Thursday, August 02, 2012

Addendum to Teague story: the Bulls's salary cap picture, and how it came to be

When the new maximum salary figures came in, Derrick Rose's 2012/13 maximum salary contract went from $15,506,632 to $16,402,500, an increase of as-near-as-is $900,000. Luol Deng's salary went down by $60,000, but that barely offsets the increases, and it's an increase that put the Bulls right up against the "apron".

After all the roster turnover, the Bulls breakdown of 2012/13 salaries currently looks like this:

Derrick Rose: $16,402,500
Carlos Boozer: $15,000,000
Luol Deng: $13,305,000
Joakim Noah: $11,300,000
Richard Hamilton: $5,000,000
Kirk Hinrich: $3,941,000
Taj Gibson: $2,155,811
Marco Belinelli: $1,957,000
Jimmy Butler: $1,066,920
Nazr Mohammed: $854,389
Vladimir Radmanovic: $854,389
Nate Robinson: $854,389

Total: $72,691,398.

Only listed above is committed salary, not any cap holds. Cap holds aren't relevant at this juncture. What is relevant is how much the Bulls have left to spend.

The process by which the Bulls put together that roster is more important here than usual. The new CBA created a level, known colloquially as the 'apron', which subjects any team with a payroll above that level to further payroll restrictions. The line exists $4 million above the luxury tax threshold of $70,307,000, so the Bulls are not over it. It is more important to note, however, that there is absolutely no way they can now go over it, because of what they have done thus far.

The Non-Taxpayer Mid-Level Exception cannot be used by teams over the apron, or by teams who would finish above the apron upon using it. Also, if you DO use it, you can't then go over the apron under any circumstances. The same is all also true of the Bi-Annual Exception. And the Bulls have used both - Hinrich received $3.941 million of the $5 million MLE, while Belinelli got the full BAE.

Proximity to the apron - which, it bears repeating, they CANNOT now go over - is now the Bulls's major problem. They have only $1,615,602 in room beneath it now, and with only 12 players under contract, they need more. This is doubly true in light of only having four big men, triply true in light of two of those four being incredibly injury prone historically, and quadrupley true in light of Rose missing most if not whole of next season. But adding more players is difficult because they just can't afford much.

Refer back now to the aforementioned Marquis Teague issue. The Bulls want to pay him less than what protocol mandates - whereas paying him 120% of his rookie scale would cost $1,028,400, 100% of it would cost only $857,000, whilst 80% of it would cost only $685,600. At the risk of stating the obvious, the less they give Teague, the more they can use to patch up the rest of the roster.

If Teague gets 120%, there's only $587,202 remaining; that's enough for a rookie minimum and two ten day contracts, and that's all. (And for what it's worth, the $473,604 rookie minimum will nonetheless count as $854,389 for tax purposes.) Until such time as Rip Hamilton is traded, the pinch is a tight one. Therein lies Teague's problem and the source of the conflict. The Bulls have much leverage with Teague that they don't have with others - if he wants to play in the NBA, he has to either play with Chicago, or, if not Chicago, spend a year out of basketball altogether for them to lose their exclusive rights. Chicago put themselves in a position where they needed to squeeze someone, and that someone was Teague.

It is not true to say, though, that the Bulls were forced to battle the apron. Were the above roster built via a different mechanism, they wouldn't have suffered from any spending limitations other than those they self-imposed. For the purposes of this post, we will ignore the basketball reasons WHY the Bulls gave Hinrich the contract that they did - as opposed to keeping the superior and cheaper C.J. Watson - and instead only look at how they could have done it.

To avoid having to pay him $500,000 in guaranteed compensation, the Bulls traded Kyle Korver to Atlanta in exchange for a nominal amount of cash. This is the same team from which they signed Hinrich. Had the Hawks signed-and-traded Hinrich for Korver, the Bulls wouldn't need to have used the MLE to sign Hinrich. The only negative difference in this outcome would have been the Bulls didn't create a TPE of $5 million, which they did in the real one. Yet it now matters not. The S&T was discussed, but it wasn't done.

Had the S&T been done, Belinelli could then have signed for his BAE amount using the non-taxpayer MLE to do so. If a team signs a player using the non-taxpayer MLE for an amount smaller than the taxpayer MLE, it is treated as though the taxpayer MLE was used instead, for the purposes of establishing whether or not the apron can be exceeded. (Put in practice, if you sign someone using the NTPMLE, but pay them less than $3.09 million in the first year, which is what the TPMLE is this year, you can still go over the apron.) Therefore, had Hinrich not taken the MLE, Belinelli could have done, and the whole thing would have been treated as though only the TPMLE was used, Chicago could sign as many minimum salaries as they have roster space, and give Teague 120% without any repercussions apart from the luxury tax incurred. But this is not what happened.

The Bulls could have had exactly the same roster without the TPE and without the hard cap that is the apron. They instead chose the TPE and thus burdened themselves with the hard cap. If the TPE from the Korver trade is used at some point (probably next July) to land a quality player that would have been otherwise unavailable, this makes sense. Yet as of right now, they aren't even able to freely use the minimum salary exception without consternation because of this process. This is what they chose. It is justified if the TPE becomes of some use, and not before.

Tom Thibodeau's salary has nothing to do with the salary cap, though. So just pay that guy.

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