Sunday, August 14, 2005

Cap Misunderstanding (Edit: I could be wrong)

I hear a lot of people make the same mistake when talking about the cap. They say that the value of the contract is averaged out for salary cap purposes. If Sundin has a contract for 3 then 4 then 5 million dollars a year, it counts as $4 million per year for cap purposes. This is only true for existing contracts. New contracts can be structured with different amounts against the cap for different years.

Here is where things get confusing though. If I decide to pay a player a million dollars a season, then 2 then 3, against the cap it will count as 1 million, then 2, then 3. It is only when the dollar amount per season goes down, not up, that there is an averaging for cap purposed. Mike Modano signed a five year $17.25 million dollar contract. He will be paid $4.25 for the first three season and $2.25 for the last two. For cap purposes, it counts as $3.45 million per season because he is getting more money in the beginning seasons than the ending seasons. If the deal was reversed, there would be no averaging.

I hope this does not confuse you even more. I just hear a lot of people saying that all new contracts get averaged for the cap. This is un true. It is only when the value goes down per year and those contracts are not that common.

Edit: Now Larry Brooks is saying that it is the average that counts against the cap. I'm waiting to hear from the NHL on this. There are people who think it's the average and then there are reports that it's not the average. Also, Larry Brooks has reported different things over the last month that seems to contradict other articles he's written. I might be wrong, but Lacroix's statement (see comments) and the fact that the NHL specifically went out of their to say existing contracts would be averaged, while not saying anything about new ones, leads me to want to wait it out. So we'll see.