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Salary Cap FAQs: 2008 Edition

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The time has come to yet again look at the state of our cap and to answer everything you ever wanted to know about the collective bargaining agreement.  Without further adieu, here's our current salary table from now until 2011-2012.  Yes, I know it's not terribly helpful right now, but it will be filled in as we fill out our roster.

Player 2008-2009 2009-2010 2010-2011 2011-2012 2011-2012
Kevin Garnett** $24,750,000 $16,400,000 $18,800,000 $21,200,000 n/a
Paul Pierce $18,077,903 $19,795,712 $21,515,521 n/a n/a
Ray Allen $17,388,430 $18,776,860 n/a n/a n/a
Kendrick Perkins $4,078,880 $4,250,000 $4,390,208 n/a n/a
Brian Scalabrine $3,206,897 $3,413,793 n/a n/a n/a
Rajon Rondo $1,315,080 $2,094,922 $3,018,783 n/a n/a
Leon Powe $797,581 n/a n/a n/a n/a
Glen Davis $711,517 n/a n/a n/a n/a
Gabe Pruitt $711,517 $825,497 n/a n/a n/a
J.R. Giddens* $797,600 $857,400 $917,200 $1,655,546 $2,483,319
Bill Walker* $442,114 $736,420 n/a n/a n/a
James Posey Free Agent n/a n/a n/a n/a
Tony Allen Free Agent n/a n/a n/a n/a
Eddie House Free Agent n/a n/a n/a n/a
P.J. Brown Free Agent n/a n/a n/a n/a
Sam Cassell Free Agent n/a n/a n/a n/a
Scot Pollard Free Agent n/a n/a n/a n/a
Totals: $72,266,519 $67,151,604
$22,855,546 $2,483,319

Team options are in red and qualifying offers are in green.  Salaries shown in orange represent non-guaranteed / partially guaranteed deals, while trade kickers and other owed salary obligations are in purple. Player options are listed in blue.  Total salary assumes that all options are picked up.

* Salaries for Giddens and Walker are estimated.  Giddens' salary amount is based upon 100% of the rookie scale, and Walker's deal is a standard two-year minimum.

** KG's salary is listed differently on Hoopshype and ESPN than it is on ShamSports.  Sham sports lists his salaries as $24,751,934 / $16,451,934 / $18,866,934 / $21,281,934

Of course, the "meaty" part of this post is the "Frequently Asked Questions", where you can learn everything about J.R. Giddens' contract holdup, why we really won't have cap space in 2010-11 even though it looks like we will, and the fate of Semih Erden.  Titillating stuff, I know. 

All that and more, below the fold.

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Frequently asked questions:

1) How much is the salary cap for the 2008-2009 season?  How much is the luxury tax?  What is the difference between these two numbers?

The salary cap for this season is $58.68 million.  The luxury tax is $71.15 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.)

Last year, the luxury tax was $67.865 million.  Our payroll was roughly $76 million, meaning we paid a little over $8 million in luxury tax ($8,218,368, to be exact).  We also missed out on a league subsidy of $3,081,807, which only goes to non-taxpayers. 

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 annual raises equivalent to 8% of the contracts first year value each year.  This exception is available to teams above the salary cap, and can be used annually.  For the 2008-09 season, the MLE can be used to give free agents contracts starting at $5.585 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.  The LLE for this season is $1.91 million.  The LLE can be used in its entirety on one player, or can be split amongst multiple players.

Bird Rights:  For any of our own free agents who have played for three years without changing teams via free agency for three seasons, we have what are known as "Bird rights".  This allows the team to sign the player for any amount up to a max contract.  Tony Allen is the only one of our free agents that we have Bird rights with.  (The exception is named after Larry Bird, who was the first player to be signed with the exception, in 1984-85.)

Non-Bird Rights:  For any of our own free agents who only have played for one year or less without changing teams via free agency, we can offer them a 20% raise over their 2007-08 salary, plus an annual raise equal to 8% of the value of the first year of the contract.

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.

3) What's the max contract we could give to another team's free agent?  Posey?  House?

