Since Dave and I took action to develop this site, one of the articles I wanted to write was how the new CBA made life difficult for the Chicago Blackhawks, specifically Marian Hossa’s contract. I wanted to talk about the economics of the situation. Then Jerome Iginla rumors started flying and the trade deadline got closer and the timing made no sense.
And now the Chicago Blackhawks are Stanley Cup champions.
A Brief History (set an alarm to ring every 5 minutes, math ahead)
The NHL took offense to the way teams circumvented the salary cap in the last CBA. Ken Holland, Detroit’s general manager, opened Pandora’s Box when he signed Henrik Zetterberg to a 12-year, $73 million contract. The contract ensured Red Wing fans would be watching him play in Detroit until he’s 40, but not really. Worse yet, many GMs took to this model and offered deals with phantom years at the end. Chicago pushed the envelope with Marian Hossa, taking him out to 42-years old (the franchise was under investigation for a year from the NHL for this). New Jersey later tried to take Ilya Kovalchuk to age 44.
What Devils President and General Manager Lou Lamoriello did was so obvious and egregious, the NHL called shenanigans and nullified the deal.
The fear is starting to fade
The commissioner’s office had seen enough. With the new CBA, they implemented an effective contract structure which would end the “back diving” farce. Yet, that wasn’t enough. Gary Bettman wanted his pound of flesh. Now, the Sword of Damocles under which Stan Bowman operates is Hossa’s retirement and the recapture mechanism.
If Bowman was looking to get under the $64.3MM Cap for 2013-2014, he could buy-out Hossa [Editor’s Note: Chicago has as many as 22 players under contract for 2013-2014 with slightly more than $200,000 to spend. This includes buried contracts]. There is a newly-minted codicil in the CBA, whereby teams get two compliance buyouts which avoid cap hits. In a special accelerated option, they were made available this past off-season as the Rangers and Canadiens exercised options with Wade Redden and Scott Gomez, respectively.
Per the NHL.com website:
Starting 48 hours after the Stanley Cup Final ends until prior to the start of free agency, teams have the ability to buy out as many as two healthy players for two-thirds of the remaining value of their contract spread out over double the years left. The player’s salary will not count toward the team’s salary cap after the buyout takes effect.
Name such as Danny Briere (two years, $5 million remaining but a $6.5 million cap hit), Mike Komisarek (one year remaining, $4.5 million) and Roberto Luongo (nine years, $48 million remaining) have been floated as possibilities.
The next three years of Hossa’s contract still pay out $7.9MM, with an associated cap hit of $5.275MM. After that, the payout drops to $4MM and the final four years clock in at a cool $1MM each. He’s an injury risk to be sure (at the time of this writing, Hossa has a disc in his lower back causing numbness in one of his legs/feet), yet he scores at close to a point-per-game when healthy. Hossa is a 3-zone player and fits into just about any team’s Top 6. Without the protection of a “No Movement” clause, surely a GM would place a claim* for the player, hurting the Blackhawks now and in the future.
I’m going to want some draft picks thrown in, too
Cap Advantage Recapture (contracts of 7 or more years in duration)
This tasty morsel also goes by the “Roberto Luongo Rule” moniker, as if nothing good ever comes from that town [Hint: nothing ever does]. It boils down to penalizing benefits gained up front and applying them to the back end of the deal. I mentioned Hossa “saves” Chicago $2.625MM each year for the first seven years. If he continues to play here, that’s $18.375MM over the course of the contract [It should be noted this number has not been adjusted for the just-concluded 48-game season]. According to CapGeek.com (and confirmed by the League), teams do not receive a credit for seasons with negative cap benefit (where cap hit exceeds salary).
Confused? Of course you are. Black-hearted lawyers wrote this. Basically:
Salary > Cap Hit … needs to be punished
Cap Hit > Salary … no one cares
This number, in this case $18.375MM, becomes significant in respect to when Hossa hangs them up in retirement. If he honors the contract by playing it out, then all’s well; there is no penalty for being compliant. Otherwise, the NHL will impose a cap hit. Again, per CapGeek.com: Following retirement/defection, the “advantage” will be “recaptured” and charged against the club’s cap in equal amounts each year until the contract expires.
If Hossa plays the rest of his career in Chicago and retires one year early, all $18.375MM hits the 2020-21 Cap for Chicago. To put that in perspective, the summer of 2010 saw less need to shed money, only around $14MM, which resulted in trading half the team. If Hossa retires two years early, approximately $9.2MM is applied to both the 2019-2020 and 2020-21 Cap. It is tough to imagine what the salary cap may be then, but it is easy to assume this penalty would be at least a 10% handicap both seasons.
We can put off the “equal return” discussion because that recapture formula does not go away. Chicago has already seen benefit from that contract, currently to the tune of (approximately) $9MM. Also, Chicago is a buyer, not seller, and Hossa is hurt. Anyway…
The number currently accrued stays with Chicago until this contract runs its course. If Hossa is traded or claimed off waivers, the current amount stays here and the new team is on the clock for any future benefits. Just as important, Bowman no longer can influence when Hossa retires, thereby losing control of future cap penalties.
Long Term Injury Reserve (LTIR)
Outside of being able to play at a high level at 42, this is the saving grace to this whole discussion. As shown, an early retirement will be punitive for Chicago. However, Hossa can satisfy the requirements of his contract, and get paid while doing so, if he winds up on the LTIR. Hockey loves the ill-defined injury descriptors. We have seen older players suffer in silence, namely Chris Pronger, on the LTIR. Should Hossa feel his body or mind is no longer able to compete in the NHL, it would be best if Bowman placed Hossa on the LTIR – “Get me Jerry Krause on the phone!” – until the completion of the contract term. Only then would Hossa be allowed to officially retire.
Outside of the dubious course of action, the only lasting detriment would be to Hossa’s fans seeing his induction to the Hall of Fame delayed.
* (ii) Compliance Buy-Outs. During the “Ordinary Course Buy-Out” periods following the 2012-13 NHL Season and 2013-14 NHL Season, in addition to any other Ordinary Course Buy-Outs a Club may want to effectuate pursuant to Paragraph 13 of the SPC, each Club may elect to terminate and “buy-out” the SPC of up to two (2) additional Players (in the aggregate over the two (2) years) on a Compliance basis (a “Compliance Buy-Out”) (i.e., each Club shall be entitled to a total of two Compliance Buy-Outs that may be exercised in one year or over two years). Such Compliance Buy-Outs shall be effectuated on the same terms as are set forth in Paragraph 13 of the SPC, except that (i) there shall be no charge against the Club’s Averaged Club Salary in any League Year on account of a Compliance Buy-Out and (ii) any amounts paid pursuant to a Compliance Buy-Out shall be counted against the Players’ Share in the League Years in which they are paid. Further, a Player who has been bought out under the Compliance Buy-Out provision of this Agreement shall be prohibited from rejoining the Club that bought him out (via re-signing, Assignment or otherwise) for the 2013-14 League Year (if that Player was bought out in 2013) or for the 2014-15 League Year (if that Player was bought out in 2014).
Paragraph 13 of the SPC states:
The Club, in addition to other rights hereunder, at its option, by written notice delivered to the Player in accordance with Exhibit 3, may terminate this SPC on the following conditions: (a) The Club shall offer the Player on Unconditional Waivers, either before or promptly after the notice of intention to exercise the Ordinary Course Buy-Out option (herein called “notice of termination”) is given.