NHL Salary Cap Observations

Published by Mark on Wednesday, October 6, 2010 — View Comments

NEWARK, NJ - DECEMBER 19: (L-R) Travis Zajac #...

Create a rule and someone will soon devise a way to bend it to the point of breaking. So it is with the NHL’s salary cap.

After 3 work stoppages and loss of a season, the NHL were able to secure a salary cap system, tied to league revenues, with rules that would govern how players could be paid, and how that pay would be counted against the team’s cap limit. Management claimed with cost certainty, everyone would benefit. Yet, the owners and GMs can’t help but try to circumvent the system they themselves forced down the throats of the NHLPA.

Teams have flirted with being over the cap. There have also been contracts carefully structured to try to provide cap relief. Teams have managed creatively to get under the cap in time for the deadline. While players and agents have been willing partners in trying to beat the cap, GMs and ultimately team ownership, the very people who insisted a salary cap was necessary to ensure the health of the NHL, are the worst culprits.

The New Jersey Devils have been dangerously close to the cap in previous seasons. Once again, it seems they might be forced into some decisions about personnel as they sit about $3M over the cap. Rumors swirl that Langenbrunner, Parise, or Zajac (all key to New Jersey’s offense) may have to be moved. The Cup-champ Chicago Blackhawks, who have also flirted with the cap limit, have shipped about 40% of the team that hoisted the silverware to other locales. Byfuglien, Niemi, and Versteeg  were key contributors, and while some would argue that the key pieces remain, such turnover is bound to affect chemistry. Recall also that Chicago and Calgary had cap issues in previous seasons (late in the 08-09 season, the Flames at times dressed only 15 players). Player movement is not new, and it is up to the GM to build a team how he sees fit. But there is something to be said for integrity of the game, duty to present a competitive team. When teams have to dress 18 players for a game instead of 20, or trade a skilled, high-paid fan favorite strictly for cap relief, that seems a big issue.

Another phenomenon of the cap seems to be teams finding ways to hide their past mistakes. We have 3 recent examples. In Toronto, the acquisition of Phaneuf, the non-trade of Kaberle, and return from an injury of Komisarek has fueled talk all off-season that the Maple Leafs would simply demote Jeff Finger and his $3.5M off the books. The New York Rangers have demoted a declining Wade Redden to Hartford, clearing cap space. And in Edmonton, Sheldon Souray has been told to stay away. There will be arguments that especially in these 3 cases, the player did not perform as expected or as hoped. I don’t have an issue with renegotiating, or that a player may accept demotion. I think perhaps the NFL ‘no guaranteed contracts’ model, where a player is simply released, is a better system. But the issue is more that these players are going to essentially be ‘hidden’ in the minors. The team gets cap relief, and GMs get to bury their cap problem, instead of being made to resolve the issue.

Perhaps the biggest story of the off season swirled around Kovalchuk and the Devils, and a contract which was ultimately found to circumvent the salary cap by spreading a large sum of cash over as long a period as possible. The NHL finally stepped in and made changes to the way contracts could be structured, but only after having approved a series of contracts that been building to this point. Creatively, owners, GMs, players and agents used a loophole whereby the bulk of the salary is paid in the front end of the contract, but with a term long enough to reduce the cap hit. In some cases, the term is long enough that it’s reasonable to think the player will be retired when the term ends. In Kovalchuk’s case, the term was 17 years, ending at 44 years of age, structured to pay a total of $102M, with $95M being paid in the first 10 years, and the remaining $7M paid over the last 7 years. The effect is to reduce the cap hit to a manageable $6M per year, leaving the Devils room to sign players like Parise and Zajac in years to come. Kovalchuk’s deal was restructured, and the Devils are still above this year’s cap number. Further, they will pay a hefty price ($3M fine, loss of their 2011 3rd round draft choice, and loss of 1 of their next 4 1st round choices) as the league makes an example of them.

The fact though is that the Board of Governors and the Commissioner have generally turned a blind eye to GMs and agents and players finding ways around the cap system which is supposed to be the salvation of the NHL. It won’t take a genius to see that another work stoppage may loom, as owners cry poor and beg the NHLPA to give them further rules to save them from themselves. And it won’t take a genius to know that within minutes, someone will be figuring out how to bend those rules also.