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

[Mortimer Snerd]

Ok, if we use the Jarvis contract as an example....pretty sizeable deal and at the end of the day, there is only a cap saving of less than $500K per year year....close to nothing.

I know you suggest there is no way Jarvis gets the same total dollars without the deferral, which may be true, but it doesn't benefit him in any way whatsoever. Example....if someone is willing to give me $10 day, but no more, but offers me $14 in 10 years instead...I would say, yes, there is no way I'm getting that $14 today, but I'd prefer to get the $10 today and wait 10 years and get $14. I could take the $10 today, invest it and get a modest 5% return and it would be worth $16 in 10 years.

My main point on this has always been this:

1 - there is literally ZERO benefit to the player. I haven't seen a reasonable scenario yet as to why it benefits the player to defer. Tax situation has been thrown out there, but there isn't really any validity to that. I think some might suggests it protects them from themselves, forced savings as example, but they can easily get paid now, buy a Canada savings bond or someone other GIC that matures in 10 years and you'll be further ahead.

2 - there really isn't any meaningful cap savings. The Jarvis example you can show the $3.8M, but you can't look at it on a total contract, people only care about the cap on a year to year basis, so it's less than $500K per year, which gets even less significant as the cap increases

I disagree. 1. If there is ZERO benefit to the player then he doesn't do it. The benefit is simple. He gets more money than he would be offered without the deferral. Enough more to persuade him to sign the deal. We can only speculate on the specific alternatives but we can safely assume that both parties benefit in some way.

2. It looks to me like Canes consider the 500k to be meaningful. Why else do you think they did this?

 

[Mortimer Snerd]

Assuming that 500k results in 300k after tax, and is invested and compounded annually at 7% which is arguably even conservative but probably a fair average over 5 years since there will be ups and downs in the market. The result of the extra 300k each year up until 2032 would be

Year 1: 215k
Year 2: 181k
Year 3: 160k.
...
Year 8: 21k

I'd still imagine the 5m (3.1m after tax) would come out slightly ahead but not as much as you're making it out to be but the overall net would be probably under 1.5m when you factor in inflation. So it depends if you want that money now or later.

Given the option, who would choose getting it later? Carolina benefits by the lower cap hit and also by spending their money later. Jarvis benefits by getting more money. I'm sure he and his agent calculated the value lost by deferral before accepting the deal. We don't know what was the alternative contract offered if he turned down this deal.

 

[Dfence033]

IIRC he only needs 16 votes to be re-instated and within the board of governors there's an executive committee and chairman of the board. There's not full transparency on the votes and functions, so it's a bit hard to tell.

Some things are voted, like expansion teams, Olympic participation, lock out, etc.
But, the NHL (Gary Bettman) choses and elect the owners of the new teams and teams on sale.
It was quite clear with the Jim Balsillie situation and more recently the sale of the Coyotes and Senators.

I never said he was devious or anything like that. He does what he thinks will be more profitable for the league. He has a ton of power too, once elected.

Your first paragraph belies the ridiculous notion that Bettman can simply ignore, piss off, and damage certain teams by himself because “Canada.” There are layers of bureaucracy, all controlled by the owners - not by Bettman.

The NHL owners approve expansion and sales. Bettman doesn’t do that himself, and is essentially the spokesman for the owners decisions. So unless you are suggesting something nefarious that Bettman is doing being his boss’s backs, or that half the league is out to spite Canada, the whole idea should be discarded outright.

 

[mouser]

Use John Tavares contract as an example. It's already stupid enough with $873K per year as salary + $10.1M in bonuses each year on average, but this doesn't matter, nothing strange to impact the cap hit here.....other than the majority of the cash coming in the early years (so opposite of what we are dealing with here.). Let's say you take the same contract, $873K in salary each year for 7 years, but then take the $71M signing bonus and defer payment of that until 8 years from now. Yes, this would have a significant impact on the cap hit, taking it from $11M per year down to ~$7.8M.....but for a player to accept that, they would have to be the type of person that would want a $1 bill instead of a $100 bill because, hey #1.....in other words, very low intelligence. If a player somehow lost his mind and decided to accept such a contract, the league would then (with 100% certainty here) step in and not approve the deal.

Keep in mind contracts with deferred money still have to abide by the year to year variance rules. It would not be possible for example to give a $71m bonus in year 1 and defer it to year 9. Would have to defer money from all 8 years of the contract. The NPV % difference of those years 2-8 reducing the AAV will not be as large if the deferred money is all paid out in year 9.

