Analysis of The Zdeno Chara Contract

On the off chance you missed it, Zdeno Chara signed a long term extension with the Bruins worth $45.5 million over 7 years.  If you're like me, your first thought was "Great!  Z's gonna be around awhile...holy crap, that's a long and lucrative deal for a guy who's going to turn 40 before that contract is over." 

So, does the contract make sense for the Bruins?  Let's look at it from a few different points of view.

According to the indispensable Cap Geek, Z's cap hit will be $6,916,666 from 2011-12 through 2016-7, and then $4M in 2017-8, his age 40 season.  If I understand the compromise brokered between the NHL and the players' association, players are charged their actual salary against the cap from age 40 onward.  Thus, Chara makes $4M that season, and so his cap hit is $4M.  Since it's still an over-35 contract, they cannot buy him out or shuttle him to Providence and save cap money; that money is on Boston's cap unless Chara is traded. 

Note: I was wrong, the contract is not an over-35 contract.  In the unlikely event that Chara's game falls off a cliff in the next few years, he can be bought out or demoted.  I am assuming for the sake of this article that will not happen.

1. Economics

Let's start with the financial impact of this.  In the short term, Boston saves a little money against the cap for next year, as Chara had a cap hit of $7.5M this season.  Of course, when they signed Chara to his contract back in 2006, he was a better bet for continued success than he is now, but never mind that for the moment.  The Bruins are looking at $12.4M in cap room, and their most significant free agents are Mark Stuart and Blake Wheeler, the latter of whom is restricted.  That's a very positive cap situation for the B's, and unless one of the current free agents does something to warrant a massive extension (an unlikely possibility, in my estimation), the Bruins should have the opportunity to add an A-list free agent if they so choose. 

Of course, the short term isn't what Bruins fans are worried about with this deal.  Is a cap hit just a shade under $7M for a 39 year old defenseman something the Bruins will regret in a few years?  Will we turn into carbon copies of Islander fans, who are scratching the days on the wall like Edmond Dantes in his prison cell, until Rick DiPietro's contract expires?  To figure that out, let's begin with a thought experiment: is a dollar today worth the same as a dollar tomorrow?  Consider that Chara will make more this season than Bobby Orr did his entire career combined.  With all due respect to Big Z, there's not a person alive with at least a double-digit IQ who believes he's better than Orr.  Salaries go up over time.  The salary cap, too, goes up over time.  It's not so much how much a guy is getting paid, it's how much he's getting paid relative to the salary cap.  Orr's contract, for its time, was extremely lucrative.  Now, it's less than the league minimum. 

The cap, this season, is $59.6M.  In 2007-8, it was $50.3 million.  If we assume the cap will go up at that same rate during the life of Chara's contract, the cap will be $83 million in the 6th year of his deal.  (I'm using the 6th year of his deal because the cap hit, as noted above, drops significantly for the 7th.)  Chara's salary would amount to about 8.3% of Boston's cap space.  For comparison's sake, 8.3% of this year's cap would be $4.97 million.  So, the question, in our terms, becomes less "is Chara going to be a $7 million player in 2016-7?" and more "is Chara going to be a $5 million player in 2016-7?".  That's a pretty big difference.

Take a look at some of the defensemen in the $4 to $6 million dollar range.  Some of the guys there signed their deals as restricted free agents, deflating their contract values (Mike Green and Shea Weber come to mind), but that's mostly a list of guys who are good, but hardly great.  Can the Zdeno Chara of 2016-7 be roughly as good as the likes of Dan Hamhuis are right now?  Peter Chiarelli is gambling that he can, and that segues into my next observation.

2. Moral Hazard

Whenever I see a long term contract signed, the above two words flash through my mind.  For those not familiar with the idea of moral hazard, it's a situation where someone takes an action unrestrained by long term consequences.  Ever quit a job before?  Of course you have.  I'm assuming, or at least hoping, you gave your boss at least 2 weeks notice.  Wasn't that last day awesome?  You showed up late, in jeans and your Metallica '92 World Tour t-shirt, took a three-hour lunch, during which you drank six beers, finally asked out the hot secretary and spent the rest of your time goofing off on the internet reading this and other fine websites.  When called out for your behavior, you told your boss "what are you gonna do, fire me?"  There were no consequences for your actions.  You could take actions in the short term that benefited you, even if they were detrimental to your employer. 

