JR Smith contract impasse/Bird Exception Proration

[jaywalkszzz]

I doubt it will ever get to this, but if JR Smith holds out far into the season, are there any pressing deadlines for JR Smith or the Cavs that would affect his salary & the Cavs’ cap hit?

According to http://www.cbafaq.com/salarycap.htm#Q26 :

Starting January 10 (February 10 in 2011-12) of each season, the Mid-Level (Non-Taxpayer, Taxpayer and Room), Bird (Larry Bird, Early Bird and Non-Bird) and Bi-Annual exceptions begin to pro-rate2 (reduce in value). For example, if there are 170 days in the season, then these exceptions reduce in value each day by 1/170 of the amount remaining on January 10. So if a team had a $5 million Non-Taxpayer Mid-Level exception and spent $1 million before the start of the season, then on January 10, and each day thereafter, it would reduce in value by 1/170 of $4 million, or $23,529. If the team signs another player on February 1 for $1 million, the daily pro-ration would still be 1/170 of $4 million.

So can JR hold out until January 21 and still earn his reported asking price of ~$15M for the 2016-2017 season (I’m disregarding his multi-year demands in this question)?

For instance, is it possible to sign on January 21 via his Bird Exception to a one-year “35% max” rest-of-season contract of $30,963,450, which pro-rates down to $14,935,450 because there’s 82 days remaining out of the 170 days in the season?

Also when is the last day JR can sign with the Cavs to be eligible for the 2016-17 playoff roster?

According to http://www.cbafaq.com/salarycap.htm#Q65 :

If a team requests waivers on a player after March 1, the player is ineligible to be included in the playoff roster of any team that subsequently acquires him.

However, what if JR signs with the Cavs as a free agent after March 1, but before April 12 (Cavs last regular season game), will he be eligible for the playoffs (assuming the Cavs make the playoffs of course)?

[DBoys]

The simple answer is that there really aren't any deadlines.

1 Whatever amount he signs for, that's what he gets paid, regardless of how many days are left in the season. IOW if he signs for 15M with 1/3 of the season left, he will get paid 15M not 5M.

2 Since he wants a multi-year deal averaging 15-ishM per year and his Bird exception is far bigger than that amount, CLE will have the cap freedom to offer him that big of a multi-year deal at any time, even until the very last week of the season.

3 (Assuming he doesn't sign elsewhere and then gets waived in the interim) There is no playoff restriction if he waits and then signs with CLE at any point, up to the last day of the season.

4 Neither side is bound to the other. There's nothing that says he can only sign with CLE, or that CLE must save a roster spot for him and sign him, so the only thing that will keep them from a deal is the inability to agree on a number.

[jaywalkszzz]

1 Whatever amount he signs for, that's what he gets paid, regardless of how many days are left in the season. IOW if he signs for 15M with 1/3 of the season left, he will get paid 15M not 5M.

According to http://www.cbafaq.com/salarycap.htm#Q29:

"A "Rest-of-Season" contract is exactly what its name implies -- it is a contract signed after the start of a season, which is in effect for the remainder of that season.

With the exception of minimum-salary contracts, salaries do not pro-rate during the season. However, the exceptions that enable players to be signed are subject to pro-ration."

So if JR signs a "35% max" rest-of-season contract via the Bird Exception on 4/12/17 (Cavs' last regular season game), shouldn't it pro-rate down to $182,138 (1/170 of $30,963,450)?

[jaywalkszzz]

1 Whatever amount he signs for, that's what he gets paid, regardless of how many days are left in the season. IOW if he signs for 15M with 1/3 of the season left, he will get paid 15M not 5M.

According to http://www.cbafaq.com/salarycap.htm#Q29:

"A "Rest-of-Season" contract is exactly what its name implies -- it is a contract signed after the start of a season, which is in effect for the remainder of that season.

With the exception of minimum-salary contracts, salaries do not pro-rate during the season. However, the exceptions that enable players to be signed are subject to pro-ration."

