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  • How the cap recapture penalty could doom the Minnesota Wild


    After every Minnesota Wild loss, fans on the social media and newspaper comment sections are used to seeing these kinds of sentiments:

    Let’s say, for a second, these understandably unhappy fans got exactly what they wanted, especially with regards to the first two hashtag requests — that the Wild were somehow to rid themselves of the $98 million men, Zach Parise and Ryan Suter, either via trade, buyout or them deciding to hang up their skates. What would that mean for the future of the franchise?

    Before we look to the future, it’s helpful to reflect on where the team has come from — specifically, heading back to January 12, 2013, when the NHL and NHLPA agreed to their most recent CBA after a lockout that cost the league half the season. One of the ramifications (and arguably, the biggest one) was the institution of the “Cap Advantage Recapture,” which was the league’s way of dealing with a spate of front-loaded, long-term contracts given to aging stars that were likely to retire before completing the term. These contracts were advantageous at the time thanks to their final years with relatively low salaries, which allowed the teams (at the time) to lower their cap number and make it easy to buy out or trade away the deals towards the end of the term.

    Parise and Suter’s deals would definitely qualify as prime examples:

    The NHL weren’t big fans of teams circumventing their cap rules, so the league retroactively added language to the CBA that would penalize teams if their players retired prior to serving out their contract. Basically, the math works like this:

    Player AAV (Cap Hit) – Salary Owed = Cap Advantage

    The amount of cap advantage the team was able to earn by back-diving the contract would be spread over the remaining years on the contract after the players’ retirement. So what does this mean for the Wild?

    In short, somewhere between pretty bad and fold-the-franchise-and-repeat awful.

    Scenario One: Retirement from the Wild

    Parise and Suter’s no movement clauses mean that the most likely scenario is that both players will end their careers with the Minnesota Wild at some point in the next six years. And while Parise and Suter have both shown so far this year that they are capable of being reliable NHL players at this point in their careers, that might actually be a bad thing. For as long as they keep playing, the penalty for retiring prior to the end of their contracts only gets worse, as shown below:

    Either player retiring after this season would cost the Wild just under $4 million in cap space over the next five seasons. Retiring after next year means one less year of recapture, but the price goes up significantly to over $5 million a year, and over $6 million the year after that.

    To date, the largest cap recapture penalty levied against a team was suffered by the Vancouver Canucks, who, this past June, saw their bill come due for goaltender Roberto Luongo’s original 12-year deal. The final assessment: $3.033 million over three years. Luongo’s wasn’t the first contract to cost his team after the fact; Los Angeles is paying the final year of a five-year, $1.3 million penalty for their buyout of Mike Richards.

    Three million is just half of the potential penalty that the Wild are facing. And that’s only one player. If both Parise and Suter retire after the 2022-23 season, the Wild would be on the hook for a total of $13,076,923 for two (2!) years. That’s the equivalent cost of Matt Dumba, Jared Spurgeon and Ryan Donato combined.

    That’s a serious problem. But it’s far from the worst case scenario.

    Scenario Two: Retirement from Somewhere Else

    One might think the Wild would be safer to beg the two stars to waive their no move clauses and send them to a team that can handle their cap space and possibly contend for a title. An unlikely scenario due to the numbers (and the fact that Suter has flat-out said that he doesn’t want to leave), but you never know what the future holds.

    In any case, trading one or both of these players could potentially take the cap recapture problem from a 7 or 8 on the “we’re doomed” scale, to a full blown 20 out 10.

    When a player who could potentially be subject to the cap recapture penalty is traded, his cap advantage is locked in for his original team at the time the trade is agreed to. That value is carried forward until the player decides to retire with his new team (or wherever he ends up — he could be traded 10 more times and the number stays the same). At which point, the full value is spread over the remaining years of the original contract. So, let’s say Parise agrees to a deal this season, which sends him home to the New Jersey Devils to finish out his career. The Wild’s cap recapture penalty locks in at $19.6 million dollars. Should Parise then retire after this season, that $19.6 million would be spread out over five years, meaning the Wild suffer a hit of just under $4 million as we saw before.

    However, let’s say that Parise finds a second wind and plays with the Devils through the 2022-23 season. With two years left on his contract, that full value of $19.6 million would be spread over two years for about $9.8 million dollars in cap penalties. If he plays until 2023-24 and retires with one year left on his deal, the full $19.6 million would be due over one year. And remember, if Suter goes the exact same route, you’re looking at potentially double that amount.

    The absolute worst case scenario is if both players are traded during the 2020-21 season, and then retire in 2023-24. If they do, the Wild are potentially looking at a cap penalty of... $40,307,692.

    Let’s repeat that.

    Forty million, three hundred and seven thousand, six hundred ninety-two dollars.

    At over half of the current salary cap, you might as well fold the franchise and call it a day.

    Scenario Three: Long-Term Injured Reserve

    The word “potentially” is key in the last section, because even though the situation looks pretty grim for the Wild, there’s at least some precedent for the Wild getting away scot-free.

    Former Chicago Blackhawks forward Marian Hossa opted to retire from the game in 2018, officially due to a progressive skin disorder. But instead of signing his retirement papers on the day of his press conference, Hossa opted to remain under contract with Chicago, putting him on long-term injured reserve. This gave the Blackhawks the cap space to replace Hossa, while also ensuring that they were not subject to the cap recapture penalty, as Hossa has not officially retired (though he did sell his Chicago residence and move back to Slovakia with his family). Hossa’s deal was eventually traded to the Arizona Coyotes, but as long as he doesn’t officially retire, Chicago won’t face any of the repercussions they otherwise would.

    Henrik Zetterberg received a similar deal from Detroit in 2018 when he retired due to issues with his back, thereby allowing Detroit to avoid penalties through 2021 when his contract will roll off the books.

    Too good to be true? Perhaps, and many have stated as such. But Hossa and Zetterberg do have documented conditions, which, like it or not, makes them eligible for LTIR.

    So, back to Parise and Suter. I would hazard to guess that LTIR would more likely come into play for Parise than Suter, as Parise has had more injury concerns than his defensive teammate over the last few years. It’s well within reason to believe that his back, knee, foot or other part of Parise’s body will give out as the winger pushes the age of 40. At some point, injury might curtail his career, making LTIR a viable and reasonable option.

    I’m not willing to root for a career-ending injury. No one should. All I’m saying is that, if it happens, other teams have been able to successfully use it as a way out of their cap conundrum.

    What will happen?

    The fact that the NHL enforced the penalties on Vancouver and Los Angeles for their bad deals does not bode well for the Wild. But the NHL hasn’t yet been faced with such a large penalty before. They might soon — Shea Weber’s original 14-year, $110 million deal with Nashville is subject to cap recapture, and his penalty begins to near the $5-million mark as soon as 2021, with a worst-case scenario of $24.5 million in 2025. Would the NHL hold fast and allow a deal that was legal at the time it was signed, to irrevocably damage one of its premier franchises? Will the NHL work out some kind of other punishment, like the one handed down to the New Jersey Devils in the wake of their rejected Ilya Kovalchuk deal — a punishment that originally included a hefty fine and forfeiture of their first and third-round draft selections? Or when the NHL CBA comes up for renegotiation after the 2021-22 season, will some of these rules be rewritten to accommodate for them? Time will tell.

    Parise and Suter were originally signed to their $98 million deals in order to help the Wild win a Stanley Cup. And if the Wild are lucky, both players will enjoy long, healthy careers and retire at the end of their deals.

    But if things go terribly wrong, those same deals might prevent the Wild from coming close to a Cup for a long, long time.

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