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Every Scenario Regarding Ehrhoff and Recapture Penalties and Buyouts

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Old
01-28-2014, 06:10 PM
  #26
Sabretooth
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Quote:
Originally Posted by Djp View Post
NOT TRUE !!!!!!!!! There are special rules for long term contracts of 7 years or longer.
Yes we know there are special rules. Read further down some of the replies. The recapture only comes into play only if a player retires or defects or is otherwise not playing and not receiving salary pursuant to his contract.

A play who is bought out satisfies neither condition for the recapture to come into play. When bought out, the player receives salary pursuant to his contract, and then the contract is terminated, so the player is never not playing while under contract.

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01-28-2014, 06:11 PM
  #27
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Well if we get an offer for Erhoff alone or in a package to get a first line forward I would hope the Sabres take the risk and just play their cards right as his contract comes to an end. 1 year of pain for 10 years of gain is something to consider...

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01-28-2014, 06:14 PM
  #28
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One more complicated question, if we retain salary in a trade next year, would we get half of the cap benefit at the end of contract?

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01-28-2014, 06:16 PM
  #29
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Quote:
Originally Posted by Sabretooth View Post
You're table actually uses the recapture costs the sabres would be charged if Ehrhoff stays/retires a sabre though.

The %'s get higher at the end in the case when he's traded, right?

YearEstimated Cap% hit if retires in 14/15% if 15/16% if 16/17% if 17/18% if 18/19% is 19/20% if 20/21
2014-201571.002.01%       
2015-201674.551.92%2.24%      
2016-201778.281.83%2.13%2.56%     
2017-201882.191.74%2.03%2.43%3.04%    
2018-201986.301.66%1.93%2.32%2.90%3.86%   
2019-202090.621.58%1.84%2.21%2.76%3.68%5.52%  
2020-202195.151.50%1.75%2.10%2.63%3.50%5.25%10.51%

The bolded are the different values, if Ehrhoff is traded then retires. The difference between your table and mine would be the risk, no?
You're right, I grabbed the numbers from the wrong chart and didn't double check.

And yes, the difference between the two charts is the "risk" which is 1-2% of cap except for the very last year where it would be ~7%

Although there also additional risk if he stays, namely that he doesn't retire and occupies 4m in cap space for who knows what level of play.

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01-28-2014, 06:41 PM
  #30
hatterson
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Quote:
Originally Posted by JLewyB View Post
One more complicated question, if we retain salary in a trade next year, would we get half of the cap benefit at the end of contract?
Based on a cursory reading I would say yes, although if someone wants to take a closer look it would be appreciated. If not, I'll look again when I come home this evening.

Assuming it does work like that the recapture penalties would stay the same for all retirements prior to the 2017/2018 season.

At that point the cap recapture penalty would be as follows (assuming he's traded prior to the 2017/2018 season)

If he retires following the 2017/2018 season the Sabres would owe a cap recapture penalty of $10,000,000 - ($1,000,000 * percentage retained) for a minimum penalty of $9,500,000 over 3 years or $3,166,666.66 per year. This is a cap savings of $166,666.66/year over no retention.

If he retires following the 2018/2019 season the Sabres would owe a cap recapture penalty of $10,000,000 - ($4,000,000 * percentage retained) for a minimum penalty of $8,000,000 over 2 years or $4,000,000 per year. This is a cap savings of $1,000,000 a year over no retention.

If he retires following the 2019/2020 season the Sabres would owe a cap recapture penalty of $10,000,000 - ($7,000,000 * percentage retained) for a minimum penalty of $6,5000,000 over 1 year. This is a cap savings of $3,500,000 over no retention.

However this would obviously come at the cost of retaining $4,000,000 * percentage retained (maximum 50%) in cap hit from the trade until his retirement.


Last edited by hatterson: 01-28-2014 at 06:56 PM. Reason: Grammar and words and stuff
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Old
01-29-2014, 02:46 AM
  #31
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Quote:
Originally Posted by hatterson View Post
You're right, I grabbed the numbers from the wrong chart and didn't double check.

