Creative Financing In The NBA

If you Google the term '"creative financing" otis smith', you'll find quite a few hits. It's long been a favoured phrase for Orlando Magic general manager Otis Smith, and his most famous usage of the phrase came in the run-up to the 2007 offseason. Smith used the term "creative financing" to describe how the Magic were going to handle having maximum cap room, juggling signing other team's free agents with retaining Darko Milicic. It was a fairly generic term that said something without really saying anything. And it only gained its resonance after Smith used all his money to give Rashard Lewis a ridiculously, amazingly, biblically terrible contract

You'll also, slightly depressingly, find this website fourth in those search results. There's a reason for that. "Creative financing" is something that I've harped on about for a while. The financial side of the NBA gives me a jolly; watching and learning how the NBA teams manage (or mismanage) their salary cap space, the luxury tax threshold and all their exceptions gets me off in ways that it really shouldn't. I don't know why it's fun, I only know that it is. I think you agree.

Therefore, there follows a list of some of the better examples of creative financing in the NBA today, some of the ways in which executives and cap experts have manipulated the system, staved off the shackles of oppression, and beaten the terrorists.


- The Bulls set a precedent by signing four players to descending contracts at the same time. At one point, the contracts of all four of Kirk Hinrich, Andres Nocioni, Smiling Joe and Sulking Ben had contracts that shrunk on a year-by-year basis. The idea of this was to maintain future salary flexibility to allow them to retain Ben Gordon, Luol Deng and Tyrus Thomas down the road as well. It didn't work, though; even though they paid them backwards, the Bulls overpaid all four, then overpaid Deng as well, and those combined with a staggeringly powerful fear of the luxury tax unbecoming of a team with such hefty profits (and an irrational hatred of the man) led to Gordon leaving as an unrestricted free agent this summer. Which sucked. Still, it could be worse. They may well have maximum cap room in 2010. (Yay! Because cap space went so well for us last time.)

- The Hawks are currently trying something similar. In the last six weeks, they've re-signed all three of Marvin Williams, Mike Bibby and Zaza Pachulia, all to pretty decent value contracts. All three also have contracts that dip in value in the 2010/11 season, a crucial offseason for the Hawks if they are to be able to pay to keep their star player, Joe Johnson. Knowing this to be true, GM Rick Sund has tried to set himself up to be able to pay all four players without going into the luxury tax. It's a good idea, in a way. But the downside of it is that this means the Hawks are going to be grazing their balls against the powerful stone grinding wheel that is the luxury tax threshold, and all they'll have done is retaining a good yet inadequate core. Of course, they would have had some financial flexibility, but they decided to use it all on Jamal Crawford, instead of re-signing the thoroughly comparable Ronald Murray for a third of the price. It's a strange decision.

- Quite a few players have taken second year dips in multi year contracts. The Magic (the creative financing GENIUSES that they are) once did it with Tony Battie, a move which enabled them to give Lewis even more completely unnecessary money than before. The Raptors have done it with Jarrett Jack, as they'll be struggling to stay under the tax next season. Others to have signed contracts that either descend or that have the occasional dip in them include Kris Humphries, Devin Harris, Speedy Claxton, Jarron Collins and Marcus Camby. But it's not common.

- Contract guarantees can be fun, too. There's way more leeway to them than there is often considered to be. Most unguaranteed or partially guaranteed contracts are guaranteed against lack of skill; that is to say, 'if we don't think you're good enough, we're cutting you.' Furthermore, any of those include dates on which the contract will become guaranteed if the player is still on the roster. But you can get way more creative than that if you want to. One such example is that of Matt Harpring; the Jazz re-signed Harpring to an oversized 4 year $25 million contract, but with conditional guarantees on the fourth year. Harpring were to only be guaranteed $4.5 million if he either:

a) missed 47 games combined during the 2006-07, 2007-08 and 2008-09 seasons due to injuries to his right knee, or
b) missed 35 games in the 2008-09 season only due to injuries to his right knee.

Neither of these happened. Harpring gutted out the injury, as well as a concurrent serious injury to his ankle, and saw through all three seasons. It came at a cost, though; he's now about to retire. What a trooper, though.