Real life is filled with examples like this, by the way.  See: deficit spending, Medicare, subprime lending and many others.  And yet, I digress. 

This is a major concern with a general manager, particularly one who might not be long for his job.  Suppose a GM on the proverbial hot seat makes a major move that has significant boom or bust potential.  If it works, great, he looks like a genius.  If it fails, it doesn't matter, because he's probably getting fired long before the full effects of the deal are felt.  He's trying to do anything he can to save his ass, and if it backfires, he's no worse off.  With the Patrice Bergeron contract, this wasn't a big issue.  That's a three year deal.  What are the chances that Peter Chiarelli will still be Boston's GM at the end of that contract?  Pretty good, I'd say.  Probably 80% or better.  The Bruins have a good, young core of players and should have enough success that a front office shakeup won't be needed during that time.  But what are the chances that Chiarelli will be the GM in 2017?  Certainly not 80%.  There's just too much that can happen in that time. 

By the same token, the chances are hardly negligible.  Depending on how you feel, PC's job performance rates somewhere between "competent" and "excellent".  I doubt you'd find many people that believe he's doing a manifestly poor job.  Maybe the chances of him being GM in 2017 aren't 80%, but 50% might be reasonable.  As such, there's enough chance that Chiarelli will be around at the end of Chara's contract that I believe the issue of moral hazard can be ruled out.

3. On The Ice

"OK, great", you think.  "So maybe the finances aren't as bad as I thought, and maybe PC wasn't just looking to bring Chara back at any price to keep him happy.  In the end, we're still looking at a guy who's going to be 40 years old at the end of the contract.  The list of players who have been effective after that age isn't a long one, you know."

There are a number of things in Chara's history that suggest he should age well.  One of those is his position; he's a defenseman.  As a shorthand way of looking at players who were effective at advanced ages, I sorted players aged 38 to 42 in the modern era, by plus/minus and the vast majority were defensemen. I don't pretend to know for sure the reasons behind this, but I have a theory.  Many of the attributes that make a good defenseman are attributes that should age fairly well.  Size and strength will age much more gracefully than speed and quickness, for example.  A defenseman can counter declining speed with good positioning, something that's much harder for a forward to do, since he will constantly be attacking the opposing zone.  Positioning is a function of hockey sense, and should therefore not decline at all with age. 

Chara's three biggest advantages as a player are: his freakish size, his inhuman strength and endurance, and his sound positioning.  I'm going to assume he'll still be the tallest player in NHL history by the end of his contract, unless Tyler Myers grows a couple more inches.  His strength will decline a bit, simply because muscle tone will decline with age.  Positioning should remain sound.  By age 39, his offensive skills probably will be in steep decline.  His rocket slapshot probably will not have nearly as much on it, and his skating will have slowed to a point where he cannot join the rush on offense like he does now.  Maybe the shot and skating will age a bit more gracefully, but even if they do not, he should be at worst a rich man's version of Hal Gill.

In looking at the list I referenced above, I note that a high percentage of the players on it were big defensemen: Larry Robinson and Kjell Samuelsson were most prominent, but Sean O'Donnell, Rob Blake, Slava Fetisov and Teppo Neuminen also qualified, and I didn't see any defenseman high on the list that was under 5'11 (Mark Howe, Mathieu Schneider and our old friend Raymond Bourque were listed at 5'11).  The name Chris Chelios was bandied about (and he's prominent on that list), but it's another Chris who might be a better analog: the 6'6 Chris Pronger is 36 and remains a Norris Trophy contender with a skill set that's pretty similar to Chara's. 

The sample size is too small to make a sure determination, but it, at minimum, gives us something of a proof of concept.  It seems to me that if you're going to bet on a player to age well, you're well served betting on a big defenseman. 

Let's go back to Hamhuis for a moment.  His GVT the last three years has been 7.2, 7.6, 7.2, for a mean of 7.3.  Chara's GVT the last three years has been 16.4, 14.8, 15.7, for a mean of 15.6.  A full 50% decline in Chara's GVT would still put him at 7.8.  That's a pretty steep decline in his skill, and perhaps not an absurd one to assume.  And yet, even if we do, he's still, by that measure at least, a better player than $5M man Dan Hamhuis.

I don't have a crystal ball, nor, I suspect, does Peter Chiarelli.  However, I believe there's a good chance that Chara's contract will remain reasonable for his performance throughout the life of the contract, and there's at least a small chance that it will prove to be a bargain.

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