And yes, the difference between the two charts is the "risk" which is 1-2% of cap except for the very last year where it would be ~7%

Although there also additional risk if he stays, namely that he doesn't retire and occupies 4m in cap space for who knows what level of play.
The team can buy him out in 2018 and just tax a max $3.33M cap hit for 3 yrs which is less than the $4M if he was playing. He gets bought out in 2018.

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01-29-2014, 02:56 AM
  #32
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Originally Posted by Sabretooth View Post

So unless I'm really misreading this, it sure seems to say that if a player is bought out, regardless of which team actually does the buying out, there is no recapture penalty assessed.
You are misreading it. as I cited....teams cant eliminate recapture on long term contracts in any way shape or form. Even if he is traded, bought out , or retired, or any combination of that.

Quote:
Originally Posted by Jame View Post
^ so what was the purpose of creating the recapture penalty, If a team could simply avoid it by buying out a player who planned to retire?
This is why ...a team will just buy a player out to avoid the recapture.

Thus you will see trades made where a teams trades a player who has a high recapture in the last years of his contract so instead of him retiring, or being bought out the team trades him to another team and then they buy him out---thus recapture is averted.

Rangers dont have to worry about buying out Brad Rischards..instead trade him to buffalo, he plays for Buffalo for 3 years then buffalo agrees to buy him out when his $1M years occurs--then they buy him out and the rangers are wiped clean of any recapture--why burn a CBO on him then. It saves them millions of dollars.

even better yet...Rangers and Cancaucks trade Richards fir Luongo and then each buy them out...thus allowing the teams to avert recapture penalties

brilliant.........

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01-29-2014, 03:16 AM
  #33
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Sorry if it's been already here, but does Buffalo have a chance to trade his contract to a floor team if he retires? Like Boston traded Thomas?

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01-29-2014, 03:31 AM
  #34
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This should be stickied on the trade board.

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01-29-2014, 03:55 AM
  #35
dotcommunism
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Quote:
Originally Posted by Djp View Post
You are misreading it. as I cited....teams cant eliminate recapture on long term contracts in any way shape or form. Even if he is traded, bought out , or retired, or any combination of that.
You haven't actually shown that at all. The excerpts that you have cited don't indicate what you assert that they do. They also don't refute the excerpts others have cited which do imply that a buy-out would negate the recapture penalty, which you have conveniently not addressed

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01-29-2014, 04:58 AM
  #36
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Quote:
Originally Posted by Sabretooth View Post
Yes we know there are special rules. Read further down some of the replies. The recapture only comes into play only if a player retires or defects or is otherwise not playing and not receiving salary pursuant to his contract.

A play who is bought out satisfies neither condition for the recapture to come into play. When bought out, the player receives salary pursuant to his contract, and then the contract is terminated, so the player is never not playing while under contract.
Once a player is bought out they are no longer receiving salary pursuant to that contract. Thus it does satisfy the recapture rules. That clause/section is referring to the contract causing the cap recapture issues. Once that contract stops being in effect the penalty kicks in. And one way it can stop being in effect is a regular buyout.

There are only two ways the Sabres can avoid the cap recapture penalty on that contract. He plays out the entire length of the deal (regardless of where) or they use a compliance buyout on him.


Last edited by joshjull: 01-29-2014 at 05:27 AM.
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01-29-2014, 09:26 AM
  #37
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so... the issue is not settled then? Someone needs to define "pursuant" in the NHLs eyes? lol

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01-29-2014, 09:35 AM
  #38
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Quote:
Originally Posted by joshjull View Post
Once a player is bought out they are no longer receiving salary pursuant to that contract. Thus it does satisfy the recapture rules. That clause/section is referring to the contract causing the cap recapture issues. Once that contract stops being in effect the penalty kicks in. And one way it can stop being in effect is a regular buyout.

There are only two ways the Sabres can avoid the cap recapture penalty on that contract. He plays out the entire length of the deal (regardless of where) or they use a compliance buyout on him.
He's still receiving salary due to that contract, though. 2/3rd of it to be exact.

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01-29-2014, 12:13 PM
  #39
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Originally Posted by JLewyB View Post
He's still receiving salary due to that contract, though. 2/3rd of it to be exact.
No, the buyout terminates the contract. Even though they are still receiving money, it is not in accordance with the document they signed. 10 years, $40M is the length and amount I signed to receive. I get bought out in year 8, the contract is terminated, Im receiving money, but it is not in accordance with the contract I signed.

