NHL, NHLPA and their salary cap headache for 2013-14
Watching Gary Bettman meet the media after the New Year’s Day collective bargaining talks, one got a sense of cautious optimism from the Commish. But as he said: “We’re clearly not done yet.”
So what’s the hold up? Part of it is about next season, and how to finesse the NHL’s bloated financial system into a tighter squeeze under the League-proposed $60-million salary cap for 2013-14. It’s these transitional rules that on which the two sides have found it hard to find harmony.
In its proposal last week, the NHL offered an upper limit of $70.2 million for the salary cap in the truncated 2012-13 season, which then drops to $60 million for the 2013-14 season.
One look at Cap Geek reveals that 16 teams are over $60 million against the cap for the 2013-14 season. Free agency and trades will obviously help some of these teams get under the cap, yet as Mirtle notes there are plenty of teams kissing the cap next season.
But the essential issue for the players is escrow.
Yes, we hear eyes rolling into the backs of heads upon hearing the word. (Can’t the NHL hire Frank Luntz to focus group an alternative? Maybe “Player Reinvestment”?) If there’s still any confusion on what the hell it is, Offside offered this primer:
If the NHL thinks it's going to make $2 billion in revenue, the salary cap will be based on that number. BUT if the league only ends up making $1.7 billion, there’s a $300 million shortfall. If there’s a shortfall, then the NHL takes the money from the escrow fund to make up the difference. However, if the league makes $2 billion, the players would get this money back.
There’s a more detailed breakdown of how escrow is calculated here at The Hosers, which brings us to the current conundrum facing the NHL and the NHLPA: The adjusted midpoint of the salary range is going to be dramatically affected by the number of teams pressing up against a $60 million cap so quickly. Escrow withholdings would skyrocket; it could climb back to the 25 percent levels we saw in 2009, perhaps even higher.
So the two sides are battling over escrow for the 2013-14 season, as the Globe & Mail explains:
In their latest offer, the owners called for a pro-rated $70-million (all currency U.S.) cap for whatever length this season is, with the cap dropping to $60-million in 2013-14. Both sides have already agreed to a 50-50 share of league revenue.
However, the players want a gradual drop to a cap based on a 50-50 split while the owners want it in 2013-14. The players also want the owners to guarantee a minimum escrow hit on their pay cheques. NHLPA executive director Donald Fehr was expected to address both issues in the counter-proposal. The players were expected to ask for a $67-million salary cap in 2013-14 and for a cap on their escrow payments. The owners have thus far refused to consider a cap on escrow.
Will the NHLPA stick with the cap on escrow? Andy Strickland of TrueHockey.com reports that they’ve come off the request, adding:
Sources say the NHLPA has moved in the NHL’s direction when it comes to the 2013-2014 cap number. The NHL has it set at $60 million while the NHLPA has come down from $67 million towards the NHL’s position. Not quite all the way down to $60 million but less than $67.
I spoke to a player on background this morning that didn’t exactly sound enthused about the two sides bridging this gap on escrow. Maybe that’s because the NHLPA had to come off its request for a cap; or maybe that’s because there’s no easy way to drop the salary cap by $10 million one year to the next and not have the players have to pay more into the pot – especially when no one knows what effect the work stoppage will have on the next full season's revenues.
Again, they're close to a deal. But this could be one of the significant obstacles.