- Leon Powe had something similar but different going on with his first contract from the Boston Celtics. Powe signed a three year minimum salary deal with the first year guaranteed, but with performance-related guarantees on the other two years. His second year salary became guaranteed if Powe either made the 2006/07 rookie team, or if his point, rebound and assist averages added together to total more than 14.0 in more than 41 games played. His third year had a similar guarantee, but with the threshold raised to 16.0. It turns out that this was quite a good idea, as Powe became a valued contributor while playing for the cheapest possible price. Shame about the latest knee injury.

- There's not much flexibility for creativity with rookie scale contracts. They follow a strict formula - two guaranteed years, two option years - and even though players and teams can negotiate the contract's value to between 80% and 120% of the scale amount, almost everyone gets the 120%. (The only ones I can think of that haven't are Ian Mahinmi, George Hill and Sergio Rodriguez.) However, this season, the Indiana Pacers found a new way to make things interesting. When signing Tyler Hansbrough, they gave him the customary 120%, but with an interesting caveat; all four seasons of the contract are only 80% guaranteed. (Note: that's all that rookie scale contracts have to be guaranteed.) The purpose of this isn't entirely obvious; if Hansbrough really sucks or dies or something, the option years won't be exercised anyway, so having a partial guarantee on them doesn't make much of a difference. But it's interesting because it's creative. And, dammit, that's what we're after.

- Speaking of creative, check out Brandon Roy's guarantee conditions. Intense.

- It might be the Mavericks, not the Magic, that are the kings of creative financing. (A cynic would say that they need to be, considering that they overpay almost everyone. That cynic would have a point.) Particular favourites of Donnie Nelson and friends include conditional guarantees based on championship wins (given to Jerry Stackhouse and Greg Buckner) and team based performance incentives (see this). Having unguaranteed final seasons in contracts is a good ploy of theirs; Erick Dampier has an unguaranteed 8 figure final season in 2010/11, with conditions that he's never going to meet, giving the Mavericks a massive trade chip to play with. Buckner's contract - which they initially signed, then gave away, but have now brought back - has only a small percentage of his final two years guaranteed. You probably already know about the last year of Stackhouse's deal, and the uses that had. And you may also have known that the last year of Jason Terry's contract is only $5 million guaranteed as well.

But the Mavericks have saved their best unguaranteed contract trick for last. After the Magic matched the offer sheet that Dallas gave to Marcin Gortat, the Mavericks found themselves with a full MLE again. Rather than use on an MLE calibre player, they instead decided to spend $4.5 million of it on Drew Gooden, a poor player with the worst defense in the NBA and an increasingly bad understanding of offensive continuity. The contract, though, has a caveat; only $1.9 million of the $4.5 million is guaranteed. And there's no guarantee date.

It's fairly normal for players to sign partially guaranteed one year contracts. If it wasn't common practice, training camp would suck. But it's rare for players earning more than the minimum to do it, and it's the first time I've ever seen it on a contract this size. It's actually quite a clever ploy, because it gives the Mavericks quite a trade chip. In a year when so many teams are over the tax, and so many teams need to make instant salary savings, unguaranteed contracts have to be considered even hotter shit than usual. And by signing Gooden to one, the Mavericks give themselves a pretty mean trade chip between December 15th (the first date Drew can be traded) and January 10th (the date all contracts become guaranteed). He was, without a shadow of a doubt, signed with this intent in mind. So expect it to happen.

As for what's in it for Gooden.......well, not a lot. $2 million for three months work is never bad, but for this to have been the best he could get, his other offers must have really sucked.

- And finally, here's an example of how not to creatively finance. Naturally, it involves Otis Smith. And it also involves the man in the opening picture, James Augustine.

Augustine was drafted by the Magic in the 2006 draft, and signed a two year rookie minimum contract with the team. He stayed with the team for the whole two years, barely playing, and was became a restricted free agent. The second year of his first contract was only 25% guaranteed until July 30th, and the rule with qualifying offers is that they have to be at least the same amount of guaranteed money and the same guarantee dates as the final season of the previous contract. So when Orlando tendered him a qualifying offer, Augustine accepted it immediately, and was thus under contract for the 2008/09 season for $972,581 (the amount of the QO = minimum salary + $175,000), of which $243,145 (25%) was guaranteed, with a guarantee date of July 30th 2008. Orlando then waived him before that date, meaning that they essentially paid Augustine a quarter of a million dollars to have him under contract for two weeks in mid-July.

