Leafs Ready to Benefit from Sound Salary Cap Management

By #jontent (@yakovmironov)

$76,071,000

That’s the combined cap hit of all 35 of the Leafs current standard players contracts for next season. Thankfully half of those are returning to the Marlies, and beyond that, even more will be Buried, put on Long Term Injury Reserve, Bought Out, or possible traded. The reality is the Leafs cap situation is very good at the moment, but with a couple of missteps that could change very quickly.

caphitpercentages

$64,634,000

That’s the next number. That’s the Leafs cap hit for next season using the 23 most expensive salaries available. That includes Nathan Horton, who in all likelihood is going to find himself on Long Term Injury Reserve, as he was last season, and as he’ll likely be for the next four years.

$60,630,000

These are the 14 player contracts that are not ELC deals. Players can have their contracts buried in the minors, but with $950,000 of relief coming the Leafs way, nothing beyond that. At this point it’s also worth mentioning that Phil Kessel’s retained salary and Tim Gleason’s buyout are factored into these numbers as well.

$55,330,000

Nathan Horton’s Long Term Injury Reserve assignment is all but guaranteed, so let’s remove that to get our new number.

$51,580,000

While we’re at it, since the Leafs have publicly said they will be buying out Jared Cowen this summer, calculating in his buyout makes sense too. Cowen’s deal is bizarre and in the first year of buying out his $3,100,000 cap hit, the Leafs would actually receive $650,000 of cap space back instead of being penalized. Next season the hit is $750,000, but with expiring contracts this year, it’s easy to fit that hit into the 17-18 season, especially since the Leafs key entry level contracts wouldn’t expire until the end of that season.

Who are the 13 Cap Hits?

The players that make up the Leafs 13 concrete cap hits that need to be dealt with are…

The Rentals

Brooks Laich, Jonathan Bernier, Colin Greening, and Matt Hunwick. Greening certainly may give us some reason to be excited about what he can do next year, but with Laich and Hunwick the Leafs are essentially running out the clock on them. As for Bernier, with goaltender trade markets being what they are, a looming expansion draft, and a rough 2015-16 season, it looks like 2016-17 will be yet another audition for Jonathan to show if he can provide Toronto with the goaltending it needs.

The Walking Dead

Stephane Robidas, Joffrey Lupul, and Milan Michalek are almost as likely as Horton to find themselves on the Long Term Injured Reserve. Combined they are $12.25M of salary, and while Michalek could suit up for the Leafs, at this point it sounds very unlikely that Lupul or Robidas will be in a Leafs uniform again.

If Robidas isn’t put on the LTIR by the Leafs, he could be moved to another team to do the same. His $3M cap hit for one year might be an asset for a team trying to get to the floor. In the event that Robidas is going to try and play next season, he might also be an attractive option to move because his $2M salary is under his cap hit, and $1M of that will be paid as a bonus by the Leafs. Essentially a team could bring him in at the cost of $1M after July 1st, but have a $3M cap hit.

Lupul is a tougher situation. Long term injured reserve is probably a less appealing option to player that isn’t on a 35+ year old contract, and though he’s often injured, he always finds his way back into the lineup. With Lupul it seems that more likely that he will be on the regular injured reserve through the 2016-17 season, before his salary drops in 2017-18 and more options open up for him. Perhaps the fact that Lupul has $2M paid in bonuses means that he could become movable after that money has been paid.

