The Flames Pending Cap Problem

Kent Wilson
December 11 2012 10:44AM

The CBA talks will resume this Wednesday with indication of when or if the new agreement will be signed. That means there's a lot that can change between now and whenever hockey returns, but what seems to be coming into clearer focus at this point is the money part. The players have pretty much capitulated when it comes to dollars, with the HRR split likely to settle in at 50-50 ("make whole" provisions notwithstanding). 

That means the next salary cap will be around $60M, or more than $7M less than the Flames already have committed to payroll currently. That would be a challenging enough obstacle even with some sort of one-time amnesty buy-out compliance program, but word is the NHL isn't interested in doing that this time around.

Larry Brooks suggests an interesting work around at the above link, but assuming the NHL stands firm and doesn't get too creative, the Flames will have to find some completely conventional (but painful) method to get under the new cap ceiling.

We talked about this some months ago in reference to Matt Stajan, but that was when we thought the Flames would be afforded a buy-out option. Stajan remains the most desirable contract to get rid of, but doing so via trade is far more difficult than a simple buy-out given his lousy performance and the lowering of the cap.

In addition, even if somehow the Flames were able to move Stajan for pennies on the dollar, it would still leave them more than $3M north of the cap. That means at least one more big(ish) ticket would have to be moved for cap space before the club could step foot on the ice.

Salary Dumps?

The candidate for trades are limited. Cory Sarich was just re-signed at $2M and moving him doesn't even get Feaster across the finish line. Dennis Wideman ($5.25M) was just signed long-term and has a NTC. Mark Giordano ($4.02M) is an anchor on the back-end and one of the few guys within hailing distance of value for dollars.

Up front, five players other than Stajan make more than $3M per year: Alex Tanguay ($3.5M), Roman Cervenka ($3.77M), Jiri Hudler ($4M), Mike Cammalleri ($6M) and, of course, Jarome Iginla ($7M). Cervenka, Tanguay and Hulder were all relatively recent signings by this regime and are penciled in at the top of the rotation.

So dealing two mid-level contracts to get to $60M looks problematic. That leaves moving a big salary + a lesser contract to get things done. Of course, the only three big dollar deals on the club are Jarome, Cammalleri and Jay Bouwmeester ($6.68M).

From a coldly logical perspective, Iginla would be the contract to move. He's 36 years old in July, on the last year of his current deal and is a non-trivial risk to sign elsewhere in the off-season. His clout and superficially good stats means the team would likely get a lot more for the captain if he was put on the auction block relative to JayBo as well.

Bouwmeester, on the other hand, is signed for one more year, is just 29 years old and and is far-and-away the best defensive option the team has on the back-end. His contract is definitely poor value given his lackluster offensive results, but the Flames will certainly have diminished chances of success if they deal him for picks and prospects.

Cammalleri is also overpaid as well and also has just a single year left on his deal. Michael is a decent but supplementary player at this point in his career. Im unsure what his value is perceived to be around the league, meaning moving him at $6M per year night prove difficult.

Of course, Iginla is Iginla and we know moving the captain in lieu of the much maligned and overpaid Bouwmeester would be extremely unpopular in town. The Flames have always publicly communicated their reluctance to deal Iginla and even with his free agency (and rapidly approaching best before date) looming, my guess is they would opt to shop Cammalleri and/or Bouwmeester to placate the league's new ceiling.

Other Stuff

The current NHL kerfuffle remains confusing if one assumes each side just wants to get a fair deal done so hockey can resume. In fact, both combatants have a deeper agenda.

The NHL would like to undermine the union and weaken its resolve so the owners can continue to wring concessions from the players. Both now and in any future CBA battles. Bettman and the owners know they have more money and a longer view of things than a majority of the players, so the leverage almost always resides with the owners in these things. 

On the players side, Donald Fehr aims to counter by making these talks as painful as possible for Bettman and company. In the short term, because it means the players wouldn't be seen as push-overs and would at least be able to mitigate some of the damage done to their revenue share and contracting rights. In the long-term, it would be to galvanize the union and protect them against entering a perpetual spiral where each successive CBA means further capitulation to league demands. This could mean either a radicalization of the union to the degree that every future battle will be long fought or bloody (suggesting predictable brand damage and revenue loss every time a CBA expires), or to ultimately decertify and dissolve the union, which would lead to chaos in the aftermath, but would at least break lock-out cycle. At this point it seems collective bargaining has simply made it simpler for the owners shift the burden of risk to players - a single neck around which one leash can easily be fastened, so to speak - so Fehr probably isn't just thinking about how to get everyone back on the ice with a minimum of fuss.

- On the issues of contentious contracting rights (specifically the instance of the league on a 5 year cap on new contracts) I recommend Tyler Dellow's recent article as well as Tom Benjamin's work.

FN on FB

Finally, I wanted to let everyone know I decided to create a FlamesNation Facebook page. Please swing by, take a look, maybe give us a thumbs up. I invite anyone to leave post ideas or suggestions there as well.

Related

Alex Edler, gone from this salary capped world?

