FanPost

The #Structure: influences and Stastny’s offer

I had planned to pen this fanpost shortly after the beginning of free agency when the team lost Paul Stastny but I was on vacation with my wife. So, you are getting this a couple of weeks late and with a bit more of retrospection.

It was reported that initial contract offers to Stastny from the Avalanche started in the $5 million range. The Avs held a press conference in which they now infamously stressed their salary structure, the importance of it and that they would not deviate from that structure.

Many around here assumed that the cap hit on Stastny’s next contract would be in the $7 million range and it was exactly that. Pundits have since said that was an overpayment for Stastny and perhaps it may have been compared to players that are already under contract in the $7 million range from contracts negotiated in years past. However, it is more accurate to compare his contract to others that are/have been signed around the same time (i.e. when the salary cap is the same amount) and compared to what the market currently is, Stastny slots in not much above an inferior Brandon Dubinsky’s $5.85 million and well below a more decorated Jonathan Toews’s $10.5 million cap hit. Besides all of that, market value is defined as what someone will pay. We heard that Stastny was contacted by about or over half of the teams in the league, so there was certainly demand. St. Louis was willing to pay Stastny $7 million per year. So, that’s his market value plan and simple.

So, if Stastny’s market value was unpredictably $7 million, why did the Avs’ structure only value him in the $5 million range? Here are some reasons that I think the front office set the structure as it is and offered Stastny what they offered:

1) 2014-15 Salary Cap

This one is pretty simple. Half way through the season, initial reports of the 2014-15 salary cap were projecting it to be approximately $71.1 million. We now know that the salary cap ended up being $69 million for the coming season, which left the Avs (and all other teams in the league) $2.1 million less room to work with beneath the upper limit.

2) Nathan MacKinnon bonuses – preventing a bonus overage

I’ve made a couple of comments about this already. Basically with nearly half of the league facing performance bonus overages during this coming season, the Avs are likely looking at other teams’ situations and not wanting to handicap themselves in the future by having any significant performance bonuses count against them (thanks for Iggy, Boston!).

Nathan MacKinnon’s base salary of $925,000 is augmented by potential schedule A bonuses up to $850,000 and schedule B bonuses up to $2,000,000. This means that during any given year of his 3 year entry level contract (ELC), MacKinnon’s cap hit could fall somewhere in between his base $925k and the full $3,775,000 of his base salary plus performance bonuses. Teams are allowed to exceed the salary cap each year by the amount of performance bonuses in player contracts. This allowance comes with the caveat that the amount paid in bonuses by which they exceed the upper limit during one year counts against their cap during the following year in the form of a performance bonus overage.

Bonuses are specifically written into the ELC and we do not have access to MacKinnon’s particular contract to how those bonuses are laid out. However, taking a look at the requirements for those bonuses, he almost assuredly reached the full $2,850,000 amount of those bonuses this past season as he achieved the minimum bonus threshold on 7 schedule A categories and likely achieved schedule B by winning the Calder Trophy. The Avs were far enough below the upper limit this past season that they were one of just a few teams to not have an overage going into this coming season.

It’s easy for us fans to look at capgeek, see MacKinnon’s $925 salary and think that the team has more room under the cap than it actually might. If we assume no regression in MacKinnon’s performance and point production, he will easily obtain the schedule A bonuses during each of the next two years. Although the schedule B bonuses are more vague, it looks like he could possibly achieve them by finishing in top 5 voting for league awards such as either the Hart, Selke, or Richard trophies , which is possible but more unlikely. This means that realistically MacKinnon’s cap hit for the next two years projects to be $1.775 million ($925k base salary + $850k schedule A bonuses). Assuming that O’Reilly and Barrie sign for a combined approximate $9 million, the Avs would project to have about $1.4 million in cap space once MacKinnon achieves his schedule A bonuses (UPDATE: O'Reilly's cap hit is $6 million):

FORWARDS

Ryan O'Reilly ($6.000m) / Matt Duchene ($6.000m) / Jarome Iginla ($5.333m)

Gabriel Landeskog ($5.571m) / Nathan MacKinnon (+bonuses) ($1.775m) / Alex Tanguay ($3.500m)

Jamie McGinn ($2.950m) / Daniel Briere ($4.000m) / John Mitchell ($1.800m)

Cody McLeod ($1.150m) / Jesse Winchester ($0.900m) / Maxime Talbot ($1.750m)

Marc-Andre Cliche ($0.700m) / Patrick Bordeleau ($1.000m)

DEFENSEMEN

Brad Stuart ($3.600m) / Erik Johnson ($3.750m)