On Signing Bonuses from Article 50.5(g) of the CBA:

Accounting for Signing Bonuses, Reporting Bonuses and Roster Bonuses. (i) For purposes of a Club’s Averaged Club Salary, any Signing Bonus, Roster Bonus and Reporting Bonus shall be subject to the “averaging” rule, and the Club’s Averaged Salary shall be charged the Averaged Amount of any such Bonuses over the entire term of the SPC, regardless of when such Bonuses are paid. However, for the purposes of the Variability Rules as set forth in Section 50.7 below, such Bonuses shall be counted as part of the Player Salary and Bonuses in the year in which paid 280 ARTICLE 50 50.5-50.5 (e.g., no combination of Signing Bonuses, Roster Bonuses and/or Reporting Bonuses may, in the year when paid, result in a Player receiving Player Salary and Bonuses for such League Year that violates the Variability Rules as set forth in Section 50.7). Illustration: A Club wishes to sign a Player to a three-year SPC providing for $2 million in Player Salary (with no Bonuses) in Year 1, $2 million Player Salary (with no Bonuses) in Year 2, a $2 million Player Salary in Year 3, and a $4 million Signing Bonus in Year 3. Even assuming the Club had the $3.3333 million in Payroll Room sufficient to accommodate such Player Salary and Bonuses (the $10 million total in Player Salary and Bonuses over the three-year term), such SPC still would not be permitted because it does not comport with the Variability Rules in Section 50.7(b) (since it is not a Front-Loaded SPC) because of the variation between the Player Salary and Bonus in Year 2 as compared to Year 3 ($2 million in Year 2 and $6 million in Year 3).

The Core*

Nazem Kadri, Tyler Bozak, James van Riemsdyk, Leo Komarov, Jake Gardiner, and Morgan Rielly are the guys you don’t mind having under contract, or at least that’s the case for van Riemsdyk, Kadri, Gardiner, and Rielly. They are all at the age that they can be a part of Leafs getting better and becoming competitive.

Bozak and Komarov on the other hand are players who certainly have a place in the lineup, but don’t necessarily fit the long term vision of the team. With Bozak proving that he can put up numbers without Phil Kessel last season, he may have made himself a tradeable asset at the draft.

Komarov’s “All-Star” season has likely done the same for him, and after a grueling playoff that will likely produce a number of blue collar, agitator type heroes, the market for Komarov should be there if the Leafs want to make a move, potentially providing the Leafs with even more cap relief.

What Does This Mean In The Short Term?

Based on most recent reports and best estimates, the NHL salary cap should be around $74M next season, leaving the Leafs with around $22M to spend on finalizing their roster.

Mitch Marner, William Nylander, Nikita Zaitsev, and Auston Matthews are all likely additions to lineup, and would come in at under $4M before you count their bonuses, leaving the Leafs $18M to spend on filling in 5 or 6 roster positions.

Martin Marincin and Connor Carrick seem likely to be Leafs, so does Nikita Soshnikov. Soshnikov is under contract, but Marincin and Carrick are RFAs, though likely not expensive ones. Combined they should account for another $5M of cap hit, leaving Toronto with $13M to spend, assuming they haven’t moved out any of their undesirable contracts to make this even easier.

What do you do with $13,000,000?

At this point we have one forward position, one defense position, and one goaltender position unaccounted for. The Leafs are a rich team, and wouldn’t think twice about spending that money, but it’s a matter of looking at what won’t do damage to the Leafs. In order to fully understand that we need to also look at the medium, and long term cap implications for the Maple Leafs.

The 2017-18 Cap Situation

Assuming no one is out, and no new long term deals have been brought in, the Leafs are looking at a total of 18 players under contract in the organization with a combined cap hit of $47.8M. There is relief in the form of $5.3M by putting Nathan Horton on the LTIR, and presently Connor Brown, Nikita Zaitsev, and Brendan Leipsic are the most notable free agents that need to be re-signed.

Brooks Laich, Milan Michalek, Jonathan Bernier, Matt Hunwick, Colin Greening, and Stephane Robidas will all be completely off the books, and of those players the only position that needs to be addressed is Bernier’s number one goaltender spot.

If the 2016-17 Cap situation seems too good to be true, there really are no words for how great 2017-18 is. With the added chaos of an expansion draft occurring at this point, the Leafs are in a prime situation to make necessary additions to their team.