We can offer any free agent the MLE, which as noted above begins at $5.585 million.  The max we can offer is a 5 year deal.  Thus, the breakdown is as follows:

Year 1: $5,585,000
Year 2: $6,031,800 (8% raise equal to $446,800)
Year 3: $6,478,600 ($446,800 raise)
Year 4: $6,925,400 ($446,800 raise)
Year 5: $7,372,200 ($446,800 raise)

Thus, the max contracts we can give are:

One year deal:   $5,585,000
Two year deal:   $11,616,800
Three year deal: $18,095,400
Four year deal:  $25,020,800
Five year deal:  $32,393,000

We can also offer Posey and House non-Bird contracts, in the following amounts:

Year 1: $3,847,200 (20% raise from this year's salary)
Year 2: $4,154,976 (8% raise from Year 1 salary, equal to $307,776 raise)
Year 3: $4,462,752 ($307,776 raise)
Year 4: $4,770,528 ($307,776 raise)
Year 5: $5,078,304 ($307,776 raise)

One year deal:  $3,847,200
Two year deal:  $8,002,176
Three year deal: $12,464,928
Four year deal:  $17,235,456
Five year deal:  $22,313,760

As for House:

Year 1: $1,800,000
Year 2: $1,944,000
Year 3: $2,088,000
Year 4: $2,232,000
Year 5: $2,376,000

Thus, that's a max of a five year, $10,440,00 deal.  More likely, he'd be looking at a two or three year deal, maximum.

We could also offer any player the LLE, which is $1.91 million this year and $1.99 million next season.

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 nine players under contract.  We also have the draft rights to J.R. Giddens and Bill Walker, who are expected to sign contracts, and Semih Erden, who will play at least one additional season overseas..

Once the season starts, a team can have a maximum of 15 players under contract, and a minimum of 13 players.  Rosters must be finalized on or before October 31, 2008.

5) 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 $797,581 of player salary; the league pays any amount over this threshold.  Additionally, only $797,581 counts towards the luxury tax.

6) Where can I find a list of this year's free agents?  What about free agents in future years?

This year's free agents are available here.  You can find rankings by position here, and you can also find a decent free agency tracker here, although it has yet to be updated.

Potential 2009 and 2010 free agents can be found here.

7) Do teams have the right to match offers given to their free agents?

Generally not.  The only time a team has the right to match an offer sheet given to a player is if that player is a "restricted" free agent.  Essentially, a player is a restricted free agent after four years on a rookie deal for first rounders, and for all others players who are entering free agency in their first three seasons.

Under those circumstances, a team has a right to match offers to its restricted free agents, so long as the team extended the player a qualifying offer.  If a team chooses not to extend a qualifying offer, the free agent then becomes unrestricted.

Our only potential restricted free agent this season was Tony Allen.  However, the team elected not to extend him a qualifying offer, instead choosing to make him an unrestricted free agent.  As noted above, we still possess Tony's Bird rights, and can sign him for any figure up to the maximum.

8) I heard J.R. Giddens didn't report to minicamp because he didn't sign his rookie contract.  What's up with that?  Aren't rookie contracts slotted at a certain salary?

Yes, rookie contracts are slotted.  A rookie contract for the #30 pick is slotted at $797,000.  However, here's the catch:  teams can sign their rookies for anywhere between 20% below that number and 20% above it.

Thus, we can sign Giddens to a contract for anywhere between $638,080 and $957,120 in his first year.  That's a difference of $319,040.  Most rookies are given the full 120%, but with our team over the luxury tax, it's likely that Danny is trying to avoid going that high.

9) How much will we pay Bill Walker?

As a second rounder, there is no "slot" for Walker's salary.  We're allowed to pay him any amount between the minimum salary and the full mid-level exception.

In the past, 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.

However, if the team signs Posey or another player to the full MLE, it is likely that we'll sign Walker to a minimum deal. ($442,114 this season, $736,420 next.)

10) What about Semih Erden?  Will we have to pay him if he's in Europe?

