Monday, 4 June 2012
06/04/12 The Salary Cap Spending Trap
The NHL salary cap has been raised to roughly $70.3 million, which is the number that general managers will work with in the off season. However, that number is only temporary and could trap a team or two in salary cap hell.
James Mirtle reported on the cap increase a few days ago, and he also gives a nice run down of how the salary cap is calculated. $70.3 million is a $6 million increase over the 2011-12 cap, which would have just about any fan drooling over the possibilities.
Offer Ryan Suter a pile of gold bullion so big that he could fill the pool in the house the Oilers buy him! A six million dollar salary cap hike is enough to fit a number one defenseman comfortably into the Oilers' spending structure and have plenty of money left over for the likes of Nugent-Hopkins, Hall, Eberle and Yakupov when they need new deals. Under the current upper limit the Oilers would have almost $27.5 million in space, with Gagner, Smyth, Petry, Peckham and Dubnyk the team's only meaningful free agents. Of those, only Smyth is a UFA, and he's going to have to take a significant pay cut to stay.
Sounds grand, right? Not so fast!
Earlier I mentioned that Mirtle explained how the cap is calculated. Without getting too deep into specifics, the basic gist is that the cap is based on the revenue that the league brings in, and the share of that revenue that the players get. The current Collective Bargaining Agreement has the players' share at 57% of league revenue, but the league is expected to want to lower that number in the new CBA. The lower the players' share, the lower the cap. If the league gets their way we could actually see the cap decrease from where it sat in 2011-12.
In that case the Oilers - and many other NHL teams - will be in a tighter spot. Perhaps based partially on that uncertainty, Roger Millions reported that the Flames will be operating on a $55 million internal budget. If the cap decreases and the Oilers are left with $20 million or less, they still shouldn't have much trouble fitting their own free agents in; but what about going after the big fish?
Gagner, Petry, Peckham and Dubnyk combined for $5.15 million in cap hits in 2011-12, and each will get a pay bump if they're retained. Hands up if you think Jeff Petry is going to carry on making $1 million per season. Devan Dubnyk made just $800,000 in 2011-12, but he's only one year from unrestricted free agency unless the Oilers can convince him to forgo it. Add Ryan Smyth to that equation and half of the Oilers' cap room is gone.
Fortunately, there's still space for the young forwards, and the Entry Level Contract of the 2012 first overall pick will expire at the same time that Horcoff's $5.5 million albatross does. But things definitely don't look as rosy with a cap that goes down instead of up. Ironically, the Oilers - one of the teams that the cap was supposed to protect - need money for all the stars they couldn't acquire in the 90s and early 2000s.
This off season will be an interesting test of Oilers management's ability to spend wisely and with foresight - something they haven't exactly excelled at in recent years. More than any other summer, this is the one in which to be cautious.