Blazersedge Exclusive: A Chat with Tom Penn

Thanks to Dave's futuristic swag, I was lucky enough to chat on the phone this morning with Tom Penn.  Obviously, Mr. Penn needs no introduction around here so we'll get right to it: we talked salary cap, salary cap, salary cap, salary cap and, uh, salary cap.  

Check back Monday for Mr. Penn's contribution to Honor Terry Porter. 

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Blazersedge: The big news of the week was Rudy Fernandez's signing and I read an article by Brian Hendrickson in which he described how the team was able to land Rudy.  What are your memories from that draft day and how were you able to create the salary cap exception that brought Rudy to Portland? 

If you're over the cap and you trade a player at any time, the base line rule is that you have an exception where you can replace that player's salary with other players, for one year.

9 out of 10 times you simultaneously end up replacing that player with a player you are bringing back. So that's called a simultaneous trade, which most trades are: player for player. In a simultaneous trade, you get to replace that player's salary, plus the fudge factor of 25 percent. So if your player is worth 10 million dollars, you can bring back simultaneously a player or players for up to 12.5 million dollars. Or, if you don't do it, you can take back a player for that exact amount any time in the next year.

So when you do multiple player trades, where there are a whole lot of players going back and forth, frequently the math will work so that if you send out multiple players, that total 20 million dollars, even if you bring back 22 million dollars in that deal, that 22 million won't necessarily go into each of those guys' slots.

Basically we ended up giving up 3 players and the players we brought back fit into the slots created by 2 of those players. So with one of our 3 million dollar guys, we didn't take anything back into his slot, so we knew we had a trade exception that we could use for a year.

That all happened pretty fast in the draft room. I basically said to Kevin, we're going to have this exception for a year.  It took him about 40 minutes for him to find a home for it.

Blazersedge: [laughs] So you created this exception not knowing how you planned to use it?  Or, did you have the plan to use the exception and then work to create it via trade?

Well, it's more the latter. All along we knew that if we could come up with a slot about that big we could probably use that slot to do a trade with Phoenix. The plan all along was that if we had it, we knew where we would go use it.

The tricky part with that trade was that we had to put that trade in our pocket for a few weeks because of salary cap reasons. It's more of, "we're going to have this exception in the future," and when we have it, we're going to use it for your player, so we took James Jones from them and then bought the 24th pick.

Blazersedge: There is a lot of grumbling by fans around the draft day about how trades can't be announced on draft night. Is there any chance that in the future the timing will work out differently so we'll be able to have the excitement factor of draft day trades or do you think we're locked in to the current situation in which trades sometimes take weeks to clear?

I don't think there can or should be a change because what you'll get is the occasional trade where everyone acts like it's done, but for one reason or another it doesn't get done.

Blazersedge: Caused by a failed physical or...?

Well, a failed physical is always out there as a thing to undo a trade but it's not so much that or even an injury.

Things happen fast on draft day and trades aren't official until the league office goes through its formal procedure. Things happen a lot when one team can think they'll have a deal, but another team decides "no, we don't have that deal."

There could be other legal issues that get through where two teams think they have a deal but it turns out it doesn't work under the rules. You'd end up with chaos about all these announcements and things that are going to happen or not happen, and if they don't go through, that would be even more confusing. So I don't know an easy way around that one.

From the league's standpoint I think it's better to not formally announce things until they are true. You get a credibility issue if you start announcing things that might be true or are likely to be true.

Blazersedge: Would you say that the value of expiring contracts has lessened this past year? It seems like in previous years we heard about them all the time and recently not as much.  How much value do you put in to expiring contracts?

What people really value is flexibility, the ability to improve their team by having cap room. So, expiring contracts can get you there, but really, no one is dying for an expiring contract; what they want is the result of that, which is flexibility.

You didn't hear much about [expiring contracts] last year because there weren't many. This year coming up and the following year, there should be quite a few. There is opportunity for more of that movement.

