« Hornets Beat: Owning the Ownership Conversation
Breaking Down the Tentative CBA With a Focus on the Hornets
The following is a guest post by Mason Ginsberg, who writes for HoopDat.
AswasmadepublicearlySaturdaymorning, the NBA players and owners have come to alaboragreementwhichwillendtheNBAlockout. Now that we can rest easy knowing our beloved Hornets are back, it’s time to take a look at the finer points of this new CBA and the effect it will have on the team. There are a lot of modifications set to take place throughout the life of his new deal, many of which will have an important impact on the future of this Hornets team and how it operates and performs. After the jump, all major system changes are outlined, as well as what they could mean for the Hornets.
- BRI SPLIT – The players will receive 51.15% of total Basketball Related Income in year 1 of the agreement, and in future years, will fluctuate between 49% and 51%, depending on how the league does relative to projections. This change, down from 57% in the prior CBA, is one that both players and owners expected, and is one that will substantially increase the value of every NBA franchise. Every team now has a much better chance at profitability year in and year out, which should go a long way in helping a smaller-market team such as the Hornets find an owner who is confident that the team can be successful in New Orleans long-term. Impact on Hornets: Positiveï»¿
- SALARY CAP/TAX SYSTEM–
a.Mid-level Exception – Teams above the salary cap but under the luxury tax limit will have a $5 million annual exception, which can be offered at a contract length of up to 4 years. Teams over the luxury tax threshold will only be allowed a $3 million annual exception and can only offer it for up to 3 years. In the prior CBA, each team had the same mid-level exception that it could use regardless of the team’s total salary prior to using said exception. The new agreement, however, creates two separate mid-level exceptions – one for teams under the luxury tax, and one for teams over that amount. This adjustment should provide a slight boost to the Hornets, as it restricts deep-pocketed teams from having the same benefits as teams that stay under the luxury tax. Impact on Hornets: Positive
b.Mid-Level Exception for Room Teams – Teams with room under the salary cap will receive a $2.5 million annual exception upon reaching the cap, which can be offered at a contract length of up to 2 years. In the last CBA, teams that entered the off-season under the salary cap received no added benefits over teams who exceeded the cap in the case of mid-level exceptions. With this addition, such teams will be given an exception of their own if and when they hit the cap; previously, once these teams reached the cap, they could only offer minimum contracts. The Hornets could immediately benefit from this new exception, as New Orleans currently finds themselves well beneath the salary cap. Impact on Hornets: Positive
c.Traded Player Exception – Non-taxpaying teams can acquire the lesser of either 150% of the salaries of players traded plus $100,000 or the salaries of players traded plus $5 million. Previously, the rule for all teams over the salary cap (whether they were paying the luxury tax or not) was that they could only acquire 125% of the salaries of players traded plus $100,000; now, this rule only applies for teams above the luxury tax threshold. This change should make player movement easier, which could benefit the Hornets should they decide to deal Chris Paul. Impact on Hornets: Positive
d.Minimum Team Salary – The minimum salary amount for each NBA team will be 85% of the salary cap for the next two seasons, and 90% from the third season going forward. This change represents an increase from 75% in the prior CBA, with the goal in mind to ensure every team is providing its fans with a quality on-court product. Impact on Hornets: Neutral
e.Luxury Tax Rate – Starting in year 3 of the new CBA, the tax rate for teams above the luxury tax threshold will increase based on how far over the threshold that team finds itself. If a team is $0-$5 million over the tax level, the tax rate is 150%.; from $5-$10 million, it’s 175%; from $10-$15 million, it’s 250%; from $15-20 million, it’s 325%; for every $5 million over the tax level after the $15-20 million category, an extra 50% is added (ex. from $20-$25 million, it’s 375%). If a team is over the luxury tax limit by any amount for at least 4 seasons in a 5-season span, the aforementioned tax rates increase by 100% (ex. if a tem is $0-$5 million over the tax level but is guilty of this condition, the tax rate is 250% instead of 150%). These stricter luxury tax penalties should not only help small market teams like the Hornets become more competitiveby making it more unappealing for large-market owners to exceed the tax limit, but it should also help these teams become more profitable, since up to half of all luxury tax payments will go directly to non-paying teams. Impact on Hornets: Positive
f.Conditional Hard Cap – A team that a) uses the non-taxpayer mid-level exception or bi-annual exception in any season or b) acquires a free agent in a sign-and-trade transaction starting in year 3 of the new CBA cannot exceed the luxury tax limit by more than $4 million in that season. This provision should also help teams like the Hornets achieve more competitive balance than was present in the last CBA, placing more restrictions on freely-spending teams. Impact on Hornets: Positive
- Guarantee/Escrow – 10% of all players’ salaries will be held in escrow; if that amount is not enough to reduce aggregate player salaries and benefits to the agreed-upon share of BRI, then the difference will be taken out of the players’ post-career benefits pool. In the prior agreement, the difference came from their salaries in the following season, so despite the increased withholdings, this is an improvement for the players. The change doesn’t really have a terribly significant impact on any of the NBA teams or owners. Impact on Hornets: Neutral
