NBA Salary Cap Blog

Max contracts link

2009-07-15T23:05:00.002-04:00

I found Christopher Reina's article on max contracts to be a concise and informative link.

Rubio updates

2009-07-15T22:41:00.005-04:00

Though I no longer have the Spanish skills to translate, apparently, this article states Rubio has accepted that if he plays in the NBA it will be with the Minnesota Timberwolves. Additionally, it is being reported that Rubio's issue is not so much playing in Minnesota, as it is about paying the Juventut buyout. Ric Bucher of ESPN is reporting Juventut wants no less than $4 million. Rubio will make about $600,000 less per year based on the slide from the third pick to fifth pick. Also, keep in mind the Wolves can pay up to $500,000 of the buyout. Rubio will have to pay a substantial amount of the buyout, but if he were picked higher in the draft, it would only make up a fraction of the difference.

Marbury update

2009-07-09T20:49:00.002-04:00

Previously, I blogged about Stephon Marbury using the NBPA as his agent. Now, Marbury is looking at his options to play basketball overseas. It is not clear whether Hal Biagas is still helping him with this endeavor, but it seems odd that Marbury could use the NBPA to negotiate an overseas contract. Would the NBPA help Josh Childress negotiate an extension? You have to wonder where the NBPA will draw the line.

For a contrarian view (to mine), see the Sports Law Blog. Michael McCann posts about Marbury's recent use of the players' union and fellow blogger, Rick Karcher, has written a law review article advocating the use of the union as agents for the individual players. I always thought this was an interesting idea, but never thought it was realistic. I guess I will have to check out Karcher's article now.

Salary Cap for 09-10 set

2009-07-08T21:26:00.003-04:00

The NBA is setting the 2009-2010 salary cap at $57.7 M. Of potentially bigger news, the NBA is forecasting next year's salary cap at between $50.4M and $53.6M.

Also, not surprisingly, the NBPA is upset. Of course, there is no reason why the players should not share in the economic downturn. With guaranteed contracts, they have supreme job security. Additionally, the NBPA negotiated the CBA.

For more reading see: http://sports.espn.go.com/nba/news/story?id=4312837.

This link did a good job of breaking down some of the effects of the lowered salary cap and escrowed funds. The owners hedged their exposure for what was probably a very unlikely condition. I know the first time I read about the escrow system I thought it would never apply.

Stephon Marbury

2009-06-28T21:21:00.004-04:00

Apparently, Stephon Marbury will enter the free agent market this summer without an agent. Marbury used the services of the NBPA to negotiate his buyout from the New York Knicks last season. Satisfied with the previous services, he plans to use the NBPA services again this summer. It should be noted the NBPA is not charging a fee; I wonder how long such a practice would continue if more players try such an approach.

Defining International players (Not Jennings or Calathes)

2009-06-12T21:40:00.009-04:00

International players are defined as a player who has maintained a permanent residence outside of the US for at least three years prior to the Draft, who has never previously enrolled in a college in the US, and who did not complete high school in the US. Article X, Section 1(c).

Should the NBA consider expanding its definition of an international player? The current definition excludes players like Josh Childress (does not meet any of the three requirements), Brandon Jennings (he only meets the collegiate requirement), and Nick Calathes (does not met any of the three requirements). While, it has at least been rumored Childress was able to sign a contract without a buyout, it is widely rumored Jennings and Calathes had no such luck. Even worse, it appears that both were incorrectly advised an NBA team would pay the buyout or at least the first $500,000. Though Sonny Vaccaro was not the only person that thought an NBA team would pay the buyouts or at least part of the buyouts, it does not make the incorrect advice the players received less troubling.

As players struggle to gain leverage through lucrative offers from opposing NBA teams, they may look abroad for competing offers. Once scoffed at, Josh Childress, Earl Boykins, Nick Calathes, and others are bringing validity to this threat. It may become a particularly interesting option for players with limited options due to restricted free agency, like Josh Childress. Further, as team salary budgets are expected to decrease in the next two years, players are increasingly likely to be offered higher compensation abroad. The current narrow definition of an international player will offer these players no relief when faced with the buyout from their European team.

