July 24, 2014

The Great Spending Spree of 2010

Cleveland Cavaliers GM Danny Ferry is going to have his hands full in the summer of 2010. We try to figure out exactly how much money Ferry will have to spend on free agents in the “Summer of Truth” for the Cavaliers.

When the Akron Beacon Journal’s Patrick McManamon recently wrote about the possibility of the Cavs signing two megastars in the summer of 2010, it lit up the blogosphere. And with good reason. With still over a month until preseason games begin, and with little going on in free agency or trades at this point, it left us all with precious little to write about. So it’s only natural that such a speculative piece would be so widely covered.

With that in mind, I began to think about Patrick’s article. I wondered how realistic it really was. The one thing Patrick neglected to mention in his piece was the NBA’s “Free Agent Amount” cap charge. The basis of this rule is that a team’s free agents continue to count against the cap until either the team renounces their rights to the player, the player signs with the same team, or the player signs with another team. In other words, even though he’s a free agent in 2010, LeBron James will still count towards the Cavalier’s team salary and thus will freeze up some of that cap space Patrick was talking about.

Even considering LeBron’s Free Agent Amount, it would still appear the Cavaliers would have a lot of money to spend, but exactly how much? That’s what I wanted to look into, and so I decided to do a little research for all of us to come up with maybe a more realistic idea of what the Cavalier’s free agent situation will look like in that monumental summer of 2010.   

The first thing we need to look into is what the salary cap is projected to be in 2010. To do this, I asked around to some of the NBA’s best bloggers, and the unanimous answer that I got is that predicting the future salary cap numbers is pretty much impossible. It’s not that it’s just an inexact science, but rather, there’s no science to it whatsoever. The salary cap is determined as a percentage (51%) of the NBA’s Basketball Related Income (BRI).

The reason why it is so hard (impossible) to project future salary cap figures is because of what all goes into determining the league’s BRI. Items that are added into the BRI include regular season gate receipts, broadcast rights, exhibition game proceeds, playoff gate proceeds, novelty and program and concession sales, parking, proceeds from team sponsorships, proceeds from team promotions, arena club revenues, proceeds from summer camps, proceeds from non-NBA basketball tournaments, proceeds from mascot and dance team appearances, proceeds from beverage sale rights, 40% of proceeds from arena signage, 40% of proceeds from luxury suites, 45%-50% of proceeds from naming rights, proceeds from other premium seat licenses, and proceeds received by NBA Properties, including international television, sponsorships, revenues from NBA Entertainment, the All-Star Game, the McDonald’s Championship, and other NBA special events.

In other words, I challenge anyone to accurately predict each of the numbers for every single one of those categories. It can’t be done. The best we can do is look at the annual increases for the existing CBA to get an idea of the average annual increase. For the first year of this current Agreement, the summer of 2005, they used a number of 49.5% of the BRI rather than 51%. This left us with a cap that year of $49.5 million. In 2006 it was $53.135 million, 2007 it was $55.63 million, and this year it is $58.68. If we pretend for a minute that they had used the 51% number for 2005, the cap would have been $50.9 million. This leaves us with increases of $2.235 million, $2.495 million, and $3.05 million respectively, for an average increase of $2.593 million. If we project that rate forward for 2 more years, that would give us a salary cap of $63.866 million for 2010. However, it’s important to note that the annual increases have been getting larger every year, so it’s safe to say the cap could easily be $64 million by 2010, so for the purposes of this post, we will use $64 million as our projected 2010 salary cap.

The only players the Cavaliers have locked up for 2010 as of right now are Mo Williams, Daniel Gibson, and JJ Hickson (assuming the Cavaliers pick up the team option on him, which it is likely they will do). In 2010, Mo Williams will make $9.3 million, Daniel Gibson will make $4.015 million, and JJ Hickson will make $1.528 million, for a total of only $14.843 million. Remember, though, the Cavaliers will have to also include LeBron’s Free Agent Amount. But what other free agents will the Cavs have? Ben Wallace, Zydrunas Ilgauskas, and Sasha Pavlovic will all have Free Agent Amounts counting against the Cavaliers books. It’s safe to say the Cavs will renounce their rights to Wallace and Pavlovic for sure. Zydrunas Ilgauskas will be 35 years old on June 5, 2010 and will be coming off his 12th NBA season. I don’t think any of us would expect Big Z to still be in the Cavs’ plans that year, and worst case scenario, the Cavs could renounce their rights to Ilgauskas, and then still use the Mid Level Exception to re-sign him to a lower amount if that’s what the team wanted to do.

