http://danrosenbaum.blogspot.com/2005/08/update-how-will-new-nba-collective.html

Update: how will the new NBA collective bargaining agreement and new luxury tax rules affect the free agent market?
By Dan T. Rosenbaum

Shortly after the new deal was announced between the players and owners, I declared it a big victory for the players. But with a caveat. We shouldn't pretend that the fat lady was singing until the fat lady was indeed singing.

And not a peep was heard from the fat lady until more than a month later when the final details were hammered out. Based upon what I am hearing, the owners did quite well. This deal is pretty even for both sides and the ultimate outcome will depend largely on what happens to revenue growth over the life of the deal.

The initial details suggested that the teeth were taken out of the luxury tax, but that does not appear to be true. The luxury tax is guaranteed in every season of the deal at a lower threshold than used in 2004-05. Perhaps most importantly, teams not paying luxury taxes will likely continue to get larger luxury/escrow tax distributions than teams paying the tax. The new luxury/escrow tax system will be different, but it may deter spending just as much as the old system.

The increases in the salary cap were not extended to maximum salaries, which for owners takes a bit of the sting out of that change. Also, changes in the formula for the salary cap and for salary cap holds will, in effect, make the increase in the salary cap smaller than it appears. In addition, changes in the formula for the Mid-Level Exception (MLE) will result in it growing more slowly than it otherwise would.

Another important detail not known last month was that basketball related income (BRI) increased to $3.037 billion in 2004-05 - a 10.2% increase over 2003-04. That is a marked change from the 1.7% average growth over the previous two seasons. Part of the increase is due to the expansion Charlotte franchise and some accounting quirks, but some of it appears to reflect real growth. If so, the players may regret allowing maximum raises to decrease. It could be the case that revenue growth comes close to outstripping these maximum raises.

Before continuing, let me lay out the major provisions of this new deal. The provisions in green should significantly increase the overall compensation of the players, while those in red should decrease them. There is a lot in here that I believe is not reported anywhere else at this time, so I hope that this can serve as a resource for what this new deal looks like (at least until Larry Coon is able to update his FAQ). I think I have pretty good information on most of these provisions, but as new information becomes available, I will update this material.

1. The luxury tax will be dollar-for-dollar on spending above the 61.0% of BRI luxury tax threshold (just below that used prior to 2004-05), except that the new deal guarantees that the luxury tax will be triggered in every season of the deal. [Note that in 2004-05 the threshold was at 63.3% of BRI.]

2. All teams (including those who pay tax) under the new deal will receive a full share of the escrow tax collections. The most likely distribution of the luxury tax appears to be a full share to teams below the luxury tax threshold with the remainder being split evenly among all teams. This is likely to result in teams losing about $3 million in distributions if they end up being taxpayers.

3. Luxury Tax Amnestry Provision (Allan Houston Rule): Up through August 15, teams will be given a one-time opportunity to waive one player and eliminate the luxury tax on any future contractual payments to that player. The salary will still count towards the salary cap, and payment will still have to be paid to the player according to the contract, but the team will not be subject to tax on that player’s contract. This provision will also apply to previously waived players, but not players traded for after June 21st.

4. For all minimum salary players, teams above the luxury tax threshold will pay luxury tax equal to the amount for a minimum salary player with two years of experience. This is also true of minimum salary players with zero or one year experience, whose salary for luxury tax purposes will be bumped up to that for players with two years of experience.

5. The salary cap and luxury tax exceptions for players who are deemed ‘permanently injured’ will begin after one year rather than two, but can only be applied by the team on which the player played at the time of injury. [Teams will not be able to trade Terrell Brandon to a team looking to create salary cap space and/or avoid the luxury tax.]

6. The escrow tax on player salaries will be reduced from 10% in year one, to 9% in years two through five, and to 8% in year six of the agreement.

7. The players will be guaranteed a total of 57% of BRI each year. My understanding is that, contrary to earlier reports, this percentage will not increase during the life of this agreement.

8. The escrow tax will only be retained by the owners to offset salary costs when total salaries exceed 57%, just like in the last season of the prior deal, but in the new deal that threshold will be raised to 57.5% if BRI is 30% higher than in 2004-05 and to 58% if BRI is 60% higher than in 2004-05.

9. The salary cap will be set at 49.5% iof BRI in 2005-06 and 51% thereafter, up from 48.04%. Maximum salaries will continue to be tied to the old 48.04% of BRI percentage.

