The Carolina Hurricanes’ contract extension for Seth Jarvis could change the way organizations and players do business, and its impact could be felt quickly.
Daily Faceoff’s Frank Seravalli reported Saturday that the eight-year, $63.2-million deal becomes “one of the first in NHL history to have a salary cap hit substantially lower than the typical average annual value because he was willing to defer salary.”
Jarvis’ deal bucks the trend of the total dollar amount being spread out over the length of the deal, with Seravalli reporting if the deal followed the trend, he would have a $7.9-million cap hit. But with the structure of the deal seeing Jarvis earn a signing bonus a day after his contract expires, the AAV is split over nine years, not eight, Seravalli added, with the winger’s cap hit being $7.5-million, freeing up $400,000 per year.
The unique structure of Jarvis’ contract could hypothetically impact Leon Draisaitl, the Edmonton Oilers, and the contract being discussed between the two sides. It’s one Seravalli reported seeing Draisaitl and his camp asking for “north of $14-million per year on average” on a long-term deal.
In an article Saturday, Seravalli loosely theorized about how the Oilers and Draisaitl could get him the same total dollar value, but thanks to theoretical deferred payments, keep his cap hit millions of dollars lower:
Let’s call it $14.2 million for example and argument sake. That is a total of $113.6 million over eight years, which yes, would typically come with a salary cap charge of $14.2 million on the AAV.What if Draisaitl was hypothetically willing to defer $33.6 million of that contract to be paid out over the 40 years after the deal expires? That would be approximately $840,000 per year from 2033 until 2073, and yes, we’re talking a Bobby Bonilla-type contract. That would pay Draisaitl $80 million over the first eight years of the deal, hypothetically making for a cap hit in the neighborhood of $10 million per year – or a discount of $4.2 million per year of the deal.That isn’t exactly how the calculation or the math works, but the numbers are round and it’s easy to grasp and understand. Draisaitl has already earned north of $70 million in his career. To bring in another $80 million over the first eight years of the next deal makes him more than financially secure for future generations of Draisaitls – and the deferred $33.6 million, which is accruing interest the entire time, is not just gravy but also idiot-proof savings.
This would be a massive boon to the Edmonton Oilers, who in recent years have navigated sticky situations in a salary-cap world stuck in a vice grip because of the COVID-19 pandemic. While the cap is increasing, jumping $4.5-million from last year to this, and more growth of similar or greater numbers is coming, so will the amount of money players receive from teams.
Jarvis’ agent, Gerry Johansson, represents three Oilers players in Brett Kulak, Matthew Savoie and Max Wanner, so it’s not unreasonable to think that the idea of deferred payments could come forth for these players in the coming years.
Athlete’s in other sports have already begun doing this in a big way. Look at the MLB’s Shohei Ohtani, who signed a 10-year, $700-million deal with the Los Angeles Dodgers last winter. In the structure of his deal, Sportico reported, 97 percent of the money is deferred, seeing the two-way superstar’s deal pay him “$2 million annual salaries and $68 million deferred each year without interest to be paid in $68 million installments between 2034 and 2043.”
This idea of deferred payments, Sportico added, have been in baseball for decades.
If Draisaitl is at the forefront of these deferrals in the NHL, what’s to keep his close friend and teammate Connor McDavid from not doing the same as they search for a Stanley Cup Championship?
Zach Laing is the Nation Network’s news director and senior columnist. He can be followed on Twitter at @zjlaing, or reached by email at zach@thenationnetwork.com.
