Browns Pro Bowlers early selections in team drafts
January 23, 2015Browns reach out to Brian Hoyer to discuss new contract
January 23, 2015NBA fans voted in LeBron James as an Eastern Conference All-Star starter, but did not vote in Kyrie Irving despite his start last season and his reigning All-Star Game MVP honor. That snub will likely cost Irving – and by definition, save the Cleveland Cavaliers – around $9-10 million over the course of the point guard’s current contract.
Late January is usually silly season in the NBA. But this year, more and more trades happened in December and early January than usual. That will make the next three weeks fairly anticlimactic as many contenders already added a piece or two to their rotations. This is especially true for the Cavaliers. But Thursday’s All-Star starting lineup announcement and Irving’s loss of possible salary is one of more meaningful legitimate storylines for this now-surging team.
With that in mind, and constant curiosity over the next Cavs transaction, here is a Q&A on all types of Cleveland basketball salary topics.
How did Kyrie Irving lose money by not being named an All-Star starter?
You can blame (or, credit) Derrick Rose for this one. The so-called “Rose Rule” was added to the 2011 Collective Bargaining Agreement. Here’s how it works: A player finishing his rookie contract can earn 30 percent of a team’s salary cap1 on a maximum contract extension if he’s twice been voted an All-Star starter, twice been voted All-NBA or won an MVP trophy.
Typically, a maximum contract extension off a rookie contract only enables a player to earn 25 percent of the salary cap. This new rule changed the moneymaking potential for young superstars in the game, putting them on the same level as seven-to-nine-year veterans. Oklahoma City’s Kevin Durant was the first to profit from the rule. Irving, if he had been voted as an East starter for the second straight year, would have received extra dollars, too. Since a league MVP trophy is incredibly unlikely, the matter is now solved.
How exactly do you calculate the $9-10 million of losses?
There is actually a slight quirk in Kyrie Irving’s maximum contract extension2 which was announced almost as soon as possible on July 1, the first day of this season’s NBA calendar. In order to receive an opt-out after the fourth season of the deal, Irving compromised to receive only 27.5 percent of the salary cap if he managed to meet the criteria for the “Rose Rule.”
The rookie maximum contract extension is based off the salary cap in year one of the contract. For Irving, his contract kicks in at the start of the 2015-16 season and he has his opt-out after 2018-19. The NBA salary cap increased by 7.5 percent to $63.065 million this season. Thus, Irving’s total five-year amount depends on two things: the “Rose Rule” and the exact increase of the cap from this year to next.
Updated the Kyrie Irving max chart. Forgot max salaries based off different % of BRI than cap. pic.twitter.com/2mi3xJIwby
— Jacob L. Rosen (@JacobLRosen) January 23, 2015
But initial reports said Kyrie Irving signed a five-year $90 million deal. Why is this different?
It’s always different. Those initial reports likely used a starting basis of another 7.5 percent cap increase and no “Rose Rule.” As you can see in the above chart, yes, he would make approximately $91.8 million over five years in that situation. But the salary cap increase will likely be much more than 7.5 percent. The cap is expected to jump to as much as $90 million in the next two years with the beginning of the massive new TV deal3. That growth will make Irving’s actual deal worth perhaps as much as $100 million over five years.
In case you were curious, the same reporting took place with John Wall’s maximum extension last summer. Wall, the No. 1 pick in 2010, one year before Irving, initially was said to be receiving a five-year $80 million extension. Some outlets used the term “approximately,” but it’s more accurate to be “at least.” With the increase of the salary cap, his actual deal is closer to $85 million, according to Mark Deeks’ excellent ShamSports website.
So where does this news leave the Cavs for 2015-16 salaries?
Here is where things start to get quite messy. The salary cap will be increasing quickly, but it’s unknown to what extent the NBA might enact a smoothing process so as to limit unintended loopholes. Let’s guess the 2015-16 salary cap is between $69-75 million. That’s a huge range and a historic increase. But there are still so many unknowns. In that case, the luxury tax line would be around $85-93 million. Again, lots of unknowns with that number too4.
Here is then a chart I created a few weeks ago, following the trades for J.R. Smith, Iman Shumpert and Timofey Mozgov. Irving’s contract will start at a larger figure, but this is a good starting point:
#Cavs salary situation for 2015-16 gonna get messier and messier. About $89M sans Haywood. pic.twitter.com/wsMK6uobpP
— Jacob L. Rosen (@JacobLRosen) January 7, 2015
Holy cow, that’s $89 million! That’s maybe over the luxury tax already.
