Roberto Luongo and the Vancouver Canucks: The Saga Continues
By Ryan Kiray (@rkpitt406)
The Roberto Luongo saga continues unabated in Vancouver, a full year after it first began. Despite flirtations with the Toronto Maple Leafs and Florida Panthers, at least, Canucks GM Mike Gillis has been unable to find a buyer for Luongo at his asking price. While Gillis has been (justifiably) berated for his failure to unload Luongo, trading the embattled veteran goaltender could come back to haunt the Canucks, and any team to pick up his contract, in a big way.
By now, most have heard something about a “Cap Advantage Recapture” provision in the new CBA. Most also understand the basic gist of the provision; they know that it is intended to add some cap penalty to teams that signed players to the long, cap cheating deals that kept Gary Bettman up for so many nights. But what does that mean, and why does anyone care? Basically, it means huge chunks of dead cap space when the players signed to those deals retire.
The Cap Advantage Recapture provision (“CAR”) applies to any contract that is longer than six years. Fans will recall that Luongo’s deal was originally struck as a 12-year contract with a total value of $64,000,000. The cap hit and average annual value under that deal is $5,333,333, but for the first eight years, Luongo’s take home pay is more than that. With the CAR rule in place, his employer won’t escape that cap hit forever. Let’s say for example that Luongo retires at age 40, after the 2018-2019 season. And let’s also say that Gillis manages to trade his highly expensive backup goaltender this summer. He carried Luongo on this contract for three years, paying him $10,000,000, $6,716,000, and $6,714,000, totaling $23,430,000. Over those three years, the Canucks only had a total of $15,999,999 in cap charge for Luongo’s contract. By the terms of the CAR, the Canucks are on the hook for a portion of that cap savings for every year that Luongo isn’t playing. Luongo would still have three years left on his contract after the 2018-2019 season. The NHL will take the $7,430,001 that makes up the difference between Luongo’s take home pay and his cap hit during his tenure with the Canucks, divide it evenly over those three years, and add it to the Canucks’ cap total for 2019-2020, 2020-2021, and 2021-2022. (As an aside, the Canucks don’t get to subtract the difference between his cap hit and take home pay in the years in which his salary was less than his cap hit). In each of those three years, the Canucks have $2,476,667 in dead cap space. If the Canucks don’t trade Luongo this season, then they can add the difference for 2013-2014 on as well. Worse yet, if Luongo holds on until he is 41, that difference is divided over only two years, and the cap charge would become $3,715,000.
But just like with everything else legal, there’s a loophole. The CAR provision only applies when the player is “under a long-term contract” but not playing. If Luongo is bought out, he is no longer under a long-term contract. The Canucks would never be saddled with that cap penalty. As a bonus, the new CBA’s Compliance Buy-Out provision would allow the Canucks to buy Luongo out without any of the traditional cap penalty. His salary would disappear forever. It’s a move the Canucks should seriously consider.
$2,476,667 might not seem like a lot of space. But in the modern NHL, cap space is a commodity as surely as a prospect or draft pick. The Canucks have spent most of the last few years straining for every dollar under the cap. They barely fit under the cap this season. $2,476,667 of dead space this year would have cost them Alex Burrows, at least. Is what Luongo would recapture in trade really worth that? Luongo’s contract was a burden under the old CBA. Under the new one, it’s guaranteed to haunt his team for years to come. Once he retires, any team that picks up his salary is going to have to pay the difference in his take home pay and cap hit for the years he was on their payroll, and they all know it. The team that picks up Lu is adding a 34 year old goalie owed over $40 million over nine years and saddling themselves with a future filled with dead cap space. The return from a team that is taking such a massive financial risk may not be enough to justify the Canucks’ future cap penalty. If all the Canucks can get back is a mid-round pick and a B-level prospect, Gillis must weigh the benefits of those assets against the benefits of freeing himself from the specter of future cap charges. Ultimately, would you rather have a no-name NCAA prospect and a fourth round draft pick, or the space to keep a solid utility player or an inexpensive second line player?
The Canucks have their out. They need to think long and hard before passing it by.
All details regarding the calculation of the Cap Advantage Recapture provision can be found in the NHL’s summary of the new Collective Bargaining Agreement, located here, pp. 2-3.
Contract details, including term, average annual value, and year-to-year take home pay, but not CAR penalty calculations, can be found on Luongo’s CapGeek page, located here. CapGeek does have a useful Recapture Calculator located here.
Details of the Canucks’ payroll can be found on their CapGeek page, located at here.