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Why It Can Be Okay To Overpay a Player (Cap/Garrison/Luongo)


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#1 PR

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Posted 01 July 2012 - 09:51 PM

(Note to Mods: yes I know the topics of the Salary Cap, Jason Garrison, and Roberto Luongo have been talked about on this forum before, but I believe this post is of value and worthy of discussion and adds something new to the topics - please don't lock it without actually reading and considering the post and the discussion it will generate, thank you)

Garrison signed for 6-years at an average of $4.6 million – a cap hit the same as Kevin Bieksa. But, from a team’s strategic perspective, is Garrison REALLY getting paid as much as Bieksa?

Nope.

In a salary cap world, a player’s worth is measured relatively to his cap hit, not his absolute value. A player making $3 million is now compared to what the team could spend that $3 million dollars on. Classic opportunity cost. This is why some very good players become essentially almost worthless because of their contracts – see the cases of Sheldon Souray and Wade Redden, who both were banished to the AHL not because of their skills but because of their skills relative to their cap hit.

But the cap changes every year. This means strictly comparing one player’s salary cap hit to another’s is flawed. The actual dollar value is meaningless… except as a figure to use to calculate a percentage of the cap. That’s what is important. What percentage of the cap ceiling are you paying the player?

And this means before comparing one player’s cap hit to another, you need to take into account when the contract was signed.

So let’s compare Jason Garrison’s new contract to Kevin Bieksa’s. They both have a cap hit of $4.6 million. But Garrison’s contract was signed in the summer of 2012, for the 2012-2013 season and onward. Bieksa’s was signed a year previous. Bieksa signed for a $4.6 million cap hit when the cap was $64.3 million, or for 7.2% of the cap. Garrison signed for a $4.6 million cap hit when the cap is (as of today… things could change with the new CBA agreement) $70.2 million, which is 6.6% of the cap.

Garrison’s contract is only 92% of Bieksa’s once you account for the increase in the cap.

How would a team use this information for a strategic advantage? A team can adjust the value of contracts it offers players based on their prediction of the movement of the salary cap in upcoming years. If a team thinks the salary cap will be increasing in each of the next seasons, they could then “overpay” to get a particular player, knowing that a big inflation in player salaries is coming with an increased cap hit.

Theoretically, you’d be more aggressive in chasing particular free agents you want when you expect the cap is going to rise in the near future, and be more cautious when you didn’t expect it was going to rise much.

For example, let’s look at last summer, where the cap was $64.3 million. If you knew/predicted the cap was rising to $70.2 million – an increase of 9.2% - you could make a contract offer to a free agent you want that is higher than the value you think the player is worth – up to about 9.2% more. Yes, of course you still need to come in under the cap for the current season, so you couldn’t use this strategy for every player on the team, but you can use it to specifically target a certain player you want especially when bidding for a free agent. There are more variables to consider here but I’m simplifying.

Roberto Luongo’s contract here is a great example. He signed his 12-year, $64 million contract in summer 2009, before the 2009-2010 season. Today we know that the cap would increase 4.6% the next season from the previous, 8.2% the season after that, and 9.2% for the upcoming season (the cap for the 2012-2013 is a full 24% higher than for 2009-2010).

If the Canucks correctly identified the major increases in the cap in the next 3 years, they would have adjusted by offering a shorter-term with a higher cap hit. And you can see today that this is true, as no analyst or GM when assessing Luongo’s worth is balking at his $5.3 million cap hit, but it’s the length of the term that is killing his value.

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Edited by PR, 01 July 2012 - 09:58 PM.


#2 Champions of Nothing

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Posted 01 July 2012 - 09:53 PM

Yes, but at this moment in time they are making the same % of the cap. On a year-to-year comparison basis, current cap hit + skill = value.