It's definitely financing, no question about it. And it's definitely creative. But it was also really, really thilly.

Otis Smith's job became far easier and far more secure when the Magic's NBA Finals appearance prompted the aptly named Rich DeVos to start stumping up luxury tax dollars. Imagine what would have happened, though, if that hadn't happened. There'd be no Marcin Gortat. There'd be no Brandon Bass. There might not have been any Vince Carter trade, and there might not have been any Matt Barnes signing. The Magic would be relying on the man who coined the term "creative financing" to do that exact thing. And it's hardly something he's renowned for.

I commend the Magic's offseason. They've done pretty much everything right. Even the little things, such as the inclusion of Ryan Anderson into the Carter trade, were done correctly. Otis Smith has had a good summer. But Magic fans should be very, very grateful to ownership. Spending is easier without a budget.

The Assassination Of Devean George By The Coward Donnie Nelson

February 13th, 2008. Wednesday. Raining.

The Dallas Mavericks are tootling along with a 34-17 record. They're pretty good, and perhaps they know it, because they're suddenly overwhelmed with the urge to do something stupid.

A veteran team with only one good young player decides on a plan to get older and worse. The Mavericks decide that Jason Kidd is a significant upgrade over Devin Harris, and work out a variety of scenarios that see them trade Devin and two future first round draft picks for Kidd. They're wrong, but they work hard at it anyway, determined to obtain a player that puts them further away from the hump that they're already sliding away from. Two years ago, it would have been a steal. But not now.

Eventually, they stumble upon a scenario that both they and the Nets can agree upon. Dallas agrees to trade Harris, the picks, cash, DeSagana Diop, Maurice Ager, Jerry Stackhouse and Devean George to the Nets in exchange for Kidd and Malik Allen. The fillers are largely meaningless; outside of Harris, only Diop is a significant player for the Mavericks, and even then he sucks more ass than most people care to acknowledge. The core of the deal is Harris for Kidd, and both teams seem pretty happy with that. The fundamental pieces are together, peripherals of the long-awaited deal are finally in place, and everyone's a winner. (Except Dallas.)

Things then get a bit weird. Through a hitherto little-known technicality, one of the least important components of the deal - backup forward George - has the power to veto the trade. George re-signed with the Mavericks in the previous offseason to a one year contract, and Dallas will have early Bird rights on him when his contract expires. However, if George gets traded, the recipient team will lose his Bird rights if they trade for him, which reduces George's chances of getting handily paid next season. [Let's pretend for a minute that such chances existed.] I don't really understand the purpose of the rule, but it exists, and it applies to Devean. As a result, players on one year contracts who will have early or full Bird rights at the season's end are given the right to veto any trades that they may be in, so that they aren't powerless to prevent having their Bird rights taken away from them. And that's the power George wields.

The rule wasn't really written for situations like this. I'm not really sure who it does apply to, really, but it definitely wasn't for this reason. Yet it applies anyway, and therefore, to a chorus of anger and giggles, George exercises his right to veto the trade and emphatically pisses on Mark Cuban's strawberries for at least 72 hours.

Vetoing the trade doesn't endear George to the Mavericks fans. They boo him lustily, already aggrieved by his crapness and his club's weird affection for him. It also doesn't help that he plays 33 minutes later that same night, and scores 0 points on 11 shots. But technically and morally, he did no wrong. He did what he had to do, and looked for himself. He merely made some people look bad while doing it.

(It also doesn't really hold up the Mavericks, who rework the trade later in the week anyway, substituting Stackhouse and George for Keith Van Horn and Trenton Hassell. With Antoine Wright also coming back in the reworked version, it's a better deal anyway. But I digress.)

---

Fast forward to this month.

George saw out the season with the Mavericks, sucked horribly, yet re-signed with the team for two more guaranteed years anyway. The inexplicable love that Donnie Nelson and Devean George feel for each other can never be topped, or properly understood. But it's about to change when Nelson tries to trade George again. And this time, he succeeds.

