The National Hockey League's counterproposal to its players on Tuesday included a reduction of the salary cap from its expected $70.2 million for 2012-13 down to $58 million for next season. It would slowly creep up over the six-year term to $71.1 million in the final season.
This was expected.
That there wouldn't be a rollback on existing contracts, as the NHL stated in its proposal, was a shocker.
After rolling back salaries by 24 percent in the 2005 lockout, the NHL proposed doing it again in its first bat-crap crazy opening bid to the players in July. The NHLPA and its agents have been preparing for a rollback over the last year, as star player after star player signed elephantine contracts, complete with signing bonuses that would be exempt from a rollback.
For example: four of the top five signing bonuses in the NHL were on contracts inked in the last year, including Zach Parise, Ryan Suter and Shea Weber (leading the NHL with $13 million).
The players saw this rollback as a straight-up cash grab, without the dire "save the dying teams!" undertones that accompanied it in 2005. That's what happens when you're generating $3.3 billion in revenue — it's hard to convince the worker bees that the hive needs repairs.
So let's see: a $58 million salary cap with no rollback on existing contracts. Which would mean, via Cap Geek's numbers, that over half the NHL would be over the cap should $58 million become the ceiling.
How the hell is this going to work?
From Cap Geek, the sweet 16 teams that are over a $58 million salary cap threshold:
Boston Bruins ($68,867,976)
Minnesota Wild ($68,848,867)
Vancouver Canucks ($67,768,333)
Calgary Flames ($66,668,332)
Philadelphia Flyers ($66,643,373)
San Jose Sharks ($65,241,667)
Montreal Canadiens ($63,897,976)
Tampa Bay Lightning ($63,246,916)
Edmonton Oilers ($62,933,333)
Toronto Maple Leafs ($62,873,333)
Chicago Blackhawks ($62,445,128)
Los Angeles Kings ($62,320,227)
Buffalo Sabres ($61,542,023)
Pittsburgh Penguins ($60,263,333)
Washington Capitals ($59,627,905)
New York Rangers ($58,508,334)
Granted, some of the fixes here are easier than others: The Flyers and Bruins will get LITR relief for Chris Pronger and Marc Savard respectively; the Canucks still have a well-compensated goaltender they need to trade.
But what about the rest of the teams? With no rollback, how do they get under the cap?
The solution is … not exactly clear from a cap perspective, although it's rather clear that base salaries are going to be affected by an increase in escrow withholdings. A major increase. Like, an increase that basically serves as a salary rollback without having a formal one.
The NHL is not asking for any rollback in current contracts, suggesting that the adjustment could be made through changes in contracting practices, increases in league-wide revenue and contributions to player escrow.
Players, as a rule, dislike the NHL's current escrow practice. They have a percentage of money taken out of their paychecks to ensure that players as a group receive no more than their collectively bargained share of revenue.
The league's proposal did not include an across-the-board reduction (or "rollback") to existing contract values. Necessary adjustments would be financed entirely from a combination of modified contracting practices, increases in league-wide revenue and from the players' Escrow contributions.
The problem here is that adding more to escrow is, in terms of real dollars, not different from a salary rollback. Keeping with the "tax return" theme, if suddenly you were having more of your check withheld every pay period, and your refund either stayed the same or decreased come tax time, how would that be different from just starting at a lower salary with the percentage being withheld staying the same?
The players hate escrow like Mike hates sauceless sandwiches, and that's why this proposal isn't going to get it done. Over time, in theory, player signing practice would shift to meet the economics, but for the main duration of this deal, the players are gonna lose a significant chunk to escrow and never see it again.
OK, but how does any of this affect the salary cap numbers?
I asked an NHL source Tuesday night, one with knowledge of the league proposal, who said there are "lots of possibilities," but that this facet of the agreement was secondary to settling on the larger issues: Like what the cap and the floor will be under the CBA's term and the players' cut of revenues.
This is understandable … if a little maddening for teams well over the cap.
What might be under consideration?
A popular option among fans that want to see toxic or regrettable deals wiped off the books. If the Minnesota Wild were to buy out Dany Heatley, for example, that's $7.5 million off the cap without repercussions. Well, outside of the impact on Craig Leipold's wallet, poverty stricken owner that he is.
But there are no guarantees this will be an option like it was in 2005, as Scott Burnside of ESPN reported in March 2012 that "GMs said quietly they aren't counting on being able to simply dump a contract to get under whatever the new salary cap might look like."
There was a rumor back in 2005 that this might have been part of the final agreement between the NHL and the NHLPA, but TSN shot it down: "There is all sorts of talk that players will have to renegotiate their contracts to get underneath the salary cap...that is not going to be allowed. Players are not going to be allowed to renegotiate their contracts. They are stuck with the deal unless they are bought out."
Is this something they might revisit? Does this fall under "modified contracting practices"? Is it something the NHLPA would consider?
Recalculation of Cap Hits
Just thinking out loud here, but if "a combination of modified contracting practices, increases in league-wide revenue and from the players' Escrow contributions" are the path to an informal rollback, could base salary simply be recalculated based on Escrow to affect the average annual value of a contract? Like, for example: If you decreased base salary via Escrow withholding, you could in theory bring down the AAV slightly, dropping the cap number.
Now here's where things get sexy.
Some of the NHL's revenue-generating teams were in favor of a dispersal draft in 2005, allowing players with hefty salaries to simply be plucked from rosters. The players, again, shot it down, and according to the Mercury News via On The Wings, the amnesty buyouts were a compromise.
But could you imagine if the teams near the floor were given a chance to poach big-contract players on long-term deals? And by that we mean, could you imagine the New York Islanders not having to convince a star free agent to sign on Long Island but rather having him forced to play there?
In plain English, there isn't a rollback per se, but there's a rollback via escrow, and there's a rollback via reducing the cap without a rollback--which may or may not mean that there would be another round of buyouts, yielding a de-facto "dispersal draft," just like last time around.
(For the record: How fun would a dispersal draft be? It might even be worth sitting through this CBA nonsense for the TV spectacle that would be.)
The bottom line is this: No one knows for sure what the cap implications will be if it's dropped and there's no traditional salary rollback.
But we do know, based on the NHL's proposal, that the only way this helps remedy the NHL's alleged fiscal ills is to have players face huge escrow payments. Which appears to be the heart of the proposal.