Exactly. It’s fairly impressive how a team with about $13 million in summertime salary cap space seven months ago transformed its entire roster in a heartbeat. That’s the LeBron James effect. And speaking of LeBron, the team salaries add pretty quickly when Cleveland’s Big Three is expected to make at least $53 million together next year.
But what about those opt-outs for LeBron and Kevin Love. How would those affect salaries?
Back in mid-July, I shared the obvious: Of course LeBron James should opt out of his contract this summer. Again, maximum contract extensions have a non-compounded 7.5 percent annual raise. But LeBron did not sign with Bird rights; he signed as a free agent to cap space5. He’s only set to receive a 4.5 percent raise this summer. The salary cap increase will easily be far greater than that, hence pushing him to re-up for the exact same max contract again.
Kevin Love’s situation is fairly similar. He holds a player option for $16.7 million next season. That represents the same non-compounded year-over-year increase – slightly over $1 million – he’s had for the last few years, dating back to the January 2012 signing of his curious four-year max with Minnesota. By opting out, Love subjects himself to the rules for a seven-to-nine-year veteran. That means he could get 30 percent of the cap, not the 25 percent he received years ago. So his incentive to opt out this summer is even larger than LeBron’s. He’d make at least $2 million by doing so.
With a $69-75 million cap, the cap ramifications of these two opt-outs and re-signings could be as much as $5-7.5 million. The tax ramifications could obviously be even larger than that. Below, you can see the differences using the same possible cap increases as my Irving max calculations.
Another Cavs salary chart: Cap ramifications of opt-out/re-signings for Love and LeBron. Could add lots of $. pic.twitter.com/5SgO0lZD6B
— Jacob L. Rosen (@JacobLRosen) January 23, 2015
So the Cavs are definitely going to be over the tax next season. How do the taxes work anyway? What exceptions will be left?
The 2011 CBA revamped the entire tax structure for NBA owners. Previously, there was just a 1-for-1 tax on teams when they had player salaries surpassing that tax threshold. This was simple and easy. Teams like Cavaliers were over the tax every single season with no repeater penalty or progressive tax. But as was mildly discussed this summer, boy, how the times have changed.
Here are the three key new factors with the new CBA and taxes, via Larry Coon: there are incremental progressive tax rates; there are repeater taxes on top of that for constant offenders; and teams over the apron (set $4 million above the tax) now cannot receive sign-and-trade players. Boom, just like that, the NBA practically created a “hard cap.” As before, taxpaying teams have different rules on incoming salaries for trades. And teams over the apron cannot use the bi-annual exception and have a smaller mid-level exception.
To give you a sense of how quickly taxes will pile up in the new CBA, I’ve constructed a 2011 CBA Tax Calculator for your use. With any questions, give me a shout on Twitter or on my email.
What about Tristan Thompson and Iman Shumpert? Aren’t they both restricted free agents?
Indeed, they both are. And if Kyrie Irving’s max and the opt-outs didn’t have enough uncertainty, this is way more up in the air. Restricted free agency can be very difficult in the NBA. Just ask Greg Monroe, who saw no suitable offers and ended up as a rare athlete to accept a qualifying offer. Or the Phoenix Suns, who finally came to an agreement with Eric Bledsoe late in September just before the preseason.
Thompson reportedly turned down a four-year $52 million offer from the Cavs before the Oct. 31 deadline. He’s having a fairly solid season under the added spotlight of the team. He’s played in every possible game in his NBA career, developing into an above average and very versatile rotation big man. Maybe he’s not a starter, maybe he is. But after Kenneth Faried got $50 million, you can bet Thompson is looking for that at least. And with the Cavs’ constant need for frontcourt bodies, it seems to be a good fit.
Shumpert’s value is far more difficult to peg. While the New York hype machine was rampant, he has a far lesser track record than Thompson. The Knicks obviously felt so too, dumping him a few months early for merely extra cap space. Expectations are fairly low in Cleveland as he simply has to help out the backcourt and spell the struggling Mike Miller/Matthew Dellavedova combo. Unless something drastic changes in the next few months, a long-term match doesn’t seem to make much sense for both parties.
Oh. I guess there’s also Brendan Haywood’s contract too. What’s likely with that?
Earlier, I shared that the Cavs have at least $89 million in projected 2015-16 salaries. Already, it’s pretty likely that the team will be in the luxury tax. But that figure has three key flaws: It’s using a lower figure for Kyrie Irving’s max; it’s before possible opt-outs and re-signings for LeBron James and Kevin Love; and it uses only qualifying offer amount for Tristan Thompson and Iman Shumpert.
