Flyers could be hurt most if new CBA imposes new contract limits

JIM McISAAC / GETTY IMAGES Chris Pronger's front-loaded contract minimized Flyers' salary-cap hit.
JIM McISAAC / GETTY IMAGES Chris Pronger's front-loaded contract minimized Flyers' salary-cap hit.
Posted: January 04, 2013

NEW YORK - Long before NHL commissioner Gary Bettman enacted this flawed lockout 111 days ago, the league entered bargaining in July with a laundry list of demands.

Among the original absolutes were a reduction in the players' revenue share, and thus a reduction in the salary cap, along with unrealistic ideals of limiting free agency and arbitration rights.

Remember when deputy commissioner Bill Daly said on Dec. 6 that limiting contracts to a maximum of 5 years was a "hill we're prepared to die on"? That changed in a hurry.

Both sides have softened on a number of demands - and other demands have withered away completely. It's all part of the negotiating process.

One remaining sticking point is contract variance - simply, the maximum amount contracts can vary from year to year - which has a substantial impact on the way the Flyers conduct business. It's an issue on which the NHL has significantly softened recently.

The NHL wants to crack down on front-loaded or "back-diving" contracts. Those deals, which some think circumvented the spirit of the last collective bargaining agreement, since it determined salary-cap hits simply by dividing total salary by years, stacked massive salaries up-front and slid down to near minimum salaries by the end.

The Flyers were the NHL's biggest culprit over the last seven seasons.

Some general managers who have played by the rules would like to see the NHL retroactively penalize teams that circumvented the spirit of the CBA. That won't happen. Any deal signed will likely be grandfathered in. Besides, the Flyers never actually broke any rules in signing players to long-term deals.

In fact, general manager Paul Holmgren and capologist Barry Hanrahan used every advantage available to them under the previous rules, with the help of Ed Snider's near-limitless checkbook, in order to ice the most competitive team possible. The Flyers even exceeded the salary cap in real dollars multiple seasons, sliding under with long-term injury exceptions.

As recently as Dec. 6, the NHL was asking for a contract variance limit of 5 percent - that a contract cannot change year to year more than 5 percent from the first year.

For example: if a player makes $10 million in Year 1 of a multiyear deal, the most that player can earn in Year 2 with a 5 percent limit would be $10.5 million and the least would be $9.5 million. That is a stringent number.

Through negotiations, that number moved to 10 percent. There have been rumblings in Manhattan this week that the two sides agreed on 20 percent worth of wiggle room.

Another proposal on the table, according to CBC's Elliotte Friedman, would limit the lowest yearly salary to 60 percent of the highest year (e.g., if $10 million is the highest salary in a deal, $6 million would be lowest acceptable amount, significantly limiting circumvention). I have a hard time believing that will fly with the NHLPA.

Instead, a 20 percent variance limit seems like a reasonable compromise for both sides.

Over the last 7 years, the Flyers authored 22 major multiyear, non-entry level contracts. Only seven of those 22 deals would conform to a 20 percent variance figure. The Flyers' average amount of variance on the 15 nonconforming deals is 30.2 percent, according to contract data available on CapGeek.com.

The only contracts the Flyers signed that would be acceptable under a 20 percent limit are those of Nick Grossmann, Bruno Gervais, Andreas Lilja, Simon Gagne, Denis Gauthier, Scottie Upshall and Peter Forsberg.

The rest of the multiyear, non-entry level deals, including almost all of the Flyers' current roster, wouldn't pass the smell test. That is an alarming figure - and you could tell why the initial bargaining proposals may have made the Flyers' brass nervous, especially considering the salary cap also will drop in 2013-14.

(Visit our Frequent Flyers blog for a detailed dollar view at how those deals would not meet new variance requirements.)

The Flyers inherited the deals of Andrej Meszaros, Luke Schenn and former Flyer Joffrey Lupul and others via trade.

The Flyers' most egregious, circumventing deal was Chris Pronger's 7-year, $34.45 million extension, which was signed when he was 35. Pronger's salary starts at $7.6 million, eventually slides to $7 million, then drops to $4 million in Year 5 before going to $525,000 in each of the final 2 years of the deal. Hence, Pronger and the Flyers never really had any intention of his playing when he was 41 and 42. Yet, both sides were interested in the relatively manageable $4.92 million cap hit ($34.45 million, divided by 7).

Pronger's ultimate, maximum contract variance comes out to 45.4 percent. The argument is mostly moot now, considering Pronger is seriously injured and his contract will not count against the cap because of the long-term injury exception.

The 11- and 12-year deals signed by former Flyers Jeff Carter and Mike Richards each topped out at 33 percent maximum variance. James van Riemsdyk's 6-year, $25.5 million deal topped out at 50 percent, though it rose throughout the years instead of falling, presumably to pay an improving young player.

All three players were easily dealt by Holmgren, proving GMs appreciated the flexibility of locked-up players with palatable salary-cap hits.

In many ways, the lockout has been painful for the Flyers. They have lost approximately $1.9 million in revenue per home game canceled, though they've saved on player salaries. The revenue lost from games this season will be far more damaging than any gain seen from an increase in revenue take from players.

Still, this week's bump in variance to 20 percent means the Flyers will still be able to conduct business in a way they've pioneered, though year-to-year dollar changes will need to be a bit more gradual. That's something they'll be able to live with, until they're able to find a new method to gain a competitive advantage.


On Twitter: @DNFlyers

Blog: philly.com/FrequentFlyers

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