Who should bear this burden? Currently, the players (non-international players), even if they are incorrectly advised, must pay their entire buyout. While the players are highly compensated, and in some cases compensated so that they buyout may not be an issue, it will likely remain a factor in their decision to return to the NBA. The NBA's question is how much it desires to have these players in the NBA. Is David Stern as unconcerned as he claims or does the NBA seek to have the world's top players in its league?

Buyouts of European contracts (Ricky Rubio's burden)

2009-06-08T21:44:00.016-04:00

The buyouts of European player services contracts are becoming increasingly important in the NBA. The NBA currently allows NBA teams to pay an amount not exceeding $500,000 to a basketball team other than an NBA team or to another entity to induce an international player to enter a contract with the NBA team. NBA CBA Article VII, Section 3(e)(1). Should the NBA consider increasing this amount in its next collective bargaining negotiation?

This low amount may raise issues relating to NBA prospect Ricky Rubio of Spain. Rubio is widely regarded as the second best prospect in this year’s NBA draft. However, Rubio’s buyout from DKV Juventut is rumored to be 4.75 million euros (approximately $6.6 million) and rises to 5.75 million euros ($8 million) after June 30. With NBA teams not allowed to pay an amount exceeding $500,000, Rubio will be individually responsible for the balance of the buyout.

Rubio has unsuccessfully attempted to negotiate a lower buyout with Juventut. The buyout is particularly burdensome for the young Rubio because he earned approximately $97,000 for his play this past season. Rubio's next step may be litigation, though it appears he will attempt to arbitrate the matter first. Because NBA teams may not contribute an amount exceeding $500,000, Rubio will be forced to almost solely to pay the buyout to Juventut. Should the NBA ease the path for talented players such as Rubio by raising the amount an NBA team may contribute to an international player's buyout, or would it weaken the league by making it easier to transfer team money abroad?

It is also rumored Rubio may attempt to use the liability as leverage. Rubio is not required to play in the NBA after being drafted and can continue to play for Juvenut in Spain. Rubio may claim he can not garner the endorsements necessary to pay for such a buyout in certain NBA markets. Rubio would attempt to parlay the buyout into selecting his own NBA team. However, this scenario appears to be conjecture that has not materialized.

Rubio's situation illustrates the need to increase the amount of a buyout which an NBA team may pay. Increasing the amount of a buyout may not give the NBA much leverage in future collective bargaining negotiations, however the league would be wise to ease the immigration of foreign basketball players to the league. The league should seek minimal barriers for the world's best players to participate in the NBA.

John Wall to the NBA

2009-04-16T20:22:00.015-04:00

With rumors swirling that high school phenom John Wall would declare for the NBA Draft, as opposed to playing in college for at least one year or following the path of Brandon Jennings in Europe, I decided to determine whether he is draft eligible.

The answer regarding Wall's NBA eligibility is not so clear. The relevant provision is NBA CBA Article X, Section 1(b). To be eligible for the NBA Draft, must satisfy all requirements of Section 1(b)(i) and one of the requirements in 1(b)(ii). Section 1(b)(i) requires the player be at least 19 years of age during the calendar year of the draft, and if he is not an international player, at least one NBA season must elapse after the player’s graduation from high school, or, if the player did not graduate from high school, since the graduation of the class with which the player would have graduated had he graduated from high school. Section 1(b)(ii) includes a laundry list of possibilities that seem to be entirely encompassed within the Section 1(b)(i) requirements. Additionally, Wall would potentially qualify under Section 1(b)(ii)(F), if he merely expresses his desire to be selected in the draft in a writing received by the NBA at 60 days before the draft.

The gray area results from the language of Section 1(b)(i). Wall will turn 19 this September so he satisfies the requirement in Section 1(b)(i)(A). However, Wall is a "5th year senior." Apparently, Wall transferred during his third year of high school to Word of God in Raleigh, NC, where he was "reclassified as a sophomore." So now, there is the argument that Wall was in the High School Class of 2008, not 2009.

