NEWS SOURCE: The NHL financial crisis
Story: With two bankrupt teams, what can the NHL do to improve its financial health, and how can other sports learn from the crisis?
The Buffalo Sabres became the second NHL franchise this season to declare bankruptcy. With teams in crisis, and others in under-performing markets such as Tampa Bay and Nashville, the NHL needs to take aggressive measures to promote cost containment and competitive balance, says Dr. Patrick Rishe, a professor of economics (and rabid Blues fan) at Webster University in St. Louis.
Rishe argues that the next NHL collective bargaining agreement (CBA) should impose the following payroll guidelines:
- Each team must have a minimum payroll of $32 million. This would increase by $1 million each successive year under the new CBA.
- Any team with a payroll above $48 million will be taxed for the luxury of spending above and beyond that amount. There are currently 10 teams that would have to pay a luxury tax. This threshold level will increase by $2 million over the first 4 years of the next collective bargaining agreement.
- The luxury tax rate will be 28% of the amount of the payroll differential in the first year of the CBA, and will increase by 2 percentage points for the remaining 3 years of the CBA.
Based on current team payrolls, this would generate $30 million in luxury tax revenues for the NHL in 2004. With this money, the NHL could make conditional payments to individual teams, disproportionately weighted towards teams with lower payrolls. These payments would be conditional upon teams spending the money on payroll. This would help promote financial health throughout the league and avoid the New York Yankees'-style competitive edge that some of the wealthier teams such as the Detroit Red Wings now enjoy.
RSS