Sorry, Larry David, but we’re wishing everyone a late Happy New Year! After all, it’s best to get the niceties out of the way before we dig into the trenches.
Over the weekend, The NHL received a metaphorical “challenge” from one of its clubs, The Anaheim Ducks. Frank Vatrano and the Ducks agreed to a three-year contract extension worth $18M. Normally, that would be a “nothing burger” of news. Under normal circumstances, that contract would carry a $6M AAV and cap hit. But not this time and that’s why The NHL now has a “challenge” to deal with.
This time, the Ducks and Vatrano structured the deal by giving him $3M per year in salary and then, beginning in 2035, he will receive $900,000 per year, for 10 years, to receive the remaining $9M of the contract. Due to the deferred payment structure, the deal’s average annual value is only $4.57M. That is the “net present value” of the deal.
You might ask, “Why does this matter? It’s only a difference of $1.43M.”
Here’s why it matters. Over the last 20 years, The NHL has strongly protected everything to do with its hard cap structure. Any team who has even slightly circumvented the cap, or attempted to, has been penalized by The League. So, with the Ducks essentially circumventing the cap by deferring half of Vatrano’s deal until he’s likely to already be retired, how can The League just let this go?
Yes, deferred payments are allowed under The CBA. But that was a holdover from the pre-hard cap era. Deputy Commissioner Bill Daly told The Athletic back in September, “It throws out of whack some of the other checks and balances we have in the CBA, which forces interpretations in terms of how we allow it and what’s permissible and what’s not permissible. The original deferred-comp rules were developed in a non-cap world as opposed to in the cap world, so they kind of were inherited, and so they probably need adjustment on some basis going forward.”
This is not the first time an NHL team has structured a contract with a player where a portion of the player’s salary is deferred until a later date. It’s not even the first time in recent memory. But, according to NHL Insider Chris Johnston, “it is the most extreme use of deferred compensation we’ve seen deployed in the NHL in terms of pushing the money well into the future.”
The NHL has not stepped in to prevent teams from deferring salaries, but there is no doubt that, based on Daly’s comments, The League is not happy with the situation. When the current CBA is up in a couple of years, maybe that’s when The League will step in and prevent further cap circumventions via deferred salaries. Until then, The NHL needs to hope more teams don’t exploit this cap loophole. After all, if teams like the Ducks, who are still rebuilding and nowhere near spending to the cap, can circumvent the cap this way, what’s to stop Cup-contending teams from doing so?
Heck, it seems like every Spring we witness plenty of outrage when some playoff team exploits the LTIR loophole to circumvent the cap and load up for a deep playoff run. That’s another topic The League’s high command needs to address in the next CBA.
It makes you wonder, how do the New Jersey Devils and other teams feel about all of this current circumvention going unpunished? After all, the Devils and others were penalized money and draft picks when they signed players to excessively long deals to lower their yearly cap hits. So, why are deferred payments and LTIR loopholes going unpunished? That’s a question only The League can answer and so far it hasn’t.
Meanwhile, in a happier conversation, congratulations are in order. For the first time in history, Team USA has won back-to-back Gold Medals at The World Junior Championships! Teddy Stiga’s “Golden Goal” in overtime on Sunday night cemented America’s win over Finland and set up Team USA to chase a third straight Gold Medal on home soil next year in Minnesota.
If The USA can win a third straight Gold Medal, they’ll become the first team to do so since Team Canada won five straight from 2005-2009.
In terms of international tournaments, the countdown to the first-ever Four Nations Face-Off Tournament rolls on. And when the tournament kicks off on February 12th in Montreal, Team USA will be a co-favorite, along with Team Canada. This tournament is only for players currently on NHL rosters and Team USA has a stacked roster. Only time will tell if The Americans can add another championship to their trophy case in 2025.
photo by Sportsology.