Teams over the apron ($4 million over the tax line) are unable to receive sign-and-trade players. And the taxes will quickly pile up, as you can see in my 2011 CBA Tax Calculator. As an example, a non-repeater team would pay $16.3 million in taxes for being $10 million over the tax line. They would pay $45.0 million in taxes for being $20 million over and $92.5 million for being $30 million over. That’s how the incremental taxes are so prohibitive to reckless spending. And if the Cavs go three straight years of paying tax, they’re quickly in the repeater column.
Brendan Haywood’s $10.5 million unguaranteed deal is a fascinating asset. But more likely than not, the Cavs would be paying double, triple or quadruple the incoming salary of any new player because of these progressive taxes. If it were my money, simply cutting Haywood might seem like a more and more realistic option if nothing can work out perfectly6.
Well, what about the likely lockout in summer 2017?
New executive director Michele Roberts and the NBA Players Association seem to be preparing for war in 2.5 years when both sides can opt out of the current CBA. As of now, a rapidly increasing cap helps the Cavs and their struggle for tax freedom. The maximum salary rules also help the team fit all three of these superstars at all under one salary cap. There’s no knowing how ugly the next lockout could be. But if I were a betting man, I’d place a bunch of money on a nasty battle.
On a scale of 1-to-10, how much will Anderson Varejao’s contract extension hurt the Cavs?
It will hurt a lot. The Cavs reached that deal on Oct. 31, the day they were unable to reach agreement on an extension with Tristan Thompson. The Varejao extension was a surprise; there seemed to be no rush to lock up the 32-year-old who played only 81 games in the first three seasons after LeBron’s departure. But alas, there’s three years and $30 million. Fortunately, the last season is fully unguaranteed. Unfortunately, that’s not until 2017-18.
If you prefer to think of an alternate universe, you can imagine the Cavs just doubling, tripling or quadrupling Varejao’s salary as opposed to Haywood’s, if they do decide to use his deal in a trade. But either way, it’s painful and a ton of money down the drain.
Dan Gilbert is a billionaire. He went over the tax oodles of times last decade. Can’t he just go all-in to buy the Cavs a championship?
Nope. If you are a Cavs fan and you read this entire post, you should feel a little squeamish about the team’s ability to work with the new CBA while continuing to improve its roster. The tax penalties are exponentially tougher than they were six years ago. Just ask the Brooklyn Nets and Mikhail Prokhorov. So no, Gilbert can’t buy a championship. He has said repeatedly that taxes won’t be an issue. But it’s hard to imagine how that’s actually true. These new Cleveland Cavaliers will have to be way more cap smart to make things hopefully work this time around.
- In the 2011 CBA, via Larry Coon’s excellent FAQ, the salary cap is based on 44.74 percent of Basketball Related Income. But maximum salaries are based on 42.14 percent of Basketball Related Income. So that’s a different number than the salary cap. This is an added oddity that makes all of the usual back-of-the-napkin maximum contract calculations slightly off from reality. [↩]
- To note: Maximum contract extensions have a set annual non-compounded 7.5 percent raise. Obviously, with the cap increasing at a higher rate, this presents a huge advantage for teams to lock up max players to long-term deals now. [↩]
- As a review: The NBA’s new nine-year $24 billion TV deal with ESPN and Turner Sports begins with the 2016-17 season. The deal pays the NBA $2.6 billion annually, nearly triple the previous $930 million yearly arrangement. I enjoyed the post from Deadspin’s Kevin Draper on this topic. [↩]
- Larry Coon lists out some of the other complications in trying to calculate the luxury tax number by hand. Similarly to maximum contracts, the luxury tax line uses a different percentage of Basketball Related Income. It also has a few changes made at the end as well. [↩]
- As you recall, the Cavs shed the contracts of Jarrett Jack, Tyler Zeller, Alonzo Gee, Sergey Karasev and even Carrick Felix to make $13 million in initial space closer to $21 million. [↩]
- As has been discussed plenty in the last 24 hours since the posting of this article, a Haywood trade in the next three weeks for a backup point guard or big man also makes tremendous sense. Haywood’s contract oddity could then become a more useful asset for a different team. [↩]
28 Comments
And if we had kept Andrew Wiggins, the Cavs would have about $11MM more in cap room next year……
Oh and also, another wing defender
https://kelseyatcascofcu.files.wordpress.com/2014/11/let-it-go.gif
I know, I know, I know, I know, but when you see the drop in Kevin Love’s production, his lack of defense and soon to higher salary. It it is soo hard.