Section 1(b)(i)(B) contemplates two possibilities: that a player graduated from high school or that he did not graduate from high school. The first possibility is that one year has elapsed from the player's high school graduation. This possibility is more clear cut. If John Wall did not graduate last year he simply does not meet this threshold. I assume he did not receive a diploma and continue at Word of God for another year. So, the second possibility contemplates a player who did not graduate from high school. Quite simply, Wall would have to drop out to even be considered under this possibility. This possibility further requires that one year elapses from the year the player would have graduated from high school. Obviously, this possibility is vague. If Wall "would have" graduated from high school that could be 2008 or 2009 (or 2010. . .). However, looking at this possibility as of today, the appropriate year is 2009. As of today, if Wall would have graduated from high school it would be this year. We are certain that he would not have graduated in 2008; he did not and he continued his high school education. I believe this is the correct interpretation of some gray language and likely how the NBA would rule. Of course, in a somewhat similar context, the NFL counts a year at a prep school or military graduation after high school graduation as a year toward its three year waiting period (I believe Larry Fitzgerald was the first player to use this loophole and it was speculated it was allowed merely because the NFL thought Fitzgerald was ready).

Fortunately, Wall has answered the question himself, he is not planning to enter the NBA Draft. Of course, Wall has only answered this question as it applies to himself, and in another year, the NBA may see Maurice Clarett-type litigation.

Following up on that HORSE trophy. . .

2009-02-19T22:11:00.005-05:00

So, for winning the HORSE contest Kevin Durant won a trophy, he was expecting a better trophy. Let's hope he also was awarded $35K too.

In Honor of All-Star Weekend. . .

2009-02-14T22:00:00.007-05:00

Did you know that any player selected to play in the All-Star Game is required "to attend and participate in one (1) All-Star Skills Competition," conducted during the All-Star weekend? NBA CBA Article XXI, Section 1(a). Of course, the language is poorly drafted as it is impossible for each player selected to play in the All-Star Game to participate in a Skills Competition because there are less than twenty-four Skills Competition participants. Ostensibly, the intent is that any player selected to play in the All-Star Game is required to participate in a Skills Competition if selected to participate in a Skills Competition.

     Also, it should be noted that there are four exceptions to this interesting requirement of players selected to play in the All-Star Game. First, this requirement does not apply to the Slam Dunk Competition. Second, players who are officers or representatives of the Players Association shall not be precluded from attending the Players Association's annual meeting during All-Star Weekend. Third, no player can be precluded from attending the Players Association's All-Star party. And finally, a player is not required to participate in a Skills Competition if he is excused from participation by the Commissioner who has broad discretion in such a decision.

     Now, on the lighter side, how much the NBA value the performance of the players during All-Star Weekend? Here is the amount of money awarded to players for their participation or performance:

     Players on the winning team in the All-Star Game- $35K
     Players on the losing team in the All-Star Game- 15K

     Players on the winning team in the Rookie-Sophomore Game- 15K
     Players on the losing team in the Rookie-Sophomore Game- 5K

     1st Place in the Slam Dunk Competition- 35K
     2nd Place in the Slam Dunk Competition- 22.5K
     3rd Place in the Slam Dunk Competition- 16.125K
     4th Place in the Slam Dunk Competition- 16.125K

     1st Place in the Three-Point Shootout- 35K
     2nd Place in the Three-Point Shootout- 22.5K
     3rd Place in the Three-Point Shootout- 16K
     4th Place in the Three-Point Shootout- 4.5K
     5th Place in the Three-Point Shootout- 4.5K
     6th Place in the Three-Point Shootout- 4.5K

     1st Place in the Skills Competition- 35K
     2nd Place in the Skills Competition- 22.5K
     3rd Place in the Skills Competition- 9K
     4th Place in the Skills Competition- 9K

     Winning team in the Shooting Stars- 45K
     2nd place team in the Shooting Stars- 33.75K
     3rd place team in the Shooting Stars- 16.875K
     4th place team in the Shooting Stars- 16.875K

I do not know what Kevin Durant was awarded for winning HORSE, but I am guessing 35K.

Miami-Toronto

2009-02-13T22:29:00.007-05:00

Miami
In: Jermaine O'Neal ($21.3525 M) and Jamario Moon (.711517*)
Out: Shawn Marion (17.18) and Marcus Banks (4.176)

Toronto
In: Shawn Marion (17.18*) and Marcus Banks (4.176)
Out: Jermaine O'Neal ($21.3525 M) and Jamario Moon (.711517)

*- expiring contracts

     First, both teams are over the salary cap and require a trade exception to complete this trade. The most commonly used trade exception is the simultaneous traded player exception. The simultaneous traded player exception is codified in Article VII, Section 6, subsection h(1)(i), of the NBA's Collective Bargaining Agreement. Under this exception, a team may simultaneously acquire post-assignment salaries that are no more than an amount equal to 125% plus $100,000 of the team's pre-trade salary.

