The new Collective Bargaining Agreement increased the amount of cash teams can receive in trades on an annual basis, from $3.5 million last year to $5.1 million this season. After dealing a second rounder to the Warriors (Roundball Reasons favorite Jordan Bell!) for the full $3.5M permitted last season, the Bulls have already maxed out their cash receivables this year as well. They did this in two deals, with the Pelicans paying $2.5M and the Blazers later paying $2.6M in exchange for the Bulls’ willingness to take on the expiring contracts of Quincy Pondexter and Noah Vonleh.
You might think that this money is offset by amounts the Bulls owe to these players, though in actuality the Bulls did not increase their payment obligations at all. While the Bulls added roughly $8.5M in 2017-18 player salaries from the Pondexter, Vonleh, and Asik deals, since they remain under the league salary floor ($89.184M), those new contracts don’t cost the Bulls anything. The salary floor sets a minimum amount for each team’s payroll, and teams are required to pay the difference at the end of the year if they fall short. Instead of owing lots of money at the end of the year—paid out as extra compensation to the players on the roster—the Bulls will now only have to chip in a little bit.
And remember from Part 2 the $11.3M due to Asik next year? There’s a strong possibility that won’t cost the Bulls anything either. Next year’s salary floor is projected around $91M, and with the Bulls likely to fill out their roster with 2 first-round picks (estimated $7M in 2018-19) and by re-signing Zach LaVine and David Nwaba (estimated $20M annually for both players combined), they’re looking at roughly $86-87M in payroll for a full 15-man squad. Barring an unexpected free agent signing or taking on much more salary in trade, the Bulls should remain under the salary floor next season too.
But the Bulls actually would’ve made more money from their trades under the old CBA, despite its lower limit on cash considerations. That’s because the old CBA enabled teams under the salary floor to profit handsomely from mid-season trades based on an accounting loophole that the new CBA closed. Surprisingly I haven’t seen any articles on this topic, and in fact this change was left out of the NBA’s official “Deal Points” memo.
Under the old CBA, calculation of a team’s compliance with the salary floor was based not on actual salary disbursements but rather on its end-of-season payroll, including each player’s full contract value—just as a team’s cap and luxury tax compliance are calculated. As a result, teams under the floor could take on a bunch of salary at the deadline, lifting their official end-of-season payroll to the floor while only paying the pro rata share of those added contracts for roughly 1/3 of the season. During the Hinkie era in Philly, and even thereafter, the Sixers used to pocket $5-10M in profit at the deadline via cap shenanigans alone, by loading up on contracts to approach the salary floor. They did this with Danny Granger, JaVale McGee, and Andrew Bogut, in each case paying in the neighborhood of $3-5M in rest-of-season salary to obtain $9-15M in payroll for accounting purposes, bringing them up near the floor.
This year the Bulls added roughly $4.5M to their end-of-season payroll at the deadline, which in past years would’ve resulted in about $1.5M in actual payments and $3M in profit. However, the new CBA added the following bolded provision:
For purposes of determining whether a Team has met its Minimum Team Salary obligation for a Salary Cap Year in accordance with this Section 2(b), the Team’s Team Salary shall:
be calculated in the same manner as Team Salary is calculated by the Accountants for purposes of computing Total Salaries and Benefits in the Audit Report (as defined in Section 10(a)(1) below), except that with respect to each player that was employed by more than one (1) Team under the same Player Contract (i.e., in cases where a player’s Contract is acquired by trade or pursuant to the NBA waiver procedure) during the Salary Cap Year, the player’s Salary in respect of such Player Contract for the applicable Salary Cap Year shall be allocated as follows: (Y) the amount to be included in Team Salary for each such Team other than the last Team by which the player was employed under the same Player Contract shall equal the Salary in respect of the Player Contract for the applicable Salary Cap Year multiplied by a fraction, the numerator of which is the total number of days of the Regular Season that the player was on the roster of such Team and the denominator of which is the total number of days in such Regular Season (or, if the Contract was not in effect for the entire Regular Season, the number of days in such Regular Season during which the Contract was in effect); and (Z) the amount to be included in Team Salary for the last such Team by which the player was employed under the same Player Contract shall equal the player’s Salary in respect of the Player Contract less the amount of such Salary allocated to other Team(s) in accordance with clause (Y) above. . . .
In simpler terms, this means that compliance with the salary floor, or “Minimum Team Salary obligation,” is now calculated based on actual salary disbursements to players acquired mid-season rather than allocating their full salaries to the acquiring team. Even more simply, the loophole has been closed. So while the Bulls were able to receive an extra $1.6M in cash considerations this year, they would’ve made about double that amount under the old system, based on lower end-of-season payments to reach the stipulated minimum salary.
This CBA change makes a particular form of tanking less profitable, which in the long run should help keep the league more competitive. There’s no longer a financial benefit to playing the bulk of the year with a shoestring payroll and then taking on big contracts at the deadline just to approach the salary floor. With this change and the flattened lottery odds, rebuilding teams now have added motivation to spend in free agency and attempt to compete.
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