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Revised Luxury Tax Projections Come in Below Expectations

June 2nd, 2013 No comments

The NBA’s salary cap and luxury tax threshold aren’t expected to rise as much as the league initially projected, a development that could have significant implications for the Miami Heat.

Estimates that were provided by the league to NBA teams on May 31 have the salary cap rising to just $58.5 million and the tax threshold to just $71.6 million for the 2013-14 season, both slight increases from the current levels but considerably lower than what had been projected. The league had previously guided to $60 million and $73 million, respectively, at the beginning of the season. The numbers will be finalized only after the NBA does a full season audit during the first week in July.

The revised projections suggest that revenues for the 2012-13 season are falling short of expectations and, as a result, player salaries are correspondingly too high, triggering escrow adjustments to the following season’s salary cap and tax threshold.  Read more…

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Just How Serious Is Dwyane Wade’s Bone Bruise?

May 5th, 2013 2 comments

Update (11/17/13): The bone bruises in Dwyane Wade’s right knee have now fully healed. While he has continuing issues with both knees, his most significant troubles are with his left knee, from which he had a portion of his lateral meniscus removed in March 2002. 

We’ve been through this before – a 30+ year-old Dwyane Wade sustaining injury, and thus being unable to perform at the highest of levels at the most critical of times. Last year, it caused perhaps the worst postseason of his career. This year, it is lowering even that standard.

Last time around, it was further structural damage to an already surgically repaired left knee, which required the joint to be drained of excess fluid in May and then an arthroscopic procedure to clean out the area in July. This time around, it’s a bone bruise in the right knee. Three, in fact.

The term “bone bruise” perhaps makes the injury seem less serious than it is. People often think of a bruise as a black-and-blue mark on the skin, which is often nothing more than a minor nuisance. But bones can also be bruised. In fact, bone bruises can be quite severe and extremely painful. They’re not all that uncommon in basketball circles. And the knee is particularly susceptible.  Read more…

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NBA Luxury Tax Projections For Next Season

March 11th, 2013 No comments

There has been widespread speculation in NBA circles over the past year or so about the fate of the Miami Heat for next season and beyond. Articles that emphatically declare the inevitable financially-motivated implosion of Pat Riley’s brainchild have run rampant all across the internet universe.

The cost of doing business in the NBA has increased dramatically under the provisions of the new Collective Bargaining Agreement. The new rules are designed specifically to financially cripple high-spending teams like the Heat, in an attempt to promote competitive balance among all of the league’s 30 teams.

It’s working. Miami’s costs are soaring. But while predictions that call for the Big Three to be broken up to alleviate the hemorrhaging in the years to come are wildly premature and not very likely if things continue to run smoothly on the court, just how much Arison may be willing to spend to surround them depends largely on future luxury tax thresholds.  Read more…

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Miami Heat ‘Feverishly’ Pursued Nikola Vucevic in 2012

March 7th, 2013 No comments

Apparently, just as the Heat were touting the virtues of a “position-less” basketball philosophy which had just won them their first N.B.A. title of the Big Three era, Heat president Pat Riley was working “feverishly” to end its existence.

John Denton of OrlandoMagic.com reported earlier today that the Heat tried to acquire then Philadelphia 76ers center Nikola Vucevic last summer, just before he was sent to the Orlando Magic in the Dwight Howard trade last August.

Vucevic is a beast, which was fairly evident even before he exploded this season in Orlando. Doug Collins wasn’t playing him in Philly, because, well, he’s Doug Collins and he does things like that, but Vucevic showed a lot in his limited time last season – enough to convince Riley to seek him out.

It was vintage Pat Riley.

Only this time, he wasn’t able to execute upon his vision. And that may very well have been his fault.

Vucevic has given the Heat fits thus far this season, having twice gone for at least 20 points and 20 rebounds. The second year player could have been putting up those numbers for the Heat, instead of against them, if Riley had been willing to part with either Mario Chalmers, Norris Cole, or both.