Two weeks ago, George was traded to the Raptors as a peripheral part of the Shawn Marion deal. Along with Antoine Wright, he went to Toronto as the afterthought backups to the also-acquired Hidayet Turkoglu, a move which showed the Raptors putting on a fine demonstration of creative financing, if not a good idea of how to build a team. (And if you don't think there's not an I-TOLD-YOU-SO post coming on that subject, then you're very much mistaken.) However, as far as Devean George was concerned, there was another caveat.

Now, it's possible that they are not vengeance-driven horrible bastards. It's possible that they just did this without considering the possible side effects down the road. But here's the thing; when re-signing George this past summer to a two year $3.2 million contract that paid $1.6 million in both seasons, Nelson and Cuban added a somewhat rare clause to the contract that called for George to get a $200,000 bonus if the Mavericks win a certain number of games this season. I don't know what the threshold was, but I'm guessing it was 50 wins, since that's what they won last season (such predictions are calculated during the moratorium using the team's record from the previous season as the basis). Since the Mavericks can be realistically expected to achieve that next year, George had himself a $200,000 bonus.

But then he was traded to the Raptors. They didn't win 50 games last year, and thus the CBA cannot consider them likely to do it this year either. As a result, George loses $200,000. And though he's subsequently been traded to the Golden State Warriors in a shameful deal for Marco Belinelli, the same applies; George has lost his bonus.

Revenge.

Of course, the fact that the Mavericks had given George a combined $5,943,370 to play with them over the last three seasons means the last laugh is still firmly on them. Their inability to realise that they were paying to retain a man with scoring the scoring efficiency of Willie Green, the rebounding of Jason Collins and the oft-misrepresented defense of Andres Nocioni means that they're the real victims here, the victims of their own silliness. But, still. Vengeance is sweet.



(EDIT: It's been brought to my attention that they above is too confusing. Fair enough. Here's the gist of it, reworded; based on last year's win total, the Mavericks were expected to win 50 games. As a result, George's cap number was raised to $1.8 million. Now that he's a Warriors, it's been knocked down to $1.6 million again. But George was only going to be paid $1.6 million UNTIL the 50 wins happened, at which point he'd get the bonus. The basic point remains, though; by not now being a Mav, George loses $200,000. That is all.)

Tyrone Nesby

I love to read when I'm on the toilet. Love it. Can barely go without it, in fact. Litotes help me to open my sphincter. Unfortunately, I don't own many books. So I tend to read the same ones over and over again.

True to form, I am currently midway through a repeat reading of "When Nothing Else Matters" by Michael Leahy, a exposé-type book about Michael Jordan's shoddy comeback with the Wizards. It's quite good fun, particularly if the Wizards era Jordan was the only Jordan era that you were around to see, as was the case for me. I'm particularly enjoying reading about all the other characters in the story, like Doug Collins, Tim Grover, Jerry Stackhouse, Rip Hamilton, Tyronn Lue, Chris Whitney, Kwame Brown (who, it's fair to say, struggles for good news throughout), Juan Dixon, Bobby Simmons, Courtney Alexander and others. But I am especially mindful of one name that I'd forgotten about, that of Tyrone Nesby, the former defensive specialist and hater of passing that had a few years of coming off NBA benches after picking up a surprisingly generous contract from the Clippers of all teams.

Because of this, I decided to look up what T-Nez was doing these days. The last I had heard, he'd become a rapper, but that was about two years ago, now, so I looked again. The news isn't good, hammer fred.

After the Wizards 2001/02 season, Nesby's $9 million contract had run out, and the Wizards looked elsewhere. No other NBA team seemed to want him, and Nesby hit the European trail, signing with Larisa in Greece and averaging 17.8 points per game. He then went to 2003 summer league with the New York Knicks, but didn't get a contract, and went back to Europe the following year visiting both Italy (13.4 ppg for Varese) and Serbia (21.1 ppg for Relfex Beograd). In the 2004/05 season, Nesby signed with Lietuvos Rytas in Lithuania, for whom he averaged 16.3 points in the ULEB Cup and 13.5 ppg in the Lithuanian league. Nesby's only other basketball stop was in the 2006/07 season, when he co-owned an ABA team called the Las Vegas Venom. (Note: if ever you've wondered what co-owning an ABA team is like, write yourself a cheque for $5,000 grand, then set light to the corner of it and use it to burn down your house. It's a bit like that.) They folded after a few months, getting little further than playing seven games and designing a logo in that time, and that was the end of Nesby's basketball efforts. (Nesby was also the head coach and the star player for the team. Four months well spent.)

