With the NBA free agency about to kick off on July 1st, we can expect a lot of activity over the next few days as players opt out and teams exercise their options. Mostly though, we will see a lot of movement of some big name players and perhaps even more impactful will be which young up-and-comer signs where. There is rightly a lot of discussion about next year's free agent period dubbed "The Summer of LeBron" but don't go to sleep on who's available now.
Before we get into specific players and the Suns salary situation, lets first have a quick primer on some free agency basics.
Free agency period, salary cap, luxury tax and what not
On July 1st free agents become "free" and teams are allowed to begin negotiations with those players. July 1st in effect marks the official end to the previous season from a salary calculation standpoint and the rosters are in essence reset. Like a pumpkin at midnight, on July 1st those valuable "expiring contracts" official expire.
But before teams can actually spend money on new players the league has a moratorium on signings and conducts an audit to establishe the salary cap for the coming season. The salary cap is mandated by the Collective Bargaining Agreement between the teams and players and is designed to limit how much teams can spend. The salary cap is set at 51% of the total basketball related revenue from the NBA.
The audit that will be conducted over the next few days determines what the salary cap will be for the coming year. The cap is based on overall league revenues. If the league makes less money that translates to a lower salary cap and less money for players. A pretty smart system.
The salary cap determines how much money teams can pay free agents. If a team has $10m under the cap it can spend up to $10m to sign a free agent.
There are exceptions to the salary cap which allow teams to exceed the limit. Most of these exceptions like "Bird Rights" allow teams to exceed the cap to resign it's own free agents. The system is designed to encourage players to remain with the same team and limit player movement.
The other well known exception is the "Mid-level Exception" which allows a team to sign one or more players up to an amount equal to the average league salary. The MLE is expected to be about $5.6m this summer.
Between the MLE (which can be used on one player each year) and the various other exceptions you can see that teams quickly exceed the salary cap making it a so-called "soft cap". The Suns for example were $17m over the salary cap last season.
The other big impact of the salary cap is on trades. If two teams want to make a trade and both are over the salary cap then the salaries have to match salaries within 125%. If however, a team is under the salary cap it can use its cap space to receive the incoming player's salary and not have to send back and equivalent salary amount. This is a very important factor in trades and is why teams with cap space have a lot of leverage when it comes to making trades with teams wanting to cut payroll.
On July 8th, when the audit is complete and the salary cap is officially set teams can official begin signing free agents and can continue to sign them throughout the season.
The Luxury Tax is the next limit teams work within. The lux tax is established at essentially 61% of all basketball related income. Last season it was $71m and like the salary cap had grown about $3m every year since the 2005 CBA went into effect. This season both the salary cap and luxury tax are expected to stay about the same or perhaps decline as a result of the economy.
The luxury tax is calculated based on the total payroll a team has at the end of the season. This is important as a team that is over the tax and wanting to get under it has until the February trade deadline to shed payroll. The problem at that point is the only way to get under the tax for the current season is to make a deal with a team that has salary cap space.
When the Suns traded Kurt Thomas to the Seattle Supersonics to save $16m, Kerr had to "pay" the Sonic two first round picks to compensate the Sonics for using their cap space. If the Suns had held on to Thomas and traded him at the deadline as the Sonic did, they would not have saved the $16m as they would have had to receive contracts back. Again, this shows why teams that are under the cap have a lot of leverage and flexibility when it comes to making deals.
The luxury tax is paid dollar for dollar for any salary over the tax line meaning a team that is $4m over the tax line will pay $4m in tax. The tax gets distributed to non-tax paying teams making the process even more painful.
For more detailed CBA information see the Salary Cap FAQ
Where are the Suns now?
On July 1st the Suns will have 12 players under contract totaling about $73m in salary. That assumes they waive Pavlovic and are on the hook for only the $1.5m guaranteed portion of his full $4.5m contract. When you add in a $2m place holder for Grant Hill who is the Suns highest priority free agent and $800k for Taylor Griffin you are at 14 players at $76m which is projected to be about $4m over the tax line.
If the Suns hadn't made the trade with Cleveland they would be at $81m including Hill and Clark and assuming they wouldn't sign Griffin or any other players.
Ben Wallace has said that he's considering retirement. If he were to accept a buy out of $10m that would save the Suns $8m and put them in a sound financial position. If he were to be traded to the Hornets for Chandler's $12m salary the team would still save about $4m. As we said when the deal went down, Wallace's intentions are important to what the Suns do over the next few weeks. If he decides he wants to play next season the Suns have no option but to pay him the full $14m. Chances are good though that we will take a buy out and either retire or sign somewhere else for much less.
If the Suns don't do anything else other then sign Clark to the rookie scale and Griffin to a minimum contract and then lock up Grant Hill for about $2m then they will be paying $4m in tax. They've said they are fine with this.
What the Suns don't have (unlike numerous teams) is the room under either salary cap or the luxury tax to sign any of the free agents available. Using the MLE would cost the team over $10m in salary and tax and they are not going to do that.
Who's got money to spend?
Using $65m as the line between teams that can spend the MLE without going to far over the luxury tax, there are 14 teams that can be considered buyers in the upcoming free agency spending period. That doesn't mean all of those teams will use the MLE but they reasonably could. Those teams in order of highest payroll to lowest are:
Bulls, Rockets, Clippers, Warriors, Nets, 76ers, Trailblazers, Kings Timberwolves, Raptors, Hawks, Thunder, Pistons and Grizzlies. Those last three teams are all about $17m to $21m under the salary cap making them major players in this market.
That's not to say certain teams with deep pocketed owners won't go even further over the luxury tax to sign certain players. The Knicks who are already about $4m over the tax line are reportedly interested in signing Jason Kidd and the Lakers who are $5m over are going to have to decide how much more to spend on Odom and/or Ariza. The Mavericks with Cuban's checkbook are right at the luxury tax line and have the very movable contract of Jerry Stackhouse which should make them a player as well.
There are some big names out there to be had by those teams with money to spend. There are quite a few solid power forwards available and a couple of very good point guards. There are also some very interesting big names like Shawn Marion, Rasheed Wallace, Allen Iverson and Stephon Marbury. I can't wait to find out where those guys end up.
Stay tuned, the next few weeks are going to be interesting.
Here's a quick look at some of the bigger names. For the full list click here:
- Rasheed Wallace
- Mehmet Okur
- Marcin Gortat
- Chris Anderson
- Zaza Pachulia
- Rasho Nesterovic
- Others include: Ryan Hollins, Johan Petro and Joel Anthony
- Brandon Bass
- Paul Milsap
- Charlie Villanueva
- David Lee
- Lamar Odom
- Glen Davis
- Leon Powe
- Marvin Williams
- Chris Wilcox
- Channing Frye
- Others include: Rob Kurz, Joe Smith, Walter Herrmann, James Singleton, Hakim Warrick
- Linas Kleiza
- Ron Artest
- Trevor Ariza
- Jamario Moon
- Matt Barnes
- Grant Hill
- Shawn Marion
- Hedo Turkoglu
- Rashad McCants
- Others include: Steve Novak, Stephen Graham, Gerald Green