- Maximum Length of Contracts/Annual Increases – Five years for Birdplayers at 7.5% raises per season (7.5% also applies to Early Bird players) and four years for other free agents at 4.5% raises per season; four new years for rookie extensions, except for one five-year max-salary rookie extension for one designated player on each team; three new years for veteran extensions unless part of extend-and-trade, in which case only two new years are allowed. All of these adjustments should help teams do a better job of controlling costs, since it has become quite apparent over the past few seasons that they cannot do it by themselves. All contracts will be shorter in length, which should help reduce franchise-crippling mistakes, and those contracts cannot increase in value by as large of a percentage each season as was permitable in the past. On average, max contract lengths will be about one season less, and the 7.5% and 4.5% allowable contract increases are down from 10.5% and 8%, respectively. These changes will help all NBA teams, but should benefit the Hornets and other small-market teams to a greater degree, since those teams generally had more trouble overcoming poor personnel decision-making than the teams who could essentially buy their way out of trouble. Impact on Hornets: Positive
- Minimum and Maximum Salaries – Minimum and rookie salaries will remain at 2010-11 season levels until the reduction that has been set in the new CBA is proportional to the 12% reduction in the overall system; players in their 5th year (coming off rookie contract) can receive a max contract from his own team that starts at 30% of the salary cap by achieving certain criteria. Basically, what this means is that most of the rules in this regard have not changed. As far as minimum salaries are concerned, the minimum/rookie salaries won’t move until the total league revenues rise enough to account for the 12% system decrease from the last CBA to this one. Maximum salary policies will remain unchanged for all players except for an added benefit for those coming off of their rookie contracts, but even then can only be eligible for a deal equal to 30% of the cap if the player meets one of the following three requirements – if he is a) named to the all-NBA first, second, or third team two times, b) is voted in as an all-star starter two times, or c) wins an MVP award. The minimum salary policy was expected based on the changes made in the system, but the max salary change benefits the players, giving younger stars the ability to cash in sooner. Currently, this change won’t impact the Hornets, bit it could at some point. Impact on Hornets: Neutral
- Salary Cap Stretch Provision – For salary cap purposes, contacts of waived players signed from this season going forward are eligible to be “stretched” evenly over twice the amount of remaining years on the contract plus one. Yet another change here which is intended to protect the owners from themselves. It doesn’t save them any money, but if a team decides to unload a player, it can choose to spread out the salary cap hit over more years. Much like the changes made to max contract length and increases, this change will help all NBA teams, but slightly favor the teams whose owners’ pockets aren’t quite as deep, such as the Hornets. Impact on Hornets: Positive
- Restricted Free Agency – Period for a player’s prior team to match an offer sheet from a new team for a restricted free agent reduced from 7 days to 3 days; players can achieve better (or in rarer cases, worse) qualifying offers by meeting (or failing to meet) certain requirements. Lowering the restricted free agent offer match time will be a major boost for those restricted free agents, since teams won’t have to worry about committing money to a player for a whole week before finding out if his old team will match. The adjustments to player qualifying offers will allow teams to pay players based on their performance as opposed to draft position. Whether these rule changes will impact each NBA team positively or negatively will be totally situational. Impact on Hornets: Neutral
- Salary Cap Holds – The amount included in a team’s salary against the cap to account for the team’s free agents prior to signing (calculated based on a multiple of the free agent’s prior salary) has been slightly reduced for both first round picks and Bird players. Without getting into the intricate details, making this alteration will benefit teams due to a bit more cap room for incomingÂ free agents, as well as players in the form of slightly increased contract value. Impact on Hornets: Neutral
- Other Trade Rules – Cash paid or received by teams in trades cannot exceed $3 million per year; trading team wishing to re-sign traded player who was waived by recipient team must wait until either one year from the date of the trade or July 1st following the final year of the player’s contract, whichever comes first. Previously, teams could include up to $3 million per trade instead of per year, so the new regulations will prevent the wealthier teams from freely throwing money into deals for players or draft picks with cash-strapped franchises.Â The rule change regarding waived traded players will prohibit teams from trading a player while knowing they will be able to get that player back after his new team waives him, a fix that was desperately needed. Both of these rules should provide a slight boost in competitive balance, which is obviously a good thing for the Hornets. Impact on Hornets: Positive
- Amnesty – Each team is permitted to waive one player prior to any season of the CBA and have the player’s entire salary removed from the team’s total salary for cap and tax purposes (player’s contract must have been agreed to before the new CBA was put in place). This clause will help NBA teams to varying degrees. There will be a modified waiver process for teams under the cap to claim amnestied players. Teams will submit bids to assume some of the contracts those players, and the team that bids the most will pay the amount that they committed to the player; the remainder will be paid by the player’s former team. At this point, it remains to be seen if and when the Hornets will use this rule on any of the team’s current players, but either way, it benefits New Orleans if for no other reason than the ability to make offers to players amnestied by other teams. Impact on Hornets: Positive
Though all of these CBA changes are either neutral or positive for the Hornets, that doesn’t mean that this is an ideal labor agreement for them. Sure, the vast majority of the system changes benefit the NBA teams and owners in some way, but that was to be expected given the financial losses documented by the owners in prior seasons, as well as the players’ lack of real negotiating leverage throughout the lockout. The fact of the matter, however, is that this CBA is undoubtedly better for NBA teams than the last one – especially for small market teams. It could have been better, but it’s still a substantial improvement, giving New Orleans Hornets fans legitimate reason for hope in the future.