Salary Floor: "Out of Pocket" Differential
Posted 11:07 AM ET | Comments 0
Today, I read Eklund's 3:46am post about the salary floor. He talks about teams struggling to get to the salary floor and how an unmovable salary like Brian Campbell's was able to be moved to Florida, since Florida needs to get to the floor.
I must say, it amazes me at how poorly some of these teams manage the cap. Tallon in Florida just doesn't get it. Edmonton seems to have gotten it but the master is Philadelphia.Let's look at the two trades yesterday.
Florida increases their cap $7.2 million cap hit and pays $7.2 million
Edmonton increases their cap $6.2 million but only pays $4.6 million
Now assume, Edmonton adds another player at $1million. Both teams have increased their cap $7.2 million toward the floor but Edmonton has gotten two playes and only paid $5.6 million or $1.6 million less than Florida.
This $1.6 million is what I call the "out-of pocket" differential. The difference between the floor and your actual salary and what your cap hit.
All things being equal, well-run big market teams should have a positive "out-of-pocket" differential (Spending > Cap) while smaller market teams should have negative "out-of-pocket" differential (cap hit > spending).
Let's take a look at the Flyers, a team that dishes out contracts 5+ years in length too often. In general Paul Holmgren front loads the contract so the first few years are higher than the cap, the middle years are around the cap and the last few years are well-below the cap. Why does he do this? Because if the player's productivity declines Homer is sure he can move that "cap hit" to a small market team. Here are some examples:
Briere for 2 years (2013-15) - total "out-of-pocket" cost $4 million, cap hit $13 million. That is $4.5 million/year differential which allows a small market team to reach the salary floor but not substantially hurt their financial viability. How about Chris Pronger, starting in 2014, you can have proger for 3 years at a total cost of $5 million or less than $1.7 million a year. Your cap hit is about $5 million so for 3 years you are saving $3.3 million in real dollars. This is the same for many players. Hartnell is untradeable because he is a cap hit of $4.2 million for the next two years. Really? His out of pocket cost is less than $3.5 million or a savings of $700K/year. Richards contract was like that as well. LA pays nearly $2 million more than the cap hit over the next 4 years but that means in 5-6 years, LA can dump his cap hit on a small market team needing to get to the floor but who don't want to spend to the cap.
I must say, it amazes me at how poorly some of these teams manage the cap. Tallon in Florida just doesn't get it. Edmonton seems to have gotten it but the master is Philadelphia.Let's look at the two trades yesterday.
Florida increases their cap $7.2 million cap hit and pays $7.2 million
Edmonton increases their cap $6.2 million but only pays $4.6 million
Now assume, Edmonton adds another player at $1million. Both teams have increased their cap $7.2 million toward the floor but Edmonton has gotten two playes and only paid $5.6 million or $1.6 million less than Florida.
This $1.6 million is what I call the "out-of pocket" differential. The difference between the floor and your actual salary and what your cap hit.
All things being equal, well-run big market teams should have a positive "out-of-pocket" differential (Spending > Cap) while smaller market teams should have negative "out-of-pocket" differential (cap hit > spending).
Let's take a look at the Flyers, a team that dishes out contracts 5+ years in length too often. In general Paul Holmgren front loads the contract so the first few years are higher than the cap, the middle years are around the cap and the last few years are well-below the cap. Why does he do this? Because if the player's productivity declines Homer is sure he can move that "cap hit" to a small market team. Here are some examples:
Briere for 2 years (2013-15) - total "out-of-pocket" cost $4 million, cap hit $13 million. That is $4.5 million/year differential which allows a small market team to reach the salary floor but not substantially hurt their financial viability. How about Chris Pronger, starting in 2014, you can have proger for 3 years at a total cost of $5 million or less than $1.7 million a year. Your cap hit is about $5 million so for 3 years you are saving $3.3 million in real dollars. This is the same for many players. Hartnell is untradeable because he is a cap hit of $4.2 million for the next two years. Really? His out of pocket cost is less than $3.5 million or a savings of $700K/year. Richards contract was like that as well. LA pays nearly $2 million more than the cap hit over the next 4 years but that means in 5-6 years, LA can dump his cap hit on a small market team needing to get to the floor but who don't want to spend to the cap.