NBA Free agency: The new wild-wild west

After Cleveland won the NBA finals (2015-16) the speculations were about the free agencies/agents where the franchisees would be ready to offer big money due to excessive salary cap, came true. While the players like Kevin Durrant, Mike Conelly and Al Horford are expected to get a max contract. There are other players like Kent Bazemoore, Hassan Whiteside (already signed with the Heat), Timothy Mozgov (Signed with the Lakers for $64 million), Chandler Parsons (Signed with the Grizzlies) and Dwight Howard amongst others who would be benefiting with the extended cap size.

There are some undrafted players such as Jeremy Lin who have also benefited for their hard work by signing a deal with the Brooklyn nets for $36 million for a span of three years. So, is the NBA’s wild-wild west theory criticized during the 90’s with Kevin Garnett being offered a major chunk of the salary and the heavily criticized contracts of Alonzo Mourning and Shaquille O Neal ($100 million worth of contracts) getting a legitimized nod of the market?

Absolutely yes, earlier there was not enough cap space so the players with relatively less/mediocre skills used to suffer with the lower priced contracts. Now, not only the star players but also the average/role players can get a major chunk of the same dough. More likely, putting both the stream at par as “Cut from the same cloth in terms of money.” With one perspective in the mind, talent will be hardly of any relevance now.

Kevin Durant

The new TV deal worth $24 Billion

It is worth mentioning that all this big money came from the whopping $24 Billion deal signed by the NBA with Turner Sports Broadcasting Inc and Walt Disney renewing their contract but at a higher price than earlier. The deal is for a span of 9 year ending in 2025, giving ESPN, TNT and ABC the rights in all form of digital broadcasting.

As the deal was signed in the season 2014-15 a cap infusion of $6 million took place as Basketball Related Income (BRI). Further the same infusion came in the year 2015-16 giving a higher cap space to the franchisees in order to retain or add players on their pay rolls.

Now, with the further cap infusion as the TV deal becomes operational. Almost, every franchisee or 2/3rd of the league has an option of accommodating a Max Contract player or an above average player offering them contracts upto $94 million as per the terms of the collective bargaining agreement.

It will be interesting to further keep an eye on the Collective Bargaining agreement as it expires at the end of the 2016-17 season where the NBPA will be deciding to stay within or opting out of the running CBA before 15th of December, 2016.

What the players can do?

Keeping in mind the expiration of the collective bargaining agreement with the 2016-17 season, there are three predicaments.
Firstly, signing yearly contracts with player option, as at the end of every season the player gets an opportunity of signing a Max deal. If you are a Max Contract calibrated player-collecting upto $27.5 million in a season and thus wait for the tide to turn for more money with a new collective bargaining agreement in place in 2017. Then, signing a max deal for a longer span. But it will be a heavy bet to place your cards on the table as to who knows how the negotiations end and what cards will the NBPA and the ownership will be playing, if the NBPA opts out mid way December of 2016 for a new collective bargaining agreement.

The second thing, which a player can do, is simple, to get cash rich by signing in max deals, which also removes discrepancies in terms of injuries as the current CBA protects every dollar that has been guaranteed in the contract so a max deal will definitely seal the future. With the player services of upto less then 10 years are based upon the CBA and NBPA mandate of the 30 % of the salary cap or 105% of the last seasons salary which ever is higher or on adding more then 10 or 10 years service to an organization, a new contract can be signed on a 35% of the salary cap or 105% of the last salary, which ever is higher.

Further, there can be a third option, if a player has been a part of an organization for 3 seasons and has not changed a team or being waived by an organization, in that case the player can be signed under the Larry Bird exception rule (they are also called as Birds free agents) and will be beneficial to players who are looking for a limited period contract, say a season. The contract under the same would increase by 7.5% each year and if the same player opts out to a different team the same contract would increase by 4.5%. The Larry Bird exception also helps the franchisees in circumventing the luxury tax limit. So, a win-win for both the players as well as the organization, as it helps them further in recruiting major talents via further increase in the salary cap.

Tax troubles for the players signing Max Contracts

As taxes being a state subject, every state has a different tax rate on personal income while some having a higher percentage, the other relatively low. It would be pertinent to note that if a player is just thinking in terms of money, a lot can be made and a lot can be saved by signing with the right team and in the right state.

As mentioned, by Prof Michael Mccann and Robert Riola in their article in Sports Illustrated.

The team states have very different state taxes and vary right from the Celtics in the state of Massachusetts collecting 5.1% state income tax to the state of California where the state taxes are as high as 13.3%. So if an average player or an above average player are nearing to close a max deal or a higher proportion of the salary cap with the kind of money which is being offered this free agency, the source of the money has to be kept in mind as most of the players don’t have a shoe/merchandizing deal to cover their part of a sizing pocket.

Long story short, the team roasters will be made or destroyed as money being the biggest gunslinger in the helm. And the salary cap increased to $94 million per season there is a lot of money to be spent with a staggering luxury tax cap at $111 million (Speculative). The question is that, where are the organizations actually going to spend this exorbitant amount of money?

The role players will be the biggest beneficiaries, who are as essential as the Max contract player, with the advent of time they all will be almost on the same verge of an equally competitive market. Who says, despite of the lockouts in the past, that the NBA is not a cash rich league! After all, money happens to be one of the biggest lure/motivation.

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