Steven Stamkos Watch: Canadiens in mix; why taxes matter; sign and trade option
As free agency looms, everything is on the table for Stamkos
The most-anticipated free agent bidding war since... well, maybe ever, is days away. Teams can already start talking with Tampa Bay Lightning forward Steven Stamkos' camp and if he opts for unrestricted free agency, the price is sure to be high. Meanwhile, re-signing with the Lightning still remains a distinct possibility for the captain.
With that in mind, we'll be checking in on all of the latest from Stamkos Watch 2016 up until the ink is dry on his new contract.
The Montreal Canadiens are in the mix
Sunday afternoon, I listed top contenders for Stamkos primarily based on public comments from general managers mostly. One team that probably should have been included (but wasn't) was the Montreal Canadiens.
Few GMs are as secretive when it comes to player personnel decision than Habs boss Marc Bergevin. Also, the looming extension for Carey Price on top of the existing mega deal P.K. Subban was playing under kind of ruled them out in my mind.
The league's most storied franchise is in the Stamkos mix, though, according to Eric Engels of Sportsnet and Craig Custance of ESPN.com. The Habs are certainly another intriguing option and surely would have a good pitch to make.
So could they really do it? They'd have to make some substantial moves first. Getting rid of contracts for players like Tomas Plekanec and David Desharnais, like Custance suggests, could help. Additionally, the Habs have a good recruiting tool in Subban, who goes all the way back to minor hockey with the Lightning captain. They'd have endorsement opportunities and the franchise's history to sell as well.
There are a lot of barriers to Montreal, though. Their own cap situation remains an issue, but there is also the tax situation, which is something you almost never hear about in these kinds of negotiations. That said, with the amount of money we're talking about Stamkos getting, taxes matter, which brings us to this next point.
Why taxes are important to note in the Stamkos Sweepstakes
The issue of income taxes is so rarely addressed when we talk about these contracts, but could play a role of some kind in these negotiations. As of right now, Stamkos is playing in a state where there is no state income tax. Aside from the Lightning, only the Dallas Stars, Nashville Predators and Florida Panthers are the other teams that can float the "no state tax" angle.
With all of that in mind, the astute creators of CapFriendly.com, one of a few really handy salary cap sites that sprouted in the wake of CapGeek.com's closure, made a calculator that allows you to see how much a player's contract is estimated to be worth after taxes in a given market.
For instance, if Stamkos were to sign a $10 million-per-year contract, his post-tax earnings with the Lightning would be around $6.083 million annually. That same contract would net Stamkos around $4.68 million in Toronto and aboug $4.69 million in Montreal, per CapFriendly's calculator. As you can plainly see, that's a huge difference. There are other ways to make up that money, but it's still a pretty striking gap.
The tax issues was first raised by Joe Smith in a Tampa Bay Times piece last January. Smith offered a fresher look at the tax factor more recently. The long-rumored number that the Lightning are offering Stamkos is a contract with an $8.5 million annual average. They're also the only team that can offer an eighth year, while everyone else can offer a max of seven. That eighth year is on the table only if Stamkos signs before free agency opens on July 1.
As a Tampa Bay Times analysis in January showed, Stamkos could net nearly the same annually after taxes in Tampa Bay at $8.5 million as $10 million in New York (Rangers, Islanders), presuming he'd be a New York City resident; Stamkos would make more over the length of the deal in Tampa because of the extra year. Stamkos would net $500,000 less annually than a $10 million deal with Detroit, another strong suitor, but, again, more over the length of the deal.
And Stamkos' hometown Maple Leafs, due to a 53.53 percent combined federal/provincial tax rate, would have to offer him $12.37 million annually over seven years to net the same as he'd make over eight years at $8.5 million in Tampa, according to national sports tax guru Robert Raiola, the director of the Sports and Entertainment group at PKF O'Connor Davis, who has professional sports clients throughout the country.
Another important note from Smith's piece is that the Lightning's option to add an eighth year would end up earning Stamkos more money over the full life of the contract than anywhere else. These are going to almost certainly be his best earning years and may never see an annual average higher than what comes with this contract.
But here's the area where the taxes become less of an issue. The number that is most public is a player's cap hit. It's the number most utilized to describe a player's overall value and worth relative to his peers. If Stamkos were to re-sign with an $8.5 million cap hit in Tampa, that puts him tied for eighth in the NHL with Henrik Lundqvist. Right now, the top two cap hits in the NHL belong to Patrick Kane and Jonathan Toews, who have matching $10.5 million AAVs.
Who knows if where he ranks on the salary charts matters at all to Stamkos, but as one of the biggest free agents in years, he has a chance to sign a statement contract.
On top of that, any losses in actual dollars could be made up in outside endorsements, of which there could and should be many more in either Toronto or Montreal. He'd instantly become the biggest star on a Canadian team, which opens a lot of doors to extra money.
Still, it's interesting to consider how much post-tax earnings could play a role. It's one of Tampa's biggest remaining bargaining chips when pitching Stamkos on the idea of staying for a smaller cap hit and helping the team remain a Stanley Cup contender.
The possibility exists for a sign and trade situation
One of the other interesting scenarios that could potentially play out is a sign-and-trade. Chris Johnston of Sportsnet floated the idea to Lightning GM Steve Yzerman, who had not previously considered the option. Here's what he had to say (via Sportsnet.ca):
"Never given it a thought so maybe I should think about it," Yzerman said when asked about the sign-and-trade scenario at the entry draft last weekend. "It's an interesting idea ... well losing him for nothing or losing him for an asset? I'd love to get an asset for him."
As noted above, the Lightning are the only team that can offer Stamkos an eight-year contract. However, if they can't come to an agreement that fits with their salary cap, they could potentially work out an agreement with their captain to sign the eight-year deal, something that would benefit Stamkos in net earnings, and trade him to one of the teams vying for his services before July 1.
The benefit for the Lightning, obviously, is getting something in return for a player they otherwise would have lost for nothing. What kind of asset that could bring back is unclear, but you'd have to think it'd be somewhat substantial given this option would prevent a team from engaging in a bidding war for Stamkos' services, driving his cap hit higher and higher.
Per Johnston's report, the Stamkos camp is already narrowing down its list of teams. Additionally, it appears his no-movement clause would give him the power to dictate where he was traded to. So it's something that could easily be presented between now and July 1. How it would be received by Stamkos' is anyone's guess as they've been remarkably silent through this whole process. It depends on how much the eighth year means to Stamkos.
The Lightning have to consider all of the options available to them, but Stamkos remains very much in control of the situation.
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