Blazersedge: Would you say that flexibility is your primary philosophical goal when managing the cap, in terms of what drives your moves?

The number one driving thing is talent acquisition.

What we've tried to do here is to acquire as much young talent as we could and then simultaneously create as much flexibility cap wise as we could. That was the objective basically since the Zach Randolph trade because that freed up our space. That put us on a pretty clear plan, to have cap room in 2009 at the same time we had a blossoming young team.

Blazersedge: Are you treating the players that will be available during the summer of 2009 like you might a college draft class, putting together extensive books on them and planning out various ways to spend that money?

We've kept a goal of creating as much cap room as possible in 2009 and that has factored into every player personnel move that we've made and every contract that we've signed for the past 2 seasons.

We may not use the cap room, though.

We may just see our young guys develop, feeling like we don't have a major hole to plug via free agency and we might just go with the horses that we've got. We may also choose to do a trade this year with some of our players and acquire that have bigger salaries, I don't know. The key, though, is that we have the flexibility to do all those things.

Are we tracking certain free agents more closely? Yeah, of course. We have short lists all over the place, we pay particular attention to guys that we have an interest in trading for or in getting in free agency.

Blazersedge: What other teams, philosophically, do you look at and think, "they really knock it out of the park when it comes to cap management?"  Who out there manages the cap the right way?

It depends on how you define ‘the right way."

A lot of that is driven by ownership and the organization's objectives financially. The cap rules are loose, there's a soft salary cap in our business, so you have the ability to spend when you are over the cap or over the luxury cap threshold.

A lot of the teams that have been able to put together championship type teams without being huge payroll teams, that would be the goal for management: create a winner without just spending like crazy to do it.

Although you can go the other way, where you just attempt to acquire as much talent as possible, by spending a little bit more freely to make your team better.

There's both approaches out there and teams have had success both ways.

Blazersedge: Is there anyone that you would single out in the first category?  Is that the Spurs model?

The recent champions who have done that are the Spurs and Detroit, both building teams that were not luxury tax payers, that were designed that way and they've been able to have a sustained run of excellence that way.

Blazersedge: I understand that Blazers management philosophy is very goal-oriented.  Attendance is up, the on-court product has improved and all indicators seem positive.  Is there anything that you can point to as a disappointment since you started with the Blazers?

We do a ton of self-evaluation and attempts to self-improve and to improve do what we do collectively in our groups. There's a lot we can do better. All of us.

We haven't made the playoffs yet.

We have the ship headed in the right direction but we're a long way from our long-term goal which is to win championships. To win an NBA championship is incredibly challenging but we've got to walk before we run, collectively.

We're starting to do that. We got to .500 last year, our goal this year is to try to make the playoffs. We are in the Western Conference which is a beast of a conference, the start of our schedule is gruesome, with 15 road games in the first 24, and 15 games against playoff games from last year, with 7 back-to-back sets.

It's going to be a real challenge for us collectively to get towards our goals. Individually and collectively we really feel like there is a lot of room for all of us to improve. [For example,] we are constantly evaluating our scouting procedures and our internal processes.

Blazersedge: Along those same lines, I understand you do extremely thorough physical evaluations of players that you draft and trade for. The team has kind of caught the injury bug lately- is that something that would cause you to go back and look at your processes, like health evaluations? Or, are injuries outside the bounds of what you can control or manage? 

I think it's just a reality of our sport with the injuries. I don't think anything has happened that would cause us to necessarily re-visit what we do in evaluating or predicting injuries.

You'd need a crystal ball to do what you're talking about.

Short of having a crystal ball, you try to select guys, get as much medical data as you can, and balance it against the talent level and where they are in their career and see if they are a fit for the team.

Then, of course, when the injuries do occur you just address them as they come up, get the best medical care, get them in the best rehabilitation plan, and we try to do the best job we can with the players' interests first. We have various guys with various levels of injuries now and a lot of guys on the road back. Hopefully we'll have a healthy group headed into the regular season.

