Tag: Luxury tax

LeBron James (L) of the Miami Heat and R

Report: League’s salary cap, luxury tax will remain unchanged


This is not really a surprise — while per-game attendance was good and television ratings were up this season (although ratings don’t immediately translate to revenue) it was expected not to really impact the cap in a shortened season.

Teams have been operating under the assumption that next year’s salary cap would be about the same as this year’s, and Ken Berger of CBSSports.com says it will (hat tip IamaGM).

Under the CBA ratified by owners and players in December, the salary cap and luxury tax threshold cannot go lower in 2012-13 than their levels in the first year of the deal — $58 million and $70.3 million, respectively. Despite a robust post-lockout recovery that included salvaging all $900 million or so of the league’s national broadcast revenues, sources familiar with the NBA’s finances believe overall revenues did not increase enough in 2011-12 to push the cap and tax significantly beyond current levels until 2013-14, the first season under a more punitive luxury tax designed to rein in big-spending teams.

Current spending levels are expected to be status quo when the free-agent floodgates open July 1. But the restrictions within that model are much harsher, and it isn’t clear yet who the winners and losers will be.

Berger’s story talks a lot about the bigger issue — in 2014 the new CBA will really start to punish teams that live above the salary cap with a more severe tax. Of the final four teams in this year’s NBA playoffs three teams — Miami, Boston and San Antonio — were in the top 5 in the league in salary and Oklahoma City will join them soon as extensions for Russell Westbrook and James Harden start to kick in.

The goal of the new CBA is to flatten out the salaries in the NBA, to make it hard to put together a team like Miami or keep a team like Oklahoma City together. A lot of the owners wanted that because they felt like it was spending that was keeping them down.

But do fans really want parity when this finals shows us that stars draw the viewers?

NBA says union, not Cuban, wanted to eliminate salary cap

Dallas Mavericks v Miami Heat - Game Six

Right now, the NBA and players and owners can’t even agree on who made ridiculous proposals that had no chance of ever coming to fruition. Just in case you thought there might be some progress and sanity anytime soon.

Here’s the story: After the last round of negotiations between the owners and players blew up last Thursday, NBA union head Billy Hunter said that Mavericks owner Mark Cuban suggested a plan that had no maximum salary whatsoever. The union was fond of this idea, but Hunter said the small market owners shot it down.

The league says that is all… um… fertilizer. From a cow. A male cow.

Here is what the Associated press (and Brian Mahoney) reports.

The NBA players’ association, not Dallas Mavericks owner Mark Cuban, proposed the elimination of the salary cap during negotiations aimed at ending months of labor strife, a league official said Tuesday….

Hunter said that, during a meeting last week, Cuban proposed what he called a “game changer” — a plan to replace the salary cap with a heavy tax for teams that spent to a certain level. Hunter said the players were interested in discussing it further and that two or three other owners in the room were really excited about it, but then were told by the owners they wouldn’t pursue it….

The NBA does not allow owners to comment on the negotiations. A person briefed on the content of the meetings said Cuban’s actual proposal was much different than what Hunter suggested, and was surprised the union ignored it given that it would have met much of what players were seeking.

Mark Cuban cannot comment. The union could say “Mark Cuban suggested every team put a strip club in the lobby of their arenas” and Cuban couldn’t deny it for fear of a David Stern fine. Well, we assume Cuban would deny the strip clubs. Maybe.

Point is, Hunter is playing the game, much like David Stern and the owners are playing the game. Which means take everything with a grain of salt. Including what Mark Cuban may have said or denied.

After all that, the Knicks still dodged the luxury tax

Donnie Walsh

The Knicks went from being a money-burning loser to a cost-effective playoff team with two superstars in just a few years under Donnie Walsh. How cost effective? They brought in a second superstar last season in Carmelo Anthony after paying through the nose for Amar’e Stoudemire, and they still dodged the luxury tax. From the New York Post:

Give former Knicks president Donnie Walsh a pat on the back. The NBA announced yesterday its audit for the 2010-11 season is complete and, according to a person familiar with the situation, the Knicks did not pay a luxury tax for the first time since the now-expired collective bargaining agreement was reached in 1999.According to a person debriefed on the audit, the Knicks 2010-11 payroll finished over the salary cap following the Carmelo Anthony bonanza, but finished at $67 million — $3 million less than the luxury-tax threshold.

via Knicks avoid luxury tax – NYPOST.com.

Naturally Donnie Walsh stepped down after the season because James Dolan wanted more of a commitment from him and they’re still searching for a replacement, but really, things are great!

It’s still pretty notable what has been done to the Knicks. The Knicks used to overpay for a terrible team and now they underpay for a playoff contender, even if they’re not going anywhere without plunking down serious money for a supporting cash. Then again, there’s no telling if the new salary cap will allow them to spend. That’s got to be a concern in these CBA talks for owners like Dolan or the Heat’s Arison. They need to maintain the ability to spend around their superstar players. The Knicks were under the luxury tap this year, which is great for them. But if they want to take a step forward, they need upgrades, which won’t be possible without any room under the new cap.

Unless they rollback salaries. And then things get more and more complicated.

Jazz owner's debate on adding Al Jefferson highlights revenue sharing issue


Jazz_logo.gifWe at PBT, along with most of the basketball world, have applauded what the Jazz did this offseason. They lost Carlos Boozer, but in Al Jefferson found a good replacement. They added Raja Bell. Next season, the Jazz may be a slightly better team than they were last year.

But it was not an easy decision, as owner Greg Miller told the Salt Lake Tribune.

Once they had discussed the favorable basketball implications of adding a low-post force in Jefferson, who averaged 20.1 points and 10.4 rebounds the past three seasons with the Timberwolves, (CFO Bob) Hyde went over the financial particulars with Miller.

Specifically, Hyde presented a worst-case scenario, according to Miller, of what would happen if the Jazz missed the playoffs given the payroll commitments they would have after acquiring Jefferson and positioning themselves as a luxury-tax paying team.

“Based on the economics, I felt like the risk was acceptable and decided to pull the trigger,” Miller said in an interview last week, adding, “It was a big decision, but I felt like … I had enough good information to make a good decision, and only time will tell.”

Applaud Miller for taking that risk, for keeping a good team in Utah.

But he will be at least $5 million over the tax threshold when the season starts (the tax threshold will be $70 million, the Jazz are at $73 million with some minor contracts to add to fill out the roster). Which means that he will pay about $5 million in the dollar-for-dollar tax. He also will not get the $3.5 to $4 million in payment that goes to teams under the tax.

That is a $9 million swing, which for a team in a small market like Salt Lake can be the difference between profit and loss. Utah needs those playoff games, when the teams don’t pay salary but they get more nights of revenue.

What it underscores is the disparity in revenue and how revenue sharing will be key. The Lakers payroll will likely be in the $93 million range. Spending money alone does not win titles (or the last decade would have been the Knicks and Mavericks decade) but Los Angeles can afford more good role-playing talent to go around its stars. It can afford more stars. It can afford more mistakes. The Lakers have back-to-back titles because they have not made a lot of mistakes, but the margin for error is there, as it is with the Yankees in baseball.

And how to bring competitive balance, so that a small step over the luxury tax is not so onerous on small markets, has to be part of the next CBA talks. David Stern wants revenue sharing and the union agreement to be dealt with separately, but they are tied together in the health of the sport.