So if JR signs a "35% max" rest-of-season contract via the Bird Exception on 4/12/17 (Cavs' last regular season game), shouldn't it pro-rate down to $182,138 (1/170 of $30,963,450)?

http://www.cbafaq.com/salarycap.htm#Q25 also states "LARRY BIRD EXCEPTION...Starting January 10 of each season, this exception begins to reduce in value."

[DBoys]

I'm not sure what your question is, but it appears you are confusing contract size and exception size.

Most cap exceptions, which allow the team "permission" to go over the cap, begin to be prorated.

But the contract is NOT the exception. The team signs the player for X dollars, they must have a cap ability of some sort or another to offer that amount, but whatever the amount is, "salaries do not pro-rate during the season" (as you just quoted). So if they write the contract for 15M and he signs on Nov 30 or Jan 30 or Mar 30, he's getting paid 15M.

And, as I already answered for you, CLE will have the ability to offer Smith that 15M average salary regardless of how long it takes before he gets signed. That was what you wanted to know, right? There's your answer.

[jaywalkszzz]

I'm not sure what your question is, but it appears you are confusing contract size and exception size.

Most cap exceptions, which allow the team "permission" to go over the cap, begin to be prorated.

But the contract is NOT the exception. The team signs the player for X dollars, they must have a cap ability of some sort or another to offer that amount, but whatever the amount is, "salaries do not pro-rate during the season" (as you just quoted). So if they write the contract for 15M and he signs on Nov 30 or Jan 30 or Mar 30, he's getting paid 15M.

And, as I already answered for you, CLE will have the ability to offer Smith that 15M average salary regardless of how long it takes before he gets signed. That was what you wanted to know, right? There's your answer.

I'll take your word for it regarding the JR Smith scenario, but now I'm confused by the CBAfaq quote: "Starting January 10 (February 10 in 2011-12) of each season, the Mid-Level (Non-Taxpayer, Taxpayer and Room), Bird (Larry Bird, Early Bird and Non-Bird) and Bi-Annual exceptions begin to pro-rate2 (reduce in value)."

How does a Bird exception begin to pro-rate or reduce in value?

[DBoys]

"How does a Bird exception begin to pro-rate or reduce in value?"

The FAQ tells you the formula (when it starts and how it is calculated) for how the pro-rated reductions in exceptions work. And you have already posted that info here in this thread.

1 Maybe what you are missing - even though I keep saying it to you as a primary point - is that none of the exceptions are designed to pro-rate down to 0 by the end of the season.
2 I'll say it again another way - - because of the way the formula is set up, on the final day of the season they will still be at maybe 43-46% of the original amount (depending on the date the season ends).
3 Or maybe this will help - - pull out a calendar, along with the formula as cited in the FAQ, and do some actual calculations, and maybe that will make it easier for you to see.

[jaywalkszzz]

"How does a Bird exception begin to pro-rate or reduce in value?"

The FAQ tells you the formula (when it starts and how it is calculated) for how the pro-rated reductions in exceptions work. And you have already posted that info here in this thread.

1 Maybe what you are missing - even though I keep saying it to you as a primary point - is that none of the exceptions are designed to pro-rate down to 0 by the end of the season.
2 I'll say it again another way - - because of the way the formula is set up, on the final day of the season they will still be at maybe 43-46% of the original amount (depending on the date the season ends).
3 Or maybe this will help - - pull out a calendar, along with the formula as cited in the FAQ, and do some actual calculations, and maybe that will make it easier for you to see.

Sorry, I'm still a little hung up on the JR Smith example. To quote your earlier example "if he signs for 15M with 1/3 of the season left, he will get paid 15M not 5M".

I did pull up the formula and did some calculations, and I do see now that it does not pro-rate down to zero by the end of the season. However, with ~1/3 of the season left (or by day 114 out of 170), it seems if he signs for $15M via Bird, he will get paid the pro-rated amount of ~$11.7M.