You can't keep a good man down, though, and Tyrone Nesby found his true talents when he started to make it big in Lithuania as a rapper called T-Nes. Nesby released an album there called "Serious Business", and it featured Nesby rapping in English to some seminal Lithuanian choruses. Samples of some T-Nes songs can be found on Nesby's website, Nesby World, as well as a frankly stupdenous gallery, feature nude pictures of Nesby's upper body and a touching moment with a Luke Jackson lookalike. So, truly something for everyone there.

In addition to this, Nesby has also seemingly gone back to university to finish his criminal justice degree (he left UNLV after two seasons), information which I learnt from reading this. That page also gives an incorrectly spelled link to Nesby's other website for his non-profit foundation, the aptly named 'Tyrone Nesby Foundation'. (The foundation's site no longer works, even when spelt properly, and is only viewable via this frankly useless archive version. But it's something.) The Hoopcoach link also speaks of Nesby's desire to become a coach one day, and, on his Linkedin page, Tyrone alluds to his dream of becoming a casino host. The man knows what he wants at least occasionally. And I can respect that.

It's all rather positive stuff. A decent basketball career, playing to a decent standard for good money, a reasonable sideline in the music industry, many years spent running a foundation with genuine (if wildly overambitious) intentions to give back to his community, and a man who went back to school to complete his degree mindful of its importance to achieving what he wants to achieving. There's a potentially crap biopic to be made out of that somewhere.


And now, the crimes bit.


Nesby was arrested in the Wizards locker room back in April 2001 after a March 1999 arrest warrant was issued for him after an October 1995 incident. If that makes sense. In the initial incident, Nesby was alleged to have punched, kicked and broke the nose of a man named David Collins in the face during an argument about the verdict in the O.J. Simpson murder trial (which might explain his decision to major in criminal science), and the assault led to a charge of misdemeanour battery. Nesby was tried over the incident in a civil judgment back in 1998, and lost, having to pay the victim $16,500, but the criminal charges were later dropped, despite the 6 years they took to come to fruition. After this came two contempt of court arrests, the first in mid 2007 and the second in January 2008, both times for failing to appear in court at hearings for outstanding child support payments. (And by "outstanding child support payments", I don't mean "child support payments which he made with a rare yet special degree of charm, grace, elegance and suavity usually reserved only for superheroes and dead crooners." I instead mean "payments that he hasn't made yet.") The second arrest saw Nesby sentenced to 22 days in jail for contempt, with the initial hearing being about a child support case that saw him owing over $65,000. A lot of money.

If that was the end of the money owed, then it would be bad enough. But it isn't. Reportedly, at the time of that arrest, Nesby owed "at least $1 million" in child support in various other judgements, not least of which is a $300,000 or so debt in Illinois, where records of so-called 'deliquents' are made publically available on a website. Nesby's entry currently shows that, despite the most recent payment being in this calendar year, he owes almost half a million dollars in this one case alone, and that's not counting the judgments in other states around the country. At the time of Nesby's aforementioned arrest in January 2008, this debt was only - if you can call it that - around $300,000; apparently, subsequent payments notwithstanding, it's somehow gone up $100,000 in less than 18 months. Bummer.

What Nesby is doing to earn the money to pay the debts is unclear, and not really any of my business. But whatever he's doing, he's not earning $3 million a year any more. Yet the payments would appear to have been set back when he was. Is that fair? I don't know. It doesn't seem it.

Either way, help out a struggling child. Put right world famine. Buy Tyrone Nesby's music. Together, we can make poverty history. Just buy two tracks a month, or whatever you can afford.

Please.