I am interpreting this meaning that even if a player is bought out, the team will still be hit with the recapture.

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01-29-2014, 12:41 PM
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Originally Posted by B U F F A L O View Post
No, the buyout terminates the contract. Even though they are still receiving money, it is not in accordance with the document they signed. 10 years, $40M is the length and amount I signed to receive. I get bought out in year 8, the contract is terminated, Im receiving money, but it is not in accordance with the contract I signed.

I am interpreting this meaning that even if a player is bought out, the team will still be hit with the recapture.
The buyout agreement is part of the player contract, and therefore when a player is bought out they reveive salary pursuant to the contract. The contract is not just the amount and length, the buyout is part of the contract. Its in the CBA.

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01-29-2014, 12:42 PM
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Quote:
Originally Posted by joshjull View Post
Once a player is bought out they are no longer receiving salary pursuant to that contract. Thus it does satisfy the recapture rules. That clause/section is referring to the contract causing the cap recapture issues. Once that contract stops being in effect the penalty kicks in. And one way it can stop being in effect is a regular buyout.

There are only two ways the Sabres can avoid the cap recapture penalty on that contract. He plays out the entire length of the deal (regardless of where) or they use a compliance buyout on him.
The buyout fulfills the contract then terminates it. There is no recapture on a fulfilled contract. The buyout terms are in the contract, so when a player is bought out, the player receives salary pursuant to the terms in the contract. After the buyout, the player is not receiving salary because the contract no longer exists.

the wording says, "if the player is not longer playing by reason of retirement, defection, or otherwise (but not including death) (such that the player is both not playing and not receiving salary pursuant to the long term contract."

A buyout is not retirement or defection. So does a buyout count as an "otherwise" scenario that would activate the recapture? For 2 reasons, it appears to be no because:

1) the player IS playing up until the contract is bought out. When the contract is bought out, the contract is terminated. So, the player is never "not playing and not receiving salary pursuant to the contract"

and

2) the buyout is "receiving salary pursuant to the contract".

Other reasoning is that the CBA specifically spells (50.5(iii) page 268-269 of the document and 50.9(i)page 288) out that when a team uses a regular buyout, the disparity between the actual player salary and the cap hit is accounted for in how the Buy-out agreement is treated, and that the amounts paid under such buy-out agreement shall be included in the Actual club salary and cap hit of the club that bought out the player.

In non-legalese, it specifically says that recapture does not apply when a normal buyout is performed because the cap benefit is accounted for in the buyout calculation, and the team that does the buying out pays the buyout costs.

Further, There is also nothing in the contract about different rules for a normal buyout depending on which team does the buying out. If Ehrhoff remains a sabres and the sabres use a normal buyout, the sabres do not pay the recapture as defined in the new CBA, but the amount they pay for the buyout includes the "cap savings" calculation that adds a cap hit to the buyout equal to what the recapture would be (not spread out evenly though like the recapture - see the scenarios in the OP and it should be obvious. The extra above the 2/3 of the salary spread out over twice the term is NOT the recapture, it is part of the buyout calculation - the sabres would not pay recapture and buyout costs).

So getting to that, there is nothing in the CBA that says when a player on a long term contract is traded and bought out, the team doing the buying out follows different rules. The team doing the buying out takes on the cap savings calculation cap hit in the buyout, the player receives salary pursuant to the contract, and the contract is fulfilled and terminated.

Based on this reasoning, it makes sense to me to conclude that the league views a normal course buyout (regardless of who does the buying out) and the player playing out his contract to be equivalent in terms of not activating the recapture penalty. In both cases (buy out or play out) after Ehrhoff would be traded, the team that traded for Ehrhoff would take on the cap hit disadvantage equivalent to the cap hit advantage received by the sabres in the first 2 years of the contract. The trade-to team is either cap-disadvantaged by the salary being a total of $10 million less than the cap hit over the final 4 years, or disadvantages by the extra $10 million in the buyout costs due to the "cap savings" calculation in the buyout.