 

[Toby91ca]

Keep in mind contracts with deferred money still have to abide by the year to year variance rules. It would not be possible for example to give a $71m bonus in year 1 and defer it to year 9. Would have to defer money from all 8 years of the contract. The NPV % difference of those years 2-8 reducing the AAV will not be as large if the deferred money is all paid out in year 9.

Yeah I know, I was trying to illustrate you'd need to have a contract that isn't even possible to start getting real significant cap savings

 

[WaitingForThatCab]

The first thing you learn in any finance class is the time value of money. The very first thing.

 

[dgibb10]

Financial literacy is so rare….


There’s no outrage because it’s not a an advantage.

Toronto super frontloading all those huge contracts is actually a huge advantage.

Backloading contracts like this is a disadvantage.

It is a very slight advantage in that NPV is not used for year 8 payouts, which are also affected by the time value of money in real life, but not according to the salary cap. So by delaying that 8th year payout, you can save some slight cap (if I am understanding how the end cap hit is calculated).

You'll still get a much bigger advantage by frontloading the contract.

The reason the NFL cap manipulation of restructuring is so prelevant is because they pay up front as a signing bonus (helping the player get the most value by being paid immediately), but the cap hit is spread out over the life of the contract (helping the team as it makes up a smaller % of the cap down the line).

 

[GOilers88]

Every third post is a Canadian complaining about how poor they are.

Welcome to Canada in 2024.

 

[jfhabs]

Your first paragraph belies the ridiculous notion that Bettman can simply ignore, piss off, and damage certain teams by himself because “Canada.” There are layers of bureaucracy, all controlled by the owners - not by Bettman.

The NHL owners approve expansion and sales. Bettman doesn’t do that himself, and is essentially the spokesman for the owners decisions. So unless you are suggesting something nefarious that Bettman is doing being his boss’s backs, or that half the league is out to spite Canada, the whole idea should be discarded outright.

I think you completely miss the point, I'm saying there are things that probably influence him a lot more than the location of the team. I will now ignore you, because it doesn't seem possible to have an intelligent discussion with you. Have a good life.

 

[Toby91ca]

Given the option, who would choose getting it later? Carolina benefits by the lower cap hit and also by spending their money later. Jarvis benefits by getting more money. I'm sure he and his agent calculated the value lost by deferral before accepting the deal. We don't know what was the alternative contract offered if he turned down this deal.

This is the whole point I’m trying to get at. You say Jarvis benefits, but how. You say more money, but what more money? He takes “x” instead of “y”? What’s “x” and “y”. The notion of him being able to get $x now but if you wait until 9 years from now you can get more than $x makes total sense, but that’s not getting more money….well I guess it’s technically more money ignoring time value, but you can’t do that. If Jarvis is actually getting the same amount of money considering time value then it would result in no cap savings…..if there is cap savings, he’s getting less money, it’s simple finance.

 

[Mortimer Snerd]

This is the whole point I’m trying to get at. You say Jarvis benefits, but how. You say more money, but what more money? He takes “x” instead of “y”? What’s “x” and “y”. The notion of him being able to get $x now but if you wait until 9 years from now you can get more than $x makes total sense, but that’s not getting more money….well I guess it’s technically more money ignoring time value, but you can’t do that. If Jarvis is actually getting the same amount of money considering time value then it would result in no cap savings…..if there is cap savings, he’s getting less money, it’s simple finance.

Well, there is cap savings. Its in the contract in black and white. So logic dictates that he did not sign the contract and this discussion is all about a figment of our collective imaginations.

 

[Habby4Life]

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

Not true

 

[Dfence033]

I think you completely miss the point, I'm saying there are things that probably influence him a lot more than the location of the team. I will now ignore you, because it doesn't seem possible to have an intelligent discussion with you. Have a good life.

The things that influence anything Gary Bettman does or can do in his job is very short: 1) What do the owners want? 2) Is it legal? (I assume)

That’s exactly the point. You are ascribing malicious intent and influence to a person who, by design of his job, cannot have either by himself.

Saying someone isn’t intelligent enough to hold a conversation with you is a pretty poor way to discuss any topic, for the record. Have a fine life yourself.

 

[Toby91ca]

Well, there is cap savings. It’s in the contract in black and white. So logic dictates that he did not sign the contract and this discussion is all about a figment of our collective imaginations.

What I’m questioning on this one is why it’s structured this way, as noted, we don’t know what he would have been offered on a normal deal. Why not simply sign and 8 year deal at $7.42 million per year? Gives you the same cap hit. Paying a bit more through deferral and getting the same cap hit is fine, but doesn’t seem to have any benefit for either side. If the team is getting a better cap hit, it means the player is losing money vs the alternative, that’s just math

 

[Hisch13r]

250k every year until this one. They also had to move from 11th to 30th (they weren't allowed to trade it either) in the first round and gave up a 3rd.