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Former Nations Overlord. Current Fn contributor and curmudgeon For questions, complaints, criticisms, etc contact Kent @ kent.wilson@gmail. Follow him on Twitter here.
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#1 Kevin R
December 11 2012, 10:59AM
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I dont think it will be as difficult as you think. The 300million make whole will likely be used over the next 1-2 years to allow the teams the time to transition to the new cap number. So if 60mill is what it should be, then the 30 teams can go to 70 mill if they decide to do it over 1 year or 65 mill if they want the transition to occur over 2 years. I could be wrong but I think that was the purpose of the make whole & these are $$$ over & above the 50% HRR the Owners are kicking in.

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#3 Adam
December 11 2012, 11:46AM
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Isn't Cervenka's cap hit only above $3 million because it was the last year of the CBA deal and all bonuses counted against the final year of the cap because they couldn't be carried over as there was no CBA to carry them over to?

If there is a new deal, isn't it possible that his cap hit goes towards his base salary (I think $750,000 or around there). That could be a savings of $2.8 million right there.

Not sure if that is how it would work. Just remember that his cap hit was so high because of bonuses like winning the Hart Tropy, Calder Trophy, Scoring race, etc.

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#5 mattyc
December 11 2012, 11:56AM
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Didn't Daly mention something about a 12-month "transition period"? Obviously nothing's official yet, but that would allow for a lot of contracts to expire.

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#6 T&A4Flames
December 11 2012, 11:59AM
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This might not be a bad thing. It could radically change the look of this team by forcing them into a rebuild/retool scenario. Takes the pressure off of Feaster & King to stick with the somewhat futile "win now" mentality.

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#7 RexLibris
December 11 2012, 12:04PM
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I don't envy the Flames their cap situation, but what I have to wonder is: hasn't this been something of an organizational issue for some time now? They've been mismanaging their salary cap almost since it was instituted.

While Feaster can't be held solely responsible for being in this situation, I believe that Bettman would have had discussions with the owners about where the league wanted to end up once negotiations finished. Given that Murray Edwards appears to be one of the principle forces driving the proverbial hardline negotiations, and taking into account the oft-repeated claims that ownership and Ken King are heavily involved in the running of the team, doesn't it seem odd that Edwards would have backed a GM who was making financial commitments at the end of a CBA when he, theoretically, ought to have known the general outlines of the new financial landscape?

As for how to fix it? The easy way is to let Iginla walk (insert laugh track here). So, that probably won't happen.

Aside from that, Bouwmeester is a good bet to be moved. For comparables I come back to the Pronger trade, which was a trade-and-sign, in which the Blues got an NHL defenceman and two blueline prospects. The NTC obviously comes into play there as well. If the NHL also removes the ability to hide salaries in the AHL then the Flames are really in tough. They'd likely be forced to trade more than one asset either at a loss (meaning the inclusion of prospects or picks in order to sell) or move a player who is an actual NHL contributor. They can't take a bad contract back so that is off the table.

This lockout, if the owners end up getting more or less what they have asked, could be the one final kick in the jewels that convinces the Flames to, er, "renovate" (because I know the other word is a no-no here). ;-)

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#9 Kevin R
December 11 2012, 12:36PM
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@RexLibris

Hey Rex! In reality, I think the Flames are probably not as bad as you think. Assuming they settle & we get an abbreviated season toots sweet the NHL know that many teams would be offside & wouldnt have time & we have several contracts with only 1 year left. Stajans could easily be bought out, even if Iggy is resigned, I would imagine it will be a 5 year retirement deal(if we dont trade him) at a much cap friendlier number. Next year we have some big big ticket contracts coming off like Cammi & JBO to name a few.

If anything, I would be concerned for the Oilers retaining these high end young players over the next 2-3 years. If the cap goes down & Eberle & Hall are already on pretty healthy contracts, you have Shultz, RNH & Yapukov all wanting $$$$. Take away the variance & only 5 years length & I see Oilers having to make some serious adjustments if these kids have any kind of success. This changing contract landscape could have huge implications if you were writing your series of different rebuilds post new CBA.

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#10 JF
December 11 2012, 01:53PM
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IIRC isn't the NHL's preferred method of cap transition simply setting the cap at an artificially high number the first year? Specifically the number it was set at before (70ish Million) with escrow eating the difference in real dollars (and the transition/make-whole payments recouping some of that). If they were to get their way with that then in the short-term the Flames are cap compliant and would be expected to use attrician to make up the difference in future years.

Personally I'd rather see amnesty buyouts used with the cap set at a number that reflects the players actual share. Granted that's mostly just because I really want to see the Minn. Wild get screwed.

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#12 JF
December 11 2012, 03:13PM
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@Kent Wilson

Oh... you're talking about next year not a hypothetical this year? In that case the Flames have 47.8M in cap committments next year.

http://www.capgeek.com/flames/

Granted that is before discussing the elephant in the room that is Iggy's pending free agency (and by extension their fair value in new new CBA environment), I'd personally have a tough time seeing him getting more then he makes now, along with Q.O. for the RFA's. Letting Babchuk walk is an easy enough call as is Stajan's 3.5M ticket (The NY Islanders or any floor team seem like a good fit for his frontloaded deal) that takes care of 6M worth leaving just 700K + the presumed 10% inflator on Q.O.'s. Roughly 1M total... Not all that hard to get rid of without jettisoning anyone substancial.