See, the recapture penalty is not actually a "penalty" at all. It is accounting. It is zero-sum. As long as the cap benefit the sabres received for the first 2 years of Ehrhoffs contract is paid back, the league considers it fair. In all scenarios, the $10 million cap advantage is always paid back through some combination of recapture costs, buyout costs, or Ehrhoff playing and being paid a salary less than the cap hit. In scenarios where Ehrhoff is traded and either plays out his contract or bought out, the Benefit recieved by the sabres is equal to the disadvantage paid by the trade-to team, and there is nothing to recapture because the accounting sums to zero.

The only time the math does not sum to zero is by league mandate - when a contract is not fulfilled, the team that originated the contract is responsible for paying back the benefit, not whichever team the player is currently playing for. If Ehrhoff is traded and then retires with 1 year left, the Sabres will have received a cap benefit of $10 million, while the team he is traded to will have only paid back $7 million by way of cap disadvantage years of the contract. There needs to be a way to make up the difference - but the league decided to write the rule that when the sabres pay the recapture, they do not get credit for the $7 million in disadvantges the other team paid, nor does the other team get that loss credited back, so there is a net loss of $7 million of cap space, due to the rule. I guess then, the term "penalty" truly does apply.

The logical reasoning behing that is that when a team trades for a long term contract like that, they do so knowingly and willingly accepting that there will be cap disadvantage years of the contract. So they pay the disadvantage whether the contract is fullfilled by playing it out, or fulfilled by the team buying it out. What the team trading for the player is NOT responsible for, however, is if the player retires or defects or otherwise does not fullfill the contract. That is all on the team that originated the contract. The trade to team still is stuck with the cap disadvantage for whatever years played while the salary < cap hit, but when it comes to recapture for the original team, the original team does not get credit for years when the player was on someone elses books, so it can be a net loss instead of zero sum.

-------


Here is an exaggerated FANTASY example of a player that is not Ehrhoff to illustrate why the recap rule exists, and when it applies and why:

Suppose the sabres want to sign Jagr as a FA. They give him contract of 5 years $14 million total, where the actual salary to be paid is $10, $1, $1, $1, $1 million over the 5 years.

So in the first year of the contract, Jagr is paid $10 million, but only counts for $2.8 million on the sabres cap. The sabres receive a cap advantage of $7.2 million.

If Jagr would play out the contract, the sabres would pay him $1 million each of the next 4 years, each year being $1.8 million less than the cap (cap disadvantage). Over the last 4 years, the sabres would only pay $4 million in total salary, but would be assed a total cap hit for Jagr of $7.2 million, so the advantage received in the first year is paid back naturally through the contract.

BUT, that is not why the recapture rule exists. Everything works out just fine as long as the contract is played out. Jagr would recieve $14 million in cash, and the sabres would be assessed a total of $14 million in cap hit for his services. However...

Imagine we go back in time, and this happened before the recapture rule existed in the previous CBA. The sabres could sit down with Jagr and his agent before signing, and have a conversation that goes something like this:

GMTM: "Look Jagr, we know you want to play 1 more year, and we want it to be with us. We can offer you a 1 yr $2.8 million contract what do you say?
Jagr: "Sorry sabres, I want $10 million, and someone is willing to give me that for 1 year."
GMTM: "We just don't have the cap space for that. Why don't we agree to a 5 year $14 million contract and we'll give you $10 million the first year. You'll only cost $2.8 million on our cap, but you'll get your $10 million. Then you can retire if you'd like and we both get what we want."
Jagr: "Pleasure doing business with you."

So you see, before recapture existed just a few years ago, this was a possible scenario (albeit exaggerated). It was possible to make contracts like this that weren't made in "good faith" that both the team and the player had intentions of fulfilling the contract.

What DID already exist in the last CBA, was a provision in the buy-out agreement to prevent the team from buying out that contract after the 1st year to get the cap benefit without ever having to pay it back. The player had to retire for that to happen, and back before the time of front loaded contracts, a retiring player would give up a substantial chunk of salary by retiring. As others have explained already, the recapture was introduced in the new CBA not to be assessed in addition to the already in place buy-out provisions, but as a way of closing the retirement loophole that was becoming a problem as teams were signing players to super long term front loaded contracts. The recapture is to prevent the behind the scenes scheming in my hypothetical Jagr example.

So let me continue the example.

