At the Board of Governors meetings in New York, NBA teams were advised that the league expects the salary cap to increase from its current $63.1 million figure to $67.1 million next season and $89 million in 2016-17, while the luxury tax is expected to increase from its current $76.8 million figure to $81.6 million next season and $108 million in 2016-17.
The figures are non-binding forecasts that have been circulated several months before the official salary cap and luxury tax threshold for the 2015-16 season are announced on July 8 following a league-wide audit (that is what July Moratorium is for).
As part of the audit, accountants jointly appointed by the NBA and the players’ association finalize the total revenue haul for the past season and, on that basis, project the revenues for the upcoming year.
They then take 44.74 percent of that projected amount, subtract projected benefits, and divide by 30 (the number of teams in the league) to get the salary cap for the season ahead. Adjustments are then made to the cap if players received way too much, or too little, in salaries and benefits for the then prior season relative to the finalized revenue figure; this serves as a mechanism to maintain the integrity of the agreed-to revenue spit between owners and players. The luxury tax uses a similar formula, but is based on 53.51 percent of projected revenues.
The figures suggest the revenue haul for this season was much stronger than originally forecasted.
The league initially forecasted revenues for the 2014-15 NBA season of $4.66 billion when the current collective bargaining agreement was drafted back in 2011. The forecast was revised upward to $4.71 billion last July, off of which projection the salary cap was based. The updated guidance provided by the league today suggests it is now expecting that when total revenues are finalized two and a half months from now, they will come in at approximately $4.78 billion. Read more…