We’ve done a lot of talking on the blog about goalies this season. We’ve taken a look at Panther goalies from the salary cap perspective and speculated who the heck is going to replace Roberto Luongo when he decides to retire. I’d like to keep the goalie train running and talk about Roberto Luongo’s strange contract and the strange trade that brought him back to South Florida. It’s an act of hockey wizardry if you’re willing to see it through to the end.

First, let’s take a step back in time and see how this trade even happened. Those of you who know the background of Luongo’s trade and his long-term contract can start at the CBA section and read from there.

The Build Up

Roberto Luongo was traded by the Panthers to the Vancouver Canucks before the start of the 2006-07 season. Luongo could not reach an agreement with the Panthers about a new contract and was traded to the Canucks. He signed a 4-year deal , and got to work. The revered Luongo was named team captain before the 2009 season, a rare distinction for a goaltender. Things were looking up for Bobby Lou, and in September 2009, when the 4-year contract was set to expire, Luongo signed a monster of a deal with Vancouver.

A Beast is Born

On Septemeber 02, 2009, Roberto Luongo signed a 12-year, $64 million dollar contract with Vancouver, an annual cap hit of $5,333,333. Signed when he was 30, the deal keeps Louie under contract until he is 43 years old. The deal includes a no-trade clause, meaning Luongo could not be traded without his permission (this becomes important in a second). The deal also was very front-loaded, with Luongo making the most money in the beginning of the contract. The salary started off at $10 million for the 2010-11 season and dwindles to just $1 million by the time the deal expires. Before we go through the implications and problems posed by such a colossal contract, we need to see what went wrong in Vancouver.

Conflict in British Columbia



To say Luongo had a falling-out with Vancouver management might be a bit of an understatement. We are going to gloss over the specific details of Luongo’s issues in Vancouver for the sake of space, but suffice it to say the Canucks became mired in goalie controversy in the 2011 playoffs, when a string of poor performances by Roberto Luongo led to him being pulled in favor of Cory Schneider. This was the start of a long rivalry for playing time between the two netminders, which you can read more about here . Luongo asked to be traded in 2012, but the deal didn’t come immediately. There was more trouble in store for Roberto Luongo.

The Canucks wound up re-signing Cory Schneider to a contract in 2012, but ultimately ended up trading him to New Jersey. Before that trade can happen at the 2013 draft, though, there is another lockout and a new Collective Bargaining Agreement.

A New CBA Makes Things Complicated



The whole story of the birth of the lockout-causing current CBA, which caused nearly half a season to be canceled, is a long one. Again, so we can get to the point we will gloss over many details and focus on the issue crucial to this article. One of the biggest things to come out of the new CBA was a limit on long-term contracts. Before the 2012 lockout there were some exceptionally long term contracts given out to players such as Ilya Kovalchuk (15 years) , Shea Weber (14 years), Zach Parise (13 years), Duncan Keith (13 years), and Roberto Luongo (12 years). These aren’t the only players signed to such deals, but they are some of the most high profile.

If you line all of these contract up next to each other you will notice one thing they have in common. They are all very front loaded. This is important for three main reasons. Firstly, it gave the players income-security. They knew that they had a paycheck coming in every year for 14-years, which is much less stressful on players, especially as they age. Secondly, it makes sense to pay a player more when they are in their prime and less when they are old, but still may be useful. Thirdly and most importantly, drastically lowering the salary of a player’s contract at the end forces the Average Annual Value (AAV) of the contract to lower, which reduces the team’s salary-cap hit. The NHL saw this as an attempt by the teams to circumvent the salary cap by artificially deflating the values of star player’s contracts.

The rationale by the league was that the final years of these contracts were mainly padding in order to lower the cap hit of the contract. this meant that teams could get the best years out of their star players for a drastically reduced rate, and get cap relief if the player retired before their contract expired. This was the nature of the circumvention. The teams received a lower cap hit but didn’t necessarily have to experience the negative consequences because players could merely retire.

The new CBA prevented teams from signing any more players to these ridiculous ultra-long-term contracts, but the super long term contracts like Luongo’s were still valid. Those contract that could not be nullified, but the league still needed to deal with these cap circumventing contracts. To address this, they added a clause to the CBA called the Salary Cap Advantage Recapture Advantage Rule. We’ll go into more detail about this, but Luongo is yet to be traded to Florida. Let’s get back to that.

Louie Comes Home



The ultimate cause for Luongo’s trade comes after the Heritage Classic on March 2nd, 2014. Then coach John Tortorella benched Roberto Luongo in favor of then rookie Eddie Lack. This seemingly nonsensical move pissed off the fans, who chanted “We want Lou” at the game; it also enraged Luongo personally. This game on the bench was Lou’s last in Vancouver, and on March 4th, 2014 he was traded back to Florida. However, the intricacies of Roberto Luongo’s contract and the new rules of the CBA made the trade hairy.

The trade at face value was simply Roberto Luongo and Steven Anthony in exchange for Shawn Matthias and Jacob Markstrom. However, the deal also included some fine print, and this fine print is what turns the deal into a work of art. The fine print stipulated that Vancouver would retain $800,000 (15%) of Luongo’s $5.33 million cap hit as well as pay any salary cap recapture fees should Luongo retire before his contract expires at age 43. The salary retention is very typical in trades, and happens all the time. By far the biggest part of the trade is Vancouver covering the fees, and lets take a look why.

Zooming in on the Fine Print

The now defunct CapGeek has an eloquent blurb on the details of the Salary Cap Advantage Recapture Rule worth posting here.

