Posted by: Kingsguru21 | April 17, 2010

NBA now projects salary cap at 56.1 million

Well, by now, you’ve heard the news that the new salary cap will be several million higher than originally projected. Henry Abbott had this post on TrueHoop regarding David Stern’s presser at the St Regis in NYC. Larry Coon had an analysis that pretty much skims the surface of what this news means.

Chris Sheridan said that there could be a luxury tax of somewhere around 68 million, and that’s the real news. This changes the ballgame for quite a few teams. (Note: I’m not saying the salary cap raise isn’t also big. It’s just that the luxury tax not going down as far as originally projected is just as important to more teams.)

So let’s get to it. First things first.

Is there a likelihood of players suing for collusion?

I’m not a lawyer. I know what collusion means, but no more or less. So, other than that this is just an educated guess based on a statement made by Billy Hunter that was put into Chris Sheridan’s piece:

“A memo of this nature can have a chilling effect on the market for free agent and rookie signings,” union director Billy Hunter said last July. “If it later turns out that the league did not have a good-faith basis for making these projections, the NBPA will pursue all available legal remedies, including a treble damages claim for collusion.”

Perception is reality. I think that NBA insiders will tell you that teams don’t spend for a variety of reasons. They will also most likely tell you that teams not spending will come in a variety of ways. Most teams will tell you that teams didn’t spend for multiple reasons:

A) the salary cap and luxury tax threshold went down
B) there wasn’t a major free agent on the market to sign
C) most of the spending that did happen came from teams who were near a championship and have paid a price this season to do so

Let’s do this in alphabetical order. Many teams around the NBA already, as a rule, don’t pay luxury tax as they view it as a bad business MO to do so. It gives teams who aren’t paying the tax, or frugal owners, a bigger advantage than they should. Thus, only a handful, sometimes 8, teams will pay the tax on any given season. (There was a record 12 teams paying luxury tax, and at one point there was 14 teams paying luxury tax until the Rockets & Hornets got under the tax line.) The history of the luxury tax on the current CBA suggests such.

B is just as important. There wasn’t a major FA to sign, and some of the bigger names like Charlie Villaneuva and Ben Gordon were signed by Detroit. Hedo Turkoglu signing in Toronto was also the biggest name signing of the summer. In some ways, Gordon & Villaneuva were lucky to get the deals they got considering the market environment. Other than Detroit & Toronto, there wasn’t a high profile team with cap space last summer either. It was a bad marketplace for players last summer. This year? You do the math.

C is a point most teams will tell you matters more than the first 2 points. If you’re going to spend, you might as well be a championship team and have a shot at winning a championship. That extra income, and there’s a lot of that from playoff tickets, can offset whatever is being paid out in luxury tax. Plus, there is always the escrow tax which is generally double what luxury tax is anyway. Every team gets escrow tax as it is.

Taking it back to Coon’s piece on ESPN, there was this interesting point he mentioned:

Teams near the tax line also are affected by Friday’s revelation. With a payroll of $70.4 million in January, the New Orleans Hornets held the equivalent of a fire sale, unloading Bobby Brown and Devin Brown to get below the projected tax threshold. Those moves might have been unnecessary, given today’s revised projections.

Now, the revised projection for next season had nothing to do with the Hornets making this deal. They were doing this to get under the tax THIS season.

While you’re chewing on that, and wondering why I mentioned why the players can sue for collusion, I bring it up for 2 reasons. The first is, to not belabor the obvious, is that many teams didn’t have any real money to spend this past off-season. One team, the Grizzlies, made a trade for Zach Randolph that meant spending more money this season than they had in years past. Yet that doesn’t keep Michael Heisley for campaigning for something anyway. And other than the Pistons, no team had any real money other than the Thunder. (Who chose to sat on their money during the summer. I think that was a wise decision.)

Basically what happened is that teams didn’t see the reason to spend money to spend money. And players generally have benefited from that more often than not in the past. Teams got smart, and Billy Hunter and the players are unhappy about it.

The second reason is a bit more complicated, and more strategic. Still, it should be simple to understand. Hunter and the Players Union recognizes that, like the perception that the players would take a hit in the upcoming 2011 CBA, is that there could be a perception that the need to depress salaries is the only way the NBA can survive. A looming litigation could alter the upcoming negotiations in the 2011 CBA. It could easily convince the owners to back off many of the stances that they currently are in belief of. Glen Taylor had this to say the other day (HT to Sonia Grover at Hoopus):

“Well, I’m hopeful. I don’t know if I’m optimistic, in the sense that I know that the issues that we are going to deal with are difficult ones. So that talking and working together, we can resolve and find some compromises, which is what we will have to do in the end.”

