How a Flat Salary Cap Can Favor the New Jersey Devils

Last week, the NHL and the NHLPA ratified a four-year extension to the Contract Bargaining Agreement. The CBA will now expire on September 15, 2026 instead of September 15, 2022. With the extension, several changes were made to the CBA. The biggest one with the largest impact on all 31 teams is that the salary cap ceiling will be kept at $81.5 million for next season and potentially beyond then.

There are terms for the salary cap increasing but they are stringent. According to the memorandum of understanding that was recently ratified (this link goes to a .PDF of the document), the salary cap ceiling will remain at $81.5 million as long as hockey-related revenue is below $3.3 billion. If revenue is between $3.3 and $4.8 billion, then the ceiling will increase on a pro rated basis to as much as $82.5 million. When revenue exceeds $4.8 billion - which is what was the projected revenue prior to the global pandemic - then the salary cap ceiling will increase by $1 million until the escrow balance is paid off. After then, we could see the cap rise more similar to how it did in past seasons. Until then, the cap is flat for next season.

It is possible that it will be flat beyond 2020-21. I expect it to be. Hockey-related revenue is not likely going to come anywhere near that target until fans are able to safely return to arenas to attend games and said fans spend money at hockey games at a level they did earlier this season. I doubt that is going to happen right away in 2020-21 even if the best case scenario happens and that season starts on December 1. If there is any kind of second wave or continuation of cases, then you can forget that. And even if there is not, it is going to take time for people to be willing to gather in masses to attend entertainment. It may be allowed but if it not perceived to be safe or advised, then it may as well not be allowed. Without fans attending games in North America, I do not see how the NHL is going to make $3.3 billion, much less $4.8 billion, in hockey-related revenue.

Even if they do reach that first mark to trigger a rise in the cap, it is not a significant amount. The extended CBA also increased the minimum salary over the length of the extension. So it will be $700,000 in 2020-21 and then increase to $750,000 beyond then and again to $775,000 starting in 2023-24. In other words, a million dollar increase in the salary cap would help a team add one player at even just the minimum salary. It would not provide a lot of breathing room for teams that are or intend to spend to the cap ceiling. And even when the $4.8 billion mark is met, there is still the matter of the escrow to be paid out. I do not think we are going to see the salary cap ceiling rise by anything more than a marginal amount anytime soon - if at all.

Unless the NHL makes way more revenue than expected and much more quickly than expected, this is the new normal for next season and beyond. That is how I see this situation right now. And this situation absolutely can favor the New Jersey Devils and other teams who already have plenty of space on the books.

As of this writing, the Devils have the most cap space in the NHL per CapFriendly. More specifically, they have about $8.775 million of it. For 2020-21, they will have $26.245 million to spend to sign or add a minimum of seven players to their roster. While Mackenzie Blackwood and Jesper Bratt need new contracts, I doubt the two of them will eat a large amount of that nearly $26.5 million of space New Jersey has. They should still have plenty to play with for the remainder of the 2020 offseason. It is always an advantage to have cap space in the NHL. With a limited ceiling set for next season, that advantage is even larger.

The space gives teams like New Jersey and Ottawa even more leverage for potential deals with teams who need to make space in order to make the moves they want to make. CJ is going to go into more detail on how the Devils can “weaponize” their cap space for this offseason in a post on Wednesday. However, here are a few teams who are right up against the ceiling for next season before they even play out the games for this season. These are prime targets for now-permanent GM Tom Fitzgerald to swing some deals to give them some needed cap relief while improving the Devils either in the short-term or long-term. All salary and cap amounts come from CapFriendly.

• Arizona, somehow, has $79.9 million committed to 2020-21 already. They have three pending restricted free agents in Vinnie Hinostroza, Christian Fischer (no relation), and Ilya Lubushkin. Even if they do not qualify all three of them and let them walk, that is still just over $1.5 million to fill in a roster that could see Brad Richardson, Carl Soderburg, and Taylor Hall walk because Arizona literally cannot retain them. I would not hold my breath for that third rounder in 2021 in getting upgraded in the offseason. Then they have just over $1.5 million to fill a lot of forward spots. Unless I am missing something, something has to give in Glendale. If you look at the Devils and wonder how things could be worse, then I ask you to look to the Coyotes. They are a bad team and they are paralyzed by the salary cap.
• Toronto has more room to play with in 2020-21 with $4.59 million in space. It is going to be tight to give new deals to RFAs Denis Malgin, Frederik Gauthier, and Travis Dermott. (Not to mention Marlies like Max Verroneau, Jeremy Bracco, and Teemu Khivalme.) And even if they allow Tyson Barrie and Cody Ceci to hit the free agency market, they would need to bring in some defenders - which also requires room under the cap. On top of that, the contracts for Nathan Horton and David Clarkson end after this season so they cannot be used to leverage LTIR money. It is not quite as tight as Arizona but it is far from comfortable.
• Vancouver fans can claim credit to having the first flat-cap-related trade rumor. TSN 1040 already brought up Brock Boeser’s name as someone who could be moved. My understanding is that Vancouver may want to keep Tyler Toffoli, who is a UFA after this season. While Vancouver has a bit over $18 million of space for next season, they also need to re-sign their RFAs: Jake Virtanen, Troy Stetcher, Adam Gaudette, Zach MacEwen, and Tyler Motte. They would need to sign a goalie if they do not retain Louis Domingue; and they would need to sign two defensemen if they let Chris Tanev and Oscar Fatenberg walk. Vancouver also needs to maintain space for a potentially large contract extension to budding star forward Elias Pettersson. Considering all of this, Vancouver actually does not have a lot of space to keep Tyler Toffoli, who received $4.8 million in salary last season and may not want to take a big pay cut. This is why they have to consider which one of their big contracts they want to move. The 23-year old Boeser may yield the largest return; or at least one much larger than trying to move Loui Eriksson ($6 million cap to 2021-22), Jay Beagle ($3 million to 2021-22), or Brandon Sutter ($4.75 million to 2020-21).
• Las Vegas is in a stickier situation than you may realize. They have $75.125 million committed to next season already. This means they have $6.375 million to spend for 2020-21. Colin Stephenson and Nick Cousins are pending RFAs that need new deals. Their UFA situation is Robin Lehner, Derek Engelland, Jon Merrill, and Tomas Nosek. It is entirely possible that the Golden Knights let them all walk and replace them with players in their system on ELCs or cheaper deals. But if they want more experienced players or if they want to keep some of these pending free agents, then they will have to spend some of the space they cannot afford to spend much of in the first place.