In the previous CBA:

Jagr plays the first year of his contract and then retires: Jagr is payed $10 million and forfeits the rest of his salary. The sabres payed the $10 mil in real cash and only carried a cap hit of $2.8 million the year Jagr played, and then are free and clear of the cap hit entirely after Jagr retired. This is the situation recapture was introduced for.

Now suppose Jagr plays the first year of his contract and then decides he wants to continue playing afterall: Well, the sabres didn't really want Jagr around for more than 1 year at a $2.8 million hit. They've got young players getting ready to sign their second contracts and need the cap and contract space. They consider their options...

Buy him out? Under the previous CBA, there were already provisions in place to prevent teams from gaining a net cap benefit by buying out a player. The rules for a buyout under the previous CBA were the same as they are today, and they are such:
Quote:
Originally Posted by Capgeek FAQ
Teams are entitled to buy out player contracts for a portion of the remaining value of the contract paid over a period of twice the remaining length of the contract. Following are the buyout amounts:

Younger than age 26 at the time of buyout, 1/3 the remaining value
Age 26 or older at the time of the buyout, 2/3 the remaining value

When a player is bought out, the team still takes a cap hit for the player over a period of twice the remaining length of the contract. The amount of the cap hit (by year) is determined as follows:

Take the actual salary due for each remaining year
Take the Averaged Player Salary (cap hit) for the current contract
Calculate the buyout amount (as described above)
Spread the buy-out amount evenly over twice the remaining years of the contract
Take the number in No. 1 and subtract the number in No. 4. This is the "buyout savings."
Take the cap hit from No. 2 and subtract the buyout savings from No. 5.

This calculation is done for each year, meaning the buyout cap hit is not necessarily the same for all years. It can even be negative, meaning a team can receive a credit.
Worked out, the buyout for Jagr in my hypothetical example would be as follows:

Contract Year 2: 2.13
Contract Year 3: 2.13
Contract Year 4: 2.13
Contract Year 5: 2.13
Year 6: 0.33
Year 7: 0.33
Year 8: 0.33
Year 9: 0.33

The math works out such that Jagr would be payed a salary of $4 mil total and the sabres would carry a total cap hit of $11.2 mil (for a difference of $7.2 mil cap disadvantage) over the final 4 years of the contract if he played. The buyout allows the sabres to only save caphit on the salary due only, not the actual assessed cap hit. So, $7.2 mil of that cap hit is assessed without reduction spread out evenly over the final 4 years of the contract in the buyout calculation (this is not recapture - remember, this is the previous CBA we are in in the example, recapture does not exist yet), while the other $4mil is only assessed at 2/3 the cap hit spread out over twice the remaining calculation. In total, the buyout costs the team $4 million cash paid to the player regardless, but a total caphit for the sabres would be $9.87 million ($7.2 million + 2/3 of $4 million). There is no net cap benefit due to the contract, because the $7.2 million benefit received in the first year is paid back in the buyout costs. The cap savings in the buy out comes from the team only being charged 2/3 the cap of of the remaining salary (salary, not overall caphit). The team saves a net total of $1.33 mil by buying Jagr out vs. letting him play, and they're only saving $0.67 million in the year that would be his second year of the contract. Does that really make buying him out for cap savings worth it? probably not...

So still in the previous CBA, the sabre decide they aren't saving anything by buying him out. What if they trade him?
The Florida Panthers are interested in trading for Jagr to reach the cap floor. They're excited to get the 2.8 million in cap hit per year while only paying $1 million in real salary per year. Very good for the bottom line - reaching the cap floor without actually having to pay salary to the floor. They happily agree to take on the cap disadvantage through the trade.

What if Jagr then retires a Panther after the 2nd year of his contract? Well, seeing as this is the previous CBA, the recapture rule is not in place yet. The sabres payed $10 million in cash and carried a $2.8 mil cap hit the first year. The panthers paid $1 million in cash and carried a $2.8 million cap hit the 2nd year of his contract. When Jagr retires, he is completely off the books for both teams. Both teams combined payed $11 million total, but only carried a combined total cap hit of $5.6 million. That means there is a net effective cap benefit of 5.4 million in the league when Jagr retired - the sabres received a benefit of 7.2 million in the first year, the panathers took a disadvange of 1.8 in the second year, for the difference of 5.4 million net benefit between the two teams. This is the scenario recapture was introduced for.