10. Gilbert Arenas Provision: Restricted free agents in their first two seasons can be offered contracts above the MLE by teams with salary cap room, but in the first two seasons of such deals players will be paid the MLE and 108% of the MLE. After the second year of the contract, the contract can increase to the maximum allowable salary for that player. For example, with no restrictions a player in their first two seasons could be offered a maximum deal of $69.6 million over five years ($12M, $12.96M, $13.92M, $14.88M, and $15.84M.) But this provision will limit that to $55 million over five years ($5M, $5.4M, $13.92M, $14.88M, and $15.84M). For the team offering this contract, the salary cap hold will be equal to the average value of this contract over each of the five years of the contract - in this case $11 million. Thus, the offering team would need to have $11 million in space under the salary cap in order to offer this contract. The original team can match if it has its MLE or early Bird exception available and for the original team the salary cap hold will be equal to the value of the contract in each year ($5 million in the first year, $15.84 in the last year).

11. A team will have 7 days to match an offer for a restricted free agent (down from 14).

12. The maximum length of a new contract will now be 6 years for a player who signs with his current team (down from 7), and 5 years for a player who signs with another team (down from 6).

13. The maximum annual raises on a new contract will now be 10.5% of the first-year salary (not compounded) for a player who signs with his current team (down from 12.5%), and 8% for a player who signs with another team (down from 10%).

14. First-round picks will be given standard contracts with two years guaranteed (down from 3), followed by two years of team options (up from 1). The contract amounts will remain standardized. [The option for year 3 will have to be picked up prior to year 2. This is very early to give up on a rookie, so it is likely that teams will rarely decline this option.]

15. In general, there are no changes being made to the general salary cap exception mechanisms which allow teams to exceed the salary cap to add players, such as the Bird Exception, Million Dollar Exception (renamed the Bi-annual Exception), Mid-Level Exception (MLE), etc. However, the average NBA salary will be computed assuming 13.2 players per team (up from

[Edited by - djsunyc on 08/10/2005 21:49:32]

BRIGGS is gonna feel the fire for this one.

LOL

Posted by mintyfreshness33:

LOL

LOL!

Posted by TheloniusMonk:

Where is Briggs anyway?

I'm sure he's searching all over the planet for articles to counter this. Problem is, they don't exist.

But you know he won't provide a link to them!

Posted by simrud:

Bonn stop being such a ahole, so what BRIGGS was wrong.

You gonna seat there and say everything you ever said was right? Give the guy a break, there is no reason to be on his back like that, get a freakin life.

When I asked Briggs for a link he said something like, 'why cant you look for one on the internet yourself.' This was when he said the amnesty clause was out the first time. I dont know why it is so hard to copy and paste a link. Its not about doubting the guy reporting it, its about wanting to read more about it!!

Then he changed that and said the Gilbert Arenas rule was out. When I said you cannot be sure he said, "good luck to the people looking for the arenas rule cause it doesnt exist." He was very sure it was not in and got slightly condescending in his replies. That is irritating. I think some of those replies were aimed at Bonn too so his posts here are justified.

[Edited by - Silverfuel on 08/11/2005 08:26:45]

Posted by simrud:

If you were sayin it to BRIGGS it would be ok, but Bonn is a major league snit in Nalod's words when it comes to arguments, if everybody came back to point the finger at him like he is trying at BRIGGS there would be nothing but Bonn you were wrong and an ahole about posts on the forum.

My posts are almost always about the Knicks. I hate bringing up petty stuff like that so I will make this my last post on this thread not about the Knicks. I was careful in backing up Bonn when I said "his posts here are justified."

I am very glad that the Gilbert Arenas rule is in. I dont think we were in danger of losing Ariza this season but its good to know we can lock him up for cheaper. This season will tell us a lot about him actually. Larry Brown doesnt play rookies unless they prove their worth like Prince in Detroit. If Ariza gets playing time it would mean he plays hard in practice and in games.

I thought he did close to that last year. I see Riza getting a lot of burn. He can handle, board and plays very hard on D, if not always effectivly. I think he soaks up LB's wisdom and his style of play will make him a quick favorite. With Jamal playing some point I can see Larry using Ariza off the bench for anyone playing the 1/2/3 at the time.

Posted by Bonn1997:

But Briggs guaranteed that the Gilbert Arenas rule was left out! I don't get it.

Did you read it b/c I really don't get it. It said that the original team can match if it has it's "Early bird" rights. What the hell does that mean? I thought you only had bird rights after 4 years or so.

And it says teams can offer MORE than the MLE. Meaning, if we don't have cap space and don't have bird rights, we can't match.