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Thread: In response to the mythical cap space in the "Bosh leaves Toronto" scenario.

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    Administrator Apollo's Avatar
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    Default In response to the mythical cap space in the "Bosh leaves Toronto" scenario.

    I've read enough in the threads around here to realize that some people require clarification on some items. I do not claim to be a CBA expert so please feel free to correct anything that you feel I've missed the mark on.

    Starting off, the current cap figure is $57.7M, with a luxury tax threshold of $69.9M.

    The following quotes are taken from ESPN's Marc Stein:

    In a memo announcing next season's salary cap and luxury-tax threshold
    NBA teams also received tentative projections from the league warning that the cap is estimated to drop to somewhere between $50.4 million and $53.6 million for the 2010-11 season
    If basketball-related income drops by 2.5 percent in 2009-10, league officials are projecting a 2010-11 salary cap of $53.6 million and a luxury-tax line of $65 million
    ESPN.com

    Thanks to ESPN for providing such a clear article on matters which are sometimes cloudy at best. Moving on, below is a figure I created to illustrate the best case scenario and the worst case scenario this summer should Bosh leave town:



    As you can see the best case scenario would land the Raptors in territory to sign an above average player but not a star. The Worst case scenario has the Raptors only able to sign a player on the level of an Jarret Jack or Reggie Evans.

    Another important note is that in both of these scenarios the MLE(Mid Level Exception) would not be at their disposal. The MLE is specifically for teams over the salary cap. It is also important to note that even if the Raptors used all their cap space on the market they would still not be allowed to use the MLE. The only way the Raptors can get the MLE this coming off season is if they re-sign enough of their players that they meet or go over the salary cap.

    And so this brings me to my important message to all Raptors fans. If Bosh leaves without the Raptors receiving compensation things become grim. There will not be enough cap space to allow them to move forward successfully. A complete rebuild would probably be in order. If Colangelo does not re-sign Bosh or land good pieces in a S&T he will have failed us all.
    Last edited by Apollo; Wed Dec 23rd, 2009 at 01:05 PM.

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    Administrator Arsenalist's Avatar
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    Very clear. I think it's a moot point, though. If Bosh walks for nothing (or gets trade for just picks), the Raptors wouldn't want to sign another big name player costing more than $6M. If anything, they'd be aiming to do a proper rebuild and shed more contracts (Calderon, Hedo).

    It would be awfully stupid of Colangelo to simply let Bosh walk for nothing. Babcock got flamed for acquiring two first rounders for Vince Carter, I think I'd actually settle for that in Bosh trade as long as it's a bad team.

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    Raptors Republic All-Star brothersteve's Avatar
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    The advantage of "cap space" is mostly myth!

    Winning Teams hold onto salaries so they can stay over the cap (both caps) and make trades to acquire talent. Dropping below the cap to acquire players is extremely risky, eliminates the MLE and BAE and dooms teams to playing with team salaries that are $10-30m less than their real competitors (see Lakers, Celtics, Cavs, Mavs, Magic etc)

    What are these "cap" based plays going to accomplish? It's highly unlikely anyone acquires 2 "star" players in FA. And its highly unlikely any true max FA leaves in anything but a S&T.

    Most of the "cap" plays will leaves teams at "average" and looking for players to acquire but no means to acquire them.
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    Quote Apollo wrote: View Post
    Another important note is that in both of these scenarios the MLE(Mid Level Exception) would not be at their disposal. The MLE is specifically for teams over the salary cap. It is also important to note that even if the Raptors used all their cap space on the market they would still not be allowed to use the MLE. The only way the Raptors can get the MLE this coming off season is if they re-sign enough of their players that they meet or go over the salary cap.
    My thoughts exactly, but I just wanted to clarify on the MLE. You may have meant this, but just to be clear, when determining whether a team is over the salary cap, the league adds the value of all of the team's exceptions. Next year, we won't have our bi-annual exception (used on Nesterovic), and assuming we have no traded player exceptions and the MLE is $5 mil, we *will* have the MLE at our disposal if the cap is at $50 mil, but not if the cap is at $53 mil. Thus, we'll either have the $6.4 mil of cap space and no MLE, or we'll have no cap space and only the MLE.