Blazersedge: If you were in David Stern's shoes, would you make any significant changes to the salary cap structure or look toward the baseball or football salary structures for changes?

The whole purpose of a cap is to create competitive balance in our league so that the small market teams can compete with the biggest market teams. The salary cap in general favors ownership and teams and creates a healthier league because you don't want the rich teams to be able to be able to pound on the less rich teams.

Portland is a small market team. We are definitely in favor of a cap.

In terms of the structure, the reason for the soft cap is so that, frankly, so that we don't lose the players that we've got all this goodwill built up with the fans we don't want to lose them to another team just because we can't pay them.

There's a real benefit to exceptions and the ability to keep the veterans that you've developed. Or the ability to sign the draft pick that you select. Under certain cap structures, you can make an announcement to your fans that a four year guy that you've developed and is now a star because you can't afford to pay him.

But it's not my position or job to speculate on what the future cap rules might be.

Blazersedge: Do you anticipate serious competition from European clubs in the coming years when it comes to signing free agents?

It's possible, certainly.

They've taken a step in terms of recruiting higher-level caliber NBA free agents. The list of players that have gone back overseas has grown.

There's a number of factors that are helping that along, one of which is certainly the Euro-to-Dollar exchange rate. Given the position of the dollar versus the Euro , there's an opportunity for players to earn a considerable amount of money overseas, but it's not happening 100% that way.

We were able to get a player like Rudy Fernandez whose main interest was achieving on the highest level of basketball here in the NBA. He went against that tre nd of guys going overseas. He came for the reasons we like: to be a part of our team, to help win games, to make it to the playoffs and ultimately to win a championship.

Blazersedge:  I often hear from fellow Blazers fans how happy and proud we are to have the "best owner in sports."  I hear a lot of suggestions for how the team could put his money to use to create a competitive advantage.  Here's a popular one: has the organization given any thought to independently running a D-league team?

You're right - we do have the best owner in all of basketball and in all of sports. Mr. Allen is 100% committed to exactly what our fans should want and that's winning games and trying to build a championship team.

Any advantage that we can get within the rules we certainly talk about and explore.

The D-League is sort of a developing partner or tool that we have to develop younger talent. The D-League has grown in number of teams, each year we have changed how the affiliation between the NBA teams and the D-League teams works.

Right now we have a really good relationship with the D-League team in Idaho and they are sort of in the neighborhood and they have a great ownership group, a very good head coach and we are pleased with how that relationship works for the purpose of developing our younger guys and having an alternative to send young guys.

Blazersedge: Really, no thought at all to an independently run team?

We've discussed it, weighed the pros and cons, and we don't expect to make any change like that.

Blazersedge: I understand that you were at the Shaun Livingston workout down in Arizona. At a workout like that, what are you looking for specifically and how does that differ from what Kevin Pritchard or Nate McMillan might be looking for?

In that setting, I'm looking for the same things they are. There's nothing I'm going to see cap-wise [laughs].

In that setting I've got my talent evaluation hat on. We're pretty collaborative over here, when you've got multiple people in the room, you just see different things. After that workout or any other workout, you get together and say, what do you think?

Blazersedge: Was the talent evaluation piece difficult for you to pick up given your legal background (Mr. Penn was a lawyer prior to beginning his career in the NBA) compared to a more traditional basketball background?

I've been in the league now 9 years. I had the privilege to work five of them with Jerry West. I've been able to work with Hubie Brown and Chuck Daly. Hall of Famers.

And if you spend enough time around those kinds of brains, you tend to absorb some stuff if you're paying attention. I've tried to learn from every basketball expert that I've had the privilege to work with - including Kevin and Nate.

Over that period of time, I feel like I've picked up a lot and I've been blessed with some really good opportunities to learn.

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"A really good opportunity to learn" is exactly what I hope this chat was for you. I know it was for me, and I know that both Dave and I are very excited to have had the opportunity to bring this to you.  Many thanks to Mr. Penn for graciously spending some time with us.

-- Ben (benjamin.golliver@gmail.com)

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