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The Salary Cap, LTIR, and the Canes’ Summer

How will Dougie Hamilton being on LTIR, new contracts coming down the road, and potential performance bonuses impact the Canes’ salary cap this summer and next season?

NHL: FEB 16 Oilers at Hurricanes Photo by John McCreary/Icon Sportswire via Getty Images

Last summer, Don Waddell assured the media that the 2019-2020 Carolina Hurricanes would be a team that pushed the top end of the NHL salary cap. At the time, not everyone believed the general manager. After all, over the last decade, the Hurricanes were consistently near the lower end of the NHL salary range, not the upper end.

Yet, Waddell knew what was coming. A $40 million extension for Sebastian Aho, a trade and buyout of Patrick Marleau’s contract, and free-agent signings Jake Gardiner and Ryan Dzingel have left the Canes right at the upper limit of the NHL salary cap. With this year’s trade deadline moves, the Canes now find themselves with a payroll of over $90 million — several million dollars above the salary cap of $83 million.

So how are they going to make this work? What is likely to happen over the summer? Let’s dig into the numbers to see what’s going on.

Long-Term Injured Reserve

The invaluable website CapFriendly explains the NHL’s Long-Term Injured Reserve (LTIR) rules as follows:

When a player has an injury of which they are expected to miss a minimum of 10 NHL games and 24 days in the NHL season, the team can place them on long term injured reserve (LTIR). LTIR can be used to exceed the salary cap. LTIR is a very complicated aspect of the NHL operations and the vast majority of details are not specified in the CBA.

Note the emphasis on the last sentence. Indeed, the NHL LTIR rules are a bewildering tangle of dictates that make your head spin. However, for our purposes, we can simplify LTIR. In the case of the Hurricanes current salary considerations, LTIR essentially acts as a coupon for exceeding the salary cap.

Take the current example — Dougie Hamilton.

Hamilton broke his leg in mid-January. The recovery time — anywhere from 6-10 weeks for healing and perhaps another 3-4 weeks to return to game shape — meant that Hamilton was ruled out for the remainder of the regular season. Since that period easily exceeded the minimum of ten games and 24 calendar days, Hamilton’s contract was eligible for LTIR. Yet, at the time, the Canes did not need the salary cap relief, so he was initially placed on the regular injured reserve list.

At the trade deadline, the Canes added three players with significant cap hits (Trocheck, Skjei, Vatanen), and Hamilton was placed on LTIR. This move freed up Hamilton’s $5.75m cap hit. Petr Mrazek, James Reimer, Sami Vatanen, and Brett Pesce all remain on the regular IR list. Anton Forsberg and Alex Nedeljkovic are on emergency call-ups from the AHL.

To be cap-compliant by the end of the regular season, the Canes will almost certainly need to make some of the following moves:

1) Send Forsberg, Ned, or both back to Charlotte. Returning Forsberg and Nedeljkovic to Charlotte would free up $1.5m in cap space. Although the $1.5m the Canes would save isn’t that much, it would probably be enough to bring them under the cap by the end of the season. It also is the choice that gives the team the most flexibility with other players that are injured.

2) If Reimer is unable to return by mid-March (when he would have missed ten games and 24 calendar days), the Canes may choose to place him on LTIR — which would free up his $3.4m cap hit. The only downside here is that Reimer would then have to be activated once he is deemed medically cleared to play. And once activated, the Canes might be forced into option three...

3) Place Brett Pesce on LTIR. Pesce has missed three games since injuring his shoulder against Toronto. All indications are that his injury is a long-term concern that will prevent him from playing anytime soon. Yet, there hasn’t been any news regarding surgery for Pesce. Both the player and the team may be holding out hope that Pesce could return late in the regular season or the playoffs. If the Canes fade from playoff contention, expect Pesce to go on LTIR. His $4.025m cap hit combined with Hamilton’s already banked $5.75m would get the Canes well under the cap.

What Does Next Year Look Like?

When considering the Canes’ cap room for 2020-2021, you have to break down the essential parts: “Dead” Money, Upcoming Free Agents, and New Contracts.

”Dead” Money

These are cap hits that all general managers want to avoid but are unavoidable. For Carolina, there are three contracts on the books for players that do not play for the team.

