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barberofcivil

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Forum: NHLAug. 19, 2019 at 2:27 p.m.
Thread: LTIR Question: TOR Cap
I've got my head around LTIR now and see if I can explain simply (excluding the performance bonuses which are not applicable for TML this season)

Some key terms that need to be understood:
AAV: is the cap hit of players for the season. It is important to note that this is pro-rated on a daily basis for the purposes of player movement.
Upper Limit (UL): is the league AAV Salary upper limit (Salary Cap) for the season. (2019-20 $81.5M)
Opening Day: Training camps end. On this day, teams must set their rosters which must be compliant. 20-23 players. Max total AAV must not exceed the UL.
Regular Season: From Opening Day until the final regular season game (2 Oct 2019 - 4 Apr 2020, 186 days). All salary calculations are pro-rated on a daily basis for AAV and cap space purposes.
ACSL (Accruable Cap Space Limit): This is only set once a team initially enters LTIR (or again after it has been cleared out completely) and is equal to the AAV of the roster prior to entering LTIR (This replaces the league UL for the purposes of cap calculations while any player remains on LTIR.)
Cap Space: Difference between the teams roster & LTIR AAV and the UL (no players on LTIR) or ACSL (player(s) on LTIR). This is accrued on a daily basis for the duration of the regular season.

First the basics of cap space accrual with no players on LTIR.
The team must be cap compliant: 20-23 rostered players under $81.5M
The upper cap limit is the AAV value for the whole season, prorated daily by the length of the regular season.
Essentially under this condition, every $ they spend below the cap essentially becomes available to future signings & trades later in the season. This way the team 'accrues' salary cap as the season progresses. This can be a benefit at deadline time as it can allow a team to increase their daily AAV to higher than they would have at the beginning of the season.
This part is important as it can result in somewhat penalizing a team on LTIR as I'll explain after.

Example: (I am going to simplify some of the numbers here for easier math.)
Lets assume the UL is $80M and the season is 200 days long.
a) Team A has a full roster at day 1 with a total AAV of $78M. This means they have a total of $2 in accruable cap space. At the end of the season, if no moves were made, they would have spent $78M in AAV, $2M under the $80M upper limit, so all is good.

Now at Day 150 (75% of the season), they want to make a trade. At this point they have spent $58.5M in AAV. This leaves them with $21.5M available to spend for the rest of the season (50 days), whereas their original roster is only going to cost $19.5M. Now lets say they want to make a trade including one of their current roster players making $1M plus some picks for a player that is making $5M, so a net increase to the AAV of $4M. At the beginning of the season they couldn't do this because they would have been over the UL by $2M so would have had to shed some additional salary to make it work. However what happens is that the new salary they have taken on is pro-rated over the remaining 25% of the season, so they are only actually paying and extra $1M in AAV for the rest of the season. So at the end of the season they have spent an AAV of $79M which is still under the UL. (in this scenario, they could have traded a net increase of up to $8M without exceeding the UL).


Now what happens when a team goes into LTIR at the beginning of the season? As soon as they do, they have a new "Accruable Cap Space Limit" (ACSL) that is equal to their AAV prior to placing the player on LTIR. The ACSL essentially now becomes their new UL in terms of accruing cap space, (at this point the original UL is irrelevant unless all players are cleared out of LTIR, at which point UL reverts to the league value).
What is important is that the LTIR player AAV still counts towards the team AAV. NOTE: it is not correct to say that it gets taken off the team AAV or that it increases their cap. What it does do is create an LTIR spending pool that they can use for replacement players, and allows then to exceed the cap through relief only. What is very important here is that the accrual of cap space is calculated based on the teams total AAV (including LTIR players) against the ACSL.

Examples:
UL = $80M (league upper limit)
AAV = $78M (teams AAV)
P1 = $4M

If the team places P1 on LTIR, their ACSL is exactly $78M. As the player is now on LTIR, they have a relief pool available equal to $4M. Essentially they are allowed to exceed their ACSL by this amount (I find it confusing in other examples that they compare to the league UL, as it is irrelevant at this point). They only have $4M available in their LTIR pool, so any replacement players have to have an AAV of $4M or less.

b) if they do not replace the player (22 man roster) and make no further changes, their AAV is equal to their ACSL, so they do not accrue cap space any more as they would have in the basic scenario (i.e. their cap space with respect to accruing is $0).

c) They replace the player with P2 who has an AAV of $1M and make no further changes. The team AAV is now $78M+$1M = $79M. This is allowed as they have a LTIR pool of $4M available and P2 fits in this. The team AAV of $79M exceeds the ACSL of $78M so the team cannot accrue any cap space under this scenario. (Note that they are below the league UL of $80M, but this does not matter and they cannot accrue cap space relative to it.)

d) They instead replace the player with P3 who has an AAV of $3M and make no further changes. The team AAV is now $78M+$3M = $81M. This is allowed as they have a LTIR pool of $4M available and P3 fits in this. The team AAV of $81M exceeds the ACSL of $78M so the team cannot accrue any cap space under this scenario. Note that the AAV now exceeds the original UL by $1M, but this doesn't matter.

e) They trade player P4 who has an AAV of $4M, and call up players P5 & P6 who have a total AAV of $2M. The team AAV is now $78M - $4M + $2M = $76M. The ACSL does not change and remains at $78M. Now they are operating below the ACSL by $2M so they can now accrue cap space through the season similar to the original scenario, but only relative to the ACSL ($2M) not the UL ($4M).

f) player P5 whos an AAV of $3M gets injured and placed on LTIR. The ACSL remains the same ($78M), however their LTIR pool now increases to $7M (i.e. they are allowed to exceed the ACSL by $7M).

