After my last Chris Bosh piece, I spent the weekend discussing with some friends whether or not he would re-up with the Raptors after this season. While I remain hopeful he’ll be the franchise’s cornerstone for the length of another max contract, the possibility exists that Bosh will leave.
What my discussions about his future with the team got me thinking about was why he would stay with the Raptors. Obviously loyalty, comfort, a chance to be moderately competitive, being the face of basketball for an entire country, and money are factors that would push him toward resigning to some degree.
Money is the issue most look at the closest, so I wanted to dig a little deeper in that regard. I know, for instance, that the Raptors, by way of holding his Bird Rights, can offer him larger raises (10.5% annual non-compounded vs. 8% annual non-compounded), more years (six vs. five), and a larger starting salary (110.5% of his current salary vs. 105% of his current salary) than other teams can. This, of course, can be negated via a sign and trade, basically making any team ‘able’ to offer him these contractual terms should they offer the Raptors something of significant value to do it. The sign and trade is rare and complicated, though, and could be considered an asset belonging to the Raptors as much as to another team (creating incoming value for an otherwise outgoing free agent).
Over the life of the contract, the Raptors can offer approximately $36.5M more than any other team, though this is overstated to a degree by the extra year. Over just five years, they can still offer approximately $9.9M more than anyone else (and yes, that means Bosh would be pulling in $26.6M in 2015-16).
But these are just numbers, and raw numbers at that. It isn’t enough to look at money in terms of a simple number, just as it isn’t enough to look at interest rates without taking inflation into account. Yes, even in the sports world, there is a large difference between nominal and real dollars. Nominal dollars, of course, are what we hear reported most often…they are easiest to understand, and the salary cap and luxury tax are explained and adhered to in terms of nominal adjustment. The Raptors get no currency exchange, the Heat face no restrictions for the lack of a state tax in Florida, and the Lakers get no kickback due to the high cost of living and operating in California.
For an intelligent player, factors like these would certainly find their way into a decision set when choosing what team to sign with. The following analysis tries to take into account the Bird Rights advantage, state and federal income taxes, and local cost of living indices. Unfortunately, I couldn’t find a feasible way to incorporate market size or marketability into the analysis, however, I sorted the results before cost of living was factored in – you may want to use the After Tax Earnings as a de facto results column, since cost of living may either be ignored by players or cancelled out by the opportunities that come with a wealthier/larger market.
The chart below (click to enlarge…seriously) shows all 30 teams, with disregard for actual cap space because so much can happen between now and the summer, and what they can offer Chris Bosh strictly in terms of money, factoring in a few nuances that turn nominal money into real money.
Obviously, even in after-tax earnings, the Raptors can offer more money than anyone else. This is an extremely important distinction because one of the main knocks against Toronto in the free agent market is the adverse income tax structure in Ontario. After the Raptors, the tax-free-state teams can offer the most, and there are intriguing options like Memphis (strong young core), Miami (weather and Wade), Orlando (championship contender and D-12), and the three Texas teams (all competitive, and Bosh’s home state). While not all of these teams will have cap space, if they do they pose the most significant monetary threat to the Raptors. The California teams would be at the largest disadvantage, able to offer $10M less in real dollars over the course of the contract than those teams in tax-free states.
When we figure in the cost of living, things get less certain for the Raps. Cost of living is a tricky area though. For one, cost of living isn’t a large part of most people’s decision sets – people simply don’t recognize the value in living in an inexpensive area. There could be several reasons for this, chief among them being (for athletes) the correlation between market size and cost of living. More expensive places to live are generally more populous, and more heavily populated areas tend to be looked at as more favorable destinations for social and marketing reasons. Again, this is why I didn’t sort the chart by the post-COLA column…cost of living may be irrelevant, or it may be cancelled out by factors that correlate with cost of living. A final note is that there is also a fairly significant cost of moving, which isn’t factored into COLA here but would affect Bosh’s financial bottom line. Selling his place in Toronto, moving, and starting anew is a costly procedure, though in terms of a $100M contract it is probably bubble gum to Bosh.
(An interesting note for us local Raptor fans: Toronto is one of the most expensive cities in the world to live, checking in just ahead of Los Angeles at 54th in 2008 but falling to 85th in 2009. The more you know…)
This analysis, of course, applies for all players and all teams (and feel free to email me at email@example.com for the Excel file…it is simple but a fun thing to play around with).
The conclusion is what we all knew already – if the decision were strictly financial, Bosh’s options would be limited to the Raptors or a team that could work a sign and trade. As it is, there are things like quality of the team, the city, other players and friends, taxes, and personal preferences all tugging at Bosh (and the entire Class of 2010)…what he puts into his final decision set, we’ll never know. We can wait…