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FAQ: The State of Our Cap

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Quite possibly, the question that is asked most often on the blog these days is, "how much do we have left to spend?"  Related to that, of course, are our current player salaries.  For anybody who doesn't want to constantly turn to hoopshype, below  are our current  salary obligations, plus projected contracts for Gabe Pruitt and Glen Davis, since we own their rights.  Text appearing in red denotes a team option; text in green represents a qualifying offer.  For the "total" figure, I assumed that we pick up all team options and qualifying offers.  Please note, also, that this table doesn't include any projection for our future draft picks, although a future incarnation may.
 

Player 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
Kevin Garnett $23,750,000 $24,750,000 $16,400,000 $18,800,000 $21,200,000
Paul Pierce $16,360,095 $18,077,903 $19,795,712 $21,515,521 n/a
Ray Allen $16,000,000 $17,388,430 $18,776,860 n/a n/a
Kendrick Perkins $4,480,912 $4,078,880 $4,250,000 $4,390,208 n/a
Brian Scalabrine $3,000,000 $3,206,897 $3,413,793 n/a n/a
Tony Allen $1,888,141 $2,744,299 n/a n/a n/a
Eddie House $1,500,000 n/a n/a n/a n/a
Rajon Rondo $1,372,320 $1,646,784 $2,623,326 $3,780,214 n/a
Scot Pollard $1,219,590 n/a n/a n/a n/a
Leon Powe $687,456 $797,581 n/a n/a n/a
Brandon Wallace $427,163 ? n/a n/a n/a
Jackie Manuel ~ $427,163 ? n/a n/a n/a
Glen Davis ~ $700,000 ~ $800,000 ? n/a n/a
Gabe Pruitt ~ $700,000 ~ $800,000 ? n/a n/a
           
Totals: $72,512,840 $74,290,744 $65,259,691 $48,483,943 $21,200,000

Below the fold, I've included a FAQ section, related to some of the more common questions asked about our current financial flexibility.  Please feel free to suggest any other questions you've had, and hopefully either myself or one of our fellow posters can find an answer to it.

Read more below the fold... 

Frequently asked questions: 

1) How much is the salary cap for the 2007-2008 season?  How much is the luxury tax?  What is the difference between these two numbers?

The salary cap for this season is $55.63 million.  The luxury tax is $67.865 million.  A lot of people get these two numbers confused, so I'll do my best to explain.  However, the absolute best place to have these questions explained in detail in on Larry Coon's NBA Salary Cap FAQ page.

Essentially, the salary cap is a "soft" number which serves the purposes of limiting a team's ability to offer free agents from other teams contracts.  A team can offer a free agent a starting salary below or equivalent to its amount of remaining cap room.  For instance, if a team is $7 million below the salary cap, it can offer a free agent from another team a deal starting at $7 million per season.  If a team is over the cap, the most it can offer is the mid-level exception (the "MLE"), explained in greater detail below.  Obviously, we are far above the salary cap, and as such, for purposes of the Celtics discussion of the salary cap is purely academic.

More relevant is the luxury tax.  Basically, for teams that exceed the luxury tax, they pay a dollar for dollar penalty on amounts above the tax.  This money goes to the league, where it is divied up between the teams that stayed below the tax (again, this is overly simplistic, but you get the idea.)  Right now, we're going to be roughly $4 million over the luxury tax, which means that Wyc and Company will be writing a check in that amount to the league at the end of the season.  They also won't have the benefit of a rebate from the paying teams; last year, that rebate check was approximately $1.9 million per non-paying team.

2) What is an "exception"? 

An exception is just that:  an "exception" to the salary cap that allows a team to go over the salary cap to sign, or in some cases trade for, a free agent.  For the Celtics, there are four relevant exceptions: the mid-level exception ("MLE"), the Bi-annual exception (also called the "LLE" or the "million dollar exception"), the minimum salary exception (also sometimes called the "veteran's minimum"), and the traded player exception.

The MLE: The MLE can be used to sign players to contracts for a maximum of five years, with 8% annual raises each year.  This exception is available to teams above the salary cap, and can be used annually.  For the 2007-08 season, the MLE can be used to give free agents contracts starting at $5.356 million.  The MLE can be used in its entirety on one player, or can be split amongst several players.  

The LLE: The LLE can be used to sign players to contracts for a maximum of two year, with up to an 8% annual raise in the second year.  This exception is available to teams above the salary cap, but can only be used every other year.  For the 2007-08 season, the LLE is set at $1.83 million; in 2008-09, the LLE will be $1.91 million.  The LLE can be used in its entirety on one player, or can be split amongst multiple players.

