Salary Cap Stuff - Explaining The Wings Long Term Contracts

Yay the new CBA is (hopefully) going to pass and we’ll have the NHL back soon!  I was reading about the new CBA and came across this fantastic article by Elliotte Friedman of CBC (he’s the best NHL reporter in my opinion – follow him on twitter here).  In the article, he explains the Roberto Luongo contract and what happens if he gets traded to Toronto (he will) and what happens when he retires before his contract is up (he will). The first thing I thought was “Crap, the Wings have a few of those contracts, how could this hurt them?!?!?”

From the above article, here’s what happens when a player with a long-term contract retires early.  You add up the sum of the salary paid and the sum of the cap hits charged so far.  You subtract the salary from the cap hits to get the “Cap Benefit”.  You then take the “Cap Benefit” number and divide it by the number of years remaining on the contract.  That number is the “Cap Hit Penalty” over the remaining years.  It’s probably hard to see without actual numbers.

So I spent my lunch hour creating this spreadsheet: NewSalaryCapPenalties.  (I included screenshots for each player I’m gong to analyze, so don’t worry about clicking it; I just really, really love spreadsheets.)

Let’s go over Henrik Zetterberg’s contract:

As you can see, Hank has a 12 year contract that totals $73 million.  Like all of these contracts, the first 9 years are higher paying years (from $7m to $7.75M) while the last three years total $5.35m.  The annual cap hit is $6.083m.  Under the old CBA, his contract would go just go off the books when he retired (since he signed before he was 35 years old).  The new CBA…not so much.

Let’s look at the spreadsheet.  It’s up so every year, you can see the salary, cap hit, the difference from those two, and the total aggregate cap benefit from the cheating contract.  Below the details, we have what would happen if Hank retired after that season.

I doubt Hank will retire anytime before 2018, but the calculations are done in case he happens to retire after 2016.  The bottom section of numbers has, for each year, the Total Salary Earned, Total Cap Hit, Penalty (subtract Total Salary Earned minus Total Cap Hit), Years remaining on the contract, and the Wings Cap Penalty (Penalty divided by years remaining).

I found it odd that the earlier he retires, the less the annual penalty is for the Wings.  If he retires after the 2016 season, he’ll have earned $53.15m and have accrued a cap hit of $43.58m.  This means the cap benefit in prior years now has to be a penalty going forward.  So, the difference is $10.56m, dived by 5 years, meaning the Wings get charged with just over $2.1m each of the next 5 years.  As he plays more years, the annual amount increases slightly.  If he retires after 2019 or 2020…ouch.  His cap penalty then will be $5.083m for the last year or two.  This is because (outside of math), he’s had so many years of screwing the cap hit that the team will get punished huge.  Of course, we could have another lockout by then, so this could all change.  Or…who knows. Numbers don’t lie.

Let’s do the same thing with Johan Franzen:

Mule’s contract is obviously less that Hank’s, so the numbers won’t be as bad later on.  No matter when he retires (after 2016), his cap penalty will be between $2 and $3 million.  Not great, but not that bad.  Of course, he’s also been on some people’s list of buyouts, so…I could have wasted a few minutes of my life by doing this exercise.  Meh.

And now, here’s Kronwall, since he’s the only other Wings that would be included in this situation:

Since Kronwall only has a 7 year contract, I don’t see him retiring except MAYBE before the last season.  That would give the Wings a $3 million cap penalty during the 2018 season.  Not that bad, especially if that cap keeps rising.  There is one BIG issue with all of this…

What happens if Hank, Mule, and Kronner all retire before they are finished with their contracts?  Let’s look at if they all retire after the 2018 season, since that’s the last year Kronner would be involved in this.

Hank would have a $4.3m penalty against the Wings.  Mule’s would be $2.95m, and Kronwall’s would be $3m.  That’s about $10.25 million in cap space the Wings would lose for that season.  That would be losing 15.5% of your available cap space next season if the cap never increased.  So…uh…don’t boycott and spend ALL OF YOUR MONEY ON HOCKEY!

And for fun, I did the Luongo contract and separated it out like in Friedman’s article.  Boom:

Yes, the years he’s playing for the Leafs are in blue!  Because he’d be playing for two different teams in this scenario, the cap penalty is split by the team Luongo played for that season.  Vancouver gets charged for the first two years while the Leafs get the final 10.  Vancouver had a cap bonus of just over $6m in two years.  If somehow Luongo played until 2021 then retired, Vancouver would have a $6m cap hit in the 2021-2022 season.  BURN!  But, because he’s probably going to retire with three years left on his deal, they’ll most likely have a cap penalty of just over $2m.

AREN’T NUMBERS FUN!?!?!?  This was really fun to do and write.  If you have any questions or comments, yell at me on the twitter and we can have a good ol’ chat (@KevinN37).  Until next time…

GO LOCAL HOCKEY TEAM!!