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#3 Tortorella's Rant

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Posted 01 July 2012 - 10:18 PM

It's okay to overpay or a player or two when you get half your roster to take a pay cut in the first place. What is the point getting discounts on certain players and saving money if you're hesitant to go and overpay a player during FA that could put your team over the top or seriously fill up a hole that needs to be. That's how I see it. Save money now. Spend a little more when you need to; when your team is only a piece or two away from being where you want it.
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#4 G-52

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Posted 01 July 2012 - 11:06 PM

I dont like gillis' internal cap system, he almost lost garrison. Thankfully he is from BC and really WANTED to play here. I cant help but think of all the potential players we lost due to internal cap system. perhaps gillis didnt even offer schultz a bonus who knows!!!

On a side note, I jacked G-52!!!

Edited by G-52, 01 July 2012 - 11:06 PM.

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#5 Psycho_Path

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Posted 02 July 2012 - 10:11 AM

It's okay to overpay or a player or two when you get half your roster to take a pay cut in the first place. What is the point getting discounts on certain players and saving money if you're hesitant to go and overpay a player during FA that could put your team over the top or seriously fill up a hole that needs to be. That's how I see it. Save money now. Spend a little more when you need to; when your team is only a piece or two away from being where you want it.


The problem with this is that it sucks for the players that took a discount. Sure they're happy to sacrifice a bit for the team to win, but when you're getting players to sign here at or higher than your cap hit when you're a better player, it sucks.
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#6 Tortorella's Rant

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Posted 02 July 2012 - 01:04 PM

The problem with this is that it sucks for the players that took a discount. Sure they're happy to sacrifice a bit for the team to win, but when you're getting players to sign here at or higher than your cap hit when you're a better player, it sucks.


True. There are pros and cons to it.
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#7 Avicii

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Posted 02 July 2012 - 01:14 PM

Gillis said it best.

Who the hell cares about cap? Come playoff time, hell, come trade deadline time, do we really even care about the cap?

You get the best available players, and make a team. People who care that Ballard makes 4.2 and uses it against him during the playoffs, lol. I don't care how much Garrison is paid, i'm just hopeful he does well..

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#8 PR

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Posted 02 July 2012 - 06:13 PM

You are taking his comments out of context Ares.

#9 Tortorella's Rant

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Posted 02 July 2012 - 06:36 PM

Gillis said it best.

Who the hell cares about cap? Come playoff time, hell, come trade deadline time, do we really even care about the cap?

You get the best available players, and make a team. People who care that Ballard makes 4.2 and uses it against him during the playoffs, lol. I don't care how much Garrison is paid, i'm just hopeful he does well..


Well said. Off topic, but... : People rag on Luongo for making what he does. Well, for starters, his overall salary is irrelevant. His cap hit is what matters and the price he comes at... he's a bargain. Always has been in the regular season. He has the best regular season winning percentage over the last four seasons as well. People will argue 'oh, well, he's only got that on his side because of the team in front of him'. You can also argue that his playoff performances are partially the teams fault too; it's just a big circular argument at the end of the day. Hence it's a team game. You win and lose as one. And his GAA and sv% are not the best season in season out but he doesn't need to be his best every night for them to win.
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#10 JordanEberle

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Posted 02 July 2012 - 07:02 PM

I dont like gillis' internal cap system, he almost lost garrison. Thankfully he is from BC and really WANTED to play here. I cant help but think of all the potential players we lost due to internal cap system. perhaps gillis didnt even offer schultz a bonus who knows!!!

On a side note, I jacked G-52!!!

how could you know this?
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#11 surtur

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Posted 02 July 2012 - 07:24 PM

how could you know this?

i think garrison had his mind made up before any money was offered....he was probably salivating at the thought of Van even having interest in him and was praying they didn't completely low ball him because he probably would take it.
but that is me speculating.

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#12 AppleJack

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Posted 02 July 2012 - 10:20 PM

The problem with this is that it sucks for the players that took a discount. Sure they're happy to sacrifice a bit for the team to win, but when you're getting players to sign here at or higher than your cap hit when you're a better player, it sucks.


Yes but there have been reports that he was offered more money then what Van signed him for so in a way can you not say that Garrison did take a discount to play here?

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#13 Live.&.Die.Nucks

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Posted 02 July 2012 - 10:26 PM

Gillis knew this when he re-signed kesler. Doesnt that sound like a discount now more than ever..?!




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