What if the Panthers want to buy Jagr out after he plays his second year? Well, they can. Remember, this is the previous CBA, so recapture does not exist. what the Panthers do to buy out Jagr has no ramifications on the sabres. Here is the panthers buyout cost:

Contract Year 3: 2.133333333
Contract Year 4: 2.133333333
Contract Year 5: 2.133333333
Year 6: 0.333333333
Year 7: 0.333333333
Year 8: 0.333333333

The math works out and sums to 0 like it should.

In the total contract, Jagr is owed $14 million, and teams must be assessed a total caphit of $14 million.

The sabres payed $10 million cash, and a $2.8 mill cap hit.
The panthers payed $1 million cash, and a $2.8 mill cap hit.
In the buyout, Jagr will receive $3 mill from the panthers. Total cash payed will be $14 mil.
Before the buyout, the net cap benefit by both teams (sabres benefit - panthers disadvantage) is $5.4 million. The buyout costs in cap hit the panthers will pay is $7.4 million ($5.4mil + 2/3 of $3mil), compared to the $8.4mil total cap hit the panthers would have been assessed had Jagr finished the contract with no buyout. The Panthers save $1 million in cap hit by buying Jagr out due to the buyout agreement (only hit for 2/3 of the salary, not total cap hit), but the $5.4 million benefit the sabres received is paid back by the panthers, built into the buyout costs.

Time-travel back to the future and transport this example back into the current new CBA: OK, what is different in the new CBA that wasn't in the old CBA? The Buyout scenarios DO NOT CHANGE. The buyout formula aready takes into account making sure no team gets an unfair cap advantage (other than what the buying-out team saves in the buyout agreement i.e. being on the hook cap-wise for 2/3 of the remaining salary). The recapture was only introduced to close the loophole in the retirement scenarios, so that when a player retires, no team gets an unfair cap advantage due to the structuring of a contract that was not made in good faith (or even if the contract WAS made in good faith - its a fair system, not really a penalty at all). The team that made the contract is responsible for recapturing their benefit should the player retire before the end, even if the player is traded first. The original team's cap benefit can be reduced when the team plays for a salary less than the cap hit while playing for the original team, but is not reduced if the team plays those years after being traded. A team is not hit with the recapture provisions in the new CBA if they buy out their own long term contract player like ehrhoff, because the buy-out provisions in the old CBA that were carried over to the new CBA already account for making sure the team doesn't get that unfair cap advantage by performing the buyout. When a player is traded and then bought out by another team, the other team assumes the contract, which includes all the costs of buying out the contract (buy out costs are part of all player contracts), which haven't changed from the previous CBA. The original team is NOT charged with recapture if the second team performs the buy out because the buy out provisions in the old CBA that were carried over to the new CBA already account for making sure there is not a net cap benefit to either team, other than what is allowed by the buyout agreement in the contract.


So there you go. Like 99% sure this is exactly how it works. Normal course buyouts do not activate the recapture provisions in the CBA. Only retirement or defection to another league, or other cases which I imagine are like when Tim Thomas decided to sit out and wasn't paid by the bruins and his contract wasn't fulfilled.

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01-29-2014, 12:47 PM
  #42
Jame
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Quote:
Originally Posted by Sabretooth View Post

In non-legalese, it specifically says that recapture does not apply when a normal buyout is performed because the cap benefit is accounted for in the buyout calculation, and the team that does the buying out pays the buyout costs.
This is the key piece of evidence

When you play with cap geeks buy out calculator, and read the rules of a buyout, it's clear that any previous cap benefits will be accounted for in the way a buyout cap hit is calculated.

If you buyout Ehrhoff AND have to pay a recapture... it's significantly more than the original cap benefit of the contract.