Patrick Marleau - The Canes picked up Marleau’s contract from Toronto in exchange for a 1st round draft pick (which may be sent to NJ as part of the trade for Vatanen). Marleau refused to play for Carolina, so the Canes bought out his contract — eating the $6.25m cap hit for 2020. The contract expires on July 1st, freeing up the Canes to use that cap space somewhere else.

Justin Faulk - The Canes retained $683k of Faulk’s cap hit for the final year of his contract. Similar to Marleau, Faulk’s contract expires on July 1st, and the Canes can use the savings right away.

Alex Semin - Ah, Sasha. The Canes are still on the hook for $2.33m because of the disastrous contract extension with the ex-Capital. What makes matters even worse is that there is still one year remaining on the deal, so the Canes have to wait until the summer of 2021 before they can finally close the book on this lemon of a contract.

Upcoming Free Agents

Sami Vatanen - In all likelihood, Vatanen is a rental. The Devils retained half of the 28-year-old’s $4.875m AAV for this season. Even if things work out this season, the return of Hamilton and Pesce next year likely precludes an extension for Vatanen. Expect the Canes to bank the $2.4m cap savings from the expiration of his contract.

Joel Edmundson - The 26-year-old Edmundson is in the final year of a contract with a $3.1m AAV. Due for a raise and some significant term, Edmundson could very well be on his way out. The arrival of Brady Skjei and the emergence of Haydn Fleury also works against Edmundson.

Trevor Van Riemsdyk - TVR’s $2.3 AAV contract comes to an end on July 1st. It remains a possibility that the Canes re-sign TVR, but much will depend on his salary and term request. With Hamilton and Pesce getting most of the minutes on the right-side of the blue-line, Don Waddell is unlikely to pay up for a third-pairing d-man.

Haydn Fleury - A restricted free-agent, Fleury is a compelling case. The Canes can ensure he remains in the organization through either an extension or arbitration. However, it’s unclear whether there is a place for Fleury on the NHL roster. With Jaccob Slavin, Brady Skjei, and Jake Gardiner all under contract through the 2022-2023 season, there isn’t much room at LD. A trade would free up a spot though...

Justin Williams - This one is simple. Justin Williams will retire at the end of the season. His $700k AAV will be added back to the Canes cap space for next season.

Warren Foegele - Another restricted free-agent, Foegele will almost surely be re-signed in some capacity by the Canes.

Anton Forsberg - In the final year of a contract with a $775k NHL cap hit, Forsberg will likely enter the UFA market on July 1st.

All things considered, Don Waddell should have over $8m in cap space for extensions and new signings - with one possible exception. The contracts for Williams, Andrei Svechnikov and Martin Necas include performance bonuses that are likely to be paid, and if those bonuses push the Canes over the cap, the difference will be charged to next year’s cap, essentially giving the team a lower cap number for next season.

New Contracts

And here’s where it gets interesting. Who will the Canes sign to new contracts? To me, there are three candidates.

Andrei Svechnikov - This one is a no-brainer. Don Waddell has telegraphed his intention of signing the second-year player to a long-term extension. Although there is still one year remaining on his entry-level contract, there’s no need to wait. Given Svechnikov’s improvement from his rookie year, it makes all the sense in the world for the Canes to sign the Russian for the long-term. Expect much of the savings from the Marleau contract to go into the Svechnikov extension.

Dougie Hamilton - His season was cut short by the broken leg in January, but Hamilton was on pace for a career-best year in 2019-2020. With only one year remaining on his current deal, Don Waddell will prioritize signing Hamilton to an extension before the start of the season. Having found a home in Carolina, it seems to be to everyone’s advantage to sign Dougie long-term. Although the Canes will have some cap space to use, finding the money to pay Hamilton may necessitate a trade, which might make this year’s draft a busy one for the Canes.

Petr Mrazek - Of the three, this is the most unlikely. Mrazek is signed through the end of next season. Although he’s been solid, he hasn’t been spectacular. But if he does return and carry the Canes to the playoffs and beyond, there’s a chance that Canes management will look to sign him to an extension over the summer.