OK, it's a bad take-off from the song by Blue Oyster Cult - actuaries are not known for their sense of humor, so if you ever see anything funny here, it was probably by accident and you shouldn't laugh. (OK ... my wife suggests you shouldn't laugh.)
With the start of free agency looming, one of the most popular topics that people love to discuss is the offer sheet. The phrase "offer sheet" is one of those terms that people love to throw out in an attempt to scare everyone. The way some people talk about them, it's almost like a scene out of a horror movie: a dark, stormy night in a house that's pitch black, someone is trying to hide from evil incarnate, the phone rings, and the voice on the other end whispers "I'm gonna send an offer sheet your way." (Insert screeching music and images of teenage girls screaming hysterically in terror here.)
Watching fans talk about offer sheets is fascinating. When your team is lobbing one at someone else, it's great business or a smart way to take advantage of someone else, but when someone else lobs one at your team then it's dirty and sleazy and certain to result in 14,000 reminders of karma. It's either "can't wait until you guys get screwed over with an offer sheet" or "can't wait until we can snatch up ________ with an offer sheet" or "go ahead and sign ______ to an outrageous offer sheet, we'll gladly take the picks" or "go ahead and sign _______ to that contract, and our GM will thank you and gladly accept it." However, for all the talk about them they never seem to materialize as often as everyone expects - and I think in many cases talk of offer sheets floating is more talk than reality.
Why is that? Part of it is because GM's watched last summer's moves by Kevin Lowe and rushed to lock up their RFA's (and in some cases, gave out some big contracts ... a few of which we may see were absurd in hindsight), but the other part is pretty simple as well. Because of the cap system, teams can't just fire off offer sheets left and right and spend $90 million in the process; building from within and smart cap management is at a premium, and good GM's don't just look at this year - they're looking 2-3 years out (or more) and trying to figure out how their team will look, and plan contracts accordingly. While the compensation limits for RFA's are lower than under the prior CBA (the maximum compensation is "only" four 1st-round picks), they're still a consideration that factor into the decision of whether an offer sheet is worth the effort.
With that in mind, there's a list of questions that teams will ask (and fans should ask as well) before coming to the conclusion that, yes - an offer sheet really is a good idea:
1. Do I have the picks available to give an offer sheet? This question alone wipes out some offer sheets from consideration. Since teams must use their
own picks as compensation and cannot use picks acquired from other teams, if the team doesn't have the necessary picks available then they can't send out an offer sheet. (Example: six teams already have their 2nd round picks in 2009 either traded or tied up and unavailable to use, and thus any offer sheet must have contract terms that don't require a 2nd round pick as compensation.)
2. Do I have all of the players I want to keep signed for next year? It makes no sense for a GM to go sign an RFA to an offer sheet, only to watch one of his RFA's get signed to an offer sheet as well. The end result could be filling one hole to see another one open up ... and then having to either spend more money to go fill it or using a player from within that may not be ready yet - or, having to overpay to keep both guys that got targeted.
3. Do I need this player on my team? This sounds like a simple question, but like many things in life (see this past Entry Draft for a prime example), everyone has an opinion - and rarely do the opinions of any two people match up exactly. If there's someone else in the system that can do about the same job for less, why throw an offer sheet out and spend more money and have to give up draft picks if the offer sheet is successful?
4. Do I have the cap space to give an offer sheet? If the team is sitting with $25 million of cap space, then obviously it has enough room to sign an RFA to an offer sheet; if instead the team has $2 million, then an offer sheet only handcuffs themselves in case the other team doesn't match.
5. Am I willing to offer what will be necessary for the player to sign the offer sheet? There's a difference between what a GM thinks a player is worth and what the player thinks he's worth; if a player thinks he's worth $5 million, it doesn't mean anyone is going to offer him that much ... and offers of $3 million may get turned down as a result.
6. Is the compensation that will be required worth getting that player? If a premier talent like Evgeni Malkin hit the market as an RFA, there would be teams who would offer four 1st-round picks and never blink an eye; however, is a guy like Joni Pitkanen worth a 1st, 2nd, and 3rd round pick? There's a tradeoff between "going for it now" and "mortgaging the future," and every GM must balance these two things to decide whether to pursue one at the expense of the other.
