Why our cap space next year isn't the same as RLEC last year

I have read several references to RLEC in recent days.  Those who feel strongly that the team needs to make a move, and make it now, seem to be arguing that waiting to use our cap space until closer to the 2010 trade deadline is analogous to last seasons failure to make use of RLEC. Basically, the argument is something like this,  "don't talk to me about all the bargains that are going to be available as the trade deadline approaches, I heard that line last year and nothing happened.  Get a deal done now!"

I see your point, and I feel your pain, but there are several reasons I think the current situation is different than the situation last February.  Let's break it down and discuss after the jump.

Let me begin by saying I am not an expert on the cap and luxury tax.  If any of you "capologists" out there think I am missing relevant info, please chime in to the discussion. 

Here is a list of reasons why I think the two situations are different:

1)  Lower cap and tax threshold for next season:  In February 2009, there was a lot of economic uncertainty, but the actual pain is going to be very real next season.  The cap and the tax level both came down between $1-2 million for next season.  My understanding is that teams can go into the season above the tax level without actually having to pay the tax, as long as they reduce salary before the 2010 draft.  This reality is likely to put pressure on several teams to dump salaries during the season.

2)  Expected sharp drop in cap and tax for 2010-11:    More significantly, the league released estimates for the cap and tax thresholds for next summer.  The cap is expected to drop significantly by about $7 million dollars.  This reduction is likely to be the 800 lb gorilla of teams financial moves next year.  Many teams are going to need to reduce salaries or face large tax consequences the following season.

3)  As everyone knows, next summer has a huge free agent crop:  Teams are going to need to shed salary to position themselves to have sufficient room under the cap to compete for these marque free agents.  New York, New Jersey, and Chicago are three teams that are expected to try to be in the hunt for LeBron, Bosh, Wade, etc.  Because the cap is expected to fall significantly, these teams need to shed salary if they are going to offer max deals to these superstar FAs.

4)  In addition to cap room, the Blazers have two quality expiring contracts:  Both Outlaw and Blake are in the final year of their contracts.  This means the team can potentially package one, or the other, or both, with the cap room to take back a very large contract.  Blake and Outlaw are each at about $4 million per year.  The Blazers will have about $9 million in cap space once the season starts and the cap holds for the Euros are lifted.  Packaged together, that means the team could take back a whopping $17 million contract.  Other teams are more likely to do a deal if they are getting back decent players in the short run.  It is a lot easier to get your fan base to accept a salary dump of a big name player, if you are getting back Blake or Outlaw, rather than a corpse like RLEC.

5)  Teams have to walk a fine line between being competitive and being financially prudent:  Before the season begins, every team is a winner, every team at least harbors illusions of being competitive.  Teams need to nurture this fantasy in order to get season ticket holders to renew for the upcoming season.  This is particularly true for the worst teams, in the smallest markets, under the most financial pressure.  Trading away players now, may have a real cost at the ticket office.  By February, illusions of improvement will have faded and the grim reality of losses on the floor, and on the balance sheet, are likely to be pressing on numerous owners.

With its combination of cap space and quality expiring contracts, Portland is uniquely positioned to take advantage of the realities of the current economic situation.  The cap and tax reductions are tied to overall league revenue.  The reason they are expected to drop significantly next summer is because revenue is expected to be down sharply this season.  Reportedly, the Blazers have the highest percentage of season ticket renewals in the league at over 90%. 

Many teams are likely looking at a very grim revenue picture.  Ticket sales are only one piece of the puzzle.  Luxury suite sales are down as corporations are cutting back.  Broadcast revenue is down because broadcasters are hurting for ad revenue.  Merchandise sales and concession sales are off sharply as consumers try to cut back on non-essential expenses.  

Summary:  Given the combination of factors outlined above, I think the Blazers have a much better chance of finding a willing partner for an unbalanced trade this year than last year with RLEC.  I am not a huge fan of trade scenarios, because of the highly speculative nature of most of the discussions.  I am a fan of discussing the Blazers strategic situation.  My feeling is that KP and team management are taking the right approach.  They tried to go after their #1 FA target.  Now, having been stymied by factors beyond their control, they are taking a patient approach; waiting for the right deal to come along.


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