players going on LTIR for career ending injuries is worse than stashing players on LTIR for a few months to circumvent the cap? Maybe in hater land

Murray for 1 year, healthy for playoff
lol @ leaf fans defending Robidas Island.

 

[zenator]

It doesn't bother me. Carolina is getting a slightly lower cap hit for 8 years. Then in year 9, they have $7.9 million of dead cap. If they are a contender in year 9, they just screwed themselves.

 

[MasterofGrond]

It doesn't bother me. Carolina is getting a slightly lower cap hit for 8 years. Then in year 9, they have $7.9 million of dead cap. If they are a contender in year 9, they just screwed themselves.

They will not have 7.9M in dead cap in year 9.

 

[HockeyScotty]

I don't understand what "Canadian team" has to do with it. A deal such as this would be approved if, say, Canucks signed Boeser to one.

The interesting part is what happens if the player agrees to deferring a larger part of their deal.

And for how long the deferral could go. I'm not sure I've read or heard anyone say that it is strictly limited to the following "NHL Year"

 

[MasterofGrond]

And for how long the deferral could go. I'm not sure I've read or heard anyone say that it is strictly limited to the following "NHL Year"

It is not limited.

 

[Toby91ca]

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.

It's easy to structure a contract that has payments that start at a base and then adjusted in future years for stuff like CPI, but I'm guessing such adjustments are prohibited in an NHL contract....I haven't checked the CBA, but seems like a pretty easy conclusion to suggest it's prohibited.

 

[HockeyScotty]

It doesn't bother me. Carolina is getting a slightly lower cap hit for 8 years. Then in year 9, they have $7.9 million of dead cap. If they are a contender in year 9, they just screwed themselves.

There is no cap hit impact (dead or otherwise) for "year 9".

Think of the bonuses as counting against the Salary Cap but not paid to Jarvis; they are placed in escrow (or invested in an annuity on his behalf) $3,074,796 in year 1 and $3,288,177 in year 2; and then $5,467,722 in year 7. He won't be taxed on the deferred amount either because it wasn't paid to him in cash during that tax year.

Then on 7/1/2032 he gets a guaranteed return of $15,670,000 ($4,950,000 for year 1 and year 2 each, and $5,770,000 from year 7). Now he gets taxed on this amount since it was paid in cash to him.

 

[Toby91ca]

I've looked at this a little bit and I still can't figure it out. Why would players agree to this type of deal or why would teams even try to do it? I'll use an extreme example (which the NHL definitely wouldn't allow, but just to try to illustrate this).

So, 8 year contract, $5M per year = $40 million total....normal contract shows that as $5M cap hit per year. So, they defer each $5M payment to year 9 and assuming 5% interest, that will work out to a cap hit per year ~ $4M...awesome right, we just saved $1M per year on the cap.

Problems:

1 - Obviously a player wouldn't accept this as they have no cash flow for 9 years, but let's ignore that.
2 - If the player is wanting $5M per year, they are losing a lot of money due to interest, $5M per year each year for 8 years is not the same as paying out $40M in the future.
3 - If the player is looking for $4M per year or $32M overall, yeah this may look good in terms of getting $40M instead....deferred, but it's theoretically the same for them and also, why would you do this rather than just signing $4M * 8 years....doesn't benefit the player, doesn't benefit the team.

What am I missing here? I can see where the team can benefit on cap with this type of thing, but that is not possible without screwing the player out of some value, so I don't get it.

 

[Svechhammer]

There is no cap hit impact (dead or otherwise) for "year 9".

Think of the bonuses as counting against the Salary Cap but not paid to Jarvis; they are placed in escrow (or invested in an annuity on his behalf) $3,074,796 in year 1 and $3,288,177 in year 2; and then $5,467,722 in year 7. He won't be taxed on the deferred amount either because it wasn't paid to him in cash during that tax year.

Then on 7/1/2023 he gets a guaranteed return of $15,670,000 ($4,950,000 for year 1 and year 2 each, and $5,770,000 from year 7). Now he gets taxed on this amount since it was paid in cash to him.

Yep, exactly. This isn't exactly like how the NFL handles deferred money on their contracts. As the CBA currently stands, there is no cap penalty at the end when the deferred money is paid back. Its absolutely a loophole and very much an unintended circumvention of the Cap, but somehow is explicitly allowed by the 2005 CBA, and hasn't been amended since.

