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timdunkit wrote:Here is a quick guide to how FA works and I'll try to cover some of the hypothetical situations that most people wonder about. I wrote this guide more as a tool for you guys to use to figure out how the CBA works.
GoldDragpn has some corrections to my thread (mostly to do with numbers and additional cap-holds). Rather then changing everything, see his quoted post at the bottom. Also, stole his salary links
Important Links:
For Salaries: http://hoopshype.com/salaries/
http://www.basketballinsiders.com/nba-salaries/
http://www.spotrac.com/nba/cap/
For Longer CBA Faq: http://www.cbafaq.com/salarycap.htm
NBA quick guide CBA: http://www.nba.com/media/CBA101.pdf
Raptors Salaries: http://hoopshype.com/salaries/toronto_raptors/
Introduction:
The NBA has, what it is known, as a soft cap. In a hypothetical hard cap, a team would not be allowed to spend past a certain amount or the salary cap. However, the NBA has a soft cap and allows team to go above the salary cap in a variety ways, mostly using exceptions or trades.
There are 3 main check points for team salaries:
1) Minimum Salary Floor
The minimum salary floor is mostly irrelevant for our purposes. It is the minimum salary that a team must carry through the season (and it is currently set at 90% of the salary cap level). If a team is under that level, then they must distribute the difference among the players on the roster. This level does not affect FA or trades in any way.
2) Salary Cap
The Salary cap level is the most important and affects trades and FA. It is determined by the amount of money the NBA generates (or specifically, BRI*0.44/30 (BRI = basketball related income, 0.44 is 44% of that income and is the percentage the NBA/NBPA negotiated for, 30 for each team)). At the end of the year, teams below the salary cap level can choose to enter into free agency with cap-space (It's a choice and I will explain circumstances where it may not be as valuable to enter FA with cap-space) and teams whose salary for the new season are above the salary cap level, cannot enter FA with cap-space but are given exceptions so that they may still partake in FA.
3) Luxury Tax Threshold
In the previous CBA, the LTT was merely a tax on teams who spent too much. It's calculated the exact same way as the Salary Cap except at 53.5% instead of 44%. It was design to deter rich teams from taking advantages of their coffers and balance out spendings (as the proceeds of the tax are split among non-tax paying teams). However, in the last CBA, the tax was only $1 for $1. Meaning that for every $1 a team was above the LTT, it had to pay $1 to the system. This didn't act as a deterrence to the rich teams as the Mavericks, Lakers, Cavaliers, and Knicks constantly outspent other teams and gladly paid the tax for it. The tax also did not affect how they behaved in trades or FA.
After ramifications of the CBA, the LTT now affects how teams participate in FA and in trades. The tax is also punitive, unlike the last CBA. Meaning that the more a team is over the tax, the more it has to pay. For example, a team 4 mill over the tax will have to pay 1.50$ for each $1 it is over the tax but a team 10 million over the tax would have to pay $2.50. The CBA also added what is known as a Repeater Tax. If a team has had a team salary passed the LTT level for 3 out of the last 4 years, it will pay a premium for that. So a Repeater tax for being 10 million over the LTT is $3.50.
This wasn't the only changes to the LTT. The LTT now affects trade and FA and some of those things are:
1) Teams above the LTT lose the Bi-annual exception
2) Teams above the LTT get a smaller mid-level exception
3) Teams above the LTT cannot make a sign-and-trade (you also cannot sign-and-trade for a player if it takes you above the LTT)
So not only do teams have to pay a tax, they also lose some flexibility in terms of what they can do in off-season.
The Raptors are a non-tax team and so do not have to worry about these things for now.
Guide to FA, trades & Raptor Hypotheticals
I will now try to provide a guide on how to view FA, step-by-step, and explain some of the nuances of the CBA.
To keep the math simple, I will be using rounded numbers!
Step #1: Determine Team Salary
This one is pretty easy as it is practically done for you on many websites. I'll be using the numbers from here: http://www.basketball-reference.com/contracts/TOR.html since it includes Ross's extension.
BBRef has the Raptors team salary for next year at 82.7 million. But there is a caveat to this. It does not have Biyombo or DD opting out of their contracts (which they have an option to and will likely exercise it). Derozan makes 9.5 million and Biyombo 3 million. If both were to opt out, the Raptors team salary for next year would be 70.2 million.
Step #2: Determine Salary Cap/LTT
The next step in the process is to know what the salary cap level is. Now this is determined by the NBA and unless you have their numbers, it's impossible to know the exact amount. But people do make educated guesses at what the salary cap level (and the LTT in retrospect). The NBA signed a huge TV deal (leading to an increase in BRI) and many people expect the cap to rise as a result of the deal (along with growth of the sport). Most people guess it will be around 85 million and that's the level we will work with in most hypotheticals. but keep in mind, if that number goes up or down it can drastically change what your team is capable of doing.
