Capitals

What a flat salary cap means for the Capitals

Capitals
Gary Bettman

With all the struggles the NHL has encountered during the coronavirus pandemic, the salary cap is likely to remain flat for years to come. That's not good news for teams tight up against the cap ceiling like the Capitals.

A "flat" salary cap refers to the salary cap not rising from one season to the next. The cap was flat for the 2021 season, remaining at $81.5 million rather than climbing as it has steadily done for several years. Now the NHL expects to be dealing with a flat cap for several more years.

"I think everybody is basically focusing on a flat cap or near flat cap for the immediate future," NHL commissioner Gary Bettman said in a virtual press conference on Thursday.

Per the collective bargaining agreement, the NHL and its players enjoy a 50/50 split of hockey-related revenue. The league's revenue is obviously down given the abrupt pause in the 2019-20 season, the cancellation of the remaining games in the regular season and the limited attendance that has been allowed at games this season and that was not allowed at all in the 2020 postseason. Bettman said that attendance accounts for "roughly half" of the league's revenue so the lack of it has been a serious financial blow.

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While the league's revenue is down, however, the player contracts and salaries remain the same meaning the players are going to owe the NHL a massive amount of money by the end of the season. Until the league recoups that money -- which is a process expected to drag on for years -- the cap is going to remain flat to control player salaries.

"The salary cap is basically going to be flat until we recover the overpayments through the escrow that we've built up both in the return to play from last season which obviously had to be concluded under different circumstances and this season where obviously there's a major escrow building up because of the fact that there's no attendance," Bettman said.

So why does this matter so much to a team like Washington? After all, the team is currently cap-compliant so why would this be a problem next season?

The biggest issue is that, even if a team keeps its roster largely intact from one season to the next, that does not mean each player's cap hit remains the same. Washington is right up against the salary cap this year and Alex Ovechkin, Jakub Vrana, Jonas Siegenthaler and Ilya Samsonov are all on the final year of their contracts. Each of those players should be re-signed, but each of those players will also be signed to a greater cap hit than they previously held. There are also players like Conor Sheary, Trevor van Riemsdyk and Zdeno Chara who are also in the final year of their contracts. The challenge is that whatever the Caps add to their salary cap, they will have to move the same amount of money out to get under the cap ceiling.

This leaves Washington with virtually no cap flexibility at all. Want to add another starting goalie next season? Ilya Samsonov and Vitek Vanecek have cap hits of $925,000 and $716,667, respectively. Whichever goalie you want to replace, you better find a goalie at the same cap hit or lower to make it work. Good luck finding a starting-caliber goalie of that caliber for less than $1 million, otherwise you have to move money from somewhere else.

As the Caps have been a cap team for several years now, general manager Brian MacLellan has had to navigate a tight cap situation before. One of the things he did was give players longer-term deals in order to keep their cap hits low. Now a number of those contracts could loom large with the cap remaining flat.

T.J. Oshie is the most notable example. At 34 years old, he still has another four years left on his contract after the 2021 season at a cap hit of $5.75 million. It was known when he signed that deal that Oshie would not be a $5.75 million player by the end of that contract, but so long as the cap continued to rise, that would provide some relief to the team as well as continue to reduce the percentage of the cap Oshie received.

 

Basically, while no one expected Oshie to live up to his contract through the final half of it, a rising cap could have made his cap hit more manageable and hopefully, by the end of the contract, his percentage of the cap would be right in line as an accurate reflection of his value. That won't happen with a flat cap.

Washington has six players signed to at least an additional three years past the 2021 season. Make it at least an additional two years and that number rises to 12 players.

So what can the Caps do?

Trades will likely have to be made and chances are they will not yield the returns you may have hoped for. No general manager will be blind to the cap situation of any team in the NHL and no one is going to do the Caps, or any other team, any favors.

Looking at the expansion draft in the 2021 offseason, it is now imperative that MacLellan convince the Seattle Kraken to select a player with a significant cap hit such as Oshie or Dmitry Orlov. When given an opportunity to shed salary this offseason, the Caps can't have Seattle take a player like Samsonov, Vanecek or Siegenthaler, all of whom carry cap hits of less than $1 million.

At the tail-end of their championship window, perhaps the situation will be less dire than it now appears. If the Caps no longer consider themselves to be contenders, then it will be easier to shed salary. If the team wants to continue to compete beyond this season, however, it is going to take some creative management from MacLellan to get this to work.