Off-Season Cap Hits Explained

It’s impossible for us outsiders to truly know all of the ins and outs of the NHL’s CBA. Even with sites like CapFriendly and PuckPedia around, there are still a lot of things that come up that confuse most fans, including myself.

For example, many people know that teams are allowed to be over the cap by 10% during the off-season, which basically means that teams can spend up to $89,650,000 before the season starts. Teams must get below the $81,500,000 cap before opening night though.

However, I just learned that the way that the salary cap hit for teams in the off-season is calculated is different than it is during the season. Vegas signed Alex Pietrangelo to a fancy new contract that had them about $7 million over the cap before making the Nate Schmidt trade tonight. They apparently needed to shed a little over $200k in order to finalize the Pietrangelo contract. The Schmidt trade took care of that piece of business. The confusing thing was that even before the Schmidt trade, Vegas was still under that 10% cushion, but they still had to make the trade tonight. What gives? It’s because the way the cap is actually calculated in the off-season is different. The actual calculation is higher than the sum of the active roster contracts. This would be a more useful explanation if I were to focus on Vegas here; but we’re Oilers fans, so let me explain the concept using the Oilers as an example.

Here is the current breakdown of the Oilers cap situation based on the likely opening night roster as it currently stands:

Nuge ($6M) McDavid ($12.5M) Puljujarvi ($1.175M)
Ennis ($1M) Draisaitl ($8.5M) Yamamoto ($894,166)
Neal ($5.75M) Turris ($1.65M) Kassian ($3.2M)
Nygard ($875K) Haas ($915K) Archibald ($1.5M)
Khaira ($1.2M) Chiasson ($2.15M)

Nurse ($5.2M) Barrie ($3.75M)
Russell ($4M) Bear (RFA)
Jones ($850k) Larsson ($4,166,666)
7D

Koskinen ($4.5M)
Smith ($1.5M)

IR: Klefbom ($4,167,000)

Total: $75,542,832
Retained: Lucic ($750k)
Buyout: Pouliot ($1,333,333), Sekera ($2.5M)
Overage: $338,000

Total: $80,464,165
Cap Space: $1,035,835

This is the sum of the 14 likely roster forwards, the 5 roster defenders, and 2 goaltenders currently with firmed up contracts for next season. CapFriendly posted an article about the Leafs’ situation in the 2016-17 off-season where they revealed how the off-season cap hit is ACTUALLY calculated. I’ll summarize it for you.

There are only a few subtle differences. Obviously, you have to include the full cap hit of every one-way contract, but that also includes guys that are likely to play in the minors. In the case of the Oilers, we have to include the contracts of Patrick Russell ($700k), Anton Forsberg ($700k), and Alan Quine ($750k) even though none of the three are likely to be included on the opening night roster.

As always, you have to include any buyout penalties, retained salary, and performance bonus overages. The Oilers have a bit of all three. They have buyout penalties for Pouliot ($1,333,333) and Sekera ($2.5M), retained salary for Lucic ($750k), and a performance bonus overage of $338,000 in each of the next two seasons.

This is where it starts to get a little complicated. The next step is to include any two-way contracts that spent time on the NHL roster last season. For these players, the off-season cap hit is calculated by taking the amount of days that they were on the NHL roster for last season, dividing it by the total number of days in the NHL season (186), and multiplying it by the value of the player’s contract for the coming year. Yamamoto and Jones are the only two cap hits that need to be calculated this way.

Yamamoto: (98 days/186 days) x $894,166 = $471,120
Jones: (138 days/186 days) x $850,000 = $630,645

Lastly, you need to include the RFAs. Their off-season cap hits are calculated the same way as the other two-way contracts, but the difference is that they currently do not have contracts. The value used to calculate the off-season cap hit is their qualifying offer. Ethan Bear and William Lagesson are the two Oilers that need their cap hits calculated this way.

Bear: (185 days/186 days) x $735,000 QO = $731,048
Lagesson: (73 days/186 days) x $735,000 QO = $288,468

Here’s the current actual off-season cap breakdown for the Oilers:

Nuge ($6M) McDavid ($12.5M) Puljujarvi ($1.175M)
Ennis ($1M) Draisaitl ($8.5M) Yamamoto ($471,120)
Neal ($5.75M) Turris ($1.65M) Kassian ($3.2M)
Nygard ($875K) Haas ($915K) Archibald ($1.5M)
Khaira ($1.2M) Chiasson ($2.15M) P. Russell ($700k)

Nurse ($5.2M) Barrie ($3.75M)
Russell ($4M) Bear ($731,048)
Jones ($630,645) Larsson ($4,166,666)
Lagesson ($288,468)
Quine ($750k)

Koskinen ($4.5M)
Smith ($1.5M)
Forsberg ($700k)

IR (eventually): Klefbom ($4,167,000)

Total: $77,969,947
Retained: Lucic ($750k)
Buyout: Pouliot ($1,333,333), Sekera ($2.5M)
Overage: $338,000

Total: $82,891,280
Cap Space: -$1,391,280

The actual calculation is $2,427,115 higher than the calculation based on the projected opening night roster right now! For Vegas, this calculation had to have added up to a couple hundred thousand dollars more than the $89.65 million cap with the 10% off-season cushion, which is why they had to make the Schmidt trade tonight.