    What brothersteve said is very correct as well. Cap space is only good if you have enough of it and can lure a big free agent. Freeing up less than $10 mil cap space is useless since it also means you lose the added value of your MLEs from previous years.

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    Administrator Apollo's Avatar
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    Quote Arsenalist wrote: View Post
    Very clear. I think it's a moot point, though. If Bosh walks for nothing (or gets trade for just picks), the Raptors wouldn't want to sign another big name player costing more than $6M. If anything, they'd be aiming to do a proper rebuild and shed more contracts (Calderon, Hedo).
    A proper rebuild does involve spending money. Its spent on guys who fit the system and who are young enough to be a long term part of the core. No doubt I agree with you about shedding bad contracts and contracts of those who don't fit..

    Quote brothersteve wrote: View Post
    The advantage of "cap space" is mostly myth!

    Winning Teams hold onto salaries so they can stay over the cap (both caps) and make trades to acquire talent. Dropping below the cap to acquire players is extremely risky, eliminates the MLE and BAE and dooms teams to playing with team salaries that are $10-30m less than their real competitors (see Lakers, Celtics, Cavs, Mavs, Magic etc)

    What are these "cap" based plays going to accomplish? It's highly unlikely anyone acquires 2 "star" players in FA. And its highly unlikely any true max FA leaves in anything but a S&T.

    Most of the "cap" plays will leaves teams at "average" and looking for players to acquire but no means to acquire them.
    I don't think its a myth at all. You point out the Magic as one of your teams but the reason they got Lewis, second most important player on the team, was because of cap space. Not to mention most teams don't have the luxury of being gift wrapped superstars in lopsided deals like the Lakers and Celtics. Either way, as time moves forward now the luxury tax threshold is going to continue to drop and as such teams like the above mentioned are going to really feel the sting. The American economy and its dollar are still teetering on doom regardless of a few positive things the fed said recently. Unemployment is at 10% down there. Taxes are rising. Prices are and will continue to inflate. There will be less money to be spent on tickets, cable packages, merchandise, etc.
    Last edited by Apollo; Wed Dec 23rd, 2009 at 03:10 PM.

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    Raptors Republic All-Star brothersteve's Avatar
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    Quote Apollo wrote: View Post
    A proper rebuild does involve spending money. Its spent on guys who fit the system and who are young enough to be a long term part of the core. No doubt I agree with you about shedding bad contracts and contracts of those who don't fit..



    I don't think its a myth at all. You point out the Magic as one of your teams but the reason they got Lewis, second most important player on the team, was because of cap space. Not to mention most teams don't have the luxury of being gift wrapped superstars in lopsided deals like the Lakers and Celtics. Either way, as time moves forward now the luxury tax threshold is going to continue to drop and as such teams like the above mentioned are going to really feel the sting. The American economy and its dollar are still teetering on doom regardless of a few positive things the fed said recently. Unemployment is at 10% down there. Taxes are rising. Prices are and will continue to inflate. There will be less money to be spent on tickets, cable packages, merchandise, etc.
    Magic got Lewis, but it took years before it mattered. There is no quick fix building through using cap space. (Partly because they couldn't acquire anyone else at the same time due to salary cap restrictions) And now they are winning with payroll way over the lux tax threshold.

    Economies go up, they go down - Anybody who believes they KNOW what the future holds can make a fortune - Few Do. If you are willing to bet things will get better - you'll take more risks and can be more successful.

    Teams over the luxury tax cap are betting they can get far enough into the playoffs to compensate (except for the inept NYN - it often works).

    Lakers & Celtics prove they can make money with huge lux tax payments - And be favored from the start of the year - thus leading to working out of sold out building with high ticket prices. Yes they are taking risks but it Works for them.