Of course, that’s still relatively short term/medium term thinking, and it’s important to look at the long term cap issues.

The Long Term Cap

While 3 years out may not be long term in the truest season, it’s somewhat important as it will be when things become particularly challenging for the Leafs.

William Nylander, Nikita Soshnikov, and Andreas Johnson could become expensive free agents, especially if Toronto wants to forego a bridge deal with William Nylander and lock him up long term.

Toronto will also be dealing with what to do with the potentially departing James van Riemsdyk, and while they might not be held in as high regard, the Leafs would also have to address the roster holes created by Tyler Bozak and Leo Komarov. Assuming all three walk (as they probably should) this would create $11.4M of space to address the RFA contracts. Throw in the fact that Lupul’s $5.25M would be off the books at this point and the Leafs being out from the Gleason buyout and again 2018-19 looks manageable.

Beyond 2018-19

Obviously the other two big fish that will need to be landed will be Mitch Marner and Auston Matthews, both likely needing new deals in 2019-20. If you are lucky you are also dealing with a couple of Kapanen, Bracco, Timashov, or Dermott also needing a new deal because they’ve panned out so well.

Assuming the Leafs will be taking on around $20M in commitments to Matthews, Marner, and Nylander in the near future, and adding those in with the long term commitments to Kadri, Gardiner, Rielly the Leafs could have almost half their cap committed to 6 players (this isn’t a bad thing, if you have great players that’s what you should be doing), 7 players if you assume that a number one goaltender is part of the equation as well.

So What Do You Do With It?

We’re back to where we were when we were just looking at the 2016-17 Cap Situation, we need to figure out how to best use it. The Leafs expiring UFAs provide the perfect buffers over the next few seasons to make sure that Toronto will have the space it needs to sign their top players as their Entry Level Contracts expire, but for now, that current surplus still remains, and it is understandably burning a hole in the Leafs pocket.

Signing Stamkos?

With the imminent arrival of Auston Matthews, the pursuit of Steven Stamkos as the a potential first line center seems to be losing some steam, and with valid reason. He’s expensive, and he’s going to require a long term commitment. It’s not something that a team is going to go into lightly, especially if Stamkos is wanting to earn around $10M per season.

stamkoscaphit

At $10M, Stamkos is going to eat up almost all of the Leafs available cap space (assuming they plan on filling out the roster), and Toronto would likely be going into the 2016-17 season with Garret Sparks as their backup netminder, and without a trade, the team would only count Nikita Zaitsev as their sole blueline upgrade.

The term commitment is going to be the maximum seven years, but that shouldn’t be particularly scary since Stamkos will be 33 when the deal expires, and other players with high upside have shown the ability to still thrive at that age.

33yearolds

Now, none of those players had years that anyone would feel comfortable paying $10M for, but a few assumptions are required to make it a little more tasteful.

  1. The salary cap will continue to trend upwards. It not likely trend upwards to the point where $10M isn’t a large chunk of your cap space to be spending on a 33 year old forward, it will go up.
  2. Between now and the end of Stamkos’ contract would come another Collective Agreement between the NHL and NHLPA. While it’s far from a guarantee, the last couple of CBAs included compliance buyout options, and it’s entirely possible that the Leafs could rid themselves of a potentially declining Stamkos
  3. Stamkos is a better player than most of the players on that list, save for the debate on Datsyuk, Zetterberg, Thornton, Hossa, and the Sedins. All of those players have been productive past 33 as well.
  4. Players get traded. If the Matthews, Marner, Nylander trio is completely as advertised you can always make a move to get assets back on Stamkos somewhere down the road. This is probably the selling point that speaks most to me, as a Stamkos contract now is probably 3 great years of Stamkos playing, and then a deal for a 1st round pick and other assets in year 4.