There was also this:

“It’s one of the things that we’re proposing and I think the players will look at,” Taylor said. “We are basically, as owners, saying, ‘There is so much money.’ And on the other hand, we’re saying to the players, ‘You probably have an opportunity to tell us how you want it distributed.’ I mean you can do it by giving it to the key players or you can do it by giving it to the veteran players, or you can average it out — or, as you indicated, you can give it to the rookies. I think [the players] need to have a say in that, and we’re looking for some leadership from them on that issue.”

Today hurts that very viewpoint. The players are going to use the salary cap not going down to dire proportions to use that against the owners. The threat of the lawsuit may be more effective than the actual lawsuit. If players file a lawsuit, and it has to be settled before a new CBA can be negotiated, that could stall things and create a situation where the owners and players have to agree on something. A lockout, this time around, could hurt the owners as much as the players. Just something to chew on.

Doesn’t this benefit teams like the New York Knicks and Miami Heat who are going after big free agents?

Yes, it does benefit them. As Coon mentioned though, the Knicks also had to give up Jeffries and Jordan Hill to get enough cap space to have max cap space. Here’s the problem with that reasoning: Hill & Jeffries make 9.5 million dollars next season combined. (This is assuming Jeffries picks up his option. He is almost 100% certain to do so.) Basically what this does for the Knicks is give them more room under the cap than they honestly thought at the beginning. They would have had to still throw Hill with Jeffries to get the deal they got from Houston.

This just gives Miami more cap room to work with in their impending quest to keep Dwyane Wade and build through Free Agency.

As Coon mentioned with Chicago, the Bulls also had to do some things to get enough room to have max salary cap room. However, like the Knicks, the Bulls wouldn’t have had max cap room without doing the deals they had. This only helps them in their quest to improve their franchise through Free Agency.

Teams like the Clippers and Kings benefit as they will have enough room to offer a max deal to a potential FA as well. The Wizards also have max cap room too. Basically, it just makes things easier to get a deal done over the summer is all.

The real winners, though, are the Thunder and the Timberwolves. Neither team had enough room under the cap to sign a max FA with the projected cap around 53.7 million, but now both teams have substantially more space to operate under the cap. This could mean either team can make a substantial offer to a Free Agent, or simply utilize their cap space to facilitate a trade using the cap space. This helps both teams substantially. Oklahoma City won’t even have cap holds (to speak of) in case they wish to use their cap space, and Minnesota won’t have one that won’t be occupied by a 2nd round pick they own in the draft. As I say, both teams are serious winners with the current cap projection. (Assuming that the projection holds true.)

How is this going to help the teams over the projected luxury tax for next season? What about the teams over the tax this season?

This is going to help teams that are over the tax as the luxury tax threshold rises when the salary cap goes up. Therefore the amount of tax a team pays goes down at the same time.

Teams like the New Orleans Hornets, who started about 7.5 million over the luxury tax line before yesterday’s announcement, and who are now under the line after repeated trades decreased their salary throughout this season, are at 71.75 million for their payroll next season. Having a 4 million dollar tax bill is significantly less than a 7 milliion tax bill (which is what would have happened if the luxury tax was around 65 million as it would have been if the salary cap was at 53.7 million or thereabouts).

Another team that benefits is Indiana. Right now, they’re at 65.7 million for next season. With a 1.865 million salary scale pick (or 120% of that to be more precise), Indiana won’t have to pay luxury tax with the impending rookie (10th overall assuming they don’t jump into the top 3) coming in. They had no room under the luxury tax under the old projections, but now there is still wiggle room for the team to maneuver.

Philadelphia is another team where they were over the luxury tax for next season, but now they have less tax to pay. It’s always easier to get under the tax when you’re a million over than when you’re 4 million over.

This will help Cleveland too. The last several years they have paid luxury tax by having multiple inflated salaries on their team (not counting LeBron) like Shaquille O’Neal and Zydrunas Ilgauskas. Without either guy making the same kind of money again, the Cavs can actually make trades and take on money that will get them near, or over even, the luxury tax and improve their team. Plus, the use of the Mid Level and Bi Annual exceptions are perfect for a team like Cleveland looking to upgrade.

