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Cap Terms

After we posted the link to Storyteller's updated contract information B.E. member 50backflips (Dude, doesn’t that make you dizzy?) requested some clarification on the terminology and the various categories salaries can fall into for cap purposes…in plain English please.  This seemed like a good idea in general, so we’ll do it.

This is a layman’s guide to salary cap distinctions, based on the categories at Storyteller's site.  What you’re going to read will cover the majority of the situations.  There are exceptions in some cases, but in my experience those are rare enough that the six paragraphs it takes to explain them don’t justify the time and confusion they cause.  In the vast majority of cases, the following will hold true.  This ought to do you unless you want to be the next Tom Penn.

Player Option: (Peach-colored on Storyteller’s site)

This is simple.  Some contracts are structured to let the PLAYER decide whether he wants to finish the contract at the agreed-upon price or end the contract early and become a free agent.  In the case of a guy like Raef LaFrentz, it was clearly to his advantage to play out the last year of his contract in 2008-09.  He’s due to be paid $12.7 million and he couldn’t get anywhere near that on the open market.  On the other hand if all goes well this season Carlos Boozer of Utah may well opt out of the last year of his contract, worth $12.3 million in 2009-10.  With his production he could likely demand a raise and get it.  Also there are rumors he may want to switch teams.  Player options put a lot of leverage in the player’s hands and you have to be in a reasonably good bargaining position to get one added to your contract.

Team Option:  (Grey-colored on Storyteller’s site)

This works on the same principle as the Player Option, except here the TEAM gets to decide whether it will retain the player until the end of his contract or opt out early.  The Blazers structured Steve Blake’s and Travis Outlaw’s contracts to have a team option for 2009-10.  If those players fit and the Blazers think they’re paying a reasonable price for services rendered they will pick up the option and pay those guys the amount shown.  Should the Blazers anticipate needing more cap space in the summer of 2009 they have the option of terminating the contract and turning Blake and Outlaw loose into free agency after the 2008-09 season.

Note that the rookie contract scale calls for each team to have a team option on first-round draft picks after their third and fourth years, so you’ll see a lot of grey on the charts.

Adjusted:  (Cyan-colored on Storyteller’s site)

These are little accounting bumps along the road, either because of arcane cap rules or because we have incomplete information about a player’s salary.  For the most part these adjustments are minimal and not worth paying attention to.

Unsigned Draft Pick:  (Green-colored on Storyteller’s site)

The rookie salary scale calls for each first-round pick to make a target amount in their first two seasons.  Each team can negotiate with its draft picks for a contract ranging from 80%-120% of that target amount.  Until the draft pick actually signs a contract, though, a hold is placed on the team’s cap for the exact target amount.  Once they sign a contract this hold disappears and is replaced by the actual salary of the new contract.

Note that the cap hold does not translate into trade value for purposes of matching salaries in a trade.  Technically the Blazers still own the rights to #13 pick Brandon Rush and Indiana owns the rights to #11 pick Jerryd Bayless because that trade has not been officially executed yet due to salary-matching needs.  Rush puts a hold of $1.5 million on Portland’s 2008-09 cap and Bayless a $1.66 million hold on Indiana’s because neither has signed.  But neither of those figures count as salary for matching purposes in the trade.  Draft picks are valued at $0 for salary-matching purposes until they actually sign.  Only the salaries of Jarrett Jack, Josh McRoberts, and Ike Diogu make a difference in determining the legality of the trade until or unless Rush and Bayless sign a contract.

In other words, if you want to throw some names in a trade machine to see if a scenario works don’t bother throwing in new draft picks until they are signed.  Much like cabbage in the Weight Watcher’s plan you can add all of them you want for free.

Qualifying Offer:  (Yellow-colored on Storyteller’s site)

Qualifying offers mark the beginning of the end of the rookie contract period for first-round draft picks.  Each team has the option to make a qualifying offer following a first-round draft pick’s fourth season.  The amount of this offer is scaled by the player’s draft order, with higher picks mandating higher offers. 

The player has the option to accept the offer, which is always one year in length.  If the player takes this offer he plays for one more year and then becomes an unrestricted free agent following that year.  Or the player can reject the offer and instead become a restricted free agent following his fourth season.  Restricted free agents have the right to bargain with other NBA teams for the best contract terms they can get.  The player’s original team has the right to match any offer and retain the player’s services if desired.

