FanPost

Managing the NY Rangers within the Salary Cap

Subtitle: Why The Rangers need to send Redden and Rozsival to Hartford.

There have been rants and raves for weeks now, some sane, some less than sane, but all passionate and well-intentioned – about what the Rangers need to do to improve their roster for next season.

We’ve bantered about all sorts of ideas – and argued the merits and drawbacks of all of them. "We need to get (Phaneuf, Exelby, Kovalchuk…..)". And inevitably we either realize by ourselves, or one of the other regular contributors reminds us, that there’s this annoying little thing called the NHLPA and it’s annoying cousin, the SALARY CAP, that bring us crashing down to reality.

The purpose of this particular dissertation is part education, part historical journey, ultimately leading to a recommendation for the Owners and Management. No, I’m not going to get into "Fire Sather" – that’s a separate topic that has a life all of its own. This topic deals with the realities as they currently exist – and it is that reality which the GM, whomever that might be, must confront.

I apologize in advance for this being brutally long - there's so much information I wanted to present, and I'm not a professional writer or editor by profession (which is probably a good thing!).

Let’s start with the historical journey, shall we?

The last year before the lockout, and the subsequent NHLPA/Salary Cap era, was 2004. This happens to be the year of several interesting events:

  • The Rangers entered a ‘rebuilding mode’ of sorts, shedding themselves of Petr Nedved, Anson Carter, Brian Leetch, and Alexei Kovalev (again).
  • The Washington Capitals flipped Jaromir Jagr to the Rangers (for Anson Carter) and then sent Carter packing to Los Angeles. They also rid themselves of Peter Bondra, Sergei Gonchar, Robert Lang, and Steve Konowalchuk
  • Despite adding Teemu Selanne and Paul Kariya to a star-studded lineup, the Colorado Avalanche didn’t make it to the Cup finals. Likewise, the Anaheim Ducks, who had added Sergei Fedorov and Vinny Prospal to a team that made it to the seventh game of the Cup Finals the previous year, failed to even make the playoffs. For that matter, the Rangers also missed the playoffs….
  • John Tortorella led a surprising Tampa Bay Lightning team to the Stanley Cup
  • Dan Cloutier (remember him?) was one of the top goalies in the league that year, playing in 60 games, and putting up 33 wins, with 5 shutouts, a .914 save percentage, and a 2.27 GAA for the Vancouver Canucks.

OK – enough with trivia time. Now for some facts (after the jump!)

As you can see from the table below, in 2004 the Rangers had some staggering financial numbers. They were valued by Forbes as the franchise with the highest value of any NHL club - $282mm. Despite healthy Gate Receipts ($42mm), they actually had a LOSS in Operating Income of -3.3mm. A fair amount of that was no doubt due to the $78mm in player expenses (salary/bonus and benefits), which was second in the league – only surpassed by the Detroit Red Wings (at $80mm).

Since 2004, the Rangers have dropped to the Number 2 position in terms of overall value, surpassed by the Toronto Maple Leafs. However, even though they’ve surrendered the Number 1 value position, the worth of the club has grown by 134mm – or 47.5%. The Maple Leafs have increased by 190mm, or 67.8%. One reason for that is the fact that for 2009, the average ticket price for Leafs games is $92 (USD), while the average ticket price for the Rangers is $55 (USD). (Note that with the changes in ticket prices for the current 09/10 season, the average for MSG may no longer be that low.)

Team

Year

Value Position

$Value

Debt-to-Value

Revenue

Oper. Income

Player Expenses

Gate Receipts

Wins/ Player 1

Playoffs

NYRangers

 

 

 

 

 

 

 

 

 

 

 

2004

1

282

89%

118

-3.3

78

42

41

DNQ2

 

2006

2

306

82%

109

17.7

46

43

84

Conf. Qtrs.

 

2007

2

365

0

122

25.4

49

51

105

Conf. Semi

 

2008

2

411

0

137

30.7

57

61

101

Conf. Semi

 

2009

2

416

0

139

27.7

61

63

86

Conf. Qtrs.