Teams like Utah, Portland, Detroit, San Antonio and Charlotte will be helped as well as it gives them breathing room and they can let their expiring contracts expire rather than using them to get under the luxury tax if they were over. (Detroit and Charlotte were not likely to ever get over the tax at any point. Utah might go over the tax, even without the tax potentially being raised now, to re-sign Carlos Boozer. I doubt Utah would have done this, but still it should be noted.) San Antonio is near the luxury tax now, but it decreases their tax payment nonetheless.

Houston will be greatly helped by the salary cap being raised as they will likely be able to give Scola a big raise and not pay the luxury tax next year EITHER. (Note: The deal with the Knicks & the Kings allowed Houston to get under the tax for this season.)

Teams like Dallas, Orlando, Denver, LA Lakers are all helped by the higher threshold as it decreases their tax payment. In the case of Phoenix, the higher luxury tax threshold makes it less likely than any improvement (or blowing up in Phx’s case) will cost the team in a luxury tax payment.

******

The other part of this summer is the fact that multiple luxury tax payers will not be paying tax next season OR will be paying very little tax for next season.

The list of those teams are: Miami, New York and Cleveland. In Miami’s case, they have never been a big taxpayer. But in the cases of both Cleveland and New York, this is going to result in a big loss of luxury tax money for non paying tax teams. This is because Cleveland and New York have payed alot of luxury tax (New York especially) the last few seasons.

Will this affect trades at all?

I doubt it. Any time a team has an expiring contract, and any time there is big contracts out there, there is always the possibility that a team will consider doing a trade to help itself. Trades happen because teams have many motivations. Next year’s Free Agency probably won’t effect the trade market with the exception of teams being able to use cap space to do an uneven money deal. (Like the Zach Randolph for Quentin Richardson deal the Clipps & Grizzlies did last summer.)

There are teams out there who will likely make trades using expiring contracts as the main chips. One is the New York Knicks and Eddy Curry’s contract. Another team is the Milwaukee Bucks. A lot of people aren’t talking about this (probably because Milwaukee is not a team that has usually taken on money in trades), but Michael Redd has a fat 18 million dollar expiring contract. You couple this along with Dan Gadzuric and John Salmons (another 13 million combined in expiring contracts), and you could see the Bucks be a big player in the Free Agent/trade market.

One example of the Bucks using Redd’s contract to help them could be something like this: Rip Hamilton and Jason Maxiell for Redd’s contract. It helps Detroit get out of both of those deals. I’m not saying Detroit would do this, or that Milwaukee would. It’s just one area where the Bucks could use a big expiring contract to get a player or two that can really help them. Just the fact that there is more breathing room under the luxury tax likely will help this maneuver. Another possibility could be something like Andris Biedrins and Corey Maggette for Redd’s deal. There is plenty of possibilities out there. These are just a couple off the top of my head. I’m not implying anything is imminent. What am I saying is that the Bucks have the best situation to pull off deals using their expiring contracts. (Yet another reason to believe John Hammond is Executive of the Year.)

What is the best possibilities for the Kings out of this?

Well, the best possibility for a franchise level big player up front is still through the draft. (Cue the DeMarcus Cousins argument vs Derrick Favors here…..)

On the FA route, the Kings could sign Chris Bosh, David Lee, Amare Stoudemire, Carlos Boozer, and Luis Scola among others.

As far as Scola is concerned, he is a restricted FA and Houston can match whatever the Kings offer. They likely will.

With Boozer and Stoudemire, I don’t like Boozer because of his injury history and the fact that he is a total mercenary. He’s also not a shot blocker or a guy who will get you many stops defensively. (Utah is a total offensive team.) Plus Boozer will be 29 for most of next season. That age is just too old for an average roster age of 25 this season.

Stoudemire is a bit different in that he’s a worse rebounder than Boozer, and he’s just as injury prone. He’s also pretty insecure with his role and status at all times. (I don’t like appeasing players like Amare.) That’s true of a lot of players, but in general I’m not a fan of those high maintenance guys unless they are LeBron or Kobe. You factor in that Stoudemire’s defense is not anything to build a team around and I think he’s a no-no. His age is a little less of a factor than Boozer, but he will be 28 next season. Also, if you think Spencer Hawes is bad at rebounding get a whiff of Stoudemire over a course of the playoffs. See how many tough rebounds he gets in traffic. That’s one area where Boozer actually excels.

