FanPost

[Updated x2] On Cost Certainty and "Cap Circumvention"

The CBA Trapezoid[1] :

None of the commentary on the contract rejection that I have seen is addressing the issue of the original purpose of the current Collective Bargaining Agreement ("CBA") in the first place. That purpose was to provide "cost certainty," or, in other words, to ensure that all of the teams were competitive by keeping a few teams from accelerating player prices beyond the capabilities of all the rest to stay competitive. Long, spread-out deals do nothing to impact this cost certainty. If you own a home, you'll know exactly what I mean.

The overwhelming majority of home-owners in the United States have 30-year mortgages on their homes. The price of the average home in my county is about $400,000. Most people do not have the ability to pay the full amount up-front, or even over three or four years. Folks know that they have to write a check for a certain amount every month to keep the house. They, therefore, have "cost certainty." 

Because most people get paid twice a month here, the time frame of the mortgage payments is compatible with their income.

Now, this analogy can be taken a step further. Before the current CBA, teams were literally going bankrupt trying to keep up with the "mortgage payments" that kept getting higher and higher, and those player contract payments bore no relationship to the ticket sales, tv revenue, or other income the team had. A few teams, Philadelphia, the New York Rangers, Montreal, and Toronto could afford this escalation, but even they had their revenue limits. During this timeframe, when most other teams were bought by new owners with the realization they would have to take a loss on the payroll and hope to sell the franchise to make up the profit: they would "flip" the team.

Just like the housing market, the price of player contracts became completely decoupled from revenue (or people's wages) and the system broke down. Owners couldn't rely on a quick sale to recoup their losses.

Here the analogy ends, because the CBA applies a complicated formula of anticipated and actual revenues to adjust the cap, and provides for some revenue sharing. As a result, teams that aren't negligently managed won't go broke. 

Nothing in any of the long-term deals given to Yashin, DiPietro, Pronger, Hossa, or Kovalchuk upsets this formula. The number is less than the maximum player salary, and will not prevent the team from putting a full roster on the lineup. Nor will it impact any teams' ability to make payroll or keep up. It has zero effect on the salary cap this year or any other, because that is measured by revenues.

It very well may be that the Devils are stuck paying a dud contract like Yashin, but that's their problem. And it's not hurting anyone else's ability to compete for players or make a profit.

In addition, the Yashin contract pre-dated the new CBA and I did not hear it gaining any kind of serious mention in the last round of negotiations. If it's so urgent now, it should have been predicted then. People seem to dislike these deals, but I don't see why they think they aren't "fair" when there's nothing but arbitrary line drawing between those that have been allowed and those that aren't—there is nothing in the CBA defining this as "cap circumvention."

For that reason, I am fairly sure that if grieved, the NHLPA will win and the contract will stand. I believe this is more of an opening salvo in the next CBA negotiation than an actual meritorious attack on the Kovalchuk deal.

As a post-script, I would add that as a long-time Devils fan, it is hard not to see this as yet another case of something being fine until the Devils do it. The neutral zone trap was fine for years on end when the Montreal Canadiens did it in the 1970s. Puck handling goalies were great when it was Ron Hextall. Indeed, even the position of goaltender being deemed worthy of interest instead of being marginalized was great in the past. The endless whining about the trap (regardless of the actual offensive output of the Devils, for example, the year they scored the most goals in the league), leading ultimately to rule-changes, the anti-Brodeur trapezoid, and now the selective enforcement of a non-rule make it hard to see this as anything other than yet another case of certain teams being praised for exactly what the Devils are condemned for. Perhaps this is just my limited perspective as a fan, but it's really hard not to see it this way.

[1] ...and that's why I'm calling this the CBA Trapezoid. It's a rule instated after the Devils do it.

UPDATE:

Per request, I'll discuss Article 26 of the CBA. First, while the list in not exhaustive, note that none of the examples of "Circumvention" set forth in Article 26.15 are what we are talking about here, notwithstanding the Yashin deal pre-dating the current CBA.

Article 26 begins:

 

Preamble. It is the parties' intention that there be full, accurate and timely disclosure and reporting of all revenues and financial information as required by Article 50, as well as of any and all agreements involving payments to Players, and that such disclosures and agreements be consistent with this Agreement, including but not limited to the provisions of Article 50. This Article 26 is designed to prohibit and prevent conduct that Circumvents the terms of this Agreement, while not deterring or prohibiting conduct permitted by this Agreement, the latter conduct not being a Circumvention.

 

Circumvention is set out further in section 26.3 as

 

[No Club may do or fail to do anything that] has the effect of defeating or Circumventing the provisions of this Agreement or the intention of the parties as reflected by the provisions of this Agreement, including without limitation, provisions with respect to the financial and other reporting obligations of the Clubs and the League, Team Payroll Range, Player Compensation Cost Redistribution System, the Entry Level System and/or Free Agency.

What strikes the reader of this Article is that the fear appears to be hidden revenue or hidden compensation. I think of the kinds of things you hear about going on in the NCAA.

 

What I don't see there is any kind of limit on a player's age, the duration of the contract, or limits on structuring other than the cap itself, the 35 and over cap hit limits, etc.

That is why all of the other contracts were allowed.

This is a line-drawing exercise plain and simple. The NHL drew the line with Kovy, but the NHL cannot interpret the CBA in its sole discretion; that is why there is the arbitration provision. Whether that works out as a practical solution has yet to be seen, but until we know more about exactly what makes this deal different (I doubt there is such information) we won't be able to really judge.

UPDATE II: Because this contract may actually end up being valid in arbitration, how is the Kings statement they would be interested if this falls through not tampering? That statement may affect the player's decision whether or not to arbitrate or negotiate a new deal.

 

 

All FanPosts and FanShots are the respective work of the author and not representative of the writers or other users of In Lou We Trust.

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