From db.com - Everybody Wins: What Labor Peace Means to Dallas

[Pirate]

Excellent comprehensive outline of the changes in the new CBA and what it does for the Mavs

http://www.dallasbasketball.com/more...?id=3277&NAV=1

What Labor Peace Means To Dallas

by David Lord – DallasBasketball.com

There is labor peace in the NBA, as the Players Union and the NBA shook hands on a deal for a new 6-year Collective Bargaining Agreement (CBA) on Tuesday. Although the final wording and exact details wont be made public for several weeks, enough details have emerged for us to summarize the pluses and minuses of the deal. We think Cuban and the Mavs were one of the big winners with this deal, and we tell you why inside:

WHAT’S NEW IN THIS DEAL?

The fine details and comparisons will be reported in many places, and an analysis here of each and every point would in my estimation add little to the landscape. If you want a broader general examination of each point of the deal, my recommendation is that you catch Chad Ford’s exhaustive reports at ESPN.com, which in my view have consistently been at the head of the pack in revealing more details as the negotiating process has evolved the past few months.

For purposes of basic understanding, here is simply a list of the changes from the old CBA to the new one that have been disclosed to this point:

1. The salary cap will be set each year at 51% of Basketball Related Income (BRI), up from 48%. That means last years cap of 43.87M will go up to the 47-50M range this summer, once revenue increases are factored into the equation.
2. The players will be guaranteed a total of 57% of BRI each year, up from no guarantee.
3. The escrow tax on player salaries will gradually be reduced from 10% to 8% over the life of the agreement.
4. The escrow tax will only be retained by the owners to offset salary costs when total salaries exceed 57%, just like in the prior deal, but in the new deal that threshold will be raised if overall league revenues increase to certain preset levels.
5. There are no changes being made to the general cap exception mechanisms which allow teams to exceed the cap to add players, such as the Mid-level Exception, etc.
6. For teams over the cap, trades will be allowed as long as they trade away as much first-year salary as they receive within 25% (up from 15%) + $100,000.
7. Base-year compensation rules, for trades involving players who just received a sizable raise, will be relaxed in some as-yet-undisclosed fashion.
8. The luxury tax will stay as is (dollar-for-dollar on teams above the same 61% threshold), but all teams (including those who pay tax) under the new deal will receive a full share of the escrow and tax collections. (In the old deal, they received amounts that were reduced or eliminated entirely, according to their spending level.)
9. The salary cap and luxury tax exceptions for players who are deemed ‘permanently injured’ will begin after one year rather than two.
10. Luxury tax exceptions will be added in some form for minimum salary players.
11. Minimum salary levels will be increased by 3.5%.
12. The maximum length of a new contract will now be 6 years for a player who signs with his current team (down from 7), and 5 years for a player who signs with another team (down from 6).
13. The maximum raises on a new contract will now be 10.5% annually (not compounded) for a player who signs with his current team (down from 12.5%), and 8% for a player who signs with another team (down from 10%).
14. Teams will be required to have a minimum of 14 players (up from 11) under contract. Maximum? Undisclosed, but presumably will still be 15.
15. The active roster will still be limited to 12 players, but the designation for the others will now be ‘inactive’ rather than ‘injured.’
16. The NBA age limit will be 19, and/or one year past high school, based on calendar year. There is likely to be a related league rule implemented that prohibits NBA scouts and personnel from scouting any high school games.
17. The NBA Developmental League (NBDL) age limit will be 18, down from 20.
18. Teams will be able to send players with less than two years experience to the NBDL for needed development during the year, while still retaining full rights, with the ability to recall any such player at any time as desired. Such players will receive their full NBA pay.
19. Teams will be able to send an assistant coach to their associated NBDL team to work with and monitor the development of their players.
20. First-round picks will be given standard contracts with two years guaranteed (down from 3), followed by two years of team options (up from 1). The contract amounts will remain standardized.
21. Second-round picks will be restricted through three years, and will be limited to the MLE for the first year of a new deal if they become a free agent within the 3 years, allowing their original team to match any offer and retain them as long as they have their MLE available.
22. Players will be subject to as many as 4 random drug tests per year (up from 1), with penalties increasing for failing a test on a 4-strike system (5-10 games, 25 games, 1 year, lifetime).
23. Suspensions for on-court misbehavior will be subject to arbitration if the penalty exceeds 12 games (formerly there was no arbitration regardless of length).
24. A team will have 7 days to match an offer for a restricted free agent (down from 14).
25. This summer, teams will be given a one-time opportunity to waive one player and eliminate luxury tax on any future contractual payments to that player. The salary will still count towards the cap, and payment will still have to be paid to the player according to the contract, but the team will not be subject to tax on that player’s contract.
26. There will be a longer-than-usual July moratorium this summer, as the wording on the deal is hashed out, but summer leagues and negotiations with draft picks and free agents will be allowed to take place during that time without interruption. No new contract signings (including draft picks) can take place til the moratorium ends this summer.
27. More money will be added to pension payments for the long ago players, pending approval under IRS regulations.
28. New rules begin with the new season that starts July 1, 2005.

