View Full Version : NBA payroll stuff - very interesting

07-16-2002, 11:48 PM
LINK (http://espn.go.com/nba/news/2002/0716/1406462.html)

Tuesday, July 16
Player salaries don't trigger full escrow, luxury taxes
By Darren Rovell

Minnesota Timberwolves forward Kevin Garnett was told he would have to give back to the NBA about $2.24 million -- 10 percent of his 2002 salary -- because of the tax the players agreed to as part of the Collective Bargaining Agreement that settled the 1998-99 NBA lockout.

The NBA's highest-paid player might want to go on a vacation or shopping spree after he finds out that, in part due to the fact that salaries and benefits did not exceed 61.1 percent calculated gross league revenues, he will only have to give back $1.12 million, or 5 percent of his yearly salary.

Approximately $153 million was automatically deducted from all players' bi-weekly paychecks this past year and put into an escrow account. If salaries and benefits made up more than 61.1 percent of basketball related income (BRI) -- which includes revenue generated from national and international television deals, regular season and playoff gate receipts, team in-arena revenues, such as sponsorships and concessions, as well as revenues from merchandising and licensing fees -- the players would have to give back the full 10 percent. But players salaries and benefits only made up 60.2 percent of the BRI, which totaled about $2.67 billion for last season.

Salary cap progression
Season Cap amount
2002-03 $40.271
2001-02 $42.5 million
2000-01 $35.5 million
1999-00 $34 million
1998-99 $30 million
1997-98 $26.9 million
1996-97 $24.4 million
1995-96 $23 million
1994-95 $15.9 million
1993-94 $15.1 million
1992-93 $14.0 million
1991-92 $12.5 million
1990-91 $11.9 million
1989-90 $9.8 million
1988-89 $7.2 million
1987-88 $6.2 million
1986-87 $4.9 million
1985-86 $4.2 million
1984-85 $3.6 million

Half the money is coming back to the players because not only was the threshold not exceeded, but other guarantees of the Collective Bargaining Agreement are kicking in. The players are getting back a total of about $77 million, according to an official with the NBA Players Association.

The fact that players salaries and benefits didn't exceed 61.1 percent of basketball related income also means that the highest spending teams will not be charged a luxury tax, which was to take effect this year. But many teams didn't spend in fear of the tax, so the threshold was never reached.

"All you had to do was the math from Day One," said Dallas Mavericks owner Mark Cuban. "It was not hard to determine in advance. Attendance had to fall off a cliff and teams had to spend more than they had in order for the tax to take hold for this just completed season."

There is expected to be a luxury tax next season at around $50 million, sources said. That's because salaries are expected to rise due to already determined salary increases in long-term guaranteed contracts and the use of cap exceptions while revenues are expected to remain static.

With about half the teams over the amount, it has been suggested by a couple owners that the league propose that to get rid of the luxury tax in exchange for three or four more years of the same Collective Bargaining Agreement. The agreement runs through the 2003-04 season and the owners have the option to extend it one more year.

The thinking is that the tax wouldn't stop teams from spending and would continue to create an imbalance between teams in the East and West, which has more teams that are willing to pay the tax. While salaries could go up, they will also be held in check by the escrow payments, should the extension keep that parameter in the agreement.

For the first time since the salary cap was implemented in the 1984-85 season, the salary cap dropped -- to $40.271 million, or 5.2 percent decrease -- just one year after the salary cap experienced its second largest year-to-year jump since its advent. Sources with knowledge of the calculated numbers told ESPN.com that the decline is directly attributable to the more than $100 million drop in revenues expected from the first year of the new television deal with ABC/ESPN and Turner.

The salary cap is determined by taking 48.04 percent of the projected basketball related income expected in the following season.