The $10M number remains the sticking point, but it’s hard to see how it isn’t the reality of what Stamkos will get. You can make the argument that Sidney Crosby only makes $8.7M, and that Kane and Toews are the only players over $10M, and that all three of these players listed are better than Steven Stamkos, but there really isn’t an UFA comparable available here as all of these players worked out deals with their own clubs before reaching free agency.

CorsiHL recently weighed the pros and cons for Stamkos coming to the Leafs, and cap hit featuring heavily in the Cons…

“In a league where salary cap space is becoming an increasingly valuable resource, there’s tremendous risk in writing Stamkos an eight-figure paycheque for the next seven years. We know that barring some form of miraculous hometown discount, Stamkos has a good shot at setting the league’s new high water mark in terms of AAV. And despite the Canadian dollar’s recent rally, there’s a great deal of uncertainty around the future of the NHL salary cap. Recent salary cap growth has been mirrored by rising escrow, which could reportedly hit 20% by the end of the season. The NHL has already tapped out several of the incremental hockey-related revenue (HRR) drivers from the past decade like outdoor games and the new Rogers TV deal. Whether you like it or not, the salary cap bubble will burst at some point. Most proponents of a Stamkos deal in Toronto will point at the rising cap environment from the past decade, looking at the percentage of the cap his AAV would theoretically occupy both now and in seven years. But the reality is, it would not be prudent to assume that salary cap increases would ease the long-term burden of such a large contract.”

Currently Zach Parise, and Ryan Suter are the best examples of reaching unrestricted free agency, and they both received matching 13 year deals back when that was allowed to be a thing. If you lop off the last three years of their deals and look at it as 10 year deals without the $2M, $1M, 1M final salary seasons, you wind up with them earning $9.4M per season on average and those deals were reached 4 years ago.

You can make the case that the NHL is slowly learning from these mistakes, but in a league where 40 goal scoring centers don’t become free agents, it’s foolish to assume that there’s a bargain to be had here.

Addressing More Pressing Needs

With Matthews arriving to help out the Leafs forward situation, it could be the perfect opportunity for Toronto to shift their focus to the blueline or to the net.

Gardiner, Rielly, Marincin, Zaitsev, and Carrick is the making of a very respectable and young defense core. The problem is that there needs to be one more solid option at the top, and in all likelihood, that player needs to play on the right side.

If you are looking at unrestricted free agent defensemen who shoot right and are under the age of the 30, the list pretty much begins and ends with Jason Demers, who could wind up being courted even more heavily than Stamkos.

While Demers isn’t going to get anywhere need the $10M that Stamkos is seeking, it’s entirely possible that he could wind up in the $6M ballpark, which would be paying him beyond his abilities. Dialing it back to the $5M neighbourhood, and Demers could be a fit, although going long term seems like a risk.

The other right handed shot option, that would be cheaper, younger, and decidedly higher risk would be Justin Schultz. Schultz is currently listed as a restricted free agent but stands next to no chance of receiving a qualifying offer at the $4M price tag it would cost to do so.

Schultz on a “prove it” deal might be worth exploring, but in all likelihood you are filling a bottom pairing hole, not a top pairing one with this move.

Instead the better option may come from chasing restricted free agents, either via offersheets or via trade.

Tyson Barrie, Hampus Lindholm, Sami Vatanen, Danny DeKeyser, Jacob Trouba, and Michael Stone are all solid options that fit right in with the age of the Leafs core. Overpaying in an offersheet would have to be part of the equation, and it’s a commitment to losing a first round pick next season when the Leafs are committing to not neglecting their future and the draft, so it’s not without it’s risk. Being down $6M-$7M per year and without a first round pick next season would be a lot to take on.

Thankfully, goaltenders should be easier. The Unrestricted goaltender market is limited to essentially just James Reimer and Jhonas Enroth. The restricted free agent options come with a price tag you don’t want to pay in an offer sheet. Frederik Andersen, Peter Mrazek and Jordan Binnington are appealing options, but giving up a first for a goaltender is not a mistake this organization should make again.