 

 

 

 

 

 

 

 

 

 

 

Toronto Maple Leafs

 

 

 

 

 

 

 

 

 

 

2004

2

280

39%

117

14.1

69

56

86

DNQ2

 

2006

1

332

52%

119

41.5

43

58

81

DNQ2

 

2007

1

413

39%

138

52.7

49

62

80

DNQ2

 

2008

1

448

35%

160

66.4

53

78

77

DNQ2

 

2009

1

470

31%

168

78.9

47

77

84

DNQ2

 

 

 

 

 

 

 

 

 

 

 

Stanley Cup Champion

 

 

 

 

 

 

 

 

Tampa

2004

13

150

33%

88

8.6

41

37

196

 

Carolina

2006

21

177

51%

82

-4.6

49

32

129

 

Anaheim

2007

15

157

0

75

-0.2

38

27

136

 

Detroit

2008

4

303

0

110

13.4

53

54

166

 

Pittsburgh

2009

11

222

45%

93

3.3

50

47

162

 

1 - Wins-to-Player Cost Ratio: Compares the number of wins per player payroll relative to the rest of the NHL. Postseason wins count twice as much as regular season wins. A score of 120 means that the team achieved 20% more victories per dollar of payroll compared with the league average.

2 - DNQ = Did Not Qualify for Playoffs

 

For the sake of comparison, the Stanley Cup Champion’s numbers are also presented for each year since 2004. One thing that isn’t obvious, but bears pointing out – the Rangers had more net Operating Income last year alone (27.7mm) than the sum of all Stanley Cup Champs since 2004 who had a positive Operating Income figure (25.3mm for Tampa/Detroit/Pittsburgh).

Just as mind-boggling – the Maples Leafs made more in the last 2 years than the Rangers have since 2006 – by 43.8mm (about 30% more). That’s 2 years for the Leafs vs. 4 years for the Rangers!!

For 2009, there are only 3 NHL Franchises with a Zero Debt-to-Value ratio – the Rangers, Detroit Red Wings, and Chicago Blackhawks. With the impending (or is it already completed?) spin-off of MSG by Cablevision, and the planned renovation of the current Madison Square Garden facility, that list may be one shorter next year.

Also interesting to note, both the Leafs and Rangers are in a minority of franchises which completely own the concessions at their arenas. Most teams contract with organizations like ARAMARK, and in some cases that may be a result of a lease arrangement with a municipal authority which owns the arena (and then controls much of the concession activity). The Rangers, Canadiens, and Flyers are among a small minority of franchises which own the arena as well as the NHL team that plays in it. (Note that the Canadiens are handicapped somewhat, as both the Rangers and Flyers owners also own an NBA franchise that shares the arena, which spreads out the costs significantly.)

So what’s the takeaway here? The owners of the Rangers own the arena outright (no mortgage, no debt). They control all of the concessions – so whatever profit is made from soda/beer/food, and "merchandise" stays within the organization – no sharing with a concessionaire or municipal authority.

Some other items that jump out at you, and make you go "Hmmmmm!"… The Leafs manage to end up with almost one-half of their total revenue as Operating Income. How come the Rangers only manage to end up with about 20%?? Unfortunately, those answers would require access to their finances which I will never get. I’d hazard a guess that some of it is the difference in player expenses (61 vs. 47) and some is due to the differences in taxes in the US (especially in New York City) and Canada – but I find it hard to believe that would account for all of the nearly 30% difference. Beyond that, I won’t speculate – it’s not fair and would be pure guesswork.

This begs all sorts of questions – not the least of which would be – with all of the money that Toronto is making – how in the hell can they manage to not even make the playoffs for 5 years (and it’s going to be 6) running??

Running a close second (both in value and in serious questions!) would be – why the hell can’t the Rangers manage to do better in the regular season AND the playoffs??

Well, if money (and really, the ability to make money) were all it takes to win the Stanley Cup, clearly the Rangers and Leafs would be in the finals every year. But as we know (as do our long suffering friends in Toronto) – it takes vision, foresight, and a whole lot more on the part of Team Management to build a winning franchise. And even those that are acknowledged as being "good at it" – like Pittsburgh and Detroit – don’t necessarily win the cup, or even get to the final dance, every year. A lot of luck is involved.

So – now we have a perspective about the value of the Rangers franchise, and to a degree how ‘profitable’ they are.

Now, for a bit more history – let’s look at the Rangers ‘Player Expenses’ over a period of time – pre and post Collective Bargaining agreement.