Also were only given back the first because he left.

 

[Orfieus]

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 ?

Is that money guaranteed? Or if he gets bought out the team isn't on the hook?

If it's the latter then it makes sense why other players didn't do this

 

[Toby91ca]

Is that money guaranteed? Or if he gets bought out the team isn't on the hook?

If it's the latter then it makes sense why other players didn't do this

Regardless whether guaranteed or not, it still doesn't make sense for players to do this unless they are simply getting more $$$ to even out the time value of money to what they would have already gotten anyway and if that is the case, the player doesn't benefit and the team doesn't benefit. I can't think of a reason why it would be done unless people are convincing the player it's better for them....the point is, it isn't.

 

[Derailed75]

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.

Pretty simple, just like with Ohatani some people value things way above money. Things like winning championships and spending entire careers on teams that are actually in the mix for winning every single year. Things you literally can not buy with money.

 

[Jumptheshark]

Here is my question.

What if the Current owner sells the team RIGHT before the deferred payment is due. Who pays it?

 

[Barrie22]

Here is my question.

What if the Current owner sells the team RIGHT before the deferred payment is due. Who pays it?

New owner. When you buy a team in the NHL every contract that is on the books gets bought also. And that includes all incentives that are written into them.

 

[Toby91ca]

Pretty simple, just like with Ohatani some people value things way above money. Things like winning championships and spending entire careers on teams that are actually in the mix for winning every single year. Things you literally can not buy with money.

No, that is not a reason at all. I totally understand that as I feel that way as well. I've gotten to a spot in my career where I make good money, I'm comfortable with how much I'm making.....I don't dislike money, would always love more, but I do think the trade-off is worth the extra money that could exist if I shift certain things.

Anyway, back to why I think this is not a reason at all is this: Using Jarvis as the example, if all $$$ are paid during the contract, cap hit is $7.9M, by deferring $16M of it after the contract, cap hit comes down to $7.42M. Why not just structure the deal to pay actual cash of $7.42M each year? That puts the team in the same spot cap wise and has the player receiving the same value, so why go through this structure? The flip argument for using the structure is that the player is more concerned about the money and wants as much as he can get, but same story, still only getting the value of $7.42M per year, so there is no difference.

New owner. When you buy a team in the NHL every contract that is on the books gets bought also. And that includes all incentives that are written into them.

Well anything is possible in terms of negotiation on sale, but agree, it would be the new owner. That said, it would be factored into the purchase price.

 

[Barrie22]

No, that is not a reason at all. I totally understand that as I feel that way as well. I've gotten to a spot in my career where I make good money, I'm comfortable with how much I'm making.....I don't dislike money, would always love more, but I do think the trade-off is worth the extra money that could exist if I shift certain things.

Anyway, back to why I think this is not a reason at all is this: Using Jarvis as the example, if all $$$ are paid during the contract, cap hit is $7.9M, by deferring $16M of it after the contract, cap hit comes down to $7.42M. Why not just structure the deal to pay actual cash of $7.42M each year? That puts the team in the same spot cap wise and has the player receiving the same value, so why go through this structure? The flip argument for using the structure is that the player is more concerned about the money and wants as much as he can get, but same story, still only getting the value of $7.42M per year, so there is no difference.


Well anything is possible in terms of negotiation on sale, but agree, it would be the new owner. That said, it would be factored into the purchase price.

If deferred money is basically the same as a bonus (as i am not able to find any information on deferred contracts) then Jarvis would still get that 15 million dollars if something happens between now and 2030-31 season and the hurricanes decide to buyout the contract.

 

[Toby91ca]

If deferred money is basically the same as a bonus (as i am not able to find any information on deferred contracts) then Jarvis would still get that 15 million dollars if something happens between now and 2030-31 season and the hurricanes decide to buyout the contract.

But that doesn't provide a reason why you'd defer payments though, you can simply have certain payments as bonuses vs. regular salary anyway.

 

[Barrie22]

But that doesn't provide a reason why you'd defer payments though, you can simply have certain payments as bonuses vs. regular salary anyway.

Because he would rather the money in 1 lump sum not split over a few different years at a smaller amount.

 

[Toby91ca]

Because he would rather the money in 1 lump sum not split over a few different years at a smaller amount.

Huh? Why? He'd rather $15M in one payment 9 years from now instead of $5M in 6 years, $5M in 7 years and $5M in 8 years? That makes no sense.