38. What is the "Gilbert Arenas" provision?

With the previous CBA it was sometimes possible to sign restricted free agents to offer sheets their original teams couldn't match. This happened when a player was an Early Bird or Non-Bird free agent (see question number 19) and the team didn't have enough cap room to match a sufficiently large offer. For example, Gilbert Arenas was Golden State's second round draft pick in 2001, and became an Early Bird free agent in 2003. Golden State therefore could only match an offer sheet (or sign Arenas themselves) for up to the average salary (see question number 25), which was about $4.9 million. Washington signed Arenas to an offer sheet with a starting salary of about $8.5 million, which Golden State was powerless to match.

This loophole was addressed in the current CBA (although not closed completely -- see below). Teams are now limited in the salary they can offer in an offer sheet to a restricted free agent with one or two years in the league. The first-year salary in the offer sheet cannot be greater than the average salary (see question number 25). Limiting the first year salary in this way guarantees that the player's original team will be able to match the offer sheet by using the Early Bird exception (if applicable -- see question number 19), or Mid-Level exception (provided they haven't used it already).

The second year salary in such an offer sheet is limited to the standard 8% raise. The third year salary can jump considerably -- it is allowed to be as high as it would have been had the first year salary not been limited by this rule to the average salary. Raises (and decreases) after the third season are limited to 6.9% of the salary in the third season. The offer sheet can only contain the large jump in the third season if it provides the maximum salary allowed in the first two seasons. In addition, the offer must be guaranteed and cannot contain bonuses of any kind.

If the raise in the third season exceeds the standard raise (8% of the salary in the first season of the contract), then they place an additional restriction on the team. In order to determine the size of the offer the team can make, they don't fit just the first year salary under the cap. Instead, they must fit the average salary in the entire contract under the cap. So a team $8 million under the cap is limited to offering a total of $24 million over three years, $32 million over four years, or $40 million over five years. If the offer sheet does not contain a third-season raise larger than 8% of the first-season salary, then they only have to fit the first year salary under the cap.

Putting this all together, if a team is $11 million under the cap, wants to submit a five year offer sheet, and wants to provide a large raise in the third season, they can offer a total of $55 million. If the average salary is $5 million, then the second year salary will be $5.4 million (8% raise). This leaves $44.6 million to be distributed over the final three seasons. With 6.9% raises in years four and five, the entire contract looks like this:

Season 	Salary 	                Notes
1 	$5.0 million 	        Average salary amount
2 	$5.4 million 	        8% raise over season 1
3 	$13.907 million 	This is the amount that yields $44.6 million over the final three seasons with 6.9% raises*
4 	$14.867 million 	Raise is 6.9% of season 3 salary
5 	$15.826 million 	Raise is 6.9% of season 3 salary
Total 	$55 million 	        Average is $11 million, which equals the team's cap room

eViL wrote:

TheGame wrote:Great detail, but what does it mean as far as Lin. How much can we offer him, and can we go over the cap to resign him. Assuming he continues to play well and the Knicks make the playoffs, the kid is going to be looking at a big raise. We should go ahead and try to sign him to a long-term deal this offseason.

we will have to offer our up to our entire MLE to keep him. that's the most other teams can bid.

guess it depends on a bunch of other factors like how well he plays the rest of the way and how many teams are trying to sign him. if he stays at this level, then he's a lock to command the full MLE.

since we are over cap we have to use MLE? Or because he is RFA we can just exceed cap? Do Knicks have choice?

martin wrote:

eViL wrote:

TheGame wrote:Great detail, but what does it mean as far as Lin. How much can we offer him, and can we go over the cap to resign him. Assuming he continues to play well and the Knicks make the playoffs, the kid is going to be looking at a big raise. We should go ahead and try to sign him to a long-term deal this offseason.

we will have to offer our up to our entire MLE to keep him. that's the most other teams can bid.

guess it depends on a bunch of other factors like how well he plays the rest of the way and how many teams are trying to sign him. if he stays at this level, then he's a lock to command the full MLE.

since we are over cap we have to use MLE? Or because he is RFA we can just exceed cap? Do Knicks have choice?

he's limited to the league average annual salary (aka MLE). we can match any offer. if we are under the cap, then we are using our remaining space to whatever extent it is available and go over if we have to. if we are already over the cap, we're using our MLE (or a part of it). not sure how it works if you are partially under the cap. i would assume that if we had to go over to sign him, we'd be left with the room exception.