This just leaves us, then, with LeBron James’ Free Agent Amount. You might be asking, how is this Free Agent Amount determined? This depends on the type of free agent, but for an unrestricted free agent with Bird Rights, not coming off his rookie contract, and making at least the average salary (all of which will apply to LeBron), his Free Agent Amount is defined as 150% of his previous salary, up to the player’s max salary.

LeBron’s 2009-10 salary will be $15.779 million, and 150% of that number is $23,669,868. However, that number cannot exceed the max salary, remember, so we have to do some more math. This math is a little bit tricky. A player with 7 years experience (which is what LeBron will have) has his max salary set at 30% of the salary cap. However, this would be too easy to calculate, so they complicate this a little bit by using a different cap number to determine max salaries. Rather than use the 51% of the BRI that is used for team salary caps, they use a cap number of 48.04% of the BRI for max salaries. So, if our projected 2010 cap number is $64 million, and we know that would be 51% of the projected BRI, we can calculate the BRI for 2010 to be a projected $125.49 million. 48.04% of that number, then, is $60.285 million. We then know that LeBron’s max salary for that year is 30% of that number, or $18.086 million. So we now know that LeBron’s Free Agent Amount to be counted against the cap before they sign him is $18.065 million.

We can now add LeBron’s Free Agent Amount ($18.086) to the existing salaries of Williams, Gibson, and Hickson ($14.843 million), and we now have $32.929 million on the Cavs books, leaving them with approximately $31.071 million to spend. This number, however, doesn’t include future draft picks. The Cavaliers will also have to include their 2009 and 2010 draft picks in that number. Once again, we have to do a little projecting. In the NBA first round draft picks’ salaries are bound by the rookie level scale. If we can agree (hopefully) that the Cavs will not be picking higher than 19th again in the next two years, we can then do sort of a “worst case scenario” mockup by looking at the future cap holds for the #19 picks. The 2009 draft pick will be in his 2nd year, so his cap hold will be $1.23 million. The 2010 pick will be in his first year, and his cap hold will thus be $1.181 million. Adding those numbers up, we get $2.411 million, and the Cavaliers will now have $28.66 million to spend.

The Cavaliers roster could potentially look like this, then:

  1. LeBron James
  2. Mo Williams
  3. Daniel Gibson
  4. JJ Hickson
  5. 2009 first round pick
  6. 2010 first round pick

Of course, this still doesn’t include Delonte West and Darnell Jackson (or the 2009 and 2010 second round draft picks). If the Cavs sign LeBron in 2010, that will leave 6 active roster spots and one inactive spot to fill, and $28.66 million to accomplish this.

I have to believe that should Delonte West still be in Cleveland, he won’t be making more money than Daniel Gibson, so we’ll use a loose guess of $3.9 million for him. We’ll just use a $0.8 million estimate for the 2009 2nd round pick and $0.5 million for the 2010 2nd round pick. That leaves the Cavaliers with $23.46 million and a roster that looks like this:

  1. LeBron James ($18.086 million)
  2. Mo Williams ($9.3 million)
  3. Daniel Gibson ($4.015 million)
  4. Delonte West ($3.9 million)
  5. JJ Hickson ($1.528 million)
  6. 2009 first round pick ($1.23 million)
  7. 2010 first round pick ($1.181 million)
  8. 2009 second round pick ($0.8 million)
  9. 2010 second round pick ($0.5 million)

That would leave the Cavaliers with $23.46 million to fill 3 roster spots. If the Cavs were to sign another max player ($18.086 million), they would then have $5.374 million for their last 2 spots.

Obviously, we are doing a lot of estimating here, and who knows what will happen with the likes of Delonte West and Darnell Jackson. Who knows if Danny Ferry might still trade Wally Szczerbiak’s expiring contract for another long term deal? Who knows what the exact salaries of the Cavs’ 2009 and 2010 draft picks will be?