Instead the Leafs should welcome the expanded trade market for goaltenders that will occur since each team will only be allowed to protect one professional goaltender in the upcoming expansion draft.

Go With the 2015-16 Model

In a year where teams will be extra cautious about losing players in the 2017 Expansion Draft, assuming it happens, it could make the summer of 2016 the year of the 1 year deal for unrestricted free agents. Bringing in players that they you don’t need to worry about protecting next year seems like a sound course of action, and it’s one the Leafs executed on perfectly in the previous season.

While a couple of affordable free agents may make sense for the Leafs, there’s also an advantage to going into the season with a wealth of cap space. The looming expansion could/should trigger a sense of panic to move out players that can’t be protected, especially for teams that are out of the playoff race by the trade deadline. Whether or not the Leafs are looking to add players, having the cap space allows them to help broker deals between teams that are either pushing the limit of the league cap ceiling, or their own team budget.

From a Leafs perspective adding salary might be a necessity as well. With the requirements of an expansion draft including a certain amount of salary to be exposed, the Leafs may need to carry some commitments into the season solely for the purpose of exposing them in the draft. Trade flexibility through the season is arguably the best use of cap resources for the Leafs, but the one that requires a bit more patience that most would like.

Seeing the Leafs not maxing out to the cap would be an issue for some, but comes at the chance for players like Marner, Nylander, Matthews, etc. to get some experience, and for the Leafs to gain a bit of understanding of what they have in their youth movement beyond their blue chips as well.

It’s A Good Situation, but…

There is little doubt that the Leafs maneuvered their way into a very good cap situation. At the moment there are few restrictions on bringing back any of the players they’ll want to. They will be able to forego unnecessary bridge contracts with their best players, and seem to have proper valuation in place for who the short term options are and who they really should be committing to. It also seems likely that if players will need to be moved there is little chance that they will be moving someone with an undesirable contract. That’s all very good news.

The news that’s a little bit more disheartening is the fact that at the moment a lot of the Leafs optimism is tied to having a lot of young players max out their potential, and while it’s hard to believe that Marner, Nylander, and Matthews won’t be surefire top six forwards, if not the Leafs top three forwards for years to come, there are a lot more question marks associated with their supporting cast. Are those question marks reason enough to mitigate the risk and bring in Steven Stamkos?

Probably, considering the fact that free agents of this caliber are rarely available, and acquiring an asset while only giving up money has to be seen as a huge win and while Stamkos being moved in season would be challenge, there’s every reason to believe he could still be a movable asset in the off-season, although he’s all but guaranteed to have a full no movement clause wherever he goes.

In the short term it may me that bodies will need to be moved out in order to get the space needed to address what are arguably the more pressing needs of goaltending and defense, but can’t be easily addressed at this point.

The Leafs will also be aided by the fact that despite the fact that it’s probably not in the best interest of the league as a whole, the salary cap continues to climb. The cap doubled in a decade, and has increased every season except for the CBA rollback year. While the Canadian dollar and lack of new TV deals for a while may slow the growth of the salary cap, it still will go up even if it doesn’t reach the $100M target that it is trending towards.

captrend
*2013-14 Lockout rollback
**2016-17 Cap projected at $74M with NHLPA inflator.

Planning a team with cap growth as part of the equation is risky, despite the fact that some growth is almost certain. Eventually there will be a limit where teams simply are unwilling to spend beyond an internal budget, and players will reach a point where they’ve become fed up with the amount they lose to escrow. It seems like we may be nearing that point, but expecting growth to immediately be stagnant, especially after the World Cup of Hockey adds to Hockey Related Revenue seems unlikely.

A team like the Leafs can be aggressive when golden opportunities present themselves, but need to still value long term sustainability of their core group of players if the organization is to become successful.

References
Salary Data from CapFriendly.com

Statistics from Hockey-Reference.com

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