Teams receiving a “cap advantage” from long-term contracts — defined as seven years or more for contracts signed prior to the January 2013 CBA — will be penalized in the event the player retires or “defects” from the NHL before the contract expires. A team receives a “cap advantage” when the player’s actual salary exceeds his cap hit in a given year. Following retirement/defection, the “advantage” will be “recaptured” and charged against the club’s cap in equal amounts each year until the contract expires. This penalty applies to any team that received a cap advantage from the contract — ie. a traded contract — except in the event that the trade occurred prior to the new CBA coming into place in January 2013. [ Edit: June 2, 2013 ] Teams do not receive a credit for net negative cap benefit (where cap hit exceeds salary over the course of the contract prior to retirement). However, in calculating net “cap advantage,” teams do receive a credit for seasons in which cap hit exceeds salary.

As I explain more about how this applies to the Panthers, now would be a good time to click here for Luongo’s contract and follow along with me.

The amount of advantage received by a team is calculated by taking the difference between the cap hit (in this case $5.33 million) and salary paid only in the years where the salary is greater than the cap hit.

Total Salary – Cap Hit = Cap Advantage

In the case of Roberto Luongo this is every season between 2010-11 and 2017-18. I have to split this up into two tables because I was having trouble with formatting.

Year 2010-2011 2011-2012 2012-2013 2013-2014 Luongo Salary 10,000,000 6,716,000 6,714,000 6,714,000 Cap Hit 5,333,333 5,333,333 5,333,333, 5,333,333, Salary Cap Advantage 4,666,667 1,382,667 1,380,667 1,380,667

Year 2014-2015 2015-2016 2016-2017 2017-2018 Luongo Salary 6,714,000 6,714,000 6,714,000 6,714,000 Cap Hit 5,333,333 5,333,333 5,333,333, 5,333,333, Salary Cap Advantage 1,380,667 1,380,667 1,380,667 1,380,667

When we add all of this up, the total sum of salary cap advantage is a staggering $14,333,336 in salary cap advantage. However, there is one more step in calculating the amount of recapture fees a team actually has to pay.

Teams get a discount credit in the amount of fee they have to pay for every year that the salary paid is less than the amount paid. The teams only get this discount credit for years when the player is still active. For example, in 2018-19 Roberto Luongo’s salary is $3,382,000, which is $1,951,333 dollars less than the cap hit of $5,333,333. This $1,951,333 discount credit is subtracted from the $14,333,336 dollars in salary advantage. Therefore, Vancouver would have to pay only $12,382,003 in penalty over the remaining years of the contract. In this case there are 3 years remaining on the contract, so Vancouver pays $4,127,334.33 per year for 3 years until the fee is paid.

(Cap Advantage – Discount Credit) / Years of Contract Remaining.

Now that we know how the entire fee is calculated, let’s crunch the numbers and see how much Vancouver would have to pay if Roberto Luongo were to retire in any of the years following 2018.

If Lou Retires In… Salary Recapture Amount Discount Credit Fee Owed Fee Owed p. Year 2018 (Age 39) $14,333,336 0 $14,333,336 $3,583,334 (4 years) 2019 Age 40) $14,333,336 $1,951,333 $12,382,003 4,127,334.33 (3 years) 2020 (Age 41) $14,333,336 $5,666,666 $8,666,670 $4,333,335 (2 years) 2021 (Age 42) $14,333,336 $9,999,999 $4,333,337 $4,333,337 (1 year) 2022 (Age 43) $14,333,336 $14,333,336 0 0 (0 years)

What it Means for the Cats

As you can see from the tables above, these fees are going to be really really expensive. The amount of cap that this would eat up in the future would be sizable given that it is likely to be more than $4,000,000 and likely to be for more than 1 year. However, for the cats the savings is more than just $4-14 million dollars. They also will be off the hook for Luongo’s cap hit once he does decide to retire.

The odds that Luongo plays through the contract until there are no fees (age 43) are slim to none. Vancouver will be on the hook for some fees once Louie calls it quits, but the Panthers also retain his cap hit, right? Wrong.

According to the currently Salary Cap Rules outlined in the CBA – which you can brush up on by clicking here – a team is only responsible for the cap hit of a player who retires if they are over the age of 35 at the time of signing their contract. Lou will be older than 35 when he retires (he’s older than that now), but since he signed his contract when he was 30 the Panthers won’t even be responsible for the salary cap hit of his contract.

What this means for the Panthers is that they get to use Lou until he decides to retire, probably some time around the age of 40, give or take 1 year. When he retires there will be a salary recapture penalty, but it will be covered by Vancouver. In addition to avoiding the recapture penalty, the Panther also avoid paying the cap hit for a player who isn’t playing because he signed the deal before age 35. As far as I’m concerned, this is highway robbery for the Panthers.

The Cats have gotten two good years out of Roberto Luongo, and probably stand to get two more good years out of him. When he decides to hang up his skates the Panthers will be liable for absolutely zero dollars in penalty. Dale Tallon took a nightmare of a contract that was considered un-tradeable and turned it into a boon for the Panthers. Tallon swooped in at the heat of the moment when Luongo was fed up and Vancouver was trying to deal him, and they wound up acquiring him for what wound up being spare change for the Panthers in Matthias and Markstrom. This is a masterwork of General Managing.

I personally think Tallon has earned his 3 year extension with his excellent drafting and for untangling this snake of a Luongo contract and turning it from something very unsightly at the surface to a work of hockey art.

Got Questions or Comments? Leave your thoughts down below.