Jan Hejda ($3.250m) / Tyson Barrie ($2.900m)

Nick Holden ($0.600m) / Zach Redmond ($0.750m)

Ryan Wilson ($2.250m) /

GOALTENDERS

Semyon Varlamov ($5.900m)

Reto Berra ($1.450m)

BUYOUTS

Greg Zanon ($0.750m)

BONUS OVERAGE

$0

------

CAPGEEK.COM TOTALS (follow @capgeek on Twitter)

(estimations for 2014-15)

SALARY CAP: $69,000,000; CAP PAYROLL: $67,629,762; BONUSES: $850,000

CAP SPACE (23-man roster): $1,370,238

It is not unreasonable to think that a team would like to have approximately $1 million in space under the cap for any in season transactions such as player call-ups or for other players acquired via trade or waivers. So, this is a pretty good number for the Avs. Replacing Stastny’s current salary with Iginla’s pushes the Avs just slightly into bonus overage territory (and this is before taking into account any additional salary against the cap such as minor league call ups):

FORWARDS

Ryan O'Reilly ($6.000m) / Matt Duchene ($6.000m) / Alex Tanguay ($3.500m)

Gabriel Landeskog ($5.571m) / Paul Stastny ($7.000m) / Nathan MacKinnon (+bonuses) ($1.775m)

Jamie McGinn ($2.950m) / Daniel Briere ($4.000m) / John Mitchell ($1.800m)

Cody McLeod ($1.150m) / Jesse Winchester ($0.900m) / Maxime Talbot ($1.750m)

Marc-Andre Cliche ($0.700m) / Patrick Bordeleau ($1.000m)

DEFENSEMEN

Brad Stuart ($3.600m) / Erik Johnson ($3.750m)

Jan Hejda ($3.250m) / Tyson Barrie ($2.900m)

Nick Holden ($0.600m) / Zach Redmond ($0.750m)

Ryan Wilson ($2.250m) /

GOALTENDERS

Semyon Varlamov ($5.900m)

Reto Berra ($1.450m)

BUYOUTS

Greg Zanon ($0.750m)

BONUS OVERAGE

$0

------

CAPGEEK.COM TOTALS (follow @capgeek on Twitter)

(estimations for 2014-15)

SALARY CAP: $69,000,000; CAP PAYROLL: $69,296,429; BONUSES: $0

CAP SPACE (23-man roster): -$296,429

If the unlikely event of MacKinnon achieving his schedule B bonuses occurs (good for him and the Avs!), the team would have enough room to absorb most of that and have a bonus overage probably under $1 million for the following season.

SALARY CAP: $69,000,000; CAP PAYROLL: $69,629,762; BONUSES: $2,850,000

CAP SPACE (23-man roster): -$629,762 - this would be the bonus overage carried over into the following season, plus whatever in season call ups were made to push more of the bonus amount into bonus overage territory, up to the full $2.85 million.

If that happened and the team signed Stastny to his current deal, that bonus overage would have a more significant impact on their cap during the following season.

SALARY CAP: $69,000,000; CAP PAYROLL: $71,296,429; BONUSES: $2,850,000

CAP SPACE (23-man roster): -$2,296,429 - this again would be the bonus overage carried over into the following season, plus whatever in season call ups were made to push more of the bonus amount into bonus overage territory, up to the full $2.85 million.

Here we see the team’s structure keeping an eye on the future and trying to put this team in position to function without much (if any) dead weight against its cap in the coming years.

3) Buyouts – Zanon (Wilson lack thereof)

Coming out of the most recent lockout, teams were granted up to two amnesty compliance buyouts which would not count against the team’s salary cap. During the 2012-13 off season Sakic made his first impact by waiving Greg Zanon and Matt Hunwick for purposes of buyouts. Neither of them went claimed and Zanon’s remaining contract was bought out while Hunwick was buried in the minors this past season until his contract expired. Retaining Hunwick cost the team $1.6 million in actual salary paid and approximately $803,077 in cap hit. The team used a regular (i.e. not a compliance) buyout on Zanon which means his buyout came with a cap hit of $750k for this past season and this coming season.

Another likely candidate for a buyout this past off season was Ryan Wilson. Wilson was projected as a top pairing guy by Roy last off season and struggled with both Roy’s man-to-man defensive system as well as injuries. He was thought (hoped?) to be a compliance buyout candidate this off season but the compliance buyout window expired on June 30, just prior to free agency with the Avs having used none of theirs. Wilson’s cap hit of $2.25 million combined with Zanon’s buyout means that this coming season, the Avs are going to be paying $3 million for two guys – one not even on the roster and another likely on the roster as a 7/8 defenseman, looking to get out of his coach’s dog house and back into the top 6 rotation.

