The discussion of the Canadian dollar's rise and its relation to the NHL has been done to death, both in the blogosphere and the media, but with the summer lull settling in, a question came to mind this weekend...

What would next year's salary cap, set at $56.7-million, be if the dollar had remained constant since the CBA was signed in July, 2005?

In other words, if the agreement was put together with an .82 cent dollar in mind, what floor and cap was reasonable to expect four seasons in?

And I knew who to ask.

Gerald Carpenter, a regular reader and commenter here, has been typing until blue in the face for years about how the effect of the Canadian dollar's shift has been exaggerated. According to his math, the cap would be down to roughly $54-million had the loonie stayed right where it was three summers ago:

NHL Revenues 2007-08 = $2.56-billion (U.S.)
Canadian team's share = 31 per cent (est.)
Canadian team's revenue = $794-million (U.S.)

Exchange rate (July 1, 2007, to June 30, 2008) = .9897
$794-million (U.S.) in Canadian funds = $802-million

Exchange rate as of when CBA was put together (June 30, 2005) = .8159
At that exchange rate, the $802-million is worth $654-million (U.S.)

Difference in revenue generated = $139-million (U.S.)

"Accordingly, NHL revenues would have been $139-million (U.S.) less this year if the exchange rate had stayed as it was on June 30, 2005."

The players' share these days is approximately 56 per cent.
$139-million x .56 = $78-million (U.S.)

So the players' share would have been $78-million (U.S.) less.
$78-million divided by 30 teams = $2.6-million (U.S.)

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Those are Gerald's figures. Now, that's all pretty rough fudging, and calculating that there is $2.6-million less salary per team available does not necessarily reflect how high the cap would be.

Plugging the same figures into the salary midpoint equation in the CBA, however, we can come up with a best guesstimate. If NHL revenues were $139-million lower last season, from $2.56-billion to $2.421-billion, we could calculate the midpoint like so:

(56 per cent of $2.421-billion) - $70-million (benefits) / 30 teams

Midpoint = $42.9-million
Floor = $34.9-million
Cap = $50.9-million

Add in the 5-per-cent boost:
Floor = $37-million
Cap = $53-million

Absent all influence of currency change since the summer of 2005, I'd say we'd have a salary cap between $3- and $4-million lower than $56.7-million. The biggest x-factor here, however, is what is the true figure for the percentage of revenue generated in Canadian funds, a number that could be larger than the 31 per cent we're plugging in here.

That drop isn't insignificant, but it also makes up only about 20 per cent of the growth we've seen from the cap, which has risen $17.7-million, an average of $5.9-million a season, in the past three years.

The chart below shows where the cap's headed if it continues to increase at that same rate over the next four seasons (Series 1), as well as a look at what those increases would look like if we take currency changes out of the equation (Series 2):

Tom Benjamin put together a good look yesterday at why that growth's unlikely to happen — and it's a good thing, too.

I'm not sure many teams can stomach a $64-million floor, even four years off.

UPDATE Benjamin has an update for us, and it addresses the fact that projected revenues were set artificially low under that first year after the lockout:

"First, most of the increase in the cap came because the cap was set too low the first year. In year 1, the league projected $1.7 billion in revenues. It came in at $2.1 B. That $400 MM was not growth driving up the cap. It was a (deliberately) inaccurate forecast of revenues. Carpenter's analysis is disingenuous. The $17.7 MM increase in the cap is an increase reflecting a rise in revenues from $1.7 B to $2.6 B. The actual rise in revenues was $2.1 B to $2.6 B. Almost half the increase in the cap had nothing to do with revenue increases and everything to do with the fact that the first cap was set on the assumption NHL revenues coming out of the lockout were going to drop by $400 MM.

"The $39 MM cap was a PR number. Carpenter has done the analysis as if it was real. As if revenues coming out of the lockout actually went up by $400 MM. The cap should have been about $46 MM the first year. The analysis implies that there was a real revenue increase of $400 MM. I really don't understand why Carpenter does this sort of thing. I'm so sick of the MSM chant "Wow! The new floor is higher than the first cap!" as if the first cap was anything except a fairy tale number."

Benjamin's right in that the $39-million figure is a misnomer, an inaccurate reflection of revenues given what the league generated in 2003-04. It's interesting, though, that if we go with his $46-million figure, the cap would have remained essentially flat the first two years after the lockout before shooting up the way it has.

It's hard not to conclude that the league wanted a $50-million+ cap at this point given the way the calculations are determined. Throwing out that first $5-million increase in the cap, it has really only risen $12.7-million, $3- to $4-million of which is due to the currency change.
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