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Million-Dollar Roger Mason Jr. Decision Due by Jan. 7

December 27th, 2013 Leave a comment Go to comments

The date in which all N.B.A. contracts become fully guaranteed for the rest of the season, Jan. 10, is looming. That leaves the Heat with a decision to make on the non-guaranteed contract of Roger Mason Jr.

Mason Jr. plays a somewhat valuable role for the Heat as a versatile three-point shooting specialist who serves as the team’s third string option at both the point and shooting guard positions. But he (along with Michael Beasley, who has undoubtedly earned his keep), is also the only player who has a less than fully guaranteed contract.

Mason Jr. is a 10-year N.B.A. veteran. He is playing under a one-year contract. He is earning $1,399,507, the minimum salary for a player with his tenure.

When a player has been in the N.B.A. for three or more seasons and is playing under a one-year contract at the minimum salary, the league reimburses the team for part of his salary – any amount above the minimum salary level for a two-year veteran. As a result, the Heat is only responsible for $884,293 of his salary, equal to the minimum salary for a two-year veteran. The league will reimburse the Heat for the rest at the end of the season. Therefore, if Mason Jr. plays out his contract, he really only costs the Heat the smaller amount, and only the smaller amount is included in team salary for cap and tax purposes. They do this so teams won’t shy away from signing older veterans simply because they are more expensive than younger veterans.

As for the mechanics of how the reimbursement works, the Heat is responsible for Mason Jr.’s full prorated salary of $8,232.39 per day (equal to his $1,399,507 salary divided by the 170 days in the regular season), until the total reaches $884,293. At that point, the league reimburses the Heat for the rest. With the regular season having started on Oct. 29, he will earn that much by Feb. 13, 2014. His services from that point on essentially become free of charge.

However, if the Heat want to capitalize on his non-guarantee, they will have to waive him by no later than 5 p.m. on Jan. 7. That’s because all non-guaranteed contracts across the N.B.A. will become fully guaranteed on Jan. 10, so a player needs be gone by no later than Jan. 9 to avoid the guarantee and it takes 48 hours for a waived player to actually clear waivers. Players continue to get paid while they are on waivers.

By that time, Mason Jr. will have already earned $600,965 on his contract. Therefore, if the Heat were to waive him on Jan. 7, they’d be saving a total of $283,328. When including the tax, given the Heat’s current tax position, that amount rises to $991,649.

The Heat is already spending $110,077,842 on player payroll obligations this season, an amount at which the team presumably isn’t anywhere near profitable, so, to some extent, every dollar counts – particularly a million of them.

However, there is some degree of financial justification not to waive him in order to capitalize on his partial guarantee. 

As noted above, if the Heat were to waive Mason Jr. at the guarantee deadline, they’d be saving $283,328 in salary payments and a total, when including the tax, of $991,649.

If the Heat were to instead trade Mason Jr. by the Feb. 20 trade deadline, they’d save even more.

When a player whose salary is partially reimbursed by the league is traded during the season, the reimbursement gets allocated to the respective teams based on the number of days accrued with each team. While a trade partner would will be responsible for the $452,782 remaining on Mason Jr.’s contract for the 55 days left in the regular season at the trade deadline, they would actually only owe $286,095 after accounting for the reimbursement. The Heat could offer to pay the remainder of his salary to any team willing to take him, allowing the Heat to wipe his salary entirely from its luxury tax computation.

Although the move would produce no salary savings, with the team currently between $10 million and $15 million over the tax threshold, and thus with a $2.50-per-dollar marginal tax rate, it would produce $2,210,733 in tax savings. And since every N.B.A. team can acquire a minimum salary contract, every N.B.A. team becomes a potential trade partner.

Of course, no N.B.A would have an impetus to trade for Mason Jr. without a financial incentive. Though pure speculation, it would probably take a $500,000 profit (in addition to the $286,095 to pay the remainder of his salary) for a team to be interested, and without the Heat having to use draft considerations in the deal. And thus, as a result of the deal, the trade partner will have produced $500,000 just for having accommodated the Heat, and the Heat will have saved $1,710,733, which amount is substantially greater than the $991,649 they would save by simply waiving Mason Jr. now.