No.  Erden has one year left on his contract overseas.  It is expected that he will come over to the United States next year.  Either way, we retain his draft rights for one year after the expiration of any non-NBA contract he plays under.  That means that if he extends his deal overseas, we continue to retain his rights until one year after his last contract terminates.

11) What does it mean when people say salaries need to "match" in a trade?

Assuming both teams are over the salary cap, incoming and outgoing salaries must be within 125% + $100,000 of each other for the trade to go through.

12) So, we have Bird rights to Tony Allen.  Does that mean we could sign him to a huge one-year deal, and then trade him to another team as an "expiring contract"?

No.  If you give a player larger than a 20% raise, he's subject to something called "base year compensation".  Essentially, what this means is that for purposes of trades, you only count 50% of the player's actual salary as outgoing salary for trade purposes.  However, the team trading *for* the BYC player has to count 100% of his actual salary for incoming purposes.

I know that's confusing as heck, so let me use an example.  Let's say we want to trade Tony for a player making $7 million.  We thus intend to sign Tony to a one-year, $7 million contract.  Here's how that breaks down under BYC rules:

Boston trades:  Tony Allen ($7 million salary * 50% reduction = $3.5 million)
Boston receives: $7 million player

The trade cannot go through, because the $3.5 million and $7.0 million salaries don't "match" within 125% + $100k.

Couldn't a team just sign Tony to a $14 million expiring contract, then?  No.  Here's why not:

Boston trades: Tony Allen ($14 million salary * 50% reduction = $7.0 million)
Boston receives: $7 million player

So far so good, right?  However, the next step kills it:

Team X trades: $7 million player
Team X receives: Tony Allen ($14 million salary, with no reduction)

Thus, once again, the salaries don't "match".  Base year compensation makes it very difficult (although not impossible) for players to be traded in the first year of contracts where they saw a substantial raise.

13) Looking at the above chart, it looks like the Celtics only have around $49 million in salaries committed for 2010.  If the cap goes up to around $65 million, does that mean they can spend $16 million on free agents?  Could they then resign Ray Allen with their Bird rights?

No and no.  Surprising to many, free agents continue to count against a team's salary cap until they're either signed or renounced.  This is called a "cap hold".  Free agents essentially count against the cap at a figure greater than their previous salary.

The amount of these cap holds varies significantly; for actual percentages, see here.  For purposes of the Celtics, Ray Allen would have a cap hold in excess of $20 million.  While the team could renounce Ray, if they did so they would only be able to pay him the minimum salary.

Of even more significance is the cap hold of Rajon Rondo.  As a restricted free agent, he carries a cap hold of 300% of his previous salary, or approximately $6.3 million.  Thus, under the above scenario, the Celtics actual cap room would be approximately $10 million, rather than the $16 million anticipated.  Further, there would be additional salary slots or cap holds for any other players on the roster.  Long story short, unless we're starting over with ten or more new players, we don't have signficiant cap room in 2010-11, even if we renounce Ray.

14) Does Pierce have an early termination option in his last year?  Is Leon's contract really not guaranteed?

There is conflicting data regarding Pierce's contract.  Hoopshype has Paul's salary in 2010-2011 as guaranteed; ShamSports (a site I actually like a little better) says it's an option.  I went with the "better safe than sorry" approach, and listed it.  Peter May would be proud.

In terms of Leon's contract, this year's salary was originally non-guaranteed, meaning the team could terminate it if they wanted.  There were certain performances clauses tied to statistics that would have made it a guaranteed deal.  Leon misses those incentives, but it seems extremely likely that the team will bring Leon back, if they have not formally picked up his option already.

15) Where can I research these issues on my own? 

Larry Coon's FAQ is an invaluable resource.  For those who want to go above and beyond Coon's efforts, you can find the actual text of the Collective Bargaining Agreement on the Player's Association website .

16) Are you going to update this during the year?  What if I have questions?

Yes, we're going to keep this updated throughout the year, in this thread stickied at the top of the Celtics Talk forum .  Questions can be asked there, or in the comments below.  We'll incorporate good questions into both this and future FAQs.


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