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01-29-2014, 12:57 PM
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Quote:
The buyout formula aready takes into account making sure no team gets an unfair cap advantage
The End

(i hope)

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01-29-2014, 01:16 PM
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Okay, you learn something new everyday, haha

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01-29-2014, 01:50 PM
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We'll given how few contracts we will have come season end you could, if you're a very skilled negotiator and very shrewd at handling the cap, build your roster so a bunch of contracts come up during the Hoff's last season. There's 6 seasons between now and then, anyone younger than 21 right now will still be a RFA going into his last year. So in theory the "core" (top 3 defenders, top 4 forwards) shouldn't include anyone with huge contract demands going into 2020/21 ie. 7+mil (Myers and Hodgson maybe, if Myers play deserves a raise I think we all would take that, and I don't ever see Hodgson being worth more than 6/per, I can't believe 2020 is something I'm talking about, I feel old). You could cut ties at that point with any veterans, preserve the core and go into 1 season at 80%. Sign some league minimum contracts to populate the fourth line and add maybe 6mil to the cap from this season. Fill that 6mil with expiring contracts, and strip the 4th line to league minimum players and I think worse case scenario you might be forced to cut ties with 1 good but not vital player.

So with all at said, I think Murray should be planning on eating the cap damages from Ehrhoffs recapture regardless of if he intends to trade him or not. While 10mil is far from a slap on the wrist, it's also not something that will be crippling as long as it's prepared for well in advance. If a trade comes that gets you a core piece for Ehrhoff you move on it. I look at how Chicago handled their post cup run, they identified their core pieces and had no issues parting with some very talented players. After a season they were back as contenders.

I think buying Ehrhoff out is cutting off your nose to spite your face and not preparing for the worst is irresponsible management of assets. However Murray can preserve his options buy planning now to eat a 10 mil cap penalty. Worse case scenario we go into 2020 with huge cap space available to sign that last piece.

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01-29-2014, 04:44 PM
  #46
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As a note, I created a thread on the BoH forums to discuss the cap implications of buyouts on recapture penalties.

The idea was to get some of the local BoH cap gurus to weigh in. Feel free to deposit your thoughts there. Keep in mind the thread is specifically for the effect of buyouts on the recapture clause, not for what the Sabres should/shouldn't do with Ehrhoff.

http://hfboards.hockeysfuture.com/sh....php?t=1593303

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03-03-2014, 01:37 PM
  #47
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With the deadline a couple days away and lots of Ehrhoff speculation (and misinformation being posted), I thought it would be a good idea to bump this and remind people to reference it when discussing Ehrhoff's recapture and buyout scenarios in the trade forums.

I also felt I needed to add a new entry to the OP - that entry being, what is the real recapture risk? As a fan base, we like to reference the $10 million and claim that any trade offer would have to wildly blow us away in order for a trade to work. While the risk is real, I think we have wildly overblown what exactly the risk is. I've created a few summary tables to illustrate the point, based on the format hatterson posted earlier in the thread.

Firstly to summarize, here is the table of recapture costs to the Sabres based on when Ehrhoff retires if Ehrhoff remains a Sabre:


And here is the table of recapture costs to the Sabres based on when Ehrhoff retires if Ehrhoff is traded this deadline or upcoming off-season:


When discussing the "recapture risk" in trade scenarios, the important point to remember is that the risk is not the values in the second table, the risk is the difference between the 2 tables. We should not talk about the risk as a $10 million cap hit in the last year of his contract, we should talk about the risk as the $7 million difference between if he retires as a Sabre vs if he retires after being traded. Here is what it looks like in table summary format:



So in the unlikely case Ehrhoff retires in the off-season of 2017 or before, there is absolutely no difference in risk whether we keep him or trade him. The recapture costs are the same to the Sabres. Of course, those aren't the retirement years anyone is worried about anyways.

Say Ehrhoff gets to the $1 mil per year salary years of his contract and decides he's had enough and decides to retire in 2018 with 3 years left. Well the difference in recapture costs between trading him now and keeping him is only $333,333 per year. The risk is comparing Ehrhoff retiring after being traded vs retiring at the same time as a Sabre, not comparing recapture costs after he's traded to no recapture costs at all.

So if he retires with 2 years left, the difference is $2 mil for 2 years - $5 mil per year if he retired after a trade vs $3 mil per year if he retired after remaining a Sabre.

And the ultimate point of this post - if he retires with 1 year remaining, the difference in recapture if he is traded now or kept is $7 million. That is the number we as a fan base should be referencing when talking about recapture risk and how good a trade needs to be to cover the risk to the Sabres.



