Burning questions for owners, players

Updated: August 16, 2004, 4:19 PM ET
By Scott Burnside | Special to ESPN.com

Observing the NHL and its players try to negotiate a new collective bargaining agreement is a little like watching a house burn down while firefighters argue about how the fire got started.

The water's there.

The hoses are there.

But still the building burns.

The torturous effort to hammer out a new collective bargaining agreement continues Tuesday as the two sides meet for the third time in less than a month to try and avert a lockout when the current CBA ends Sept. 15.

It's not rocket science to look at contracts offered by owners over the past decade and find the source of the fire.

Whether it's the obscene Bobby Holik jackpot in New York ($45 million over four years) or the ludicrous Martin Lapointe signing by Boston that disrupted the important middle-class market ($20 million over four years), or more recently Toronto's overspending on Ed Belfour and to a lesser degree on Bryan McCabe, it's clear a segment of the ownership club cannot or will not toe the company line regardless of the ripple effect its spending has on the overall health of the league.

But to what end this blame game?

Whether the players are blameless, and they're not, they live in this house, too.

With a little foresight, the players could have responded when the NHL approached them more than five years ago about reopening the current CBA and ensured a brighter future for both sides.

The players, who have seen their average salary skyrocket from $560,000 to almost $1.8 million during the life of the CBA, agree implicity the current system is out of whack. It is why Mark Recchi and Keith Primeau, Mike Ricci and most recently Brett Hull have taken significant pay cuts to ink contracts this summer.

And still the house burns.

There are two ways the negotiations can go.

If you believe the players' association, commissioner Gary Bettman has made it a personal crusade to lock out the players -- drive the union to its knees and force upon them a hard salary cap in the neighborhood of $35 million a team. That is the scorched earth path that leads to one conclusion: capitulation. No hockey, no ticket sales, no revenues, no pay checks. Nothing until one side caves in. No one can possibly know the resolve of both sides to play this endgame.

One interesting wrinkle is the pervasive rumor that the owners will not agree to a season that is shortened beyond 70 games. Unlike the 1994-95 season which resumed with a 48-game slate, sources say the owners will exert more pressure on the union with an arbitrary deadline of sometime in mid-November.

If it's true, introducing an arbitrary deadline for the season is a risky tactic which could backfire badly on the owners, said one source familiar with the process.

"I don't think it's going to be very pretty," the source told ESPN.com. "I'm not sure the players are going to get their best deal now or after there's some blood on the table."

At what point, then, do both sides begin to attack this blaze with a little creative thought instead of attacking each other? At what point do they look at a solution that means each side gives way to achieve a solution that ultimately gives each side what they want -- a viable future for a league very much short on future? Why not, for instance, look to other models, like the NBA get where players exist under a salary cap and owners pay a significant luxury tax for signing players to lucrative deals?

Make no mistake, the NBA solution is not a perfect model. In fact, as documents go, the NBA's 30,000-word tome makes quantum physics look like connect the dots. But there are elements that should act as signposts to the NHL and its players.

The NBA, facing a similar problem of escalating salaries against league revenue voided the previous agreement when salaries and benefits reached 58 percent of basketball revenues (they could have opted out when the level reached 53 percent). After a work stoppage that cost part of the 1998-99 season, the two agreed at the drop-dead deadline for the season on a system that includes a salary cap tied to revenues combined with a luxury tax and escrow tax on players' salaries also tied to league-wide revenues.

With revenues that are not all that dissimilar to those claimed by the NHL ($2.67 billion basketball revenues compared to $2 billion for the NHL), the NBA salary cap represents 48.04 percent of basketball revenues (less benefits) which translated into a per-team cap of $43.84 million dollars last season.

There are provisions for a minimum team payroll. The league also holds in escrow up to 10 percent of players' salaries to cover any overages when the final numbers are tallied to ensure that salaries do not exceed 55 percent of basketball revenues. In 2001-02, that escrow account covered the overages and $22 million was returned to players. In 2002-03, the escrow tax did not cover the overage which triggered the luxury tax.

The tax kicks in when salaries exceed 61.1 percent of basketball revenues. In 2002-03, that meant teams whose payroll exceeded $52.88 million paid a tax on a dollar-per-dollar basis for anything over that level. That money was then redistributed by the league to teams that were under the threshold.

The NBA has had success in many markets where the luxury tax acts as a "pseudo-cap" because teams not only fear being taxed on a dollar-for-dollar basis but they would also be doubly penalized by not sharing with under-the-cap teams that taxed revenue, said Toronto labor lawyer Jeff Citron who helped construct the NHL's current CBA.

"Certainly there are some teams that have looked at that as a guide," Citron said.

And the fact that teams do not know where that threshold will be until all revenues are tallied "makes them even more cautious," added Daniel Rosenbaum, an assistant professor of economics at the University of North Carolina in Greensboro who has worked extensively with the NBAPA and individual NBA teams on salary issues.

What it's basically done is kept salaries flat. In general, the owners have really liked what it's done.
Economics professor Daniel Rosenbaum on the NBA's salary cap
"What it's basically done is kept salaries flat," Rosenbaum said. "In general, the owners have really liked what it's done."

Beyond the more reasonable relationship between revenues and salaries, the NBA agreement provides teams with a series of advantages in retaining players for the long term, long the bugbear of small market NHL teams like Edmonton and Calgary.

Bettman has said owners wouldn't go for a luxury tax system because it wouldn't guarantee the control over revenues that the owners demand (i.e., it wouldn't guarantee enough control over their own free-spending brethren). But doesn't a salary cap tied to revenues linked in turn to a luxury tax that still allows teams to pursue top players in a more or less free market satisfy both ends of the equation?

The free market system the players' association holds so dearly is, after all, a figment of their imagination given restrictions in place in the current deal. Finding a tax level somewhere between baseball's (essentially a yearly tax on the New York Yankees) and the NBA's dollar-for-dollar system should keep overall salaries in line while still allowing free-spending teams to pay top dollar for top stars.

Unlike the NBA, where the league has sole responsibility over the redistribution of luxury tax money, perhaps the NHLPA could assume some control, effecting a true partnership in league fortunes. Surely, there's something creative minds like those on either side of this fire line can work with.

Something to think about while the flames crackle.

Scott Burnside is a freelance writer based in Atlanta and is a frequent contributor to ESPN.com.

ALSO SEE