Alright TD, if the cap is going up and the Raptors only have 70.2 million owed next year, why can't we go sign a FA for 15 million (hypothetical 85 mill cap - 70.2 million) and then retain Derozan or Biyombo using these things called bird rights and call it a FA. This is when step 3 kicks in ...
Step #3: Determine Cap-holds
This is probably the step that most people don't understand about the NBA and take for granted in FA. Before a team can partake in FA spending with cap-space, it forces them to deal with their own FA & exceptions in the form of cap-holds. For the most part, cap-holds are bothersome but, as I will show, teams have used them to their advantage at times.Side #1: For a team to gain a players bird rights, that player must have been part of the team for 3 years (or inherited a contract past 3 years).
For example, Derozan has been with the Raptors for 8 years, hence the Raptors own his bird rights.(Also, when you trade for a player, you also trade for their bird rights as well, as long the team trading that player has his rights. So player x does not have to be on your roster for 3 years if he is being traded to you).
BUT Biyombo, signed a 2 year deal and is opting out after 1 year. The Raptors do not own BIyombo's bird rights.
Is this a huge deal? YES! YES! YES!
One of the exceptions to being able to sign players above the salary cap is having their bird rights. The NBA allows its teams to retain players that they have owned the rights too even if it means going above the salary cap level or the LTT. However, for a player whose team does not have his bird rights, the team must use cap-space to sign that player (it is why you'll here rumblings that Miami will likely not be able to retain Hassan Whiteside).
Also, Bird rights allow teams to sign players to an extra 5th year and give them higher bonuses.You'll here this discussed when pundits compare 4 year vs 5 year max contracts.
For teams to access their salary cap-space, they must renounce the rights to all their FAs and exceptions. If a team does not renounce its right to FA or exceptions, then those take what is called a cap-hold.
In layman terms, the NBA is telling a team "look, tell us what you are going to be doing with all your FAs and exceptions before you use cap-space and if you don't tell us, we are going to slap you with a restrictions in the way of a cap-hold".
How much is the cap-hold? Well it is determined by the last salary of said player (a mini chart here: http://www.cbafaq.com/salarycap.htm#Q38).
For example, Derozan last year salary is 9.5 million and since it is above the average salary, his cap-hold is 9.5 million x 150% = 14.25 million. Biyombo also has a cap-hold of 120% (non-bird FA), which would be simply 3.6 million.
So the Raptors team salary looks like 88.05 million if we count the cap-holds of Derozan and Biyombo (I have not factored in JJ but he also has a cap-hold).
Now if we sign Derozan back, his cap-hold gets replaced with his actual salary. If we renounce Derozan's rights, his cap-hold gets removed BUT we lose his rights, and cannot sign him over the salary cap and can only sign him using our cap-space.Side-note #2: Taking advantage of cap-holds
Cap-holds look really bothersome but they can actually be an advantage in some circumstances. How so?
Well if the cap-hold of a player is smaller then the 1st year of his next contract, it makes more sense to have him on as a cap-hold, test out FA with cap-space and then resign your own player.
A real life example of this is what the Pistons are trying to do with Andre Drummond. As a rookie coming of a 4th year, his cap-hold is 250% of his last year salary (3.2 x 2.5 = 8 mill cap-hold. Drummond is going to get a max contract, surpassing that amount by a good 8-10 million.
Let's say for hypothetical sakes (this does not reflect real life), the Pistons had the potential for max 30 million in cap-space and Drummond was their only FA. Drummond's new salary let's say starts at 18 million. If he signed a contract, the Pistons would only have 12 million to play with in FA. But by not signing Drummond and leaving his cap-hold in place, the Pistons would have 22 million to play with in FA. Since they kept Drummond's rights (and cap-hold), they can now go over the salary cap to sign him to a contract.
The Raptors could have tried something like this with Ross/JV but they signed them to extensions. Is it a big deal? My guess is not because the Raptors knew they would likely re-sign Derozan and such micro-management becomes moot at that point. At this point, it's not worth debating it and what's done is done.
Before FA, every team also has access to certain exceptions to the salary cap. You've likely heard of them as the MLE (reduce for LTT teams), Bi-annual exception (not available for teams above the LTT) and any trade player exceptions the team has accrued. A team must give those up as well before being able to use cap-space. Unlike bird right FAs, there is no way to retain any of the exceptions; they must be renounced before using cap-space.Side Note #3: When is it not worth giving up your MLE?
