On Saturday morning, the Carolina Hurricanes signed star forward Seth Jarvis to a new contract. The deal, on face value, is about what you would expect: an eight-year, $63.2 million contract. Using a simple calculator, that gives us a $7.9M cap hit… but the Canes are going to only have a $7.42M cap hit.
Huh?
But…
Yeah. I know. Where’d the other $480k of cap hit go?
Jarvis’ contract includes $29.24 million in signing bonuses. And, as Frank Seravalli initially reported (and explained), there are deferred dollars in that signing bonus that will effectively lower his cap hit.
(At this point I, too, look at the phrase “cap circumvention” that was thrown around with deals like the one the Blackhawks gave Marian Hossa and scratch my head…)
Here’s how Seravalli explained it on Daily Faceoff on Saturday:
No source was willing to divulge precisely how much money has been deferred, or in which year(s) of the deal the money is deferred, but there is a deferred signing bonus payment that is scheduled for July 1, 2032 – which is one day after the contract officially expires on June 30, 2032.
Because that payment is technically scheduled for Year 9 of the eight-year deal, there is no Year 9 cap charge for the Hurricanes, and the cap hit for the Hurricanes over the course of the eight-year deal is charged on what is actually paid out during that time.
Deferred payments have been allowed in the Collective Bargaining Agreement, but to this point, the Hurricanes are believed to be the first NHL team to cross this threshold in a meaningful way. Sources indicated the NHL’s Central Registry and the NHL Players’ Association have been briefed and signed off on the structure of this deal before terms were agreed upon; the deal is expected to be registered on Saturday.
PuckPedia checked in with some additional details:
Seravalli also reported that the Canes deferred some money on defenseman Jaccob Slavin’s new contract earlier this summer, but it wasn’t enough to change the cap hit much (he indicates if changed the AAV from $6.461M to be $6.396M).
So the CBA allows for deferred payments beyond the eight-year max term on a standard player contract. And the money deferred can lower the cap hit. I’m… fascinated.
This reminds me — on a MUCH smaller scale — of the way the Los Angeles Dodgers finessed the luxury tax system in major league baseball when they signed Shohei Ohtani to what was billed as a “10-year, $700 million” contract… that, in reality, pays Ohtani $2 million annual salaries for the ten years of the playing term of the deal and $68 million deferred each year without interest. Ohtani will be paid in $68 million installments between 2034 and 2043.
Again, MUCH smaller scale here. Jarvis’ entire contract total value is less than one of the annual installments of deferred money Ohtani will get. But the Dodgers getting creative with their deferral structure helps them manipulate the luxury tax in MLB, and Jarvis’ deal will help the Canes work around the NHL’s salary cap.
Potential Blackhawks Implications?
Going all the way back to when the Blackhawks signed Jonathan Toews and Patrick Kane to their matching, then-standard setting eight-year, $84M contracts in 2014, they not only had matching total dollars but they also included matching $44 million paid in signing bonuses.
Seth Jones‘ current contract is structures to include $40,250,000 in signing bonus payments. Those are some big numbers for Blackhawks players.
We’re seeing more and more veteran players asking for significant signing bonuses in their NHL contracts. Some view this as trying to escrow-proof or lockout-proof contracts. However you want to look at it, bonuses are becoming more prevalent.
(pauses for dramatic effect)
Nathan MacKinnon’s current contract includes an NHL-record $85.34 million in signing bonus money. According to Spotrac, there are currently 15 players in the NHL who have more than $50 million in signing bonus dollars on their current contracts (a number that still includes Shea Weber, who was voted into the Hockey Hall of Fame while still hitting the payroll in now-Utah… but I digress).
I present that as background as we consider on July 1, 2025, the Chicago Blackhawks can negotiate a second contract with Connor Bedard. I think we all expect that deal to be expensive. Market-setting? Doubtful with Connor McDavid also needing a new contract. But Bedard’s could be in the neighborhood of the highest AAVs ever given by the Chicago Blackhawks.
With that being said, a creative accounting group at the United Center should take a deep dive into the deferral structure Carolina is using with Jarvis. Would the Blackhawks consider pushing some of Bedard’s money down the road to lower his cap hit? Jarvis, 22, is nearly four years older than Bedard. That isn’t a huge difference. But the Blackhawks have been thru a cap hell already in the last 15 years (a couple times). If this could help minimize those potential pains down the road…
I can appreciate concerns about organizational cash flow when the deferred payments hit, but, frankly, I’m surprised more teams haven’t figured out how to do this by now. And if, as Seravalli reports, the league registrar and NHLPA both signed off on Jarvis’ deal, it’s absolutely something to keep an eye on moving forward.