7. Is there a chance that the player's current team will refuse to match? The smart tactic is to do what Philadelphia did in 2006 - pick on a team (in that case, Vancouver) that's close to the cap or has a self-imposed budget and is running close to it, and then offer about what's left (or maybe a little more, depending on compensation levels) to the targeted player to force the team to choose between accepting the offer sheet and eat up that remaining cushion, or refuse it and take minimal compensation in return. Teams won't throw offer sheets at players on teams who have loads of cap space to match; it's both unlikely to work, and if it's a high-priced offer sheet then the possibility that it's refused means you're stuck with that contract and out the necessary picks.
8. Will the player actually sign the offer sheet? An offer sheet isn't valid until the player signs it - Brian Gionta received several offer sheets in 2006, but refused to sign one because he wanted to remain with New Jersey. Even if the first seven questions are answered favorably, if the player won't sign the offer sheet for whatever reason then there's no point in sending an offer sheet ... it will just be ignored.
While there may be a lot of offer sheets that sound good right now, there's very few that make it through these 8 questions ... meaning the fear of an offer sheet is probably overblown. That's not to say that there won't be any this summer - I expect a few to be tendered, but the targets may not be the big-name RFA's that everyone expects. We may see a GM or two try to pick off some of the lower-name RFA's in an attempt to force a team close to the cap to sweat even more about managing things this season. Regardless, at the end of the summer I think we'll see fewer offer sheets tendered than many expect.
The Bonus Cushion for 2008-09: where did it go?
Those of you who've visited the Cap Central section here may have noticed that the amount of payroll room each team has decreased in the last hour or so. In some cases, it decreased by quite a bit. If you look on each team's page, you'll see the line mentioning performance bonuses is gone which then begs the question, "what's going on - I thought teams could go over the cap due to bonuses, why is it gone?"
In the past 3 years, teams could exceed the Upper Limit by up to 7.5% due to performance bonuses (knowing that if they went over the Upper Limit at the end of th year, the amount by which they went over was carried over to the following year) ... but not this upcoming season.
Bob McKenzie pointed out today that because the NHLPA holds the right to reopen the CBA after this season, this season must be treated as the last season under the CBA because there is no guarantee that 2009-10 will be played under the current CBA. The NHLPA has the right to exercise its option to reopen by May 18, 2009 (120 days prior to September 15, 2009), after the regular season ends. Until we know for sure that the union won't reopen (and right now, it's up in the air, though I think in the end they won't), this season's cap is a "hard cap" in that teams cannot exceed the Upper Limit due to bonuses.
From 50.5(h)(ii)(A) in the CBA:
For the 2009-10 League Year, all of the above-described Performance Bonuses that could be earned by the Players under SPCs with a Club shall be counted against such Club's Upper Limit for that League Year (with no opportunity for the Clubs to "carry over" any charges to their Upper Limit for the following League Year), unless the NHLPA declines to terminate this Agreement as of September 15, 2009, consistent with Section 3.1(b) of this Agreement, in which case accounting for the above-described Performance Bonuses in the 2008-09 League Year shall be treated as set forth in paragraph (ii) above.
After a couple of e-mails (and comparing against 50.5(h)(ii)(B)), the reference to "2009-10" should read as "2008-09" - it's a typo in the CBA.
What does this mean? It means that when we talk about a $56.7 million Upper Limit for the 2008-09 season, it's not "$56.7 million, but if we go over because of bonuses we can just carry it to next year." It's "$56.7 million, including bonuses -
and not a penny more." There can be no overage carried to next year, because the above paragraph doesn't allow for it. It also means that if you've been planning your team's moves out expecting that you'll take advantage of that 7.5% bonus cushion, you might want to revisit that plan.
So, yes ... the calculations on payroll room here are indeed correct - it's just another paragraph in the CBA that everyone (myself included) overlooked that will come into play this year.
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