Chris Bosh is a player I’m not in love with, but the Kings will look at signing a guy like him because of his high production. I also think fans will go out and want to see Bosh every night. A possibility here is a S&T the Kings could pull off with the Raptors. It’s possible that a combination of draft picks, Carl Landry and Jason Thompson go to the Raptors in exchange for Bosh. (Bosh would be BYC which is why the money factor from the Kings end couldn’t be too high.)

I’ve already talked the Troy Murphy thing to death. Still, I think there is a strong possibility the Kings could trade JT for Murphy in a straight up deal. Because of the impending cap space, the Kings can make that deal and don’t have to match salary (or come within 125% of the salary to make it work).

David Lee is another possibility that I know fans love. I think the Kings will balance the need to bring in a player like Lee for more years (and money) vs the need to bring in a player like Murphy on a shorter deal. In the past Sam Amick has indicated that the Kings love both Lee & Murphy. So I wouldn’t rule one out over the other based on past indications from the Front Office.

What about Sign & Trades?

I already talked about the Kings, and I think they have the best potential of any team out there to complete a S&T with anyone else.

Other than the Kings though, the Nets, Wolves, Thunder and Wizards also could be players in this realm. (I haven’t talked about the Wiz much because much is unknown.) I don’t think the Clippers have much in the way of offering teams S&T’s, and I definitely know the Heat, Knicks and Bulls have little to offer in this realm as well. (I don’t see the Bulls offering any of their young players away.)

Does the salary cap not being lowered as much really hurt any team?

Again, I don’t think it does. For all the people (Prada isn’t alone) who are saying that New York or Chicago over played their hand, they had no idea (most likely) that the salary cap was not going to drop to the levels it was originally projected. Nobody ever said that the salary cap was a guarantee to go down or anything. There was just a memo telling teams bracing the possibility for it to go down. Well, it didn’t. So for all the hand wringing about where this ends up for different teams the reality is that it’s good for everyone. It’s good for teams with more salary committed next season, it’s good for teams wanting to re-sign players, it’s good for teams that were near the luxury tax and probably won’t pay it without costing them an arm & leg.

Also, with teams like Chicago and New York, I think doing those deals allowed each team to secure max cap space and peace of mind with it. That’s just as important as using hindsight to judge whether the NBA is doing right or wrong. (I don’t buy any rumor that the NBA is arbitrarily modifying their formula for BRI and calculating it so that it will help teams this summer. I actually plan on tackling this particular point tomorrow or over the weekend. It’s important since these conspiracy theories will be floating around the rumor mill.)

It will be popular to say that the NBA has screwed teams over in this announcement. But, like most things, there are the convenient arguments, the simple arguments and the honest to god truth. It’s up to you to figure out which is witch.

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Responses

  1. […] Evil Cowtown, Inc Chris Bosh is a player I’m not in love with, but the Kings will look at signing a guy like him because of his high production. I also think fans will go out and want to see Bosh every night. A possibility here is a S&T the Kings could pull off with the Raptors. It’s possible that a combination of draft picks, Carl Landry and Jason Thompson go to the Raptors in exchange for Bosh. (Bosh would be BYC which is why the money factor from the Kings end couldn’t be too high.) […]

  2. […] Evil Cowtown, Inc Chris Bosh is a player I’m not in love with, but the Kings will look at signing a guy like him because of his high production. I also think fans will go out and want to see Bosh every night. A possibility here is a S&T the Kings could pull off with the Raptors. It’s possible that a combination of draft picks, Carl Landry and Jason Thompson go to the Raptors in exchange for Bosh. (Bosh would be BYC which is why the money factor from the Kings end couldn’t be too high.) […]

  3. […] Evil Cowtown, Inc Chris Bosh is a player I’m not in love with, but the Kings will look at signing a guy like him because of his high production. I also think fans will go out and want to see Bosh every night. A possibility here is a S&T the Kings could pull off with the Raptors. It’s possible that a combination of draft picks, Carl Landry and Jason Thompson go to the Raptors in exchange for Bosh. (Bosh would be BYC which is why the money factor from the Kings end couldn’t be too high.) […]

  4. […] go higher and end up lower. And, this effects every team in the NBA some way. As I’ll show. I talked about this some in April, but I’ll reiterate some points with numbers that are more […]


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