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SBJ/20081027/This Week's News
NHLPA pushed for higher escrow rate
Published October 27, 2008
Fearing a potential shortfall in NHL revenue because of the slowing economy, the NHL Players’ Association pushed a proposal that players put 13.5 percent of their paychecks into escrow, NHLPA Executive Director Paul Kelly said last week.
The percentage is the highest set aside by NHL players since the escrow system was created by the current collective-bargaining agreement, negotiated in 2005. Under the CBA, players pay into escrow accounts throughout the season in case salaries account for more than 57 percent of hockey-related revenue over the course of the season. Anything above that 57 percent threshold is returned to owners from the escrow account.
“The worst thing that could happen for us would be to underestimate because we’d have to go to our members and ask them to cut checks to the owners” to cover the difference, Kelly said. “That would be a painful thing to have happen, so I’d rather be conservative.”
NHL Deputy Commissioner Bill Daly said the league, which has described ticket sales as robust despite the economic downturn, was looking at a lower escrow rate for players.
“I believe we would have proposed a lower initial rate, but after considering the reasoning offered by the Players’ Association, we agreed to adopt the 13.5 percent rate,” Daly wrote in an e-mail.
Kelly said the rationale behind the NHLPA proposal was rooted in its experience with the escrow system over the last three years.
During the first season under the new CBA, 2005-06, players put 12 percent of their pay into escrow in the first half of the season, but that rate dropped to 4 percent over the second half, when it became clear the initial rate was too high. Players received 105 percent of the money back that year courtesy of interest on the escrow account, Kelly said.
In 2006-07, the escrow rate was 10 percent for the entire year and players received 97.5 percent of escrow money back because revenue was softer than expected. Last season, the escrow rate was 9.5 percent and players are expected to receive 105 percent of their money back later this month, Kelly said.
Kelly said that players did not vote before the union’s agreement with the league to raise the escrow rate to 13.5 percent. The union is informing players about the rate during its fall tour of meetings with players at every NHL club.
“They are totally on board with our analysis,” Kelly said. “The players have a lot of trust in our financial people because they have been right the last couple of years.”