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What’s the future of front-loaded long-term contracts in NHL?

Nine years was an odd number for Brad Richards(notes). Big free-agent deals seem to go 12 years or 10 years; the New York Rangers' $60 million contract with Richards went nine years, bringing him to 2020 when he'll be 40 years old.

With that projection, the contract doesn't seem so odd any longer, considering the state of long-term contracts in the NHL.

The Ilya Kovalchuk(notes) mess from last summer didn't kill the front-loaded, cap-circumventing contracts with preposterously low payouts in their later years. No, the agreement between the NHL and the NHLPA merely prohibited contracts as farcical as Kovalchuk's 17-year deal with the New Jersey Devils, and narrowed the type of contract allowed "in the spirit of the CBA."

Richards' contract (via Cap Geek) is a complicated patchwork of signing bonuses and base salary that ends with three years at $1 million apiece, the contract terminating around his 40th birthday. So it fits into the confines of that NHL/NHLPA agreement snugly.

From Darren Dreger of TSN in Summer 2010, on the Kovalchuk Amendment:

First: For long-term contracts extending beyond the age of 40, the contract's average annual value for the years up to and including 40, are calculated by dividing total value in those years by the number of years up to and including 40. Then for the years covering ages 41 and beyond, the cap charge in each year is equal to the value of the contract in that year.

The Richards deal avoids this by going nine years and avoiding any contract years past 40 years old. Dreger again, from 2010:

Secondly, for long-term contracts that include years in which the player is 36, 37, 38, 39 and 40; the amount used for purposes of calculating his average annual value is a minimum of $1 million in each of those years (even if his actual compensation is less during those seasons).

In other words, the NHL allows Brad Richards to be a $1 million player in the fantasyland of long-term contracts at age 38, despite the fact that a player like Keith Tkachuk was still making $2.15 million at age 39.

And the NHL allows defenseman Christian Ehrhoff(notes) to make $1 million at age 37, despite the fact that a much lesser blue-liner like Sean O'Donnell was making $1.25 million at age 38.

Cap circumvention is alive and well in the NHL. Question is what, if anything, should be done about it?

The initial Kovalchuk contract last summer — 17 years, $102 million — looked like a parody of NHL contracts on paper. From the LA Times:

Kovalchuk, in his prime at 27, will earn $6 million in each of the first two seasons. But then he will earn $11.5 million each of the next FIVE seasons. Then his salary goes to $10.5 million for one year, followed by seasons of $8.5 million, $6.5 million, $3.5 million and $750,000. The last five seasons he's scheduled to be paid $550,000 each. He will be 40 then.

It was a welcome mat for the NHL to walk in and finally fight the structure of one of these contracts as violating the salary cap. It dragged the NHLPA to the table and banged out some limits.

The Kovalchuk deal was especially egregious, although not the first contract to attempt circumvention. From the Washington Post, Devils GM Lou Lamoriello stated the obvious:

Lamoriello also pointed out there is plenty of precedent for the Devils' deal with Kovalchuk. Marian Hossa's(notes) 12-year contract with Chicago ends when he's 42 and drops from $7.9 million to $750,000 in the final two seasons. Henrik Zetterberg's(notes) 12-year contract will keep him in Detroit until he's 40 and descends from $7.75 million to one million in the last two seasons. Chris Pronger's(notes) seven-year contract in Philadelphia ends when he's 42 and declines from $7.6 million to $525,000 in the final two seasons. Roberto Luongo's(notes) 12-year extension with Vancouver gradually declines from $10 million to $1 million in the final two years. Luongo will be 43 when the contract expires.

The Ehrhoff and Richards contracts are further successful attempts to get around the cap. Ehrhoff's cap hit is $4 million and he'll make $37 million of his $40 million in the first seven years of the contract. Richards' deal will pay him $57 million in the first six years, inflated with bonus money that disappears in the last three years of the deal.

What’s the future of front-loaded long-term contracts in NHL?No, seriously, the NHL rubber-stamped a contract that looked like this in the final four years.

Ryan Durling of Stanley Cup of Chowder lamented both deals:

Both contracts avoid the 35-and-over CBA clause, which states that whenever a player over 35 signs a multi-year deal, the AAV counts against the cap for the entire duration of the contract, even if the player retires before the contract is up.

But that doesn't change the fact that the Ehrhoff and Richards deals, while team- and player-friendly, are in pretty blatant disrespect of the league and the CBA. It may not be a huge concern now, but with the CBA in need of renewal come Spring 2012, these contracts could prove to be a big point of contention among owners trying to agree on their end of the CBA talks.

That's the $60 Million Question, isn't it?

The NHLPA obviously supports these long-term deals, because it provides a way for its players to break the bank in a capped league.

Some of the NHL's owners might loathe this practice of front-loading contracts — Ted Leonsis being one of them — but others clearly had dabbled in these Dark Arts quite willingly. And it's not just any owners: NHL darlings like Rocky Wirtz (Duncan Keith(notes) and Marian Hossa) and Mike Ilitch (Henrik Zetterberg and Johan Franzen(notes)) and Ed Snider (Chris Pronger) have all agreed to fund cap-circumventing contracts that solidified their teams' fortunes.

Are they the majority when it comes to the future of long-term deals in the NHL? Are they powerful voices of dissent from those desirous to eliminate the practice? Will they be satisfied with the deals they've handed out and declare "no mas!" to future circumvention?

Tough to say, but their opinions could determine everything from term limits to how the cap hits on these contracts are calculated.

What’s the future of front-loaded long-term contracts in NHL?The NHL wants to limit term, because it's always wanted to limit term: During the lockout, it wanted a maximum of three years for any contract. This was an insult to any owner who drafted a player and invested resources in that player. They should be able to sign him for three years or 23 years, because stability is only a good thing for fans.

(Or, they can make a contract disappear. Will the next CBA include a mechanism preventing problem contracts from disappearing in the AHL or in Europe?)

The issue is how a long-term contract counts against the salary cap. The next CBA negotiation will target just that, perhaps with the cap hit coming from the first few years of a long-term deal. Or this idea, via Dirk Hoag of On The Forecheck:

Within a new SPC (Standard Player Contract), no yearly salary can be less than 50% of the highest salary within the span of that contract.

If you want to pay a guy $8M early on, you can go no lower than $4M in later years. It's fantasy to think that a team can project exactly when a given player's effectiveness will drop off 5, 6, or 7 years into a deal, and those final four seasons on the Hossa deal are nothing more than a sad joke.

Something will be done in the next CBA that will end a team's ability to do what the Buffalo Sabres did with Ehrhoff and what the New York Rangers did with Richards. (The Flyers and Max Talbot didn't get over the prison wall before the guards caught them.)

But what's the fair solution to the players, the spirit of the salary cap and the teams that don't choose to use garbage years at the end of a deal to bring the cap hit down?

And will the solution be tied to a larger solution that tackles the current salary structure in the league, which has teams like the Florida Panthers overpaying middling talent to ensure they're above the salary cap floor, thus throwing everything out of balance?

Remember when hockey fans were gleefully dancing on the grave of the NBA's next season, which will likely be lost to a lockout that will redefine nearly everything about its financial system?

Remember feeling comfortable that we've already gone through the hell once and won't be doing it again?

Do we still feel that way after July 1?

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