We do not know why a compliance buyout was not used on Zanon. Perhaps, Sakic knew the team could easily absorb the cap hit and simply wanted this past season to evaluate his roster while leaving them the opportunity to use both compliance buyouts on other more expensive players . We also do not know why neither Hunwick nor Wilson were bought out. My hypothesis is that ownership is against paying players not to play for them and that Zanon was an exceedingly bad exception to that rule. I am I am okay with that in general. However if that is indeed the case, the front office should have used its first compliance buyout on Zanon, knowing that the possibility of other buyouts was unlikely. Had the team had the foresight to use its first compliance buyout on Zanon and used its second this past off season on Wilson, they could have saved $3 million against the cap and replaced him with a cheaper 7th defenseman, like Noreau, Redmond, Elliott, or Guenin and saved the team at least approximately $2.1 million under the cap. Those are significant dollars which could have given management more flexibility within its structure.

4) Improving the team in other areas: Free agents

The front office sought to retain money within its structure to improve other areas. They recognized that the major needs for the team are: depth forwards, depth defensemen and probably most importantly a legitimate top 4 defenseman. Forward depth will in part be improved upon by having a healthy Alex Tanguay back in the lineup. It was bolstered by the signing of Jesse Winchester, who likely knocks Cliche out of the lineup. Zach Redmond, Maxim Noreau, Nate Guenin will all provide competition for the 6-8 spots on the defensive depth chart. These of course are all negligible signings in terms of the salary cap as any player that makes $925k or less this coming season can have their contract buried in the minors without impacting the team's cap (in a way the team committing money to these players on one way contracts knowing that they will not all be on the roster shows a commitment to spend). Joey Hishon and Stefan Elliott will likewise provide competition for bottom forward and defense spots on two-way contracts worth less than $925k.

This brings us to the major area of improvement needed on the roster: a top four defenseman, ideally a top pairing left handed defender. The market for free agent defensemen was thin and none entirely fit the bill in terms of what the Avs were looking for outside of Christian Ehrhoff. The Avs were unsuccessful in courting other free agent defensemen, such as Brooks Orpik, Anton Stralman, and Matt Niskanen, all of whom chose to stay in the eastern conference and likely for more than the Avs were willing to pay. The Avs made due by trading for Brad Stuart, who has one year remaining on his contract for $3.6 million. Taking a look at the current projected roster above and again reasoning that the team would like to have $1 million in free space under the cap for in season transactions, we can conclude that the team had money in the $4 million range allotted within their structure towards a top 4 defender. While this is exactly what Ehroff signed on for to play in Pittsburgh, he spurned other deals to have the chance to play with Sidney Crosby and Evgeni Malkin. Taking a look at the dollars (and terms) of some of the other free agent defensemen on the market signed for gives us Avs fans a sigh of relief that the team chose not sign them. Nevertheless, the Avs made a move within their allotted structure to improve a major weakness on the team (how much of an improvement that will be is debatable). Paying Stastny what he got on the open market would have likely eaten up the majority of those funds allotted to acquiring a top 4 defenseman.

5) Parenteau’s salary

This one is pretty plain and simple. P.A. Parenteau can be an effective top 6 scorer when healthy. However, injuries limited his effectiveness and his soft defensive play put him in the doghouse with the coach. With a bevy of other scorers on the team, he and his $4 million cap hit were long rumored to be on the trading block throughout the season. The team was unable to trade him for a player with a lesser salary with nearly half of the league facing performance bonus overages during this coming season and the salary cap not having risen as much as initial projections. Ultimately, he was traded for veteran Danny Briere and his identical $4 million cap hit.

Conclusions:

The team is not perfect on or off of the ice. Management has made some mistakes but they are not as great as the missteps which they have avoided thus far. Management looked to address the team’s weaknesses while still accounting for the monies to maintain their current caliber of top 6 scorers. From the sounds of things, Stastny still would not have signed as he saw the writing on the wall with both Duchene and MacKinnon playing the center position. The Avs effectively used the money which they had allotted within their current structure to Stastny to bring in another scorer in Iginla. The team has shown that they are willing to spend but not to the point where they handicap themselves in the future with deadweight. They used said structure to limit their activity on the market to that which would not force them to spend beyond their means.

MileHighHockey.com is a fan community, allowing members to post their own thoughts and opinions on the Colorado Avalanche and hockey in general. These views and thoughts may not be shared by the editors of MileHighHockey.com.

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