Sheridan column: Breakdown of financial and system differences

NEW YORK — Have you cooled off yet, guys?

The next step in the NBA lockout is likely to be a phone call placed from the league office to the players’ association. It’ll be a courtesy call to inform the union that an announcement is forthcoming that another chunk of games is being canceled.

The call could end there, or it could include a kicker: “Feel like sitting down together again?”

Let’s face it: At some point, the logical and inevitable thing to do is to re-engage in dialogue, drop the preconditions once again and see if it might be mutually beneficial to try to finish off negotiations to end this madness before the possibility of having an 82-game season becomes moot.

This fight has become foolish, idiocy in its finest form.

Take this example, for instance:

The NBA is a business that brought in $4.2 billion last season, and the owners and players are a mere $100 million per season apart on the financial side of their negotiations. They will lose $800 million by wiping out a month of the schedule, yet that is what they seem to be intent on doing to show what tough negotiators they are. (It is worth noting that the only people making money from the NBA lockout are the law firms representing the two sides).

Burning down the village in order to save it? Yep.

By now you should be familiar with what is keeping the sides apart. The owners are offering a 50/50 split of basketball related income; the players are asking for 52.5 percent. Each percentage point equals $40 million. Do the math, and it’s $100 million per year.

But there also are differences in what the salary cap system will look like, although many of those differences were narrowed in the 30 1/2 hours of federally mediated talks held last week. Here is where the sides stand on a number of those system issues:

_ Mid-level exception: Contrary to reports elsewhere, there is not a complete agreement on this particular piece of the puzzle. Yes, the sides have agreed that the maximum mid-level exception should be $5 million, but the owners want it to max out at $15 million over three years (no annual raises), while the union wants the maximum mid-level to be for four years, with 7 or 8 percent annual raises depending on the length of the contract.

_ Restricted free agency: The union went into these talks asking that the waiting time for a team to match an offer to a restricted free agent be reduced from 7 days. The owners have acquiesced, and the window for matching will be reduced to 3 or 4 days. The union also is asking that restricted free agency be removed for players coming off their rookie scale contracts, which would allow first-round picks to become unrestricted after four years instead of five, which is the case for second-round picks.

_ Trade rules: Under the old system, the salaries of players being traded had to be within 125 percent of each other (if both trading teams were over the salary cap). This rule will be loosened considerably, although a final formula has not been agreed to. The players want the percentage to rise to 225 percent (whereby, for instance, a player making $1 million could be traded for a player making $2.25 million), while the owners have indicated a willingness to allow the percentage to rise to 140 or 150 percent — although teams paying the luxury tax would have a tighter restraint.

_ The “stretch exception”: Under this proposal, a team could waive any player and stretch out the remainder of the money he is owed, reducing the salary cap number for that waived player. For instance, if an underperforming player had three years left on his contract and was waived under the stretch exception, his remaining unpaid salary would be stretched out over a period as long as seven years. (Example: A player owed $21 million for three years who is waived under the stretch exception would still be paid his $21 million, but the cap cost would be spread over seven years, meaning he would count $3 million annually against the cap instead of $7 million.) In theory, this would free up more money to be paid to players who were worthy of the increased salary. (Also, an additional pile of money would be freed up through the amnesty clause, a one-time opportunity when this deal gets done for each team to waive one player without his salary counting against the salary cap or the luxury tax. This clause would be especially helpful to Orlando, which could remove Gilbert Arenas and the $62.4 million he is owed over the next three years, and Portland, which could do the same with Brandon Roy’s $49 million in guaranteed money over the next three seasons.)

_ Maximum annual raises: There has been little movement here, with the owners asking that maximum raises be 4 1/2 percent for Bird players and 3 percent for others. The union wants to keep the current system of 10.5 percent raises for Bird players, with the caveat that the maximum raises would drop to 9 percent for a player signing a four- or five-year contract. For non-Bird players the union is asking for maximum raises of 8 percent in two- and three-year contracts, and 7 percent for players receiving four- or five-year deals.

 _ The escrow tax: Under the old system, 9 percent of every player’s salary was withheld to ensure that players, as a whole, received no more than 57 percent of BRI (More than $160 million in withheld escrow funds from last season were refunded to players in August). The owners want to change things to have an NHL-style system with an unlimited escrow tax withheld, while the union wants to keep something resembling the present system in place.