Simple, when the cap-space you have is very little or below the MLE, then it is better to retain the MLE. For example, let's say that Derozan doesn't opt out and brings our commitment for next year to 80 million. If the Raptors wanted to maximize cap-space and renounced the MLE, they would only have 5 million to use with a salary cap of 85 million. But the MLE will be worth around 7-8 million and is likely more valuable as a tool in FA. In this case, it's better to retain the rights of your exceptions then lose them.
But one thing to keep in mind, this is where the salary cap level is IMPORTANT. If it was at 90 million, 10 > 8 million (+other exceptions) and then it becomes a debate of whether it is worth giving up the rights to our FA for the ability to spend an extra 2 million using cap-space.Side Note #4: Trade Player Exceptions (lay-men explanation)
Every trade creates a TPE but usually they are to small that people don't bother with them. How does this work? Well when you trade player X for player Y, it's not necessarily a direct swap (in my opinion). You take the higher aggregate salary of one side of the trade and that creates a TPE on both sides, where the players are absorbed into and the team taking less salary has a bit of the TPE remaining.
For example, let say you trade 18 million of salary for 16 million. An 18 million TPE get's created on both sides.The opposing team absorbs the 18 million salary it's receiving into the TPE created. You absorb 16 million into the TPE created on your end. BUT WAIT!! You only used 16 of the 18 million available, the remaining 2 million is the TPE you see created on team's salary books.
TPE's can be useful. In the past, the Lakers used a TPE from the Odom trade to sign Steve Nash (not possible today because the Lakers were a tax team at the time). Last year the Lakers used a TPE, created from their cap-space, to trade for Hibbert.
Step #4: Determine Cap-space
For the Raptors, there are a few hypothetical scenarios in how much cap-space it could have.
Like we said, the max space the Raptors could have is determined by what they do with Derozan. If he signs or moves on, we'll know what we can and can't do. The other caveat is where the salary cap will be. If it's at 85 million, then the Raptors could maximize their cap-space at 15 million. If the salary cap is higher or lower, that numbers along with it.
If we sign Derozan using his bird rights, we will likely not have any caps-space to use but will retain our MLE and any other exceptions. We can then sign Biyombo with our MLE (but chances are, he's going to command a lot more in FA).
If he walks, we can then try to sign Biyombo using cap-space or move on to another free agent.
Step #5: Have fun and a little on max contracts
Now you know how the CBA works, you can devise your own off-season some what informed.The word max contract get's thrown around a lot but is determined by the years of service.
0-6 years = 25% of salary cap
7-9 years = 30% of salary cap
10 years + = 35% of salary cap
If the cap is at 85 million, then the max contracts will be: 21.25, 25.5 and 29.75 million.
So Derozan's hypothetical max starts at 25.5 million.
Brief summary of trades:
Trades are really easy. Easiest way to check if a trade works is to use ESPN's trade machine: http://espn.go.com/nba/tradeMachine
The basics of it are that a aggregates salaries going in or out, must be within 125% of each + 100k. So you can't trade 10 million for 15 million but you can trade it for 12.5 million.
There are two exception to this rule. If you are trading a player for cap-space, then it must be equivalent to the cap-space the team has + 100k. The same is true for using TPE's to acquire players in trades (basically, no 125% rule).Gold Dragon wrote:Good job.
A couple of corrections.
1. The cap is projected to be 92M. The tax threshold projected to be 107M.
2. DD's salary was 10.15 because he made the all star game and hit a 0.65M bonus. His cap hold is 15.225M.
3. The calculations for max salaries uses a different "salary cap" than the normal salary cap calculation and ends up being less than the stated 25%,30%,and 35% numbers. Based on a 92M cap the projected maxes are:
4. The other cap holds to consider are our draft picks which will be around 3.2M if not stashed in Europe, early bird rights to JJ (3.25M), DeColo (1.9M) and 0.54M for every empty roster spot greater than 3. In the scenario where Ross, Bruno and Bebe are traded for 0 salary and our 2 picks are stashed in Europe, we have up to 18.1M to offer Biyombo or someone else while holding on to Demar's cap hold (see link below for other permutations). We can then sign Demar using his bird rights to go over the cap.
Cap holds and space made by salary dumping
In contrast if no salaries are dumped, our 1st rounders were not stashed overseas we would have only 3.6M of cap space if we don't renounce Demar's cap hold. It would be better to use the MLE of 5.6M in that situation than cap space. If we do renounce everyone including Demar, that gives us 18.8M to work with which isn't much when many teams in the league have about 40-60M in cap space this year.
Cap projections for all 30 teams
Contextualizing the 90+M cap
