Understanding the NBA‘s salary cap structure is a science. The collective bargaining agreement (CBA), which governs the cap has its own language with terms and abbreviations like RFA (restricted free agent), UFA (unrestricted free agent), MLE (mid-level exception) and “bird-rights”. The CBA requires PhD level study to interpret completely, this is why sports franchises have designated salary cap specialists. To give the casual reader some background knowledge on how the salary cap works under the current CBA; we publish this information article that helps us understand the cap as it relates to each of the Raptors summer acquisitions.
Setting the Cap
For the 2015-2016 season the cap is set at $70 million, which is $2 million higher than most experts projected. Under the CBA the cap is 44.74% on the projected basketball related income (BRI) for the next year. BRI includes ticket sales, television contracts, and any other revenue streams derived from NBA games.
The projected BRI is established through negotiations between the players association and the league. If they can’t come to an agreement the CBA dictates that the BRI is the previous year’s BRI plus 4.5% and the income earned from national broadcasting rights. Regularly scheduled TV watching is at an all time low thanks to streaming sites and TV-on-demand providers thereby leaving TV stations with one major source of revenue; live sports. ABC has renewed their TV contract with the NBA for an obscene amount of money, and since broadcasting revenues are part of the BRI, the salary cap will increase by approx $20M in 2016 and another $20M (approx) in 2017. To put this in perspective- this increase in salary gives every team two additional max players as of 2017.
Even with a complex CBA the Toronto Raptors salary-cap situation for this 2015-2016 season is relatively easy to interpret as they’ve already spent most of their money. Here is a chart that listing what the Raps have committed too over the next few years:
With the roster all but set, the Raps are looking to be a few hundred thousand under the $70M salary cap. Since they have Luis Scola on a one year rental and DeMar DeRozan is almost certain to opt out of his $9M contract next summer, the Raptors are committed to $60 million after this season. Assuming next year’s cap is at approx. $90M ($70 + the added $20) Masai has a lot of cash to play with. Predictions on how Masai will use this extra money are at the end of this article. But before diving into that, let’s examine his free-agency signings and how they impact the Raps financial future:
DeMarre Carroll-$58 Million/4 years:
For a shade under $60 million over four years Masai added the 3 and D wing. At almost 25% of the team’s cap it seems like a steep price for DeMarre Carroll‘s services. His first four years in the league, Carroll played for four different teams and only found his stride last year with a loaded Hawks team. Why did Masai sign a 28 year old journeyman to a huge contract?
Carroll’s contract will have minimal impact on the Raptor’s cap space as of 2016 and even less as of 2017. All in all, this is a good signing with little long-term financial impact. Also, it gives Dwane Casey the defensive leader the team desperately needs.
Cory Joseph-$30 Million/4 years:
This is the biggest gamble Masai has made in the free agency shopping spree and it is still a safe bet. The excitement around Joseph is based on a small sample size and it remains to be seen what he can offer a team long-term. However at less than $8 million/year, the risk is acceptable.
After trading Greivis Vasquez for draft picks, the Raptors needed a defensive point guard that could spell Kyle Lowry without wasting offensive possessions. Cory Joseph has backed up Tony Parker and was able to effectively man the starting spot when Parker went down with a hamstring injury.
The last year of Corey’s contract is a player-option. In CBA language this means that prior to the start of the 2019 fiscal year Joseph has a chance to opt out of his contract and test the open market as an unrestricted free agent. If Joseph proves to be a very good back-up or possibly a solid starter he will most likely opt-out and negotiate for more money.
Bismack Biyombo- $6 Million/2 Years :
Bismack Biyombo signed in the range of the $6 Million over 2 years. He is a defensive minded, shot blocking front man who rebounds bigger than his 6’9 frame. The Raptors can use the mid-level exception to absorb some of Biyomobo’s contract. Exceptions are a tricky concept in the CBA. They are provisions that allow teams to drift slightly over the salary cap without being penalized. Although useful for teams, these provisions are actually meant to protect the salaries of veterans in the twilight of their career or bench players who have yet to prove themselves (much like Biyombo).
Without the MLE many teams wouldn’t have the space to offer aging vets or young prospects legitimate contracts, which would force players to take the league minimum. In other words it enables franchises to spend more money than they may want to all to benefit the players. It is safe to say this will be a major bargaining point if the CBA is renegotiated in 2017.
With Biyombo, the exception also helps the Raps. This contract is more of a “wait-and-see” deal. At just 22 years old, the former 9th overall pick can still develop into something more. If he does, the Raps will surely pay him well for his services. If not, his expiring contract can be used as a trade chip or he can simply be renounced freeing up a bit more cash.