How does this impact the Oilers and their decision making? There are still some intriguing free agents out there. Dominik Kahun and Anthony Duclair would be the two that some Oilers fans want here. There are also some free agent defencemen out there that Holland could sign to strengthen the left side, but Holland has said that he is basically done. Many fans are wondering why he’s done considering that the team can go over the cap by 10% in the off-season and that Klefbom is likely to go onto LTIR.

There’s no reason why Holland couldn’t sign more players now and then either trade guys out or bury them in the AHL once the season starts. He could theoretically add another $6,758,720 right now, but he would also need to get back under the $81.5 million cap before opening night if he were to do that.

Guys like Patrick Russell, Forsberg, and Quine would not be included in that figure, but the values of Jones and Yamamoto would go back up, and the values of Bear and Lagesson would go up by unknown amounts because they haven’t signed contracts yet. That’s why I don’t know exactly how much Holland would have to shed if he were to use all of the 10% cushion to add guys right now, but the number would be high.

We know that Klefbom is headed to the LTIR this season. Some people seem to think that we can factor that coming relief into our pursuit of free agents now. For those that are not familiar with LTIR, the player’s cap hit is still included in the team’s total once he goes onto LTIR, but the player’s cap hit is then added to the team’s total cap hit at the time of the LTIR transaction. The sum of the team’s total cap hit at the time of the transaction and the player’s cap hit equals the team’s new salary cap limit. That is the calculation for any LTIR transaction that takes place on opening day or later.

It’s different if the player is placed on LTIR in the off-season. In the case of the Oilers right now, they are over the salary cap. According to PuckPedia on Twitter, if a team is unable to be under the $81.5 million cap by opening night and they wish to place a player on LTIR, they may do so, but they do not get additional relief. The new limit would simply be whatever the team’s cap hit at the time of the LTIR transaction would be. They would not have the ability to add more salary at that point.

For example, we just learned that the Oilers are actually $1,391,280 over the cap based on the actual off-season calculation. If they were to put Klefbom on LTIR today, their new cap limit would be $82,891,280, or the exact value of their current total team cap hit.

However, if they were to wait until opening night to place Klefbom on LTIR and they were to have a total team cap hit of EXACTLY $81.5 million, then their new cap limit after placing Klefbom on LTIR would be $81.5 million plus Klefbom’s cap hit ($4,167,000), which equals $85,667,000. It makes far more sense to do it this way because this number is higher than the number would be if the Oilers were to put Klefbom on LTIR now. They will have more flexibility to add players after the season starts.

Hypothetically, Holland could add a player that would put them up to that $85,667,000 number tomorrow and then put Klefbom on LTIR tomorrow as well, but that is only $2,775,720. That number was calculated using the off-season calculation for the total cap hit, which we know is more than the potential opening night calculation. We also have to consider that Holland still needs to sign Bear, which would eat up most of or all of that number. LTIR is a weapon that Holland will have at his disposal once the season starts. The power of that weapon is severely limited if it is used during the off-season because of the way that the off-season cap hit is calculated.

As it stands now using my calculation of the potential opening night roster, Holland has $1,035,835 to sign Bear and a 7D whether it’s Lagesson or someone else. If the sum of those two contracts exceeds that number, then Holland will have to move money out. Given that both of their qualifying offers are $735k, the contracts of Bear and Lagesson will definitely exceed the available cap space. If Holland wants to add a guy like Duclair or Kahun or a defenceman to strengthen the left side, then he will need to move out more money than it will take to sign any of those players. Chiasson, Russell, and Neal are all examples of guys that could be moved if needed, but no other free agents will be signed by the Oilers unless Holland has a firm plan to move one or more of the players mentioned above.

I know that the cap stuff can be confusing. I certainly don’t know everything about it. If I’ve made a mistake here, then I would appreciate being corrected. It’s the only way to learn! Hopefully this sheds some light on why certain teams will or won’t do certain things that you might want them to do.

For example, Nate Schmidt would’ve looked great on our team. If Holland made the same trade that Vancouver did tonight (Schmidt for a 3rd), then the Oilers would’ve been at $88,841,280. That would’ve been fine for now. However, in order to maximize LTIR, the Oilers would have needed a game plan to get back under $81.5 million for opening night. If you subtract P.Russell, Forsberg, and Quine from that number, then you’re at $86,691,280. Let’s subtract the altered values for Yamamoto and Jones, then add their known full values. That leaves us at $87,333,681. Let’s subtract the partial values for Bear and Lagesson as well. That puts us at $86,314,165.

That would mean that the Oilers would have had to move AT LEAST $4,814,165 PLUS the value of Bear’s contract in order to add Schmidt. I expect that to be around $3 million, so they would have had to move around $7 million to have Schmidt on the roster. That would mean moving Neal and Chiasson ($7.9 million) without taking any money back, and adding P.Russell to the active roster to fill the active roster spot. Impossible? No. Highly unlikely? Yes. That’s why Holland didn’t go after Schmidt.

Taylor Hall signed in Buffalo for $8 million. That’s $2.05 million more than Schmidt’s cap hit, so the Oilers would’ve had to move around $9.05 million to have been able to afford Hall, assuming Bear’s contract is around $3 million. That would mean moving Neal and Russell ($9,750,000) which is all well and good, but Holland would then have needed to sign a replacement for Russell. Holland would have had to move out another player just to sign a D to a league minimum contract. He would ideally have wanted someone better to make up for the loss of Klefbom and Russell on the left side, which would’ve meant moving out someone else with a higher cap hit without taking money back, likely Chiasson or Larsson. Impossible? No. Highly unlikely? Yes. That’s why Holland didn’t go after Hall.

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