Salary Cap & Bonuses: Why Hodgson's Cap Hit Is Really Only 800k

Joel Prosser@@JoelProsserCorrespondent IJuly 27, 2010

Well, I actually rounded off the numbers in the headline. Cody Hodgson’s cap hit is actually $816,666, not the 1.6 million you often hear mentioned in the media.

Or at least $816,666 is the part of the cap hit that matters for this year, which is the point of this article.

 

Hodgson is on a rookie contract which includes performance bonuses. Technically, these bonuses have to be included in his cap hit as long as they are theoretically possible to achieve, which is why you often see his cap hit reported as $1,600,000, not the $816,666 I mentioned.

 

However, there is a giant loophole the Canucks can take advantage of.

 

You can exceed the salary cap by up to 7.5% of the cap due to performance bonuses in a given year. But if the player does indeed earn their bonus, and you exceed the cap, then the cap hit for the bonus is deferred until the following year.

 

For this year, the salary cap is 59.4 million, so any team can exceed it by up to $4,455,000.

 

It can come back to bite you, but that is a pretty big loophole if you are looking to maximize your team for this year.

 

This is why you see the Blackhawks in such trouble this offseason. Aside from their other cap issues (i.e. Huet), they also had almost 4 million in bonuses earned by Kane, Toews, and company which they couldn’t pay this year. These bonuses were deferred from 2009-2010, and therefore are impacting the 2010-2011 cap for the Hawks.

 

Looking back at Hodgson’s contract, his total cap hit is $1,666,666. Of that amount, performance bonuses account for $850,000.  The difference is $816,666.

 

So the Canucks only need $816,666 in cap space to keep Hodgson on the roster, but if he earns any bonuses, they may be carried over to 2011-2012 and hurt the team next year.

 

Is it good fiscal planning to risk deferring those bonuses to next season?

 

No.

 

Could it potentially help the team this year?

 

Yes.

 

Think about it this way. 

 

Mike Gillis budgets $816,666 for Hodgson when he is drawing up the roster. If Hodgson doesn’t have a great year, he doesn’t get bonuses. To keep things in perspective, that puts him between Hansen ($825,000) and Hordichuk ($775,000) in terms of payroll amongst the forwards. 

 

Budgeting for the lower amount allows more room to sign other players, which would help the team this year.

 

Now if Hodgson does have a great year? Well, to earn out all of that $850,000 in bonuses, realistically he would have to have a great season statistically and/or win the Calder. 

 

The bonus targets that could be included in a Rookie Contract are listed on pg 260 of the CBA. In order to hit the full cap amount, Hodgson would probably have to achieve several of the following:

  • 20 Goals or more
  • 35 Assists or more
  • 60 Points or more
  • 0.73 Points per Game (minimum of 42 games played)
  • Named to NHL All-Rookie Team
  • Winning or being nominated for a major trophy

If Hodgson hits a few of the targets above and earns a bonus that is deferred, I think Gillis would be happy to deal with the cap issues next summer. 

 

And I think Canucks fans would be happy we finally had a first rounder that actually panned out.

 

Aside from Hodgson, here are some other notable Canucks rookies:

 

 

Total Cap Hit

Performance Bonus

Minimum Cap Hit

Cody Hodgson

1,666,666

850,000

816,666

Jordan Schroeder

1,025,000

125,000

900,000

Sergei Shirokov

1,350,000

500,000

850,000

Evan Oberg

1,562,500

812,500

750,000

Kevin Connauton

900,000

218,333

681,667

Thanks to Capgeek for the salary numbers.

More information on Performance Bonuses can be found in Article 50 of the CBA. 

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