    However, determining whether a trade fits within the simultaneous traded player exception is simpler than interpreting the CBA's language may sound. In the vast majority of trades, one team will acquire more salary than it is assigning and the other team will assign more salary than it acquires. In this situation, the team that assigns more salary than it acquires will fit within the simultaneous traded player exception because it is acquiring less than 100% of its pre-trade salary, let alone an amount no more than equal to 125% plus $100,000 of the team's pre-trade salary. To determine whether the team that acquires more salary than it assigns fits within the simultaneous traded player exception requires a calculation. Take the amount of salary that the team is assigning and multiply this number by 1.25 and then add 100,000. If this number is equal to or exceeds the amount of salary which the team is acquiring in the trade, then the simultaneous traded player exception applies. This inquiry will resolve most trades that involve teams whose total salaries exceed the salary cap.

     In this trade, Toronto is assigning more salary than it is acquiring. Therefore, Toronto fits within the simultaneous traded player exception. Miami is acquiring more salary than it is assigning. So, a further calculation is required to determine if Miami also fits within the simultaneous traded player exception. Miami is assigning $21.356 M in salary and is acquiring $22.064017 M in salary. 21,356,000 multiplied by 1.25 plus 100,000 equals 26,795,000. Because 26,795,000 exceeds 22,064,017, Miami also fits within the simultaneous traded player exception. Because both teams fit within an exception this is a legal trade.

Cleveland-Milwaukee-OKC trade

2008-08-14T10:03:00.003-04:00

Cleveland
In: Maurice Williams ($8.353 M)
Out: Joe Smith (4.795) and Damon Jones (4.460186)

Milwaukee
In: Luke Ridnour (6.5), Damon Jones (4.460186*), and Adrian Griffin (1.711*)
Out: Maurice Williams (8.353) and Desmond Mason (5.3)

Oklahoma City
In: Joe Smith (4.795*) and Desmond Mason (5.3*)
Out: Luke Ridnour (6.5) and Adrian Griffin (1.711)

*- expiring contracts

     This trade is fairly bland from a CBA perspective. All three teams are over the salary cap, so each team must have a trade exception. Cleveland and Oklahoma City will both use the simultaneous traded player exception. Under the simultaneous traded player exception, when a team is over the salary cap it may receive up to 125% +100K of the salary that it assigns. Both teams fit within this exception and will use the simultaneous traded player exception.

     Milwaukee, also over the salary cap, may use the non-simultaneous traded player exception. The non-simultaneous traded player exception is available when a team assigns a single player and the salary it receives is less than 100% + 100K of the assigned player's salary. Additionally, even though Milwaukee assigned two players, a team can reorganize a multi-player trade into single player trades to fit within the non-simultaneous traded player exception. Any amount less than the assigned player's salary may be used in a later trade in what is commonly termed a "trade exception." More accurately, the later acquisition simply completes the previous trade.

     Here, Milwaukee will organize this as two trades. One trade is Desmond Mason for Damon Jones and the second trade is Maurice Williams for Luke Ridnour and Adrian Griffin. In both trades, Milwaukee is only assigning one player. Additionally, Milwaukee recieves less salary than it assigns in both trades. Therefore, Milwaukee actually creates two non-simultaneous traded player exceptions that may be used in future trades. Unfortunately, the non-simultaneous traded player exceptions are only for $839,814 and 142,000. Also, the non-simultaneous traded player exceptions can not be combined.

Welcome

2008-08-13T01:11:00.003-04:00

I am starting this blog for many reasons. I intend this blog to answer questions about the NBA salary cap. As a fan, it can be frustrating to follow and understand the inner-workings of the increasingly complex salary cap. Adding to the confusion, many reporters do not report transactions with precision. I hope to help NBA followers understand the NBA salary cap.

Please feel free to ask any questions!