Rather than providing answers, what these estimates show us instead are what possibilities will be out there for the Cavaliers in 2010. If you look at the numbers, it actually will be possible for the Cavaliers to sign another max player in 2010 besides LeBron. However, it will leave the Cavaliers without much depth at all. Other than the future draft picks, who are unlikely to be contributors, the Cavaliers would only have 6 players, plus possibly a 7th player they could get with their Mid Level Exception who you could expect to play meaningful, significant minutes. It just seems to me that to sign a player like Dwyane Wade to a max deal will make it awfully tough for Danny Ferry to build a complete team around LeBron and Wade without getting extremely lucky in the 2009 and 2010 drafts. Should the Cavs sign a player more in the $14-$15 million range, rather than the max $18 million amount, that would leave the Cavaliers with enough space to sign another veteran player to around an $8 million deal, and then still use their MLE to sign another player. The options will be endless if the Cavaliers don’t take on any more salary before 2010, but if the numbers work out even close to these estimates, Danny Ferry better be certain he can find enough quality players to get to a solid 7-8 man rotation with the money he has left over.

At the end of the day, all we’re doing here is pure speculation. I don’t recall anyone predicting just a month ago that Mo Williams would be on the Cavs. This league is extremely fluid, and it’s always hard to predict what a team’s roster will look like in the future. In the absence of real news to report on, though, it’s still fun to look at the possibilities. Scott has given us his wishlist, Amar at Cavalier Attitude has shared his list with us, and Bob over at Cavs Board has given us his throughts on this story. Now that we at least have a little insight as to the ballpark of what kind of money the Cavaliers might have to spend on free agents in 2010, the question remains…..what is the best course of action for the Cavaliers to build a Championship team around LeBron? Is it best to go for the 2 megastar approach (assuming, of course, the Cavs can convince one of these guys to actually come play in Cleveland), or should Ferry try to sign several “second tier” or “third tier” stars? The only thing we can say for certain is that while 2010 may be a stressful summer for us all, it also has a chance to be one of the most active and fun summers in Cavaliers’ history.

  • Ricky

    If we were to magically sign D-Wade or Bosh (I would rather have Bosh, not as good as D-Wade but it would be nice to have the inside option) in 2010, I really wouldn’t mind too much about having less depth. In the unlikely situation where we have a starting lineup of Williams, West, LBJ, Hickson and Bosh (Maybe a true center instead of Hickson if one can be had with our remaining cap space or a future first round pick), we would still have a bench with Gibson as a solid 6th man and draft picks from the next two years to fill out the bench. The MLE and remaining cap space would be enough in my mind to get a decent big man for depth and maybe a swing man. And you really wouldn’t need too much depth when you have two superstars playing 40 minutes a game. Not that I believe any superstar that year will change teams, but if we were to snag one building a complete team wouldn’t be much of a concern to me. A team built around LBJ, Bosh, and even Mo Williams and D-West/Gibson as other options will win at least 60 games a year and easily win multiple championships

  • DCBucks

    Clear as mud.

  • http://justrubsomesugaronit.blogspot.com I’m Ron Burgundy?

    I think I have a hangover from reading this all.

    This article reminds why I’m glad I’m not an accountant or lawyer. Too many rules.

  • MacNip

    Remember how thin the Boston bench was to start the year last year? Amazing things happen when you acquire two marquee talents on a team. All of a sudden quality role players are willing to play for very cheap.

  • http://www.waitingfornextyear.com dparker

    My brain hurts.

    But, as the Celtics proved, you can win with stars and not much depth. There will also always be those in-season Sam Cassell/PJ Brown type of acquisitions out there for a team trying to win a title.

  • Jordan

    Something to think about here is that we can wait to sign LeBron and sign free agents beforehand. Doing this gives us much more capspace to work with (like 18 million if I remember) and lets us go over the cap to sign LeBron because we still have his Bird Rights. I think we did the same thing with Z the summer we got Hughes, Jones and Donyell.

  • http://www.waitingfornextyear.com RockKing

    @Jordan: “The one thing Patrick neglected to mention in his piece was the NBA’s “Free Agent Amount” cap charge. The basis of this rule is that a team’s free agents continue to count against the cap until either the team renounces their rights to the player, the player signs with the same team, or the player signs with another team. In other words, even though he’s a free agent in 2010, LeBron James will still count towards the Cavalier’s team salary and thus will freeze up some of that cap space Patrick was talking about.”

    Teams cannot wait to sign their own free agents as you suggest, as their salary still counts against the cap while they are unsigned.