Per Bill Simmons, “2015 NBA Trade Value, Part 1”
52. Kevin Love
Before the season, I wrote a 230,000-word column explaining why Love was underrated. Before the season, he would have cracked the top 15 of this column. Before the season, it would have been inconceivable if you told me, “In January, someone will ask you if you’d trade Boston’s 2015 unprotected first-rounder for Kevin Love and you’d say ‘NO EFFING WAY.’” In the 1970s and 1980s, multiple superstars in their mid-twenties abruptly tailed off for two really good reasons: cocaine or knee injuries. In the 1990s and 2000s, that dropped to one reason: knee injuries. In 2015? There is NO acceptable reason why someone as good as Love would free-fall this badly. It’s dumbfounding. Look at this …
2014 (77 games): 26.1 ppg, 12.5 rpg, 4.4 apg, 46-38-82% splits, 26.9 PER
2015 (40 games): 17.7 ppg, 10.4 rpg, 2.2 apg, 43-33-83% splits, 19.2 PER
And that doesn’t cover his more-dreadful-than-ever defense, his utter inability to protect the rim, LeBron’s inability to conceal his disgust for Love’s game at times, or the Eye Test repeatedly telling us things like “He dogged it on that play” and “He seems genuinely unhappy.” And maybe he is. But Love’s Cleveland experience has been a borderline basketball tragedy; it’s made the idea of trading real assets for him (especially when he can opt out) more than a little daunting. Nobody was more fun on League Pass last season. What a shame. I miss watching Kevin Love play basketball well
How did you get to the $11M? Wiggins and Bennett would have been paid about $11.5M for 15/16 season (per hoopshype) so the difference of salaries between them and Love is only about $5M. So I’d think the Cavs would still be over the salary cap. Unless you’re assuming a front court with TT, Mosgov and Bennett would make Lebron bolt to OKC or somewhere…
Kevin Love’s back is holding him back. I’ve only seen a few recent games and it’s obvious. Actually, pretty amazing that he’s doing what he’s doing anyway.
I don’t understand why we have yet to shut him down for a couple weeks like we did with LeBron. The regular season means nothing in the East.
If it were my money, simply cutting Haywood might seem like a more and more realistic option if nothing can work out perfectly.
We may be able to find a buyer for the contract in a 3-way deal that can net us a future 1st rounder (protected). Doesn’t seem like much, but every asset counts. We have to be able to find a way to turn an expiring asset into a future asset if we cannot cash it in right now.
Ugh, Bill Simmons.
1. Love was the ONLY scoring option on an awful mess of a team in 2014. Love is now the 3rd or maybe 4th scoring option on the floor depending on the rotation in 2015. WHAT HIS NUMBERS DROPPED? NO FREAKING WAY.
2. Love’s more-dreadful-than-ever defense only became so once Andy went down. Don’t get me wrong, he’s awful to begin with but standing alone didn’t help. Since Timo has entered the lineup he now has the actual help he will need down low.
3. “He seems genuinely unhappy”…so unhappy that he has stated multiple times he has no plans to leave. Look, he may bolt the first chance he gets and if it’s the case….HOORAY MORE CAP SPACE!
Look, this is either going to end well or well. Either he continues to find his fit (which i dont think anyone can argue he hasnt in this last week) and stays, or he doesn’t find his fit, is unhappy and leaves. Which like I said means more money for us to find his replacement.
You’re right, I forgot about Bennett. And with his rookie and sophomore seasons, how could I??? The search I did showed Wiggins pay next year is $5,758,680, so about $11MM less than Love’s.
He also did say Darius Miles was Baby KG in 2001, per that article.
Thanks for that, it totally made my Friday!
nice
It’s not just that his numbers dropped. His efficiency dropped too, when it should be going the other way. It’s his back, as mgbode said. He’s hurt. Get him the rest, these games don’t count for diddly-poo.
If Love walks, we won’t have any real cap space, we’ll just save Gilbert some luxury tax. We’d have to hope we can get something pretty shiny back for Haywood, which I’m still skeptical of. You had to give up a lot of future promise to get Love. I can’t imagine there’s many teams looking to give up a player of the quality we want for Brendan Haywood and, well I dunno, Delly. I’m still beating the trade Irving drum to get this team where it needs to be.
Up ticked for all but Kyrie
I know, I’m not going to push it here anymore past this post. It’s not going to happen, and it’s not going to generate much discussion. I just think that Irving is the guy that most of the people complaining about Love are actually describing. And that his presence takes away from what this offense needs to do – Lebron and (healthy) Love p-n-r’s all night. Replace Irving with someone of equal defensive value to his offensive value and I think you can start thinking of beating the teams out West.
Edit to add: And Irving can still be sold high. Other than Lebron, who you aren’t moving, there’s no one else on the roster that’s going to bring back anything valuable.
