FanHouse Salary Cap

Last night between games on HNIC, NHLPA executive director Paul Kelly was interviewed by Ron MacLean (link to HD video of the entire interview). The first thing they discussed was the rumor that escrow payments made by the players would be rising from 13% of their pay to 17-20%. Kelly wouldn't say exactly how much the payment would rise, but he did answer in the affirmative that the 17-20% range was accurate.

It is the escrow system that allows for the NHL to have both guaranteed contracts and a Salary Cap tied to a percentage of revenues. What this rise in escrow means is that the players contracts in total will likely be much more than the 56.5% of league revenues for the year. It was already pretty much taken for granted from the beginning of the season that the 13% that was being taken out of their checks and held in escrow would be returned to the owners at year's end.

Following up on my post from last week about the US Dollar's rise potentially affecting the salary cap, Tom Benjamin had a short post today about this issue. On the subject of revenues vs. the cap Tom B. has this to say:

If revenues actually do fall we are into uncharted waters, but the cap formula includes an automatic 5% increase. As a result revenues have to fall a lot to actually drop the salary cap. A zero increase in the cap is probably my worst case scenario. I don't think that would cause significant problems. It would, however, help the Russian league compete for players.

His point about the Russian competition is an excellent one, especially in light of Alexander Radulov's recent statements. Given that I believe there is a paradigm shift in world finance underway with the power-base shifting eastward towards Russia, China and the Arab world any drop in revenues for the NHL would be yet another data point in favor of that analysis, a potential nail in the coffin of the NHL's dominance over the hockey world.

But, that said, I have to take umbrage with Tom's assertion that it would take a large drop in revenues to drop the cap. On the contrary, given what we know about the league's revenues last year, the $56.7 million salary cap for this season includes the 5% kicker, so any drop in revenue would cause the cap to drop. Unless the numbers being bandied about are way off ($2.56 billion), the only way for the cap to be $56.7 million was if the 5% kicker was added to the cap for 2008-09. If the NHLPA waived the 5% increase, then the cap would have been set at approximately $54 million. If I'm wrong about this, please someone correct me.

Now, the likelihood of league revenues contracting is subject to much debate, and the more I discuss this the less convinced I am that revenues are likely to drop a lot. As I pointed out last week, even in a revenue neutral setting the current spending on salaries means that the escrow payments would stay with the teams as that equals ~59% of revenues where the players are due only 56.53%. This does not bode well for next year's extension of the CBA.

I love NFL football, but I don't like figuring out salary cap stuff and its effect on contracts. So, as a service to both you and me, I've enlisted Keith Weiland of HoustonProFootball.com to explain most everything Texans salary cap.

The interview is even worth a read even if you are more interested in NFL salary cap issues in general and less about the Texans.

SS: What is the best information you have about the Texans salary cap situation?

KW: Unless you're someone who has direct access to league records, the best salary cap information available to anyone is quite often questionable. I have maintained a salary cap estimate for the Texans at HoustonProFootball.com for a few years and all I can guarantee anyone is that it's wrong somewhere on that page, and probably in more than one place.

Much of the data that doesn't come from the NFLPA comes from the media, and the data provided by the media is only as good as the data they've been given (and frankly, understand). The league and its teams are rather reluctant to release salary cap information, even to reputable media outlets, so often times the dollars reported come from the agents, and who can completely trust them, right?

So the question that every Chiefs' fan is dying to hear right now is, how much money do the Chiefs have to spend this offseason?

Pete Yasinskas of the Charlotte Observer has gotten a head start on the guessing game. He projects the Chiefs to be at about $7 million above the cap, which would rank them 27th in the league.

This is where Chiefs' fans immediately reach for the panic button. Relax. These numbers mean pretty much nothing. There is really no way to project how much money the Chiefs or any team will have available to spend until the free agency officially launches.