The COVID-19 pandemic brought a lot of changes to our lives — fan-less games, more sweatpants, and the advent of the ‘flat cap’ era in the NHL.
The flat cap was part of the four-year Collective Bargaining Agreement extension reached between the NHL and NHL Players’ Association in response to the coronavirus pandemic. Essentially, an acute lack of revenue, combined with overpayments from the paused 2020 season and the return-to-play programs, have put the NHL in a tough financial spot. In order to recoup revenue losses and maintain long-term economic success, the flat cap was instituted until revenue surpasses $3.3 billion for the previous season.
Teams have already gotten creative to circumvent the flat cap, with some teams drawing more ire than others with their financial gymnastics (we’re looking at you, Tampa Bay Lightning). For as many light-hearted — and not so light-hearted — jests about their $18 million cap surplus, I can’t blame Tampa for their legal-but-side-eyed cap acrobatics to avoid being penalized. For teams that are non-cap compliant, they could be fined up to $5 million, lose draft picks and/or points, sustain forfeited games and/or cancelled contracts.
That’s a hefty penalty to pay for overspending, so teams are anxious to manipulate the cap in order to stay under that $81.5 million upper limit.
As free agency approaches and a flurry of off-season trades abound, many teams, including the San Jose Sharks are plagued by cap concerns.
If you’ve been paying attention to the Lightning, then you might be familiar with the long-term injury reserve exemption. To qualify for LTIR, a player must miss at least 10 NHL games and 24 days of the NHL season. While a player is on LTIR, their team may exceed the salary cap, up to the amount designated in the LTIR pool. It’s a nifty technique for teams to capitalize upon expensive, older players who might need more time to rehab an injury.
At the moment, the Sharks have no injuries to report, which means that, provided no unfortunate accidents happen over the off-season or in training camp, the Sharks will have to make sure their opening night roster is under the cap without the leeway of LTIR.
Even without LTIR, the Sharks have to contend with building a competitive team under the flat cap this off-season. General manager Doug Wilson has acknowledged that the Sharks are in a “reset,” which means that the team is seeking to revamp as much of their roster as possible. This rebuild-that-shall-not-be-named becomes more complicated with less resources to play with under the cap.
This means that in order to re-sign a UFA or RFA, the Sharks may have to offer a contract that’s less than market value for that player, which decreases the chances of that player taking the deal. Some RFAs also have arbitration rights, which means that the Sharks can’t risk offering a cheaper qualifying offer without risking an arbitrator awarding that player a more significant amount that the Sharks can’t pay.
In a general NHL sense, we can expect short-term deals, two-way deals for younger players, and beloved-but-highly-paid veteran players signing with teams who have more wiggle room with their cap space. For the Sharks, pending UFAs Greg Pateryn, Marcus Sorensen, Patrick Marleau and Kurtis Gabriel are the question marks. Patrick Marleau has expressed his interest in returning on a short-term contract, but Sorensen could take a bigger deal elsewhere if a team shows interest. The team has little motivation to retain Pateryn or Gabriel when cap space is precious.
The biggest question for the Sharks isn’t how to keep their existing roster — it’s how the team will add new contracts. Signing a UFA to an amount that makes both parties happy is complicated enough, but with a flat cap, teams might have to trade smaller-contract players to make room for a bigger signing.
Goaltending in San Jose is in need of a new look for next season. Starter Martin Jones ended his season with an 0.896 save percentage and 3.28 goals against average, and while at times Jones looked great in net (even being named a player of the week last April), it’s clear that both Jones and the Sharks could use a change of scenery.
San Jose has two options for Jones, and neither look particularly promising; Jones could be involved in a trade, or be bought-out in the off-season. If Jones is bought-out, then the Sharks would be left with a bill for the next six seasons paying off a weighty part of his contract. If the Sharks pursue trading him, it’s likely that they’ll have to retain some of his cap hit and sweeten the deal with a few prospects or draft picks.
There is some good news to be had with the flat cap, however. For one, it has an expiration date of 2026, provided it is not extended before then. For another, teams don’t have to pay a cap charge for players over the age of 35 who retire before their multi-year contract expires. The last good thing? Teams who have more cap space than others can leverage their financial flexibility in trades. A few prospects or high draft picks look pretty good to a team who is able to step in and retain a percentage of a cap hit in a three-way trade, and the Sharks just might be that team.
Per CapFriendly, the Sharks have a projected $9,503,333 in cap space, as of Monday. Recent acquisitions Nick Merkley and Adin Hill will both need a new contract as pending RFAs,as will Noah Gregor, who is a 10.2(c) status RFA and will not be able to be offer-sheeted by other teams. The Sharks will not be qualifying pending RFA Ryan Donato. Prospect Max Letunov is also a pending group-6 UFA.