[ESPN] Best, worst salary-cap situations

J.R. · Apr 2, 2013

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It's never too early to start thinking about NBA free agency, and what teams might be able to do this summer.

Even though the trade deadline fizzled this season, teams still took care of business -- the biggest deals were just done early. Oklahoma City started it off by moving James Harden to the Houston Rockets right before the season started (and in time to allow Houston to ink him to a max extension). Memphis followed up by orchestrating a three-way, six-player deal with Toronto and Detroit in early February, with Rudy Gay moving to the Raptors, Jose Calderon going to the Pistons and Tayshaun Prince shipping off to the Grizzlies. These moves dwarfed the biggest deadline deal: J.J. Redick moving from Orlando to Milwaukee.

On Monday, Amin Elhassan offered his Top 30 free agents by average annual value in the 2013 class. But which teams will be able to afford any of them?

More than ever, basketball reasons are now sharing the stage with business reasons when it comes to making deals. The new collective bargaining agreement really starts to bare its teeth next year, when the progressive luxury tax takes over for the meeker, dollar-for-dollar tax. Teams like the Los Angeles Lakers will be pining for the days when being $30 million over the tax line meant a $30 million tax bill; next year a team $30 million over the tax line will have to cut a check for a whopping $85 million.

Taxpaying teams can face additional obstacles in the form of reduced access to sign-and-trade transactions and exceptions like the midlevel and bi-annual, and in some cases a hard cap.

As a result, teams now are watching their finances closer than ever, and this concern is evident in the lack of significant deals at the trade deadline. Even the larger deals earlier this season were done with finances in mind -- for example, the small-market Thunder could scarcely afford to keep Harden at the maximum salary when they already had three players drawing eight-figure salaries.

So what lies ahead? We don't have firm values for next season's cap and tax levels yet (they're dependent on this season's revenues, which are largely dependent on which teams make the playoffs and how deep they go). At this point we can say the salary cap will be in the $58.5-60 million range next season, and the luxury-tax threshold will be somewhere in the $71.5-73 million range. This will put the apron -- the point at which teams have less access to exceptions and some teams are hard-capped -- at around $75.5-77 million.

These figures define salary ranges in which we can place the 30 teams:

The big spenders

Teams in this situation: Miami Heat ($86.5 million already committed for 2013-14), Brooklyn Nets ($85.6 million), Lakers ($79.6 million), New York Knicks ($77.6 million) and Chicago Bulls ($77.1 million)

Life below the tax line? A fond memory at best. Cap room? A pipe dream. These teams have hoarded expensive players and have massive payrolls to show for their efforts. As a result they are not only over the tax line, they are also above the apron -- the point at which further system restrictions take effect.

Take the Lakers as an example. Their $79.6 million payroll, while alarmingly high, is at the same time deceptively low. Dwight Howard is hitting free agency this summer, and is the centerpiece of the team's transition plans to the next generation of Lakers basketball. If they re-sign him -- and the team has gone all-in on the assumption that it will -- another $20 million will be tacked onto that $79.6 million, which will nudge their total past the $100 million mark once all is said and done.

As a result, they will face the full wrath of the new collective bargaining agreement. Their tax bill will hover in the $72-79 million range, although $30 million can be lopped off if the team uses its amnesty waiver on Metta World Peace.

In addition, the team will have a smaller midlevel exception with which to sign free agents ($3.183 million instead of $5.15 million, and three years instead of four), no access to the bi-annual exception and no ability to receive a player in a sign-and-trade deal. Compared to other teams -- especially those with significant cap room -- the Lakers will be handcuffed.

But it will be all worth it if they can bring home another title before Kobe Bryant's window closes.

The low-tax teams

Teams in this situation: Golden State Warriors ($73.8 million), Toronto Raptors ($73.0 million) and Boston Celtics ($72.9 million)

These teams are already in luxury-tax territory, but are still below the apron. The good news is that while they are slated to be payers into the luxury-tax fund, they will be paying the base rate of $1.50 per dollar rather than one of the more egregious progressive rates. The bad news is that they are also handcuffed by the same system restrictions as the apron teams, even though they are below the apron.

This is because once a team acts like a team that is below the apron, it commits itself to remaining below the apron for the remainder of the season. For example, if a team spends the full $5.15 million midlevel exception (which is reserved for teams below the apron) then the apron becomes a hard cap. This makes sense if you think about it, since the league doesn't want a team making an end-run around the rules by manipulating the order in which it does things.

As a result, the above three teams that are near the apron are better off behaving as though they are taxpayers -- spending only $3.183 million of their midlevel exception, avoiding the bi-annual exception and using the sign-and-trade mechanism to receive a player.

The teams just below the tax line

Teams in this situation: Denver Nuggets ($68.7 million), Thunder ($67.8 million) and Memphis Grizzlies ($61.0 million)

None of these three teams are in a big market, which means that none of the three can really afford to be taxpayers. This could prove to be difficult -- for example, the Thunder currently have 12 players signed for 2013-14, and may have as many as three first-round draft picks. In addition, each team will have free agents it may want to bring back, and each re-signed free agent will further add to the team's total.

Overall this means that while these teams may enter free agency below the tax line, it might prove difficult to remain there.

The teams with big cap room

Teams in this situation: Cleveland Cavaliers ($35.9 million committed for 2013-14), Detroit Pistons ($35.0 million), Utah Jazz ($28.1 million) and Atlanta Hawks ($22.4 million)

We're going to skip over the field for now (15 teams, each with a committed payroll between $41.1 million and $58.7 million) to focus on the teams that may have significant amounts of cap room this summer. Each of the above teams may be more than $20 million under the salary cap this summer, which means they may be significant players in the free-agent market.

The biggest impediment to all this cap room, however, is each team's own free agents. For example, Atlanta can only realize its full potential of $36-38 million in cap room (minus some cap holds to account for things like empty roster spots and the team's first-round picks) if it walks away from its own free agents, including Josh Smith.

Still, it's an enviable position in which to be. Each team will be unburdened by the luxury tax and apron (and related system restrictions), and will be the only teams able to dangle a maximum or near-maximum salary in front of a premier free agent.

The NBA is going through a transition period as the last vestiges of the old CBA fade away, and the new CBA takes full effect. Starting this summer we finally will see how the lockout and resulting agreement really affected the league's free-agent market.
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Ricksmith · Apr 2, 2013

Larry Coon said:

We don't have firm values for next season's cap and tax levels yet (they're dependent on this season's revenues, which are largely dependent on which teams make the playoffs and how deep they go).
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Goodbye Utah, Hello Lakers.

da_juice · Apr 2, 2013

Where are we on this list? Don't we have a very good cap situation this year?

J.R. · Apr 2, 2013

Probably among these 15 teams

We're going to skip over the field for now (15 teams, each with a committed payroll between $41.1 million and $58.7 million)
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ch0c0b0fr34k · Apr 2, 2013

da_juice said: ↑

Where are we on this list? Don't we have a very good cap situation this year?
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We're lumped with the rest of the 15 teams the article didn't talk about. We just inked Harden, Lin, and Asik to big deals, so it's understandable.

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[ESPN] Best, worst salary-cap situations

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