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Will McPhee Use Salary Cap Space As A Trade Chip?

In recent years, teams have been able to utilize cap space to acquire players at a discount

by Dan Marrazza @GoldenKnights / VegasGoldenKnights.com

Jakob Chychrun.

Yes, Jakob Chychrun.

Although the 18-year old Arizona Coyotes defenseman may be relatively unknown to many Golden Knights fans, he exemplifies a quirk in the NHL's salary cap system that Vegas is able to benefit from.

To understand the salary cap oddity that allowed the Coyotes to acquire Chychrun, and how the same anomaly could benefit the Golden Knights, we must first explain a few key terms.

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NHL Salary Cap

Starting in the 2005-06 season, the NHL has operated under a hard salary cap system.

This means that each season, a certain amount is decided upon by the NHL, and teams aren't permitted to have a roster payroll over that amount. This is the opposite of baseball's luxury tax system, where there is an amount that teams aren't supposed to spend past that they can still surpass if they pay a luxury tax back to Major League Baseball.

In hockey, the limit is the limit and there's no way to spend a dollar above it.

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Teams Are Pressed

As a result of the amount of teams in the NHL and the scarcity of elite talent, competition for the league's best players is intense.

Besides intense, demand exceeding supply results in teams paying a premium for players, and their salary cap situations becoming muddied.

After all, if a team pays a lot for top players and tries to build an entire roster under this approach, it will eventually become difficult as the salary cap ceiling becomes a concern.

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The way the NHL is currently structured, several teams are right up against the salary cap limit, making salary cap space an incredibly valuable commodity.

 

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Cap Dollars vs. Extra Dollars

If a player signs a seven-year, $42 million contract, for example, his salary will count $6 million against his team's salary cap.

However, that doesn't necessarily mean that he's making $6 million per year.

Front-loaded contracts, where players receive more cash in the early years of their contracts and less money near the end of the deal, are common.

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If a player with a seven-year, $42 million contract had a front-loaded contract, he would still count $6 million against his team's cap, even if he actually made more money in a certain year.

The player's average yearly salary in his contract is his cap hit throughout this contract.

The way this factors into salary cap space's overall value is that if a team is far from the limit, they can make trades for players late in their contracts with high cap hits, who they don't owe much actual salary.

The key to obtaining the player, of course, being the acquiring team's extra salary cap space.

 

Back To Chychrun

Chychrun's Coyotes are a team that routinely spends well beneath the salary cap ceiling.

Given that Arizona has an excess of cap space and many other teams have zero cap space, the Coyotes often elect to leverage this to their advantage.

To acquire Chychrun, the Coyotes used the 16th overall draft pick, which they acquired for virtually nothing from a team - Detroit Red Wings - with salary cap difficulties.

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The Red Wings' issue was that one of their top players, Pavel Datsyuk, decided to leave his NHL contract early to play in Russia.

With this happening, the Red Wings didn't have to pay Datsyuk anymore, but were stuck with his $7.5 million salary cap hit. Already with salary cap difficulties and needing to acquire a replacement, Detroit traded Datsyuk's rights to Arizona and included a first-round pick in exchange for the Coyotes taking Datsyuk's salary cap hit away from the Red Wings.

By alleviating the Red Wings' salary cap concerns, the Coyotes received a first-round draft pick which they used to select Chychrun, basically surrendering nothing except salary cap space that they weren't going to use to obtain a top prospect.

 

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How It Relates To Vegas

Given that the Golden Knights currently have only one player - Reid Duke - under contract, the team's salary cap space is virtually unlimited.

With trades like Chychrun's having been engineered solely because of the Coyotes' wide open salary cap situation, questions have been asked if the Golden Knights could similarly leverage the team's lack of financial commitments to acquire talent in exchange for virtually nothing.

In a recent phone call with season ticket holders, George McPhee shared his thoughts on using this strategy to Vegas' benefit.

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"Cap space is valuable," McPhee said. "And there will be people willing to give us good assets to take certain contracts, because they have cap issues. There are teams that have cap stress, there are teams that have expansion stress, there are teams that have both.

"We're here and willing to talk to all these clubs. And we'll take on some of their problems if they want to compensate us in the right way to do so. There's an opportunity cost to that. So we'll be smart about it."

The takeaway from this is that the Golden Knights utilizing the team's limitless salary cap situation as a trading chip with which to acquire top talent that would otherwise be unavailable is a distinct possibility.

McPhee, however, was quick to emphasize that this doesn't mean the Golden Knights will be a team that will be unwilling to spend to the cap ceiling.

More that as he assembles the team's roster, this will be a legitimate strategy that he will consider utilizing.

"Bill Foley has no problem spending to the Cap, if we want to spend to the Cap," McPhee said. "But until we see the entire universe of players, we're not going to know, be quite sure of what that's going to look like. But we'll spend where we have to spend to be good."

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