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#13 SmellOfVictory
December 11 2012, 03:54PM
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Kent Wilson wrote:

While Feaster can't be held solely responsible for being in this situation, I believe that Bettman would have had discussions with the owners about where the league wanted to end up once negotiations finished. Given that Murray Edwards appears to be one of the principle forces driving the proverbial hardline negotiations, and taking into account the oft-repeated claims that ownership and Ken King are heavily involved in the running of the team, doesn't it seem odd that Edwards would have backed a GM who was making financial commitments at the end of a CBA when he, theoretically, ought to have known the general outlines of the new financial landscape?

The irony of these sorts of lock-outs (some would say hypocrisy) is that the owners unified demands often fly in the face of their individual GM's competitive strategies. So the Wild sign Ryan Suter and Zach Prise to 10-year mega-contracts in the summer and then Leipold goes into CBA negotiations adamant about new 5-year contract caps.

It's definitely a hypocrisy, but it's easy to see how they get caught up in it. To some extent you can rely on acquiring good support players and drafting well to build up your team, but that generally only gets you so far before you need to compete for the occasional bigger name UFA to get a significant competitive edge. In a market with only 30 customers, many of whom can't compete financially, I can understand even the more fiscally responsible GMs feeling that they have to give in to some of the craziness.

It's like going to a boxing match, and then in round 2 someone finds a way of reinterpreting the rules so that you're technically allowed to trip a guy under certain circumstances. If you refuse to use the loophole, you're that much more likely to lose the match, regardless of how good you are at boxing.

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#15 ChinookArch
December 11 2012, 05:02PM
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On the Iginla front. He'll only get moved if he wants that to happen. I don't see Jerome resigning for a retirement deal with the Flames, or hanging them out to dry (a la Sundin). It's clear he wants to retire with a cup. I can see the team and the player to working on a Ray Bourque like departure, so that both parties win.

Even if Feaster has the real power to move Iginla, it would be a career ending move without the player and team wholly onside.

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#16 RexLibris
December 11 2012, 09:27PM
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@Kent Wilson

I agree that the optics of Leopold specifically are terrible, and from what I have read and heard he had been generally, and deservedly, panned about that behaviour.

What I wonder about is, if Edwards knew that this was going to be the line, then why empower Feaster to make those commitments? Knowing that in advance, wouldn't you want to take advantage of that as it relates to the position of your franchise?

It does seem as though there will be a one-year $70 million-ish salary cap, or something to allow for a gradual shift, a salary cap hyperbaric chamber of sorts, but the Flames have been pretty liberal with some of those big-ticket contracts recently and it might yet haunt them.

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#17 RexLibris
December 11 2012, 09:41PM
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@Kevin R

I know that point has been raised before. A few months ago it was discussed over at ON, I believe. On a $60 million dollar cap the Oilers would, in the end, likely only have to clear a very modest one or two million. That can be done by moving someone like Ryan Jones or Corey Potter.

Andy Sutton looks like his career is done, and Khabibulin's contract is over this season. That clears more than enough to get under.

As for the big-name players, Hemsky's $5 million in cap space will, in all likelihood, be moved over to one of Justin Schultz or Ryan Nugent-Hopkins, with Khabibulin's $4 million in cap space eventually being allocated for Schutlz. Add in some other expiring contracts like Shawn Horcoff to make room for Yakupov and the balance of cap space devoted to impact players becomes more even.

Don't forget, if this year gets wiped out, Yakupov's ELC shift over for another year. He hasn't played a professional game in the NHL or AHL. The KHL and NHL don't have a transfer arrangement and therefore contracts are often only barely recognized, if at all.

The Oilers may very well be in tight and I think the fan base here is very aware that not all the same faces will still be around in five or six years. But at the same time, trading away a high-end player who is still young due to cap concerns isn't the worst position in which to find oneself.

I did keep the new CBA in the back of my mind when writing. I had a few general assumptions: 50/50 split, some issues on contract length, and perhaps a change in revenue sharing making the rebuild option open to more franchises than just the ones with rabid fan bases. That being said, the last CBA allowed Pittsburgh to retain their talent long enough to win. This one? Who knows. I certainly don't believe it will reverse the trend and make beggars of the small-market Canadian franchises, regardless of what the New York Rangers might want. ;-)

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#18 RKD
December 12 2012, 01:56AM
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St. Louis wants a left handed d-man to play with Pieterangelo. What would they give up for him?

I can't see them moving Jarome unless it's a mutual agreement like the Ray Bourque situation. They could move Cammy but if he's penciled as the #1 center they would be left without one.

Cervenka has been injured multiple times already, maybe they don't resign him, buy out Stajan, and trade Babchuck.

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