The Minimum Salary Exception:  This is an important one for the Celtics, for reasons that will be explained in greater detail below.  This exception allows a team to sign a player to the allocated minimum salary, which varies subject to the signing player's service time.  Contracts signed with the minimum can be up to two years in length.

The Traded Player Exception: In trades where the incoming and outgoing salary are not identical, a "trade exception" is created.  The team sending out more salary in a trade gets the benefit of a "trade exception", which is in the amount of the difference in salaries between the incoming and outgoing amounts.  In the Celtics case', they acquired a $1,080,480 exception in the Ray Allen deal.  This exception has to be used within one year of the trade date.  It can be used to take back a player making up to $100,000 more than the trade exception, meaning we can use the exception to trade for a maximum salary of $1,180,480.  The trade exception can't be combined with players or other exceptions; I'm unclear if draft picks can be traded in conjunction with a player for a trade exception, although I believe they can.

3) What have we spent?  How much do we have left?

So far, we have used only a portion of one of our exceptions.  We used $1.5 million of the MLE to sign Eddie House.  That means we have the following amounts left:

MLE: $3.856 million ($5.356 million - $1.5 million = $3.856 million)

LLE: $1.83 million 

Minimum: This varies based upon a player's service time.  For a rookie, the minimum salary for 2007-08 is $427,163.  For a player with ten or more years worth of service time, the minimum is $1,219,590.  The team can sign as many players as it wants to the minimum; such contracts can be guaranteed or non-guaranteed. Scot Pollard, Jackie Manuel, and Brandon Wallace were signed using this exception.  

Trade exception: $1,180,480 can be acquired in trade, subject to the conditions above (ie, can't be combined with other players or exceptions.)

4) How many players do we have under contract?  What is the maximum number of players we can have on our roster?  Is there a minimum to the players we can have under contract?

Currently, we have 12 players under contract.  We also have the draft rights to Gabe Pruitt and Glen Davis, who are expected to sign contracts.

Once the season starts, a team can have a maximum of 15 players under contract, and a minimum of 12 players.  Rosters must be finalized on or before October 31, 2007.  

5) What are non-guaranteed contracts?  How do these effect the Celtics? 

Most contracts in the NBA are fully guaranteed, meaning that regardless of whether a player is waived or is otherwise unable to perform, the team is on the hook for his entire contract (subject to some limitations).  Some players have non-guaranteed or partially-guaranteed contracts, meaning that is a team cuts ties with a player before a certain specified date, they are only responsible for paying part of that player's contract.

Brandon Wallace and Jackie Manuel were both signed to non-guaranteed contracts.  Wallace's calls for him to receive $100,000 guaranteed, and if he is still on the roster as of December 20, 2007, the remainder of his rookie minimum deal becomes guaranteed.  Financial terms of Manuel's guarantee have not been disclosed.

The non-guaranteed aspect of these deals is important because if the team finds itself wanting to add a free agent that would bring the team above the 15-player maximum roster, they can cut one of these two with a fairly minor financial penalty.

6) What are the benefits to signing a player to a minimum deal?

There are several advantages to signing a player to a minimum deal.  First, there is no limit to the number of players a sign can sign to the minimum.  Second, any player signed to the minimum doesn't count against the MLE, meaning the MLE can be allocated towards other players.  Most importantly, though, the NBA actually subsidizes teams that sign players to the minimum.  The team is only responsible for the first $770,610 of player salary; the league pays any amount over this threshold.  Additionally, only $770,610 counts towards the luxury tax.

7)  Why did we sign Eddie House with a portion of the MLE, rather than with the LLE?

The answer to this question isn't clear.  I would speculate that the team had no intention of allocating the full MLE to a player this off-season, and thus didn't see it as a major detriment to use a portion of the MLE on House.  By not using the LLE this season, they will have it available next year, when the free agent crop will be better.  It could very well be that Danny is already targeting next year's free agent class, and wants to have as much money available as possible.

8) If Reggie Miller signs here, how much is he likely to sign for?

Reggie has said that if he comes back, his sole interest will be in winning a championship.  Thus, it is likely that he would agree to a deal for the minimum salary. 

9) Why haven't Glen Davis and Gabe Pruitt signed their rookie deals yet? Is this unusual?  What's taking so long?