The Heat weren’t willing to give up their top two point guards to make it happen.

The report of such clandestine trade discussions with the Sixers are a rather interesting development when considering that the Heat had at the time just executed a separate trade with the Sixers, one that sent the draft rights of Arnett Moultrie to Philly in exchange for the draft rights of Justin Hamilton and a 2013 lottery-protected first round pick.

We don’t know – and we will never know – what the Heat actually offered for Vucevic. As much as we’d like some transparency into the negotiations, we’ll never get it.  Read more…

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The Final Miami Heat Roster Spot

March 1st, 2013 No comments

The trade deadline has now passed. The waiver deadline for playoff eligibility has now passed.

The Miami Heat created a roster spot by trading away Dexter Pittman, at a cost of a second round draft pick and some cash, and nobody worthy of the spot has shaken free.

What should the Heat do?

Keep it. For now, anyway. Save some money. It is, after all, a nice insurance policy.

Then deploy it at the end of the regular season. Here’s why.

Both the Miami Heat and the Cleveland Cavaliers have reportedly had a strong interest in signing former Portland Trail Blazer center Greg Oden to a multi-year contract this season. The reason is clear. When healthy, Oden is a game-changing talent who, in his limited minutes thus far as an NBA pro, has made a serious impact down low. And while he’s never intended to play this season, a multi-year contract would have ensured either team his playing services for next season on a low-money contract.

How low?

The Heat’s only available multi-year offer would be a two-year minimum salary contract (i.e., the remainder of this season and next). The Cavaliers are still in position to use cap space to offer an up to four year contract staring at roughly $4 million.

Some in South Florida have been skeptical. Some believe the cost and the risk, when combined, are so great as to not justify the potential reward. But here’s the thing: there is no risk. None at all.  Read more…

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Heat Trade Dexter Pittman to the Memphis Grizzlies

February 21st, 2013 No comments

The Heat has completed a minor trade with the Memphis Grizzlies at the Feb. 21 deadline that gives the team some financial relief.

Miami sent seldom-used center Dexter Pittman, its 2013 second round draft pick and cash considerations to the Grizzlies in exchange for the draft rights to power forward Ricky Sanchez. The Heat will also acquire an $854,389 trade exception in the deal.

Sanchez will likely never play in the NBA. He was originally drafted in the second round (35th overall) of the 2005 NBA Draft by the Portland Trail Blazers. The Puerto Rican native has since played professionally in the Continental Basketball Association (2005-06), the D-League (2006-08), Puerto Rico (2007-11), Venezuela (2009), Mexico (2009-11), Spain (2011-12) and Argentina (2012-13), where the 6’11”, 220-pound 25-year-old has averaged 12.2 points, 7.1 rebounds, 1.9 assists and 31.9 minutes while shooting 42.2% from the field in 28 games for Libertad de Sunchales this season. His draft rights have been traded four times. He was included because each team is required to send the other something in every trade.

The trade exception holds very little practical value for the Heat either. It will allow Miami to trade for a player(s) with a total salary of up to $954,389 (the value of the exception, plus $100K) without being required to send back matching salaries. It cannot be used to sign a free agent, it cannot be traded to another team, and it cannot be combined with another exception or player in order to trade for a more expensive player. By league rule, teams over the salary cap (as are the Heat) are allowed to acquire minimum salary players without regard to salary matching anyway.

The impetus of the trade for the Heat is the roster spot that it creates. Teams are required to carry no fewer than 13 players, but no more than 15 players, on their rosters during the season. The Heat roster now stands at 14.

The Heat will look to add a player, likely a big man, who is currently a free agent or who might become available via buyout by March 1.

In order for a current player to be eligible for another team’s playoff roster, he must be placed on waivers by 11:59 p.m. on March 1. The player does not have to be subsequently signed by March 1. He can be signed as late as for the final game of the regular season to be playoff eligible. And a player who has not appeared on an NBA roster this season can also be signed any time prior to a team’s final regular season game in order to be playoff eligible.

