Creative Financing in the NBA, 2011
January 20th, 2012
The only beardless picture of Rashard Lewis I could find. It’s a part of him now. “Creative financing.” A fun term, one that’s actually employed by financiers and accountants, yet one brought into the world of the NBA when it was used, once, in a pre-emptive justification for one of the least creatively financed transactions of a generation. Nevertheless, even if the man who gave reverence to the phrase isn’t the role model for its usage, creative financing does exist in the NBA. Or at least, it did.In amongst the lockout, the protracted negotiations, and the almost complete loss of a season/confidence in the NBA’s product, a new Collective Bargaining Agreement was drawn up that sought to curb spending, introduce more payroll parity, and get the league back into the black. For those of us who enjoy looking at, and looking for, means to creatively manipulate, it was a confusing time. Of course, some teams acted like nothing had happened. Detroit gave $25.5 million to Rodney Stuckey to come back, gave $18 million to Jonas Jerebko to come back, gave $28 million to Tayshaun Prince to come back, and gave $14.5 million to Rip Hamilton to go away, committed as they were to retaining the core of a team that’s gone 57-107 over the last two seasons. Meanwhile, Philadelphia spent only what it cost to re-sign Thaddeus Young and replace Darius Songaila with Nikola Vucevic; hamstrung as they were by incumbent contracts, the team had too little wiggle room to do very much, something which will likely continue to be the case for the final 18 months of the Elton Brand era. Most others, however, recognised the changing environment, and were willing (or able) to adapt accordingly. Perhaps the most prominent example of this is the defending champion, Dallas Mavericks. […]
Creative Financing in the NBA, 2010
August 12th, 2010
Last year, I wrote a couple of posts under the heading of “Creative Financing in the NBA.” Inspired by seeing a series of quirky salary techniques that I had not previously seen in my three long and sexless years of compiling NBA salary information, I was inspired to steal Magic GM Otis Smith’s favoured phrase without permission, and use it to describe some of the financial anomalies that the offseason transactions had puked over our spreadsheets. The posts were reasonably successful, drawing in both the 25th and 26th regular viewers to the site; more than anything, however, they were a pleasure to write. Therefore, there follows another post for salary anomalies and trivia from the 2010 NBA offseason, a breakdown of all quirky payroll-related idiosyncrasies and manipulation that took place in front of our very eyes, even if we didn’t really notice it at the time. Note: this will not interest you, unless you are really big on pedantry. (Mind you, that could be said about this entire site.) – One of the first signings announced in this free agency period was that of Amir Johnson, who last year backed up Chris Bosh in Toronto. He played well, being possibly Toronto’s best defender and averaging 6/5 in 17.7 minutes per game with a PER of 16.7. The Raptors re-signed Johnson to a deal worth $30 million in base compensation (not $34 million as was widely reported), with incentives in the deal to potentially boost its value that are currently listed as “unlikely.” Amir’s contract before incentives will pay him $5,000,000 next year, rising by $500,000 annually to a total of $7 million in the fifth and final year. However, that $7 million salary in the final year is only $5 million guaranteed; if Toronto (or whoever owns him at that […]
A Brief History Of Luxury Tax
November 2nd, 2009
The NBA’s luxury tax first came into existence in 2001, the year in which the league’s new escrow system debuted. The escrow system, in layman’s terms, is a system that withholds a certain amount of player’s salaries and puts it into a separate account until the end of the following season’s moratorium. At that point, when the league’s annual audit is done (that’s what the moratorium is for; calculating the numbers), then if the league-wide player salaries exceed a certain percentage of the league’s overall revenue, that account is divvied up amongst the owners and the players never see it. Similarly, if the league-wide salaries do not exceed that percentage, the players get it back. Essentially, it’s a failsafe measure to prevent players from getting paid too much. Luxury tax is an extension of the escrow system, designed to put more money back into the owner’s pockets if they feel the players are getting too much of it. If that sounds like something that might excite you, a longer description with all the relevant numbers and stuff was written by the seminal Larry Coon, and can be found here: http://www.cbafaq.com/salarycap.htm#Q18 As you might presently yourself fully be aware of, the luxury tax is an owner-friendly system also designed to prevent rich teams from simply outspending the rest of the competition. It is calculated by using a projection of the following year’s Basketball Related Income (roughly 61% of it; a more detailed description of the calculation can be found here), and the idea behind it is simple – you can have a payroll of as much as you like, but if you cross that tax threshold, it starts costing you more. It’s designed to be a deterrent, and to emphasise parity amongst the league’s payrolls, thus tying in nicely with David […]