Delon Wright-Rookie Contract -$3.0 Million/2 years
The Raptors drafted Delon Wright for a reason. He is an NBA ready perimeter defender with a motor, and he comes at a CBA dictated bargain. Rookie contracts are governed by the CBA, as such there is little bargaining room for player and team. Within the CBA a rookie scale is set and teams can offer their 1st round draft pick between 95%-120% of the prescribed number. As compensation for handcuffing a team to a certain amount of salary the league agreed to providing the rookie exception. This also protects teams from rookies who hold-out for massive contracts. Sadly, outside of the rookie salary scale there is very little protection offered to rookies in the CBA.
The bottom line for the Raps is that they have picked-up a player who can fill a need immediately and since the rookie scale for middle picks is set at $1.3 Million, the $1.5M Wright is getting is a bit of a bonus.
Norman Powell-$2.5 Million/3 years:
The Raptors signed their second round draft pick (acquired from Milwuakee Bucks for Greivis Vasquez) to a three year deal. Based on the structure of the CBA we can assume the particulars of Norman Powell‘s deal is one commonly offered to other rookies in his situation.
As a second round draft pick, the Raptors can’t use exceptions to sign Powell and they must offer at least the league minimum (approximately $700,000)for two years. However, since Powell has shown promise in the summer league the Raptors signed him for 3 years in order to keep his “Bird Rights”. Bird Rights(named after Larry Bird) allow a team to re-sign their own free agent while surpassing the cap.
To qualify for “Bird Rights” a player has to play 3 consecutive seasons with the team and be re-signed. “Bird Rights” are also a valuable trading chip as they stay with a player if he is traded, allowing the new team to use the cap exception. With all this in mind, it makes sense that Powell has been signed to a three year contract worth 120% of the league minimum salary equating to a $2.5 million/3 year contract.
Masai traded Vasquez’s $6.6 Million contract for this potential gem of a draft pick with a bargain basement price-tag. If Powell builds on his summer league performance, Masai could be in line for another Executive of the Year award.
Predictions for 2016 Free Agency:
DeRozan opts-out but Masai will bring him back:
In 2016 DeMar DeRozan has a player option for $9.5 million he will likely opt-out of to test the open market in hope of receiving a max contract offer. Max contracts, governed by the CBA, are based on the number of seasons a player has been in the NBA. Derozan will play his 7th season by the summer of 2016. As an 8 year veteran, rumors have it that he will command a max salary of approximately $25 million or more, an amount Kevin Durant, Al Horford and Al Jefferson can expect to earn.
DeMar is a great scorer and an improving defender but he is not a game changing big-man and he is definitely not Kevin Durant. Considering DeMar’s skill level a fair contract for his services likely falls in the $18-22 million range. The Raps will have to hope for him to take a hometown discount. However, he is legitimately underpaid (he earned almost the same amount as Landry Fields last season). He will be looking to cash in next year. Since he has been on the Raptors for more than three consecutive years, we have his Bird-rights. Therefore Masai can use the exception to absorb some if not all of his contract, increasing our chances of putting together a contender that includes DeMar.
The Raptors make a playoff run this season and Masai signs a marquee free agent:
In 2016 three game changing free agents are on the market: Kevin Durant, Al Jefferson and Al Horford. If the Raptors can attract even one of these players they enter they become a finals team overnight.
Now, Toronto is no longer the team free agents disregard. Masai has kept his core of Lowry, and DeRozan and Jonas Valanciunas in tact while addressing the two biggest deficiencies: Defense and rebounding. Just like LaMarcus Aldridge, other marquee players will take note of the Raptors as an up and comer, and chances are one sign-on and put them in a position to win it all.
Masai will have to take The Raptors in to the luxury tax to win a championship:
The NBA uses a soft salary cap system. Unlike a hard cap a soft cap allows teams to exceed the cap however, they are charged a luxury tax.
The luxury tax has a graduated rate structure, meaning the amount of tax a team pays depends on how much they have exceeded the cap. Also, teams are hit with repeat offender charges if they frequently exceed the tax limit.
For some teams that operate above the tax levels, the costs start to add up.
For example in 2014-2015 the Nets were hit with a $20 million tax (a max salary for an 8 year veteran).
It is important to note however that in the last 13 years a non-luxury tax team has won the championship only twice. For the Raptors to win they will have to enter the tax, and use their projected 30 million of space wisely. For example, they could sign a max-level player with the space, and then used bird rights on DeRozan. This would put them into the tax, but give them a damn good team.
Fortunately, they won’t have to delve too deep into the tax, keeping them at the low end of the graduated scale, nor will they be levied with the repeat offender tax. If Toronto ventures into luxury tax area their fines will stay relatively low making the Masai’s decisions more palatable for MLSE.
Masai, has done well to give The Raptors a solid chance at competing next year and beyond. By utilizing short-term “wait and see” contracts, having faith in his young players, and making calculated risks the Raptors have a team that should compete in the East this year while getting better moving forward.