The advantage is not just in leveraging their space to make a deal or a more favorable one with a team closer to the cap ceiling. It is also an advantage in free agency negotiations. One of the other groups impacted by this extended CBA are free agents after this season and the next few afterwards. A rising cap helped their potential earning power, as it could lead to more demand from teams that would drive up the contract offers they would get. A flat cap means they may not get as many offers as they otherwise would and perhaps not for the same amount of money. Taylor Hall likely expected to get a massive pay day this summer. With everyone locked in to a cap ceiling for $81.5 million for at least this season, I doubt he is going to get the eight-figure deal he may have wanted. At least there would be fewer teams to even consider going that high. That would be limited to teams with an excess amount of cap space. Teams like the Devils.

This is not to write that the Devils totally bring back Hall and how amazing that would be. I don’t think they should, for what it is worth. But it is to write that the Devils have a stronger case to make when Fitzgerald approaches free agents. It is true that the Devils have been bad and it is not clear when they will not be bad. But with the cap space they have under a flat cap, they can be able to offer at least a little more than what more competitive teams could. Or they can be a team that is able to meet the player’s and agent’s demands whereas other teams would be forced to play hardball in negotiations. This is not to state that Fitzgerald needs to go in and go in hard on this year’s class of free agents. However, being able to offer an extra $500,000 or million dollars to bring in someone who can help fill a role for the team in the near future is a big advantage. Knowing that the cap will not rise means that Fitzgerald can plan for that now and have an idea for future seasons.

Lastly, if there is any need for ownership to make improvements outside of players for the Devils, then this could be a time to make that happen. As I understand it, player wages are typically one of the largest expenses for a team. Knowing that is not going to rise above $81.5 million for next season and likely in the next few seasons means that now is a good time to use money that could have been earmarked for a rising cap for other areas of the organization. Maybe something for training. Maybe something for scouting. Maybe something for the arena itself. Maybe it could be in paying more for a coaching staff or additional personnel in hockey operations. I am admittedly reaching as to this being an advantage for New Jersey as it is an advantage that could apply to many other teams (e.g. Toronto). But with Fitzgerald getting the GM job and getting his head coach in Lindy Ruff, his goodwill is presumably pretty high. The next few months is a good time as any leveraging that to make other changes to the organization provided that Josh Harris and David Blitzer are willing to spend. Given that they recently purchased a stake of less than 5% of the Pittsburgh Steelers and are bidding on the New York Mets, they have the money. But if you do not ask, you do not get - and so with clarity about the salary cap, I think now is a good time for Fitzgerald to ask.

It is an even better time for Fitzgerald to establish a direction for how he wants this team to play. Now that Ruff is hired and a coaching staff should be established over the next few weeks, more attention can be paid to how Fitzgerald wants to address this roster. By no means will it be easy. Deciding whether to extend Kyle Palmieri and/or Nikita Gusev is a difficult question, much figuring out to how much to extend them. Deciding the next deals for Bratt and Blackwood will not be so simple since Fitzgerald will need to save money for the future. Speaking of, Jack Hughes’ entry-level contract will end in 2021-22. That stated, the Devils remain in a prime position to make some serious moves for next season and get them going to a more successful position. They have the space to do so for next season and, should Fitzgerald plan things appropriately, should have space for future seasons where the cap may still be around $81.5 to $82.5 million. Ultimately, the flat cap for now can favor the Devils as much as it hinders several teams who are close to the cap ceiling for 2020-21 before they even return to play next month. It is up to you, Tom Fitzgerald, to make it reality.

What do you think of the flat salary cap for next season? Do you agree it favors the Devils? Who does it hinder in your eyes? How do you want the Devils to take advantage of that? And do you think the salary cap will stay flat beyond 2020-21? Please leave your answers and other thoughts about the salary cap and how the Devils may utilize it in the comments. Thank you for reading.