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But this won’t be a monetary decision. More important is the roster spot that parting with Mason Jr. would create. The Heat is currently at its 15-player maximum. The open roster spot would give the Heat flexibility to add to its roster should a more appealing player become available on the free agent market.

Last year, Miami waived both Josh Harrellson and Terrel Harris at the guarantee deadline, moves that ultimately created a spot for Chris Andersen. Andersen became a key contributor to the team’s title run. The Heat could be looking for a similar type of impact player this time around. Who that might be is not yet clear.

Players generally become available during the season in two waves – after the Jan. 10 guarantee deadline and then after the Feb. 20 trade deadline.

While the Heat will be considering whether or not to waive Mason Jr. at or around Jan. 7, so too will other teams be considering whether to waive their partially or fully non-guaranteed contract players. We’re entering a period of high anxiety for the 48 players around the league who meet that description.

Andrew Bynum is a player who could be waived for this reason. The Cleveland Cavaliers signed Bynum to a two-year, $24.79 million deal over the summer. But only $6 million of his $12.25 million salary for this season is guaranteed if he is waived on or before Jan. 7.

Bynum was suspended indefinitely by the Cavaliers yesterday for conduct detrimental to the team. He has reportedly been a disruptive presence within the team and the Cavs have apparently lost hope that a partnership can be salvaged. They have begun to aggressively look for a potential trade.

Though neither his attitude nor his play on the court thus far this season justifies his inflated remaining salary, the $6.25 million in potential savings could serve as an inducement in trade.

As an example of how Bynum could be used in trade, the Chicago Bulls are currently about $7.7 million over the luxury tax line. They could trade free agent-to-be Luol Deng for Bynum and then immediately waive him, which would cut about $7.8 million off the cap and get the Bulls out of the tax. Such a trade would save the Bulls about $6.8 million in salary payouts and $12.3 million in taxes, as well as qualify them for a tax distribution (paid to teams below the tax from half of the tax proceeds of teams above the tax) of approximately $3.2 million. That’s more than $22 million in instantaneous savings (1).

The Los Angeles Lakers are in a similar position as the Bulls, also about $7.7 million into the luxury tax and dealing with an injury-marred season. By trading Pau Gasol in a package for Bynum and then waiving Bynum, the injury-ravaged Lakers could potentially save even more than $23 million depending upon how it were structured. A Gasol-Bynum trade would have to include at least one other player to make the deal work under league rules.

If he is waived, Bynum reportedly wants to play for the Heat or the Los Angeles Clippers. The interest could be mutual. Even with the Greg Oden project in Miami, Bynum is much further along in his recovery and would surely entice the Heat.

Things ramp up again after the Feb. 20 trade deadline.

Once the trade deadline passes, teams only have a limited ability to improve their rosters. This is typically when quality players on losing teams request a release from their contracts so that they may attempt to join a contending team. Often they agree to surrender some or all of their remaining salary via a buyout in order to do so. Such players have until 11:59 p.m. on March 1 to secure their release and still be eligible for the playoffs with any new team for which they ultimately sign.

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Should the Heat choose to waive or trade Mason Jr., they will have a couple of alternatives with which to sign a replacement.

They can still utilize their $3.183 million Mid-Level Exception, which will begin to be prorated down (at a rate of 1/170 per day) on Jan. 10. In practical reality, however, the Heat will certainly not do so.

They can also utilize the Minimum Player Salary Exception to sign a player to a 10-day or rest of season minimum salary contract, which (assuming it is not a rookie or second year player) will cost the Heat a prorated portion of the $884,293 two-year minimum salary contract, equal to $18,206 per day when including the tax and after reimbursement from the league.

Notes:
(1) The $7.8 million in savings off the cap assumes that the Bulls sign an additional player after waiving Bynum in order to build back up to the 13-player minimum. The $6.8 million in payroll savings is calculated as the $8.1 million remaining on Deng’s contract less the $740K remaining on Bynum’s guarantee less an estimated $505K cost of the 13th player. The $3.2 million tax distribution estimate is reduced from the current $3.6 million estimate to reflect the fact that the Bulls would no longer contribute their $12.3 million to the pool. 

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