You should be able to see in the b)-f) scenarios where referencing the UL is irrelevant and can be misleading in understanding how LTIR works and affects the team payroll.

We can also see where it is a myth or incorrect and misleading to simply it as:
1) The LTIR player does not count against the UL.
2) The LTIR player increases the UL by their AAV.
The LTIR player AAV is available only as relief to exceed the ASCL. If it didn't count against the UL or increased the UL it would imply the team would be able to accrue salary cap in a regular manner. In order to accrue salary, the total AAV (including LTIR players) needs to be lower than the ACSL.

If any player returns from LTIR, then their AAV is removed from the LTIR pool and the team needs to make sure that their roster remains 23 or less, and that the team AAV is under the ACSL + LTIR pool, or if all players are removed, then the ACSL disappears and we go back to the original UL operating scenario.

What does this mean for TML?
1) Because of the Horton contract, they would be operating under LTIR for the entire season anyways, meaning unless they could shed a lot of salary, they would not be expecting to accrue any cap space.
2) Adding Clarkson allows them to increase their LTIR pool to $10.55M, which is where they get the room to sign Marner. Note though that if they want a 23 man roster, they need Marner plus someone else to replace Horton & Clarkson, so Marner's AAV number need to be lower than $10.55M to allow that without any other movements.
3) Dermott & Hyman are on LTIR temporarily and should be expected to be back, so they add an additional $3.113M to the LTIR pool, but when they return their LTIR pool disappears, and the team needs to get back under the ACSL (remove any replacement players), so it cannot be used for any season long signings. Their LTIR pools can only be used towards replacement/call-ups for the duration of their absence.
4) The team will want to set their ACSL on opening day to as close to the UL as possible, including having Horton and Clarkson on the roster before being assigned to LTIR. Why do they want to be as close as possible? Because, as they are expected to operate under LTIR all season, they want to set their ACSL as high as possible so if they can make moves later that get them under the ACSL, they can accrue some cap space. (I am not sure this is a probable scenario as they would have to shed at least $10M-11M in AAV).
5) Adding Clarkson gave them more flexibility in signing Marner, as they can use them both (Clarkson & Horton) on their starting roster to set their ACSL as high as possible.
The addition of Clarkson helps them maximize this and gives them the flexibility to sign Marner when they want. If he signs before the season, then Clarkson & Horton get put on LTIR and not on the opening day roster, the ACSL would include Marner's (plus one other replacement) AAV, but not Clarkson & Horton. If he signs after opening day, Clarkson & Horton get put on the opening day roster before being put on LTIR, the ACSL would include Clarkson & Horton's AAV, and not Marner. Without adding Clarkson, the crunch was on to get Marner signed before opening day.
6) They could have traded away Horton instead of acquiring Clarkson, this would have given them direct salary available for signing Marner, and they would have been able to accrue cap space (once LTIR was cleared out), but they would have been crunched to get him signed before opening day, as they would have had great difficulty (virtually impossible) in getting their ACSL up high enough to fit him, or they would have had to keep Hyman and Dermot off LTIR (and anyone else that may get eligible for LTIR) until they could sign Marner so they would not be setting their ACSL (this would have also eaten up 2 roster spots).
7) All-in-all, acquiring Clarkson was the smartest move Dubas could make as it maximized the teams potential in AAV, ACSL, signing flexibility and opening day roster in conjunction with getting Marner signed.
8) What the TML do lose is accruable cap space (unless they make some big salary trades)


So following this, you can see where LTIR is a benefit in allowing a team cap relief to replace injured players, but also where it ends up giving them some penalty in terms of accruable cap space that could otherwise be used for bigger signings/trades later in the season.

Note that this is not 'cap circumvention' by the TML, other than allowing them to take advantage of the fact that Clarkson and Horton will not be playing at all, so their LTIR pool is permanent for the season and gives them flexibility in signing a big AAV player (Marner) for the entire season, without having to adjust when the LTIR players return. But do note that this is counterbalanced by putting them in a situation where they are very unlikely to accrue any additional significant cap space (so don't expect any big name trade deadline acquisitions unless they trade some of their own big numbers away).

I hope this helps sort some of the confusion regarding how LTIR works, and what it's benefits/detriments are, and how it affects the current TML.
It took me a while and I found that including the UL in examples can be very confusing and misleading.