WHO WON?

Based on the raw numbers, the Players Union scored big in this deal. The analysis is simple - with the addition of the 57% floor on payroll, they ensured a bigger cut of the pie in this new deal, no matter what (since the old deal was designed to max out at 57%). We have gotten feedback from sources inside GM/ownership circles that David Stern weakly gave away the farm on this deal in a frenzy to get an agreement without a work stoppage.

But we think there were quite a few others who won with this deal. Who also came out ahead?

The Fans - NBA fans won, because the games will continue without interruption. That counts for a lot to a fan, when other sports leagues and unions have shown a willingness to choose greed over their fans getting a championship series, or even an entire season. It is not just the season that draws fans anymore - a good league is marketed 12 months a year, using the draft, off-season signings and free agent intrigue, pre-season anticipation, and so on. Losing any time at all costs momentum and drives away frustrated fans - but this time, the fans won.

The NBA - The impetus for the NBA’s willingness to offer to the players what to the owners was a less-than-ideal agreement was the league’s view that there would be a huge benefit to be gained by continuity, especially in light of what happened with the NHL. Although we think the league gave away too much, we also think that in looking at the bigger picture, it may well have been a huge win in long-term popularity for the league because of the way they catered to their fans. As Stern said Tuesday, the league is currently more popular than it has ever been, and we think that they enhanced their long-term growth prospects by keeping the game going unstopped.

Productive Players - The pool of money is guaranteed to be as big or bigger in the new deal. But within the fine points, the shortening of max-length contracts, the shortening of rookie guaranteed years, the lowering of max raises, and the raise in the age limit all will combine to reduce the ‘dead money’ being paid to non-productive players. Since the overall money pay-out is going to still be as big or bigger, that means the productive players will eventually be the ones who get more - as it should be.

Aggressive Owners - The impact of the luxury tax has been lowered rather than raised, meaning that the owner who wants to spend and spend and spend can continue to do so til he changes his mind. Trades have been made easier, and the advantage for a free agent to stay with the current team or to leave only via sign-and-trade has been increased, allowing the free-spending owner even more flexibility to maintain and reshape a roster as needed, regardless of being over the cap.

2005 Free Agents - With the raise in the cap and the lessening of tax fears, there will be an artificial increase in the available money this summer. The cap may go up as much as 6M, which would be a gigantic raise. In addition, since the new CBA reduces max years and max raises, teams may be willing to fight more aggressively by offering larger first-year salaries for the premium free agents than in prior years. Those top players who are on the market this summer should benefit greatly.

Raw Kids Buried on the Bench - The players like DJ Mbenga, Pavel Podkolzin, Darco Milicic, and others who are thought to have ability but who are on a good team so have no opportunity to play and develop will have a chance to do so in the NBDL. It is too late for Milicic, who has already been in the league for two years, but Mbenga and Ppod should both have the opportunity to develop much faster over the next year - either they will be good enough to play for the Mavs, or get valuable live experience in the NBDL to improve their skills faster.

Superstars - Under the old CBA, players paid at the max-contract level have been eligible for 25% or 30% of the team salary cap (depending on their years in the league). The raise to a 51% BRI cap in the new CBA thus will also raise the max annual pay possible to the premium talent. Though their contract length will be less, the players who are offered max contracts will now stand to get more per year under the new CBA’s 51% cap formula, and also be eligible for a new deal sooner.

WHAT ABOUT THE MAVS?

Since the Mavs have a fairly full roster of talented players, their plan this summer appears to be to make few if any changes to the team. Thus the short term impact of this deal should be minor, as they make only minor tweaks. In the long run, however, it appears from here that although this deal may have been relatively lousy for many owners, it was pretty close to a homerun for Mark Cuban and the Mavs.