Here are the approximate dates on which Danny's previous second-rounders signed their rookie contracts:

July 18: Leon Powe

July 26: Orien Greene

July 28: Brandon Hunter

August 18: Ryan Gomes

August 27: Justin Reed

Thus, it's not all that unusual that Pruitt and Davis haven't signed yet.  This has been a spectacularly busy off-season for the front office, between the Allen and KG trades and the free agent signings of House and Pollard (and the free agent pursuits of others.)  There's no reason to expect that the rookies won't get signed; the team didn't sign Justin Reed -- in a less busy off-season -- until August 27.  From all indications, Big Baby is participating in team activities.  I haven't heard anything concerning Pruitt since summer league, but I have no reason to think he won't be with the team.  Remember, this kid was drafted with the second pick in the second round.  He's not going anywhere.

10) What if Big Baby or Pruitt don't sign? 

So long as the team extends the player a qualifying tender -- which is essentially a one-year contract offer for the rookie minimum -- we will retain his rights.  If the player signs a contract with a non-NBA team, we own his rights until one year after that contractual obligation ends.  If the player doesn't sign a contract with another team, we retain his rights until the day of next year's draft, when the player can be drafted again by any team. 

11) What's this I hear about the Celtics signing their second-rounders with the MLE?

Another potential holdup with the signing of Pruitt and Davis is that the team is determining how much of the MLE it will have left to sign them with.  Danny Ainge has made a practice of signing second-rounders with a portion of the MLE.  Why? Because the team wants to sign its rookies to three year contracts, and teams can not offer three year deals with either the LLE or the minimum salary exception.

Signing a player to a three year deal (usually one year guaranteed with two options) is important for two reasons. First, because it keeps the player on a rookie pay scale for three years, instead of the typical two.  Right now, this team needs cheap young talent, as it has three well-paid superstars on the roster.  Secondly, signing players to a three year deal means that the team acquires "Bird rights" in that player, meaning that the team can exceed the salary cap to sign that player without having to use the MLE or another exception.  This is helpful in holding on to our free agents, in case Danny hits it big on one of his draft picks.

12) Assuming we sign Pruitt and Davis with the MLE, how much will we have left to spend?

Based upon contracts of former players drafted high in the second round, it is likely that Pruitt and Davis will each sign for deals somewhere around $650,000 - $700,000.  Assuming they each sign for $700,000, that would leave us with $2.456 million to allocate towards additional free agents with the MLE. 

13)  What is a buyout?  Why do people keep talking about them?

At any time, a team and a player can agree to a buyout of that team's remaining salary obligation to that player.  The Celtics did this with Vin Baker, and in recent years Chris Webber, Tim Thomas, Steve Francis, Derek Fisher, Troy Hudson, Adonal Foyle, and others have all agreed to buyouts.  In a buyout situation, the team pays a player a reduced amount, and allows that player to become an unrestricted free agent (after they clear waivers).  The team executing the buyout is responsible for the agreed upon sum, with the cap hit being divided out equally among the remaining years of the contract (ie, in Vin Baker's deal, he had three years on his deal, and he agreed to a $16 million buyout.  Thus, the team carried a $5.33 million cap hit on its salary cap for three years.)

There is speculation that a number of players could be bought out of their contracts this season, including Sarunas Jasikevicius and Sam Cassell.  If that happens, the players would in all likehihood become unrestricted free agents, allowing them the chance to negotiate with the Celtics.  Again, this is entirely speculation, but it's the reason you here so much chatter about potential buyout situations.

14) Do we have any other salary obligations, beyond those listed above?  

Yes, indeed we do.  At the time we traded for Wally Szczerbiak, his contract contained a trade kicker, which is essentially a one-time bonus paid to a player by a team acquiring him in a trade.  While the team already paid this bonus in full, for cap purposes the trade kicker was divided up equally over the remaining years of Wally's contract.  This obligation remains with Boston -- even though Wally was traded to Seattle -- for the remainder of Wally's original Boston contract.  As such, we are carrying a hit from Wally's trade kicker for the next two seasons.  The most recent information I have seen on this trade kicker is $775,000 for each of the next two seasons.

15) How come the table hasn't been updated to include Wally's information?  Where can I find updates to this FAQ?  Is this being talked about in the forums?

The reason the chart hasn't been updated on the front page is because it's insanely difficult to code a chart like this in html.  I'm eternally in Bob Day's debt for his help.  It's slightly easier to make updates in the forums (knock on wood), so I'll try to keep a more updated chart in there.  There's a dedicated thread stickied at the top of the Celtics Talk forum where this will be kept on a semi-permanent basis.

That's it for now.  If you have any additional questions, please post them below.  Thanks to everybody who has offered their input and help on this so far.