As for why Jarvis would do it, I mean he's going to get a $8m payment in 2033 on top of the salary (and signing bonus) he will make in that year when he signs either with the team or elsewhere as a UFA at what will likely be a significant raise. All for the benefit of giving the team a little more cap space per year to allow them to have a slightly better roster around him than they normally would have, which potentially allows him to have better individual stats by having better linemates that inflates his point totals year over year.

 

[dgibb10]

Rich teams with the ability to massively frontload contracts is more of an advantage in negotiating a contract than deferred money

 

[Toby91ca]

As for why Jarvis would do it, I mean he's going to get a $8m payment in 2033 on top of the salary (and signing bonus) he will make in that year when he signs either with the team or elsewhere as a UFA at what will likely be a significant raise. All for the benefit of giving the team a little more cap space per year to allow them to have a slightly better roster around him than they normally would have, which potentially allows him to have better individual stats by having better linemates that inflates his point totals year over year.

None of this explains why Jarvis would do it. I understand he'll get $X million in 2033....so yeah, lots of money, but why wouldn't he prefer that money in 2025? Totally understand the lower cap hit will give a better roster, potentially allowing him to attain better stats, etc.....but same thing if he simply takes less money on a normal deal.

I still don't see why these deals would ever make sense to happen, not from a players perspective anyway.

 

[bleedgreen]

I don’t understand the fuss here as it doesn’t help the Canes very much. It takes his AAV from 7.9 to 7.5. Big whoop? It gives them some space this season because they’re a little tight and then it will be used to give someone else an extra 400k which is near half a minimum wage player. I have no idea why anyone would care if a Canadian team did this, or why people really care that the Canes did. I myself am mildly surprised Jarvis did it as money now is better than money later imo, and I think it would be an interesting side story to know if he would change his mind about doing it three or four years from now. It’ll be a nice fat check for him a year after the deal ends which will be sweet I’m sure, and likely gives him some flexibility with whatever he wants to do at that point.

Still…the thread title is a bit too much for me. This isn’t like adding a 6 million dollar player from ltir the day the playoffs start after you already replaced that guy with another six million dollar player - and I don’t believe Canadian teams are at any disadvantage about doing things like this.

 

[Svechhammer]

None of this explains why Jarvis would do it. I understand he'll get $X million in 2033....so yeah, lots of money, but why wouldn't he prefer that money in 2025? Totally understand the lower cap hit will give a better roster, potentially allowing him to attain better stats, etc.....but same thing if he simply takes less money on a normal deal.

I still don't see why these deals would ever make sense to happen, not from a players perspective anyway.

I know this might be difficult for some to understand, but there are people out there who will take less money per year to work in a place they enjoy, and will gladly defer guaranteed money to later if it means potentially having a marginally better experience throughout.

 

[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 posted the above in the other thread; it might help some understand the concept behind a deferred payment and why it doesn't really game the system. My guess as to why a player would do it? Perhaps tax issues, or perhaps the overall contract looks bigger, and at some point the money is a way players keep score?

 

[Toby91ca]

I know this might be difficult for some to understand, but there are people out there who will take less money per year to work in a place they enjoy, and will gladly defer guaranteed money to later if it means potentially having a marginally better experience throughout.

Yes, I totally get taking less money because you enjoy your situation, that's a completely different situation here. If you want to take less money, then take less money, great, and I understand that. What I don't understand is this deferred payment situation. I laid it out above with an example. You sign a contract for $5M per year for 8 years and defer every penny of that contract. You are able to get the cap hit down to $4M a year that way. Ok, great, but why structure it that way, why not just sign a simple contract that pays you $4M per year then?

 

[Golden_Jet]

I laid it out above with an example. You sign a contract for $5M per year for 8 years and defer every penny of that contract.

you literally can’t do that with a contract.

 

[HockeyScotty]

It is not limited.

This is where I could see a team get punished "after the fact" if the league decides they don't like it.

It could almost be a way for a team to create Convertible Debt for a player that has an equity option; for a franchise player for example.

I know this might be difficult for some to understand, but there are people out there who will take less money per year to work in a place they enjoy, and will gladly defer guaranteed money to later if it means potentially having a marginally better experience throughout.

Exactly, in a way this is an option to quantify or "value" a hometown discount essentially.

 

[Toby91ca]

you literally can’t do that with a contract.

I know, I suggested the extreme example would not fly.....I was trying to figure out why someone would do it though (in a less extreme scenario).

 

[PaulD]

You aren't wrong. Same with LTIR stuff. Any Canadian team trying to pull what Vegas has would forfeit a draft pick.

lots of teams have found and used loopholes including the leafs......However nobody starts threads on teams that win f*** all when doing it.