My math:
https://docs.google.com/spreadsheets/d/16BICcHtlFUbPICId8E-GwOfB8bJ_OtJsCWqPzfyJjBQ/edit?usp=sharing

I could be wrong though. I checked w/ Bobby Marks to clarify

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Thanks for your help.

[DBoys]

Bobby Marks gave you the correct answer, if his understanding of your question was that the original size of the Bird Exception was 15M, and the player (with about 1/3 of the season left) was signing for as much as allowable using that Bird Exception.

But it wasn't quite right, when you took that limited answer (based on a hypothetical inferring a 15M starting Bird Exception) and apply it more broadly.

For example, with JRS's Bird Exception being $31M to start, then on Mar 1 it still allows an exception up to about $22M (very broad guesstimate). If they sign him that day to a $15M deal, it's well below the exception so it is an allowable contract to offer, and once signed he'd be getting paid that entire $15M he signed for, rather than a prorated portion of that amount.

If you still have any fuzziness in getting it, maybe you'd turn it around and simply tell Marks that JRS's Bird Exception is for $31M, and ask him how late in the year JRS can sign for (and get paid) at least $15M from CLE, and see what he says.

Also, notice that as we speak, at $15M JRS is asking for less than half of his current Bird Exception of about $31M. So there's a long way to go before that Exception is pro-rated down to below $15M.

And to be more specific on how late in the year he can still get the 15M-average deal:
- For a one-year deal, that "last date CLE can give him at least 15M" would be roughly Apr 8.
- For a two-year deal, that "last date CLE can give him an average salary of at least 15M" would be roughly Apr 10.
- For a three-or-four-year deal, that "last date CLE can give him an average salary of at least 15M" would be Apr 12.

[DBoys]

If a player signs for $10M, he gets paid $10M. And if you want an extreme example, let's say CLE had enough cap room (where they aren't using an exception to sign JRS), and wanted to sign him on the last day of the season. In that situation, they could sign him for an amount up to $30,963,450 (max) and he would get paid that full amount for that one day's work.

What keeps teams from doing that, besides the fact that they aren't stupid and frivolous with their money, is that most of them are over the cap by the time they get to the last part of the season, and the only way they can sign a player is to fit them within what's allowed by an exception. Thus, it looks like the contracts are getting pro-rated down, when instead it's the exception that allows the contract that has gotten smaller and necessitated a smaller number on the contract. (Sometimes they may simply write "minimum" on the contract, rather than a number, but by definition, as the minimum pro-rates down, that word would be denoting a smaller number.)

[jaywalkszzz]

Bobby Marks gave you the correct answer, if his understanding of your question was that the original size of the Bird Exception was 15M, and the player (with about 1/3 of the season left) was signing for as much as allowable using that Bird Exception.

But it wasn't quite right, when you took that limited answer (based on a hypothetical inferring a 15M starting Bird Exception) and apply it more broadly.

For example, with JRS's Bird Exception being $31M to start, then on Mar 1 it still allows an exception up to about $22M (very broad guesstimate). If they sign him that day to a $15M deal, it's well below the exception so it is an allowable contract to offer, and once signed he'd be getting paid that entire $15M he signed for, rather than a prorated portion of that amount.

If you still have any fuzziness in getting it, maybe you'd turn it around and simply tell Marks that JRS's Bird Exception is for $31M, and ask him how late in the year JRS can sign for (and get paid) at least $15M from CLE, and see what he says.

Also, notice that as we speak, at $15M JRS is asking for less than half of his current Bird Exception of about $31M. So there's a long way to go before that Exception is pro-rated down to below $15M.

And to be more specific on how late in the year he can still get the 15M-average deal:
- For a one-year deal, that "last date CLE can give him at least 15M" would be roughly Apr 8.
- For a two-year deal, that "last date CLE can give him an average salary of at least 15M" would be roughly Apr 10.
- For a three-or-four-year deal, that "last date CLE can give him an average salary of at least 15M" would be Apr 12.

Ahh I see. I think I’m getting it.

