Teams Spending Money in 2010 Might Soon Come to Regret It

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Published: July 1, 2010

“If you put a gun to my head right now, I would say yes. Yes there will be a hard cap under the new CBA.” These words came four days ago from an Eastern Conference executive that has quite a bit of knowledge regarding the upcoming labor talks. He went on to state that he believes that eventually the hard cap will be somewhere around 60 million and that the new maximum salary that teams can offer will be “30 to 40 percent less” than it is under the current CBA.

What does all this mean? Well, a hard cap would mean no more exceptions- no MLE, no Bird-Rights benefits with regard to the cap, and no more bi-annual exception. Basically, every team will have to find a way to get all of its players under that figure and can not go over that threshold. This would serve two purposes: 

One, it helps level the playing field. While all teams did technically have the option to go over the salary cap and luxury tax this season, only those franchises in bigger markets or with deep pockets could realistically do it. After factoring luxury tax payments, the 2010 NBA Champion Los Angeles Lakers spent nearly 40 million dollars more than their first round opponent- the OKC Thunder.

Two, it would help protect owners from themselves. Without a hard cap, owners will continue to overpay players, because frankly they have to in order to stay competitive. While the game changing players will still get paid regardless, the role players of the world can not make 6-15 million dollars per year if teams want to turn a profit.

While it is unlikely that the hard cap will come into play immediately, it will affect how teams juggle their rosters. Another person in the league that I talked to said he expected the league to double the luxury tax penalty in the first year of the new CBA, and then triple it in year two before mandating the hard cap in year three. Even if this is how it plays out- that means that by 2013-14 there should be a hard cap in place that won’t allow any team to exceed the ceiling determined by the league. So how does that affect the teams fighting for the 2010 free agent class? Let’s take a look at Joe Johnson and the Atlanta Hawks for our answer.

Atlanta is set to give Joe Johnson a 6 year contract worth over $120 million. That means that when the hard cap is set by the league, Johnson will be taking up over one-third of the proposed room that the Hawks will have- leaving them only forty million dollars to sign the remaining 11-14 players (or about 3.6 million per player). Now compare this to a team that will get its max player locked up under the new CBA rules.  If estimates are true, then said player’s deal would be in the neighborhood of 70-80 million over six years- giving the team an extra 7-8 million per year for complimentary players.

If you have a shot at LeBron or D Wade, you pay whatever it takes- but teams that give big money to David Lee, Rudy Gay, Carlos Boozer, and possibly even Chris Bosh, Pierce, Dirk, and Amare Stoudamire will be regretting it down the line. Those deals, made in an old CBA, will cripple teams in the new CBA. And even worse, there may only be two options for those teams- ride it out with average players around that overpaid star or swallow their contract by using an amnesty clause like the Mavericks did with Michael Finley after the last CBA allowed each team one amnesty.

So, it could be the case that as early as 2011 many of these same guys could be back out on the market with $120 million in their back pocket looking for a new contract. Scary thought for teams looking to spend this offseason.

 

 

 

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