So how to we evaluate proper value for a trade? What other "risks" are involved? These are hard to quantify and summarize. If we keep Ehrhoff in order to avoid a net $7 million dead cap hit in 2020, we have to remember that we're also keeping him and his cap hit and salary. For the next 6 years, Ehrhoff will cost the Sabres a total of $24 million in cap hit the seasons he plays, and then $3 million in recapture the last year if he retires, for a total of $27 million in cap hit. We'd also have to pay a replacement player in the 2020-21 season, and assuming an equivalent player has the same caphit, that'd be another $4 million. So the total cost of keeping Ehrhoff is $31 million in cap hit spread over the next 7 seasons.

But if we trade him now, Ehrhoff only directly costs us the $10 million recapture worst case, leaving $21 million over 7 years to acquire his replacement and break even. You're going to say, there's no NHL player in the league right now who brings what Ehrhoff brings for a better cap hit than he already has, and I'd agree with you. But what if Ehrhoff declines? What if he becomes a healthy scratch by the final 3 years of his contract? Then we're paying his contract, a replacement player anyways, and then the $3 mil recapture when he retires. Sure, he could also be solid 2nd/3rd pairing defenseman on a Sabres stanley cup contending team by then, but we're looking at worst case. If we're looking at worst case recapture if he's traded, it makes sense to compare it to worst case if we keep him. There are scenarios one could dream up where even if we get hit with the worst case $10 million recapture, we could end up spending less on cap hit over the next 7 years and still end up with a "better-than-Ehrhoff" replacement during/at the end of the 7 years.

And the Sabres still have the "reacquire to buyout" option as another bullet to mitigate the risk. Maybe its as simple as Darth Murray demanding a trade condition that if Ehrhoff retires before the end of his contract, the Sabres get that team's 1st round pick in 2021 draft. Thats a hell of a long ways out but GaMeTiMe seems to like conditions and it would allow for a bit of leverage in any reacquire for buyout negotiations down the line, instead of relying on another team's good will or giving up assets to make it happen.



The point I'd hope everyone would take away from this is that we have overblown what the recapture risk really is, as a fanbase, when discussing potential Ehrhoff deals. There is a risk that is real and significant, but it is not nearly as bad as most jump to whenever an Ehrhoff trade proposal pops up. I'm sure much of it is runaway hyperbole due to the shear magnitude of times the issue has come around now and needing to explain it over and over again. But I just feel as a fan base we should be dialing it back some. The risk is real but in no way makes Ehrhoff untradeable. It doesn't require massive overpayment that no team would pay. There are ways to mitigate the risk, and even ways to replace Ehrhoff with a better player and still pay less overtime with the full recapture hit vs. keeping Ehrhoff to avoid the big recapture hit.

I propose that, as a fan base, we stop focusing on the recapture for the primary reason why Ehrhoff is untradeable, and focus more on things like how we actually like Ehrhoff and don't want to trade him (most of us), that he is a solid player on a very favorable contract, that he is a veteran player this team needs, that he is unlikely to decline due to his style of play, etc. And if other team's fans still want to propse trades, then give THOSE reasons as the reason why more than just fair value would be required, and not focus so much on recapture. I'm an Engineer, and in engineering there is a thing as building too much margin into a product. Margin is safe and desireable, but if you end up with components that are too costly or too heavy, you end up being uncompetitive with other suppliers who are willing to take more risks. Risk is in everything, and sometimes you have to accept a little more risk in order to reap even greater reward. Worrying about recapture and trying to either eliminate the risk or make another team pay to cover it is like building in too much margin. Its very safe, but you might end up missing out on something really good by playing it too safe and conservatively. We may not need or want to trade Ehrhoff at all, but IMO recapture is the smallest contributing factor to that conclusion.


Last edited by Sabretooth: 03-03-2014 at 01:49 PM.
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03-03-2014, 01:43 PM
  #48
EichHart
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If we trade Ehrhoff can we use one of our buyouts to "Buyout" his cap hit from the previous CBA?

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03-03-2014, 01:44 PM
  #49
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Can you repeat that please?

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03-03-2014, 01:47 PM
  #50
MARCUS FOLlGNO PHD
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Excellent post.

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