I don’t mean to nitpick the specifics, but just to gauge my understanding of the concept that you’re trying to explain, I edited what you wrote (your quotes are in bold & italics). My edits are underlined.

And to be more specific on how late in the year he can still get the 15M-average deal:
- For a one-year deal, that "last date CLE can give him at least 15M" would be roughly Apr 8.

On April 8, the maximum allowable pro-rated exception would be $14,753,168
On April 7, the maximum allowable pro-rated exception would be $14,935,306
On April 6, the maximum allowable pro-rated exception would be $15,117,444

So technically, “for a one-year deal, April 6 is the last date CLE can give him at least $15M”.

- For a two-year deal, that "last date CLE can give him an average salary of at least 15M" would be roughly Apr 10.

On April 10, the maximum allowable 2-year average would be $14,928,475.
On April 9, the maximum allowable 2-year average would be $15,117,44.

So technically, “for a two-year deal, April 9 would be the last date CLE can give him an average salary of at least $15M”.

- For a three-or-four-year deal, that "last date CLE can give him an average salary of at least 15M" would be Apr 12.

Agreed.

To better depict JR Smith’s situation, I created a doc that takes into account his current maximum allowable Bird Exception of $30,963,450.

“Year 2”, “Year 3”, “Year 4” are calculated based on 7.5% raises off the Year 1 base.

I highlighted in green, the specific dates that you gave and I bolded in red the nitpicking I referenced above.

https://docs.google.com/spreadsheets/d/100PT5yt-D5r9586qUYvggl6ya1YXC5Om3ENKAn6OxTc/edit?usp=sharing

[DBoys]

The question you asked was "...if JR Smith holds out far into the season, are there any pressing deadlines for JR Smith or the Cavs that would affect his salary & the Cavs’ cap hit?"

And the answer, as I told you from the get-go, is simply:

"No, there are no real deadlines."

Yes of course I ball-parked the exact final date (which is why I used the word "about"), because I didn't see the point of chasing exactness on something that's moot. It's not as if CLE is going to offer 15M for a few days play, when they have no desire to offer it for a full season. Nor is there any chance that they and JRS might somehow be screwed by passing a certain date, since the worst consequence possible is a deal whose limit is smaller by nickels and dimes (as if).

It's an issue of understanding and applying the concepts, which (as I've been telling you) are:
1 Exceptions and contracts are not the same.
2 Exceptions (some of them) get pro-rated at a certain point. But salaries do not pro-rate during the season.

[HartfordWhalers]

The question you asked was "...if JR Smith holds out far into the season, are there any pressing deadlines for JR Smith or the Cavs that would affect his salary & the Cavs’ cap hit?"

And the answer, as I told you from the get-go, is simply:

"No, there are no real deadlines."

Yes of course I ball-parked the exact final date (which is why I used the word "about"), because I didn't see the point of chasing exactness on something that's moot. It's not as if CLE is going to offer 15M for a few days play, when they have no desire to offer it for a full season. Nor is there any chance that they and JRS might somehow be screwed by passing a certain date, since the worst consequence possible is a deal whose limit is smaller by nickels and dimes (as if).

It's an issue of understanding and applying the concepts, which (as I've been telling you) are:
1 Exceptions and contracts are not the same.
2 Exceptions (some of them) get pro-rated at a certain point. But salaries do not pro-rate during the season.

{Minus minimum contract salaries, which only matters in this case if we are pivoting and now talking about JR Smith joining the Warriors...}

[jaywalkszzz]

The simple answer is that there really aren't any deadlines.

4 Neither side is bound to the other. There's nothing that says he can only sign with CLE, or that CLE must save a roster spot for him and sign him, so the only thing that will keep them from a deal is the inability to agree on a number.

Touche to your no “deadlines” answer and I get my "exception size" & "contract size" confusion. I renamed this thread to “JR Smith contract impasse/ Bird Exception Proration.