30 teams in as many days as it takes: Dallas

Players acquired via free agency or trade:

Brandon Bass (two year minimum)
Trenton Hassell (acquired from Minnesota)
Eddie Jones (two year, full BAE)



Players acquired via draft:

First round: None
Second round: Nick Fazekas (34th overall), Reyshawn Terry (44th overall, unsigned), Reinaldas Seibutis (50th overall, unsigned)



Players retained:

Jerry Stackhouse (re-signed, 3 years, $22,376,250, I think)
Devean George (opted out, re-signed, 1 year, $2,369,111)
Devin Harris (signed a wildly oversized 5 year extension)
DeSagana Diop (exercised team option)



Players departed:

Greg Buckner (traded to Minnesota)
Austin Croshere (signed with Golden State)
Kevin Willis (unsigned)
Pops Mensah-Bonsu (waived, signed in Italy)



Bobbins:

The Mavericks have one of the worst young cores in the NBA. With only Devin Harris, Juan Jose Barea and Maurice Ager as the only returning players under the age of 26, and with only one of those playes able to crack any NBA team's rotation, Dallas enjoys (if that's the word) almost nothing in the way of prospects. There's Josh Howard of course, but he's 27 now, and while DeSagana Diop is still only 25, you're an optimist and an idiot if you think there's some skills in there that he's merely kept hidden for 6 years.

(Incidentally, did you know that Mavericks training camp signee Jamal Sampson is only 24 years old, despite being around for what feels like a million years, and that commonly accepted youngster Diduer Ilunga Mbenga is about to turn 27? Me neither. These things are worth noting. That is, they are worth nothing if you're really bitterly pathetic like me. If you are, hooray! We should hang out.)

Dallas tried to add to this somewhat this summer. Without a first round draft pick, they picked Nick Fazekas high in the second, thus once again insuring that they have a tall white forward who takes 85% outside jumpshots and who doesn't move well on defense. It's a recent trend that began with Keith Van Horn, was last year handled marvellously by Austin Croshere, who now passes the mantle onto Fazekas.

Fazekas figures not to play much, though, after the unheralded signing of Brandon Bass seems to have given the Mavericks a backup power forward worth a damn. After two years of bland nothingness with the Hornets, Bass was allowed to leave unchallenged when Dallas picked him up. Since then, despite it only being preseason, Bass has shown signs of being a capable player, and being only 22 he can join (or rather, "be") Dallas young core.

But then, who gives a shit about a young core when you've just won 67 games the season before? To add young talent is nice, but all Dallas really needed to do was to keep the core that they had, maybe add one or two pieces, and try all over again. They did this, adding some perimeter defense in Eddie Jones and Trenton Hassell, while bringing back Devean George and Jerry Stackhouse for some more depth. The Mavericks can boast now one of the NBA's deeper teams, and they still rock the core that resulted in the 5th best record in NBA history last year (it was something like that, at least. I forgot what it was exactly).

They didn't blow it up, and under no circumstances should they have done. Watch as they now decimate the roster in a trade for Kobe.



Next year:

Much has been made of the Mavericks historic capitulation to the Warriors in round one of the playoffs last year, which set all kinds of trends that I can't rememeber. But what a lot of people tend to overlook was the sheer bad luck of it all. If any other team claims that eighth seed, Dallas polishes them off with no problem at all. Yet Golden State offered up by far and away the biggest matchup problem of them all, and it's them who Dallas drew.

The Mavericks did not help themselves by somewhat wilting under pressure, and Avery Johnson by his own admission did not make the correct adjustments.

None of this, however, means that the right way for the Mavericks to go is to start thinking "yes, what we need right now is the sub-30% clutch shooting of Kobe Bryant", or "we can never with win Dirk, let's trade him".

They have a formula, and it's one that works. It worked last year to the tune of 67 wins, and while regular seasons don't account for anything in the playoffs (as Golden State showed), it does serve to prove that this Mavericks team can beat all comers. All, that is, but one.

To solve Golden State (and believe me when I tell you that I realise how stupid it is to imply that a team's season rests on one matchup versus one solitary mediocre opponent), Dallas doesn't need to revamp their roster, but make some adjustments and not get rattled. They didn't, and so they lost. But were that situation to happen again, that's all it takes to avoid that drama again.

Dallas is arguably the best team in the league. The Spurs have the title and claim that crown, but Dallas is up there. They should once again finish with the best regular season record and win the Western Conference.

This year, they just need a better stroke of luck, and a dose of fortitude. If that happens, they may win the title. They're one of very few teams that are good enough.