_ Base-year compensation: The is an incredibly complicated rule dealing with the cap number for players who are in the first year of a new contract that pays them considerably more than they earned in their previous deal (i.e. a player coming off a rookie scale contract who signs a max deal). The union wants the rule eliminated, and the owners are open to that idea — except in the case of luxury tax-paying teams, and when the base-year player is involved in a sign-and-trade deal.

_ Additional Bird restrictions: The owners have backed off their previous demands that no team could have more than three Bird players on its roster at any time, and that no tax-paying team could use the Bird exception on more than one player per season. The owners are continuing to ask that tax-paying teams be prohibited from using the mid-level exception or the so-called Early Bird exception.

_ Maximum salaries: The owners have withdrawn their demands for changes to the maximum salary structure for individual players. The old system will remain, with the hard cap on individual salaries remaining roughly 25 percent of the cap for players with 1-6 years of service, 30 percent for players with 7-9 years, and 35 percent for players with 10 or more years of experience.

 

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  1. Jacob says

    I appreciate all the details on where the negotations are with the system. This is really good information. But there is something lost here. Folks, this is basically the same system they had before. Sure there are a few tweeks, a year removed here and there, but it is still a very soft cap.

    The players really seem to be winning this negotiation. No roll backs and no hard cap because those are blood issues. Now we are back to making the CBA the exclusive vehicle for revenue sharing again? How did that happen? Was that a blood issue too?

  2. says

    Chris, I appreciate the update on the status of these system elements. However, why do you refer to the stretch provision as an ‘exception’? It’s not an exception to the basic rule of the salary cap. Are you really trying to say that only teams above the cap will be allowed to utilize this stretching of payments to waived players?

  3. sully00 says

    The problem with restricted free agency is that teams don’t have to pay a player anything close to his market value to hold that option. Teams should have to guarantee a player the average salary or a significant pay increase to hold the right of first refusal. If a player isn’t worth that kind of commitment then teams shouldn’t jam them up while their trying to get what may be their only multi-year deal just because they can. The Maximum Qualifying offer rule is good and should remain but RFA needs to be adjusted for the guys taken late in the first round.

  4. Steven says

    After reading all the different articles, Thank you for reporting your perception or knowledge of the facts. It is a breath of fresh air. The comment what they have to negotiate by the previous writers is interesting ,

  5. Dee BasketBall Dude says

    Rookies should become come unrestricted after the initial contract. They should have the freedom to choose where they want to play.

    • Adrian says

      what does that solve? The whole point of the draft system is to make the worse teams better. How are the worse teams suppose to build to get better if the rookies are just going to go join the top tier teams as soon as their contract ends? They have the choice now… but they are incentivised to stay with their team.

  6. Akis says

    If the owners are serious about wanting better competitive balance, there is no way they should acquiesce to the union’s demand of wanting first round picks to be unrestricted Free Agents after their rookie contracts. The league is driven by star power, and most small markets only get their stars through the draft, and restricted free agency plays a big part in keeping those players on their teams for a while.

    • Paulpressey25 says

      If the owners are serious about any competitive balance, they wouldnt acquiesce to half of the stuff above Chris claims they acquiesced to.

      140 to 240 percent on trading contracts? Awesome. Now the Lakers only have to send Luke Walton out to get Dwight Howard and have the salaries match.

      Now giving up on limiting the number of bird rights players?

      I think the players should take all the stuff above, as it looks pretty good to me from their perspective. Good for the big markets also.

    • Stay Chisel says

      As I understand it, players coming off their rookie deals would still be RFAs after 3 years and UFAs after 4. Maybe Chris can clarify.

    • Kevin J says

      If the owners want a competitive balance then dump the Lottery. Let the worst team choose first. This whole Lottery business is a joke.

Trackbacks

  1. [...] few system issues that are up for debate even when/if the BRI and hard luxury tax get sorted out. NBA lockout update: Where the sides stand on financial and system issues MLE: both sides agree to 5M starting salary. Players want annual raises and a length of 4 years. [...]

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