Musings on Ilya Kovalchuk’s recapture “penalty”
By Cam Charron
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There’s been some discussion on Twitter—and a lot of confusion—over why Ilya Kovalchuk’s cap recapture penalty for the New Jersey Devils is so low in the wake of his surprise retirements while Roberto Luongo’s would be pretty high.
The problem with the confusion surrounding the recapture process is that it’s been tagged as a “penalty”. There was a good post by Tom Tango a couple of days ago about how salary recapture isn’t necessarily a penalty, it’s just paying out salary cap savings from a previous date.
The Devils will be paying just $250K for Ilya Kovalchuk’s retirement deal until 2025. That’s absolutely peanuts, compared to the couple of million dollars the Canucks would pay if the same process occured with Roberto Luongo. This is for three reasons:
- Ilya Kovalchuk’s contract with the Devils was longer, so the recapture penalty is spread out over a larger number of years.
- For the first two years of his deal, Ilya Kovalchuk made less money than his salary cap hit, which had the unintended consequence of lowering the recapture penalty.
- Kovalchuk has only made $3-million more than his total salary cap hit in three years with the Devils.
Here’s how Kovalchuk’s contract shakes down. The bottom right of the table shows the total salary cap savings the Devils earned by front-loading the deal:
| Salary | Cap Hit | Total Salary | Total Cap Hit | Total Cap Benefits | |
|---|---|---|---|---|---|
| 2010-11 | $6,000,000.00 | $6,666,666.67 | $6,000,000.00 | $6,666,666.67 | -$666,666.67 |
| 2011-12 | $6,000,000.00 | $6,666,666.67 | $12,000,000.00 | $13,333,333.33 | -$1,333,333.33 |
| 2012-13 | $11,000,000.00 | $6,666,666.67 | $23,000,000.00 | $20,000,000.00 | $3,000,000.00 |
Since there are 12 years left on the deal, simply divide $3,000,000.00 by 12, and you’re left with a small $250k recapcture cost. It’s not so much a “penalty” as it is just charging the Devils the money against the salary cap that they saved by front loading the contract.
Compare that same deal to Luongo’s, and let’s say Luongo retires at age… 36:
| Salary | Cap Hit | Total Salary | Total Cap Hit | Total Cap Benefits | |
|---|---|---|---|---|---|
| 2010-11 | $10,000,000.00 | $5,333,333.33 | $10,000,000.00 | $5,333,333.33 | $4,666,666.67 |
| 2011-12 | $6,716,000.00 | $5,333,333.33 | $16,716,000.00 | $10,666,666.67 | $6,049,333.33 |
| 2012-13 | $6,714,000.00 | $5,333,333.33 | $23,430,000.00 | $16,000,000.00 | $7,430,000.00 |
| 2013-14 | $6,714,000.00 | $5,333,333.33 | $30,144,000.00 | $21,333,333.33 | $8,810,666.67 |
| 2014-15 | $6,714,000.00 | $5,333,333.33 | $36,858,000.00 | $26,666,666.67 | $10,191,333.33 |
The Canucks would have saved more than $10-million next to the salary cap over five years. With seven years left on the deal, that would be about $1.4-million. Still not particularly high, but later on in the deal, since the Canucks front-loaded the contract so much, the costs would be much stiffer towards the end because the savings were ultimately higher.
Here’s how it shakes out, starting with this summer:
| Retires after… | Recapture “Penalty” until 2022-23 |
|---|---|
| 2012-13 | $825,555.56 |
| 2013-14 | $1,101,333.33 |
| 2014-15 | $1,455,904.76 |
| 2015-16 | $1,928,666.67 |
| 2016-17 | $2,590,533.33 |
| 2017-18 | $3,583,333.33 |
| 2018-19 | $4,127,333.33 |
| 2019-20 | $4,333,333.33 |
| 2020-21 | $4,333,333.33 |
| 2021-22 | $0.00 |
The total savings keeping going up because Luongo is due to make more than his salary cap hit until 2018-2019.
I don’t have a huge problem with the NHL forcing teams to pay their salary cap costs, since allowing them to structure deals to avoid the salary cap in the last CBA was just a huge oversight. I do have a problem with the way that the NHL is stretching out the deals. Had Kovalchuk retired next year, the Devils’ recapture cost would be $700k. It would keep going up, and in my view the NHL shouldn’t have written this clause that makes it easier on teams if their players retire as soon as their salaries start to go down. The NHL is worse off not having Ilya Kovalchuk around, and if Luongo is still productive in 2017… well what then? Does he play another year and have a chance of further hurting the salary cap situation?
If it were averaged out over a set number of years, rather than the remaining time on the deal, players could be convinced to stick around longer. For all the talk about how Kovalchuk “quit” on his team and had no honour, he really did the Devils a huge solid by walking away from $77-million now rather than $66-million next season, or $55-million two summers from now. The NHL shouldn’t be encouraging that sort of behaviour.
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