    Why did Lakers and Celtics get to make those lopsided deals - because they are prepared to take on contracts that cost them double in lux tax payments and few other teams are. Gives them a huge advantage in trades - And they could never have acquired that talent through FA.

    Just Saying - it's easier to win with a $90m payroll than a $60m payroll (even if you did just manage to sign a big FA)
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    Administrator Apollo's Avatar
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    Quote brothersteve wrote: View Post
    Economies go up, they go down - Anybody who believes they KNOW what the future holds can make a fortune - Few Do. If you are willing to bet things will get better - you'll take more risks and can be more successful.
    Well I'm telling you that the Americans are $57 trillion in debt. Trillion. Divide that through by their total population. They will never pay that off. I think their dollar will crash at some point. All it would take is for the Chinese pulling their money out and their economy will crash. There is still a commercial mortgage crisis on the horizon and the residential mortgage crisis will hit its second breath in 2010 when the rates reset. The subprime loan crisis is only the beginning. Based on everything I've read things are going to get far worse, not better. I look at right now as the calm before the storm or being in the eye of the storm.

    15 teams, half the league, needed loan money to pay the bills last season. The Pacers and Magic say they're taking hits of $20-30M per season. That can't go on forever. There needs to be a correction. I think NBA teams will turn to the thinking of many NFL and NHL teams; building through the draft and cutting ties with players who feel they're worth more than the team has planned. I think the Spurs, Blazers and Hawks will be the norm in the future. Cap space will always be a friend of those beginning rebuild mode though. I also feel the owners are going to take the players to the cleaners in the next round of CBA negotiations, just like the NHL of a few years ago.
    Last edited by Apollo; Wed Dec 23rd, 2009 at 04:44 PM.

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    "You can't try to just say, 'Well, this guy made this (before), so I should make this,' " said Knight, in his 12th season and one of the free-agents-in-waiting. "Because coming up now, it's going to be a lot different than what it was."
    Knight still has yet to find a home.

    "It's going to be a nuclear winter for them," Dallas Mavericks owner Mark Cuban predicted.

    "I think most of the teams, there'll be some sort of an effect," New Jersey Nets president Rod Thorn said.

    "I can't speak for 30 owners and management teams," said Gregg Popovich, the San Antonio Spurs' coach and president. "But I'm sure that tightening of the belt is something that goes through every organization's head, for obvious reasons. We're all part of the economy, too."
    Scripps News


    Owners of various teams within the National Basketball Association (NBA) are finding it difficult to complete day-to-day transactions, due to the economic crisis at hand. Some owners have lost millions of dollars recently
    As the economy has continued to take a nosedive, attendance numbers have dropped, corporate sponsors have been reluctant to renew contracts, player and coach salaries have risen, and the price of upkeep for stadiums and practice facilities have also begun to rise.
    “If money is needed for the upkeep of the facilities, the players and coaches need to bite the dust and take the pay cut,” said Deandre Henderson, a sophomore Economics major at Howard University. “It is obvious that the diminishing state of the economy is taking a toll on its revenue stream so they must make the necessary cuts to follow suit. Borrowing the money will only hurt the economy more in the short run.”
    The HillTop

    “We’ve been operating at a $15 [million] to $20 million [annual] loss over the past half-dozen years,” said Alex Martins, chief operating officer of the Orlando Magic.
    The HillTop

    We knew about layoffs of employees within the league and various franchises. We knew various local and national sponsors were bailing, most notably car companies and major banks (two staples for the NBA). We knew certain franchises were losing significant wads of money and reacting accordingly. (Details are still trickling out. For instance, after the trade deadline, The Sacramento Bee reported the Kings would have lost $25 million had they not dumped Brad Miller's salary and bought out Mikki Moore, and the newspaper's Kings blog reported team employees were no longer allowed to work overtime or eat dinner in the media room.) Even trade talk -- normally a staple of any All-Star Weekend -- revolved more around themes such as, "They have to cut payroll," "They can't take on any money right now" and "They're too terrified of the tax to do anything."
    Mike Bass, the NBA's senior vice president for marketing communications, said gate receipts are down less than the league projected.