Year

Rangers Player Expense

League Rank

1998/1999

39.8

1

1999/2000

59.4

1

2000/2001

55.5

1

2001/2002

57.3

2

2002/2003

69.2

1

2003/2004

78

2

2005/2006

46

n/a

2006/2007

49

n/a

2007/2008

57

n/a

2008/2009

61

n/a

As you can see, in 99/2000, the Rangers leapt from a 40mm payroll to almost 60mm – or about what it’s been this year (09/10) and last. That’s the year that Gretzky was gone, and Beukeboom retired – so Neil Smith went on a free agent binge to shore things up (sound familiar?) with the likes of wings Theo Fleury, Valeri Kamensky, and Pavel Brendl, plus defensemen Sylvain Lefebvre and Stephane Quintal. If you’re thinking that Fleury is the most recognizable name of that crew you’d be correct, and not necessarily for all the right reasons. If you need to know more, get yourself a copy of his recent book. Kirk McLean was brought in to be Mike Richter’s backup, after Dan Cloutier was dealt to Tampa Bay.

In each year after that, leading right up to the last "pre-CBA" year of 2003/2004, the Rangers had either the #1 or #2 (as in most expensive) payroll in the league. And diddly-squat to show for it when it came to playoff experiences. And surely no Stanley Cup(s). In the middle of the 03/04 season, you had the Jagr and other moves mentioned near the start of this piece – which culminated in a total player expense number of about $78mm, just slightly behind Detroit that year. And Washington was paying about one-half of Jagr’s salary!

OK – now it’s time for the punch line(s) – you can all breathe a sigh of relief!

It’s now 2010, and at the end of this season, presuming that no other GMs are crazy enough (or influenced by psychotropic drugs or Jedi Mind Tricks) to take Wade Redden or Michal Rozsival off the NY Rangers hands, they both need to be sent to Hartford to play out their days, or as some might say "to serve the rest of our sentence". Now, before I say anything else, I’ll add this – as people, I have nothing but high regard for both of these individuals. It is not their fault that they’re being paid long-term salaries which far exceed their actual value. In the same situation, I’d have jumped at the opportunity to sign the contract. This is strictly a business decision taken in the context of what needs to be done for the betterment of the hockey club. If you’re offended, I apologize in advance, it’s nothing personal.

We all know that these contracts, more than any others, are absolutely killing the ability of the Rangers to make roster-improving moves. No more. Sending them to Hartford removes them from the salary cap. And the Rangers, based on pre-2005 Player Expense numbers (as shown above), and the overall profitability of the organization, can absolutely afford to do it.

In 10/11, you’ll be adding $10.5mm to the NHL player expense numbers, bringing it to roughly $74mm – still less than the $78mm of the 03/04 season. In 11/12, it’s 9.5mm, and in 12/13 and 13/14, it’s 5.0mm. And that’s it. The pain is over. 4 seasons, and the thorn has been removed from your side. Permanently. And with no lingering side-effects.

"Why not use the buyout?" you ask. Good question. The answer is that you prolong the pain and you get less benefit. For Wade Redden, the pain period doubles until after the 2017/2018 season. Not only that, but unlike shipping them to Hartford, where 100% of the cap hit is immediately removed, using the buyout costs you anywhere from almost $2mm to almost $3.5mm against the cap! So, instead of having both legs (or other body parts) in a wringer, now you only have one leg caught. You still can’t run or skate – but it only hurts one-half as much.

"But the AHL has the ‘Development Rule’ – you can’t send both of them to Hartford!" you say. Well, you’d be right about the rule, which is meant to protect the AHL and make sure that it remains a ‘developmental league’ for future NHLers. The rule defines a ‘veteran’ as someone with more than 260 games of ‘professional experience’. Any AHL team can have up to six players with 260 or more professional games apiece – or up to 5 players if any one of them has 320 or more professional games. As of right now, there is no one on the Wolf Pack roster that approaches the threshold other than Mathieu Dandenault (who is injured). So, this is not a concern or limitation for the scenario being proposed.

"But, what about the AHL Salary Cap? Surely adding Redden and Rozsival would break the cap for Hartford?!?" Well, it would, except for the fact that the AHL doesn’t have a salary cap. See the 2nd line of the article reporting on the AHL President’s address link - click here.

No – the simple answer is that the Rangers as an organization can easily afford to pay the remaining salaries of both of these albatrosses in Hartford, with the accompanying instantaneous benefit of freeing up $11.5mm in cap space for the 2010/2011 season.

Spent wisely that’s a lot to build with.

Edit: I neglected to note that all financial information is readily available at Forbes.com. Each year, they analyze the state of each major sport (baseball, hockey, football, basketball - there may be others). Forbes.com was the source for the financial information I compiled to present to you in this post.

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