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Under CBA contract values are TBD Wednesday, October 17, 2007 Stars goalie Marty Turco's new four-year, $22.8 million contract kicks in this season. His contract is worth $6 million for 2006-07, but it's actual value is to be determined (TBD) thanks to the NHL's CBA. That's because Turco's contract, like every other NHL player contract, is just a number on a piece of paper for now. Buffalo forward Donald Briere's $5 million salary arbitration award is another number. So is the $7.5 million Boston will pay Zdeno Chara in 2006-07. Ditto for the $450,000 Stars forward Antti Miettinen will be paid this season. They are numbers that can have their value altered in order to fit into the great equation that must end up ensuring that the compensation awarded to all NHL players equals a set percentage of NHL revenues. As much as people focus on the team salary cap, which is $44 million for 2006-07, there is another salary cap at work in the NHL. It's the league-wide salary cap on player compensation, which limits players to a set percentage of league revenues. The league-wide cap on player compensation is a hard cap. Players receive a percentage of league revenues as determined by the CBA. No more. No less. The team salary cap is an upper limit on an overall team payroll range. Some thought it would merely set a cap on the big spenders. But Stars GM Doug Armstrong said it is proving to be what many others argued it would be -- a magnet that would draw teams towards it. "It's interesting. The salary cap was meant to be an upper limit and really what it is working to is a magnet for some of the teams that would have never even considered paying $38 million or $40 million. Now they are all going to be at $40 million," Armstrong said on The Ticket earlier this summer. "It'sreally leveled the playing field. The only negative thing to that is that it all comes out of 54 percent of the revenues the players get. So, they are going to be paying a big escrow check if everybody is at the top of the cap."
He has a point. So far, based on actual team payrolls, the league average is about $37.36 million. The table to the left show where teams currently stand as far as actual club salary. In other words, what they will actually be paying players instead of what each team has far as player cap costs. These figures come from the NHLPA web site and also include buyout totals and other player costs team may have. They are just approximate figures for each team. Actual club salary, which is different than the averaged club salary used for salary cap room purposes, is still important under the NHL's new CBA. It is the total of actual club salaries that will determine if player compensation has exceeded the league-wide cap level for the season. The actual club salaries also determine how much of each player's paycheck goes into escrow, which is how the NHL guarantees the players don't exceed their allotted percentage of league revenues. That $37.36 total is important because it exceeds the $36 million adjusted midpoint figure. Although a lot of people focus on the upper limit as the important number, the adjusted midpoint is the crucial number. That figure is used for both the team salary calculations and plays a role in the league-wide salary cap. The adjusted midpoint number is what the league used to determine the upper and lower limit of the salary cap. The upper limit ($44 million) is $8 million over the adjusted midpoint and the lower limit ($28 million) is $8 million under it. That $36 million figure is also used to help determine how much of each player's paycheck will go into escrow. The greater number of teams that go over the adjusted midpoint and start approaching the upper limit, the more the escrow issue becomes a factor. Escrow is the mechanism the league uses to ensure compliance with the league-wide cap. A portion of each player's paycheck goes into an escrow account, which can be used to pay back the owners if the player's share goes over the league-wide cap, which should be 54 percent this season. The percentage that goes into escrow is based on formula that includes how much the aggregate actual club salaries exceeds the aggregate adjusted midpoint for the 30 teams. For example, if the season were to begin right now, the players would appear to be looking at about 3.64556 percent (this is how many decimal points the CBA requires) of each paycheck going into escrow for the first quarter of the season. Turco, for example, would be looking at $54,683 coming out of his paycheck in the first quarter of the season using the current payroll figures. Fill out team rosters around the league at a little more than the mininum league salary for the remaining players and he would be looking at $80,000 in the first quarter. Spread that out over the season and that is $320,000. That's just for starters and that's a pretty conservative estimate. Remember this is before players start getting called up and players might start hitting targets for some of their performance bonuses. The escrow calculations get adjusted three more times during the year and will be based on actual team payrolls at the time. The escrow deductions can go up over the course of the season. The true value of a contract like Turco's won't be known until the end of this coming season, which will be the first one in which the league operates using actual numbers from start to finish. Last season began with low projections on revenues based on coming out of the lockout. This season will be based on actual revenues and a team salary cap based on those actual numbers, not on doom and gloom revenue projections. And when all is said and done, player costs, excluding benefits, can't exceed 54 percent if the league's revenues are under $2.2 billion. If player costs equal 54 percent, then no problem. Turco and the others get their escrow money back and their contract values stay the same. If player compensation doesn't reach 54 percent it gets even better. Players get their escrow money back and additional payments to get their share to the target level. The contract actually gains some value.
If league-wide spending on player salaries exceeds 54 percent of league-wide revenues, then money will be taken from the escrow account and refunded to the teams. What's left, if any, will go back to the players. Contract values take a hit. Right now, based on where team payrolls are and where they may be at the beginning of the season, the players could be pushing the 54 percent limit this season. It may not be by much, but it may be enough that some of that escrow money could go back to the teams. That's ultimately how the league controls salary inflation. Individual players may get big contracts via extensions, free agency or arbitration, but in the end player salaries as a whole remain constant as a share of league revenues because of the league-wide cap on player compensation. If player salaries rise too fast then one way or another, someone will have to give up something to make sure the players' share falls in line with what is called for under the CBA. Players, like Turco, could pay through escrow. Some could be forced to take lower salaries to help offset the higher salaries. Some could lose jobs to lower paid players. All of it to make sure the equation adds up to the correct percentage. "Because at the end of the day," Buffalo Sabres Chief Operating Officer Dan DiPofi said, "54 percent is still 54 percent." At least until league revenues hit $2.2 billion. Then 55 percent will still be 55 percent.
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