Most owners have chosen to stay at or near the salary cap, and by raising the cap the NBA has almost forced them to spend more money than they have been spending in the past. The tax threshold, however, is still at the same 61%, which will leave less of a cushion between cap and tax. In addition, the amount received from escrow payments and tax payments will be reduced. For the frugal or semi-frugal owner, there are tough conflicts looming between fans who want that cap money spent on as much talent as possible, versus owners who are now having to dig deeper into their pocket. Will an owner cut into his profits by a few million and attack that higher cap, knowing he will be getting fewer league subsidies?

But for the Mavs, this deal appears to offer quite a few sizable benefits and few minuses, as follows:

1. With the Mavs far over the cap, and Cuban’s willingness to spend on talent, the change in cap calculation effectively makes no difference to the Mavericks.
2. There was a stated desire by the NBA to obtain an even stronger luxury tax (200% or more, instead of the current 100%) in this deal, to impose on teams like the Mavs who are far over the cap, but that was scrapped. (Instead, the tax impact was lessened!)
3. Since the Mavs will now get back a share of escrow and tax money, the Mavs will pay less net tax than before, even with the same payroll. That decreases the Mavs net expenditures - which may make Cuban more amenable to adding payroll going forward, when needed.
4. The easing of tax restrictions on permanently disabled players (such as Eschmeyer) or one-time buyouts (Abdul-Wahad, perhaps) will reduce the Mavs potential future tax liability even farther.
5. The added ease in trading players will make it even more advantageous to have a huge pile of trade chips, like the Mavs typically do.
6. The reduction in max raises and max contract length, along with the increased advantage to the current team in the available terms, will make it easier for the Mavs to retain their premium players whose contracts will expire in the next few years such as Dirk Nowitzki and Josh Howard. (A max length/max raise deal with a 50M cap, under the old CBA, required a team to commit over 144M to a player. With the new CBA, the max/max with the current team is down sizably to about 113M - and that is now 30% more than an outside team can guarantee the same player.)
7. The ability to utilize the NBDL will allow the Mavs to speed the development of Mbenga and Ppod, and more quickly determine if they can make a sorely needed impact as backup big men.
8. With the Mavs ongoing status as one of the better teams in the league, the added flexibility in contracts for first-round picks will allow them the ability, when picking low, to select a player and groom them for 2 years in the NBDL if needed, and then cut them without penalty if they don’t pan out - rather than being stuck with them for 3 or 4 years as under the old deal. The old deal, with its longer guarantees to low first-rounders of uncertain ability, made those draft picks as much a disadvantage as an advantage - but the new deal offers a less risky opportunity for the Mavs to find and develop kids to add to the mix.
9. While the Mavs are obviously out of the premium free agent market this summer, the increased money available due to the jump in the cap will raise spending on those players. This will mean that the Mavs rivals who are looking to keep their own free agents or add others will have to choose between spending huge sums or getting outbid, if they want to retain and/or improve their talent base. The less talent they can afford, the better for the Mavs.

[hairball02]

good read.

thanks for the post pirate. yaaarrr

[DubOverdose]

Does the increase in cap mean that the Bucks DIDN'T have to trade away KVH so they could affored Redd?

[Mavs414]

good post

[Pirate]

The Bucks never had to trade away anyone to have enough cap room for Redd, cause they have Bird Rights and can pay him any amount they want to. What they were obviously actually doing (though the media screwed it up in the way they said it) was lowering PAYROLL to fit within their own budget. They also were probably clearing space to add other free agents next to Redd. They just picked up a bit of extra spending room, which they can piggyback on top of the Van Horn deal. There is no reason to believe that with the new CBA they suddenly gained a desire for a huge payroll this year, however.

[jayC]

The Bulls cleared a lot of payroll a few years back. What the bulls got was Ron Mercer. No one of any significance is going to the Bucks. At least in the free agent market. The Bucks will have to wait a few years to see if their draft pick this year pans out.

[a.weidner]

Second round picks are much more valueable now imo. 3 years restricted, guaranteed to not cost more then the MLE. An you can just park them in the NBDL and see if it pans out. Nice stuff. I guess because of the minimum roster-size of 14, every team will now sign a couple of players and send them to the NBDL. Picks will be much sought-after this year.