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October 20, 2018

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Next task for the Vegas Golden Knights: attract free agents

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Sam Morris/Las Vegas News Bureau

Vegas Golden Knights head coach Gerard Gallant and general manager George McPhee applaud the crowd during a Vegas Golden Knights Stick Salute to Vegas fan appreciation rally at the Fremont Street Experience Wednesday, June 13, 2018.

Since completing the most remarkable season for an expansion team in the NHL, George McPhee, the general manager of the Vegas Golden Knights, has had little time to rest on his laurels.

Less than two weeks after the Golden Knights’ stirring inaugural season ended with a five-game loss to the Washington Capitals in the Stanley Cup Finals, McPhee took home the NHL General Manager of the Year Award at the league’s season-ending award ceremony in Las Vegas.

McPhee then caught a flight to Dallas for the entry draft, where Vegas selected Russian forward Ivan Morozov first among its eight picks. McPhee’s next task is convincing free agents that Las Vegas is the place to be when the signing period begins Sunday.

“A year ago, everyone was wondering if hockey would work in the desert, and now we’re a fabulous hockey market,” he said.

Last year, McPhee constructed a roster nearly from scratch through the expansion draft. Now, he has about $30 million in cap space to play with in the next several weeks, but he faces a number of difficult decisions.

Despite their affinity for the fans and the city, forwards James Neal and David Perron, unrestricted free agents, are unlikely to be back. Nearly a dozen Knights players will be entering the final year of their current deals, including goaltender Marc-Andre Fleury. William Karlsson, the team’s leading goal scorer with 43, a more than sixfold increase from his previous season, is a restricted free agent and can file for arbitration by July 5.

The Knights may continue to pursue Ottawa Senators defenseman Erik Karlsson, a two-time Norris Trophy winner whom Vegas nearly acquired at the trade deadline.

The Knights appear to have lost out on the sweepstakes for marquee free agent John Tavares, but McPhee holds a trump card that few other general managers possess.

Sweeping changes to the federal tax code could create an additional sweetener for an elite free agent considering a team in a state that does not have a personal income tax. The tax reform package will create a substantial advantage in free agency for teams in Florida, Texas and Nevada, said Allan Walsh, an agent with Octagon Hockey.

By opting to sign with a team in a high tax jurisdiction, rather than one in a tax haven, a player making $14 million a year could incur a tax hit of as much as $4.5 million, a detailed analysis from Octagon found.

The tax considerations could entice top free agents to move to the desert and allow the Knights to retain their own stars. Fleury has said he hopes to end his career in Las Vegas.

Current players like Nate Schmidt are concerned about disrupting the team’s chemistry. Cast aside by their former teams, the players, known as the Golden Misfits, formed a close-knit locker room in large part by proving their doubters wrong. Away from the ice, numerous Knights players volunteered at blood drives in the community and met with emergency workers in the wake of October’s mass shooting.

Schmidt said he was looking for a certain attribute in each of his new teammates.

“If anyone does come in, they will be heavily vetted in the character department because that’s the most important thing with our group,” he said.

From a business perspective, Vegas’ successful first season will accentuate the honeymoon effect that typically lasts around three years for teams in nontraditional hockey markets, said Roger Noll, an emeritus professor of economics at Stanford University. The Golden Knights have sold out their season-ticket allotment for next season, but Noll predicted that the ultimate test for the city’s viability as a hockey town would come once the honeymoon ended.

If the Knights’ play regresses sooner than expected or if they can’t keep their stars because of the NHL’s hard salary cap, the team will have to retain its fan base through savvy marketing. And beginning in 2020, the Knights could face stiff competition for the local consumer’s dollar when the Oakland Raiders of the NFL are scheduled to move into their $1.8 billion stadium just off the Strip.

John Vrooman, a principal senior lecturer in economics at Vanderbilt University, noted that the Nashville Predators suffered a dip in attendance for a few years after the Tennessee Titans joined them in town.

Hoping to avoid some of the pitfalls that befell other expansion teams in the Sun Belt, the NHL designed favorable expansion rules for Vegas that could accelerate the Knights’ development.

“In effect, the league has reverse engineered its own perfect storm,” Vrooman said.

As long as the Knights are skating, scoring and defending at a Stanley Cup level, they could fend off a challenge from the Raiders, he said. The Knights can realistically hang with the middle of the NHL pack with current annual revenue of around $150 million, he added.

And an abrupt decline in the Knights’ on-ice performance is unlikely, said Pierre McGuire, a hockey analyst with NBC Sports. He added that Vegas could emerge as one of the league’s most respected franchises because of its strong ownership support, ardent fan base and entertaining up-tempo style employed by coach Gerard Gallant.

“This is going to be a destination location for players,” McGuire said.

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