    "All of our teams have been very responsive to the financial concerns of our fans," Bass said in a statement to CBSSports.com. "The majority of our teams have held or lowered ticket prices this season, and all have introduced a number of creative, family-friendly ticket options in response to the financial difficulties our fans are facing. The response has been extremely positive as attendance is off slightly from last year, which was our third highest attendance in history."

    League-wide, average paid attendance through Nov. 29 was 13,187, down 3.7 percent from 13,699 at this point last season.

    The five best:

    Cleveland: 18,157, up 10.4 percent
    Portland: 17,714, down 0.5 percent
    New York: 17,523, up 4.2 percent
    Boston: 17,067, up 0.8 percent
    Bulls: 16,272, down 2.4 percent

    The five worst:

    Memphis: 6,879, up 6.8 percent
    Sacramento: 7,606, down 21.1 percent
    Milwaukee: 8,331, down 26.7 percent
    Philadelphia: 8,701, down 16.4 percent
    Charlotte: 8,969, up 4.7 percent

    The disparity between high-revenue teams and low-revenue teams is one of the key issues looming with owners and players preparing for negotiations on a new collective bargaining agreement. As expected, owners have notified the players’ association that they will not extend the current agreement, which expires after the 2010-11 season.

    Compared to full-season figures for 2008-09, the number of teams netting less than $500,000 in gate receipts per home game has grown from five to eight, with the Sixers, Kings, and Bobcats joining the Grizzlies, Timberwolves, Bucks, Pacers, and Hawks in the under-$500K club. But pricing pressure also has affected the high-revenue clubs. Compared to full-season totals from ’08-’09, the number of teams netting at least $1 million per home game has shrunk from 12 to seven, with the Suns, Thunder, Rockets, Warriors, and Suns dropping out of the $1 million club.
    http://ken-berger.blogs.cbssports.co...=rss_blogs_NBA
    Last edited by Apollo; Wed Dec 23rd, 2009 at 04:01 PM.

  9. #9
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    Quote Apollo wrote: View Post
    I don't think its a myth at all. You point out the Magic as one of your teams but the reason they got Lewis, second most important player on the team, was because of cap space.
    Don't forget though that the reason Orlando managed a successful rebuild was not because of that cap space. Had they drafted Okafor, or had they tanked the 2004-2005 or 2005-2006 seasons instead, Lewis would only give them another mediocre playoff team at best. Most teams that go the cap space route spend season after season re-visiting the draft, never good enough to go anywhere, never bad/lucky enough to draft a franchise cornerstone.

    Clearly, the best way to build a really good contender is to tank until you can draft a game-changer like Kobe Bryant, Lebron James, Chris Paul or Dwight Howard, along with a few young pieces from surrounding drafts. When you have that cornerstone in place, spend up to the cap. The following years, sign complementary players with each year's MLE. You'll be able to add a decent player each year through free agency and another contract through the draft, whose salaries you can later package in a trade for another star player.

    That last part of the plan is why cap space is mostly a myth. What most people don't understand (and I know you do, so I'm not ragging on you) is that once you hit the cap, certain rules limit your player transactions. Just as you can't add salary as you see fit, you also can't let players walk and expect to add back that same amount of salary and value through free agency. Good teams add salary each year and trade what they don't need to teams looking for salary/cap relief. This way, they can achieve $80-100 mil worth of talent, whereas cap-conscious teams are stuck with $50-60 mil worth of talent.

    Of course, this is all in a normal economy, unlike now. Cap relief is more important now, in terms of maintaining finances and not so much building a winning team. Those teams with stockpiled salary will likely feel the brunt, but some teams will manage to stay afloat.

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