Seems like JRS doesn’t have much leverage in these negotiations unless Denver (~$14M cap space), Brooklyn (~$16M cap space), or Philly (~$19M cap space) offers him a contract. However, those teams (if they even want JRS) have the leverage to wait ~2/3 into the season and see if they can even contend for the playoffs or “start building for the future” (AKA tanking).

The Cavs also seem like they are playing hardball with the Toney Douglas training camp signing.

The only point where I see Dan Gilbert/David Griffin giving in a little is if the Cavs start to lose their assumed #1 seed in the East. At that point, the season will probably be ~2/3 finished. I can’t see Gilbert paying Smith’s rough asking price ~$15M for 1/3 worth of work left in the season, especially if that would add ~$42.5M in luxury taxes (doesn’t factor in Mo Williams likely buyout & assuming no major trades/salary dumps). The Cavs will likely be at the repeater rate (assuming no major trades/ salary dumps) for the 2017-18 season. Thus, an expensive multi-year deal for JRS is unlikely if Gilbert is pinching his billions.

However, I can see Gilbert paying JRS a 1-year contract worth ~$5M with 1/3 worth of work left into the season. That would cut his luxury tax bill considerably. Gilbert may even pay what he originally offered, ~$10ishM with 1/3 worth of work left into the season so that JRS is on the playoff roster and his luxury tax bill is still cut considerably.

Obviously open to negotiation and just speculation, but it seems the Cavs have all the more motivation to drag this out longer than JRS from a fiscal perspective. From a basketball chemistry perspective, both sides should get this deal done sooner rather than later.

JR Smith should settle for a contract in the Courtney Lee/Arron Afflalo/Eric Gordon/Jamal Crawford range. If this holdout drags out to the extreme, I doubt the Cavs will offer ~$14M just so he could make the playoff roster plus play 1 regular season game.

[Smitty731]

Well, J.R. Smith does have leverage in the sense that the Cavs have replacement for him on the roster and no way of replacing him. But the Cavs have no reason to worry for a few months at least. They can always just bring him in with enough time to get re-integrated in to the system and ready for the playoffs.

[DBoys]

It will be interesting to see to what degree this becomes a power struggle between the owner who would prefer not to blindly spend and waste a boat-load of money on tax payments, and his self-appointed GM (Lebron) who despises any degree of fiscal responsibility by an owner.

[ranger001]

JR Smith's leverage is that he has the same agent as LBJ and LBJ wants him signed.

The Cavs have options though and JR has none really. Neither Denver nor Philly will want him as they are rebuilding so the Nets are really his only chance and they are not going to give him $15m+. The Cavs have a tpe and they are rumoured to be looking to trade Love who doesn't seem to be a great fit on the Cavs.

[DBoys]

"The Cavs have a tpe and they are rumoured to be looking to trade Love who doesn't seem to be a great fit on the Cavs."

Non sequitur. The fact they own a TPE doesn't make it any more likely they trade Love, nor does it enable such a trade or make it easier. And at this point, by all reports the Cavs are way more comfortable with keeping Love than the trade-machine fans want to admit. ("Trade-machine fans" is not at you personally, but just a reference to the "rumors" which are really just inventive and assumptive speculation by people making things up. CLE is currently said to have no interest whatsoever in moving him, but the trade machine lives on.)

[ranger001]

Those two points about a TPE and Love are only related to my sentence about the Cavs having options. They can use the TPE to get a player to replace JR or they can trade Love and get a package back to replace JR. So two options, not related to each other.

[DBoys]

The Cavs have options though and JR has none really.

Those two points about a TPE and Love are only related to my sentence about the Cavs having options.

Perhaps. Or, maybe their first and best option - and the one that they saw as their only real option - was that they would simply pay him what he was asking, when it got down to time to make a decision. As in ...

Marc Stein– Verified account ‏@ESPNSteinLine
Sources say J.R. Smith's new Cavs deal is fully guaranteed for $45 million over the first three seasons no matter what happens in Year 4

Remember, that was the very same route they used with Thompson last year. After a protracted wrestling match, pay him essentially what he wants.