It’s an interesting way to go, but I don’t think there are many that can provide that defensive presence. Think it’s also invaluable to have someone LeBron trusts to handle the ball besides himself in the playoffs.
We’ll see though.
To echo cmm13 and mgbode, the biggest issue I’m seeing is that Love’s back spasms are keeping him from hitting 3s at his normal career clip. We saw it with Bosh before in Miami… if you want LeBron and Kyrie to have those lanes to drive into the paint in the 4th quarter, then you can’t have Love in there clogging it up. You get Mozgov to come out and set a high screen so that his man has to come out with him, and you get Love posted out at the 3-point line where his defender has to make a choice to help guard a freight train or a wizard driving to the hoop, or guard our stretch 4 out on the 3-point line. When I listen to Simmons and his buddies (who only occasionally watch the Cavs) complain about how the Cavs have turned Love into a spot-up 3-point shooter… well yeah, and he should be doing a much better job at hitting those shots if it weren’t for the back problems. The number of wide open looks that Love has missed this season is astonishing. If Love is healthy, he’s hitting 40% of his 3-point shots instead of 33%, and everybody probably quiets down about how supposedly unhappy he is. I’d be unhappy too if my back was constantly hurting. And it’s not like they don’t go to Love in the post at all. You can tell that the Cavs’ plan is always to get him early touches in the post and get him going. Are they running the offense through Love in the high post like the Wolves used to do? No. Because LeBron is handling the ball. In every situation, somebody is going to be playing off the ball. And what are the benefits of having a notorious shooter like K-Love waiting on the wing? His defender is nowhere near the basket, so he’s helping his teammates’ efficiency. If you look at the Cavs’ best 5-man lineups, all of them have LeBron and K-Love. No surprise right? Sorry for the rant, I was reading the same Simmons article earlier and his comments about Love ticked me off… classic case of someone looking at a handful of stats and then diagnosing what is actually happening.
I know it’s what he is going for, but I found the article after the exchange above and just was laughing. BS always picks one outlandish thing to put in there to drive page-clicks (and it worked, as usual).
Kevin Love is apparently not as valuable in a trade as:
Alex Len
Jusuf Nurkic
34yo Pau Gasol
Kyle Korver
and, of course, a BS-favorite: Victor Oladipo
note: I understand the premise of the article favors those on cheap rookie deals with RFA attachments afterwards, but it is still pretty ludicrous to put Love at #52 because he has had a few bad weeks with a balky back.
Isn’t this entire article about a cat chasing its tail? If only the cat would just run faster… If Lebron, Irving and Love and Thompson and everyone else wants max money, then it just doesn’t matter what the cap is since the max contracts go up in ratio to the cap. At some point, these guys have to grow up just a little bit and bow to the San Antonio model where the big three there make a cumulative total that is something like 15 to 25 million less than what they could make if they all got max deals. This team still needs a back-up center.
I’d guess they’ll take less than they can get only after Dan Gilbert does.
I’m all for Lebron getting a percentage ownership in lieu of pay, or less pay, but that is against NBA rules, why, I am not sure.
Haywood if the first line of defense were Mozgov to down, i would suggest it makes more sense to give him meaningful minutes every game to get him used to a possible Nate Thurmond role should Mozgov need a few games off for some reason.
Love is in a weird spot. If he takes time off it could hurt him this offseason regarding his next contract. Plus, when Lebron was out, he had to keep playing. Now that the team is going well, he probably doesn’t want to take time off and ruin the new chemistry that is developing. Best hope is reduced minutes for a while.
The reason I hated all the moves made last summer bore out halfway through the season. If Lebron had just showed up and played alongside the team as was constructed at the end of last year, the Cavs would have had a better record at the halfway point then they ended up having by trading all of the younger players and getting Love. However, the recent trades have tipped the scales back in favor of the new look Cavs. The Cavs now have a nice blend of younger players to veterans, they just need a back-up center to Mozgov going forward.
Or it shouldn’t be his decision. He needs to sit IMO.
Thanks for this, jacob. Really helps me understand the situation (read: predicament) the Cavs are in.
i agree with everything you said, but I can’t agree that it’s a win-win if Love leaves. The Cavs gave up years of control of Andrew Wiggins to take Love this season. It would be a tremendous loss to lose Kevin Love, regardless of who else is available.
Of course, if LaMarcus Aldridge would decide he wants out of dreary, rainy Portland he would be welcomed heartily to the sunny shores of Lake Erie….
I never realized Darius could play the saxophone.
since you brought it up, who would you suggest?