  • http://www.waitingfornextyear.com Craig

    I prefer to think the Cavs won’t have to wait until 2010 to get a superstar. They have one of the most valuable expiring contracts in the entire league this year with Wally. Now, they just need some team to find themselves in rebuilding mode unexpectedly. I know it is less than unlikely, but if Dallas stumbles with that team, how long would it be before they decided to part with some of their roster cornerstones in hopes of a fresh start?

    And no, I am not talking about Jason Kidd!

  • Eric

    I hope Danny Ferry read this twice like I did.

  • http://www.waitingfornextyear.com RockKing

    If Danny Ferry is looking to blogs for advice, then the Cavs are in more trouble than we ever imagined! :)

  • Hoy

    haven’t had time to read the whole thing, but I just wanted to point out that the salary cap increase is exponential (based on a percentage) which is why it increases by a larger amount each year. So if you look for the % change from year to year and then average that you may be able to get an accurate prediction.

    Constructive thoughts to come later

    Hoy

  • http://www.waitingfornextyear.com RockKing

    I actually did give that consideration Hoy, but there’s nothing naturally linear about the BRI formula, so I wasn’t sure that would be a statistically sound approach to take for this. I mean, the increasing rate of growth could be purely coincidental, so I decided to take a more cautious approach. I would imagine if you averaged the % increases for each year, you get a number higher than $64 million. I just kind of split the difference to be safe, if you will…..not that what I did was statistically sound in any manner, either, so oh well. :)

  • Shaun

    I would also love bosh over wade cuz the inside option. I think we will make a move this trading deadline tho that will negate the 2010 talk. I hope hickson becomes a savage also.

  • Hoy

    Yea that BRI is messy, theres probably some relationship between it and inflation, although thats certainly beyond the scope of anything thats going on in a basketball discussion.

    I’m not sure how likely it is that we’ll have all of our 2009 and 2010 draft picks to play with, if the ‘Wally for a baller’ deal occurs I would imagine some draft picks being part of that deal, or we take on a bad contract along with the star player. If we take on a bad contract then it hurts our cap space even more, if we trade draft picks we can probably sign some D-league type or a bench player that someone else cuts after they get their draft picks.

    Another (non monetary) factor in this deal may very well be Mo Williams, if he plays to his potential (and doesn’t go hughes on us) then it will make Cleveland that much more attractive for other players.

    And as several people have pointed out quality veterans will play for cheap when they think a ring is in their future (see Gary Payton and Karl Malone in LA, as well as the aforementioned Celtics).

    Great article, definitely tackling a mess of a situation, but its fun to do until we have better stuff to look at.

    Hoy

  • SambofromOH

    Since dane team proceeds are factored into the BRI it is safe to assume that we are helping increase the BRI by purchasing Cavalier Girl calenders right? So if I buy ten calenders, I am helping the Cavs sign better free agents in 2010.

  • http://www.waitingfornextyear.com RockKing

    Well, in theory, Sam…..but of course, you’re also increasing the value of LeBron’s max deal, so it might all cancel each other out.

    Then again, the higher the max deal is in the initial year of LeBron’s contract, the more the contract will be worth in 6 years after the 10.5% annual increases, thus leading to even more money LeBron would have to leave on the table to sign somewhere else. So do your part to keep LeBron in Cleveland, everyone….buy as many dance team calendars as you can.

    Also, here’s a hint, but you can buy Lakers girls calendars and it will have the exact same affect….and I have a feeling the Lakers Girls Calendar might be better.

  • KingKing

    “Should the Cavs sign a player more in the $14-$15 million range, rather than the max $18 million amount, that would leave the Cavaliers with enough space to sign another veteran player to around an $8 million deal, and then still use their MLE to sign another player”

    That’s wrong.

    If you start to use your cap room to sign F.A., you don’t have your MLE anymore.
    The exceptions count against the cap while you are under ca, so if you keep it and the MLE is at about $5.6M, you have $5.6M counting like a salary, so you only have 8 – 5.6 = 3.4M left and as you can’t combine the MLE and the cap room, you have 8M of cap room. But you won’t have the MLE before the next summer.

  • Jai

    Delonte West has a team option of $4,658,500
    Darnell Jackson’s option is for $854,389
    Anderson Varejao will likely be resigned and his cap number will be there.
    Plus were are going to have to have to have more players than 6 on the roster. The Cavs may realistically have $10-12M Million in cap space