The yellow-highlighted number on the salary charts shows you the amount of the qualifying offer.  Note the following:

--The team has the option to not make a qualifying offer when the time comes, thus wiping that amount off of their cap. 

--If the team makes an offer and the player rejects it, entering restricted free agency, then the team gets a hold placed against their cap which is generally 300% of the player’s previous year’s salary (not the yellow amount). 

So mark that yellow number with an asterisk in your mind.  That amount may count against the team’s cap in that year, but not necessarily.  It’s there mostly for your reference.

This is the big question with Martell Webster, Channing Frye, and Ike Diogu on our team.  We don’t know yet how much they will count against our cap next summer.  It could be the yellow number if they accept the one-year qualifying offer.  It could be 300% of this year’s salary if they reject the offer and become restricted free agents.  It could be nothing if the Blazers don’t make them an offer and instead just let them go.  Or it could be a different number entirely if the team and players negotiate new contracts before this all becomes an issue.  This gives everybody a chance to play “You Be the GM”.

BYC (Base Year Compensation) Players:  (Magenta-Pink-colored on Storyteller’s site)

Sit down and let me tell you a story, children.  Once upon a time, after the matching-salary rule was created to govern NBA trades, a very clever GM had an idea.  You see, this GM wanted to make a trade badly but he didn’t have the right salaries to do it.  So the clever GM said to himself, “I will just create the salary I need.”  So he called up the agent of his 13th-best player, Splurdly McGee, and said, “Hey Agent, what say I give old Splurdly a big, fat raise to make his contract worth exactly the amount I need to make this trade?”  The agent, being pure and ethical as all agents are, said, “Is that kosher?  After all, my client Splurdly isn’t that great of a player.  He’s not really worth that much.  What would the NBA think of the domino effect such a raise would undoubtedly cause?”  As it turned out the league didn’t think much of the plan.  So they instituted the Base Year Compensation rule.

The BYC rule says this:  If you just gave one of your players a big raise, the new salary amount is not going to count fully for purposes of matching trade salaries during the first year of his new contract.  This is designed to prevent teams from signing players to salaries based on cap/trade considerations instead of worth.

The BYC designation doesn’t do a darn thing to the cap of the team that owns the player.  If you see a number in pink that’s the exact number that counts against a team’s cap.  You can just add it in with all the rest.  If you’re not worried about trades the pink shading means nothing to you!

However the BYC designation does rear its ugly head when that team tries to trade a player.  How it works is this:

--The team receiving the player has to absorb the full amount of the salary highlighted in pink.

--But the team trading away the player can only take back half of that amount.  (There are exceptions to the exact amount, but don’t’s always less than the pink number.)

Example:  LeBron James was a BYC player for Cleveland last year.  His salary was roughly $13 million.  Had Cleveland wanted to trade him to Portland, then the Blazers would have to take LBJ’s $13 million salary under their cap but they could have only returned $6.5 million to the Cavs.  Since Portland was over the cap already, that wouldn’t have worked.  They didn’t have the $6.5 million of extra cap space to absorb that contract.

How can you make a trade involving a BYC player work?  You have three options:

1.  You can trade him to a team which is enough under the cap to absorb the difference.  For instance had Portland been $7 million under the cap last year then they could have happily said yes to Cleveland’s proposal.  They had $7 million in cap space, they traded $6.5 million in salary back to Cleveland in the deal, that leaves them a nice $13.5 million cap slot in which LeBron’s $13 million salary fits nicely.

2.  If the receiving team is over the cap, it can try to find a team (or teams) which are under the cap upon whom it can dump some contracts to make space.  For instance, had Kevin Pritchard fielded that call from Cleveland, after he got done peeing his pants in excitement he could have gotten on the phone to Charlotte and Memphis, both of whom were under the cap last year.  If he could have managed to trade away $6 million or so in contracts without taking anything back then that, with the contracts he would have given back to Cleveland, would have made enough room.  In other words Portland trades $6.5 million to the Cavs, $4.5 million to the Grizzlies, and $1.5 million to the Bobcats, which totals around $12.5 million, but takes back only Lebron’s $13 million contract in return.  Done and done.

3.  Obviously teams under the cap are rare, so scenarios 1 and 2 almost never happen.  The more common solution is to simply wait out the first year of the player’s new deal.  After that the BYC designation disappears and his salary is completely normal for trade matching purposes.

Hope that helps a little bit.  I’m sure if I forgot anything basic and important Storyteller will let us know soon.

--Dave (