Possible buyout candidates who may be of interest to the Heat include Jermaine O’Neal of the Phoenix Suns, Samuel Dalembert of the Milwaukee Bucks, Chris Kaman of the Dallas Mavericks, and Timofey Mozgov of the Denver Nuggets.

There is some rationale to believe that each could be a buyout candidate, although none is likely to be. The Suns need the roster spot to accommodate the soon-to-be-acquired Marcus Morris, and O’Neal has reportedly been pushing for the chance to play for a contender in the dusk of his 17-year career. The Bucks have agreed to acquire center Gustavo Ayon as part of a multi-player trade involving J.J. Redick, which would add Ayon to a center rotation that includes incumbent starter Larry Sanders and the reportedly unhappy Dalembert. The Mavs are fading out of playoff contention and are dealing with a reportedly unhappy Kaman who, himself, is dealing with a concussion sustained more than three weeks ago. The Nuggets have been looking to deal the seldom-used Mozgov, though they would seemingly have little reason to buy him out; if they do, it’d be simply to do him a solid.

Pittman, who had been banished to the D-League for the bulk of the season and didn’t figure into the team’s future plans, could always have been waived in favor of the roster spot anyway. Therefore, in essence, this trade was actually all about the money. The Heat sent $276,420 in cash to the Grizzlies to cover the remaining portion of Pittman’s contract – the same payout as would have been required were Pittman to have been waived. However, the Heat is no longer on the hook for the $854,389 in luxury taxes his contract created.

The success of this trade, therefore, hinges on the value placed on the draft pick. In trading Pittman, the Heat is essentially saying that its 2013 second round draft pick is worth less than $854,389 in cash.

They’re probably right. If the season were to end today, the pick would wind up being No. 59 overall in next year’s draft. Depending on how the rest of the regular season plays out, it could reasonably increase only to as high as No. 57.

Generally speaking, players picked at these levels wind up never playing in the NBA, let alone become valuable enough to meaningfully contribute to a title contender.

There are some notable exceptions, however. Manu Ginobili was selected No. 57 overall in the 1999 NBA Draft. Second year point guard Isaiah Thomas was selected with the final pick in the 2011 NBA Draft. But such cases are rare.

And so the trade, unnecessary as it should have been, was probably a marginally good one — at least from the perspective of owner Micky Arison. To see that, think of it this way: Arison probably could not have otherwise sold the No. 59 pick in the 2013 NBA Draft for $854,389.

Of course, the Grizzlies got an even better deal. They had just 12 players on their roster. They needed to get to the NBA minimum of 13. So they took Pittman for free. It’s nothing more than a two-month tryout. If he doesn’t develop, the Grizzlies can waive him at no cost. If he exceeds expectations, Memphis maintains his full Bird rights as a restricted free agent this summer. Yet, smartly, they negotiated for a 2013 second round pick from the Heat as well, again, absolutely free of charge. Free player, free pick. Not a bad day’s work.

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David Stern Projects Revenues To Be Up 20% To $5 billion

November 16th, 2012 1 comment

Some very big news was quietly made earlier this week.

Speaking on Tuesday at a Beyond Sports United event at Yankee Stadium, Commissioner David Stern estimated that league-wide revenue for the season would increase by about 20% from the last full season in 2010-11, to an all-time record $5 billion.

A year after the long and contentious collective bargaining agreement negotiations of 2011, during which the league claimed losses in the hundreds of millions of dollars and threatened “nuclear winter” if serious concessions weren’t made by its players, the NBA is apparently thriving.

Five billion dollars is a lot of money.

In fact, it’s significantly more money than the league was forecasting just a few months ago.

Since national TV revenue was already set, the league already knew about things like the Lakers’ and Celtics’ new multi-billion dollar local TV deals, and most other major revenue streams (such as ticket sales) have limited growth potential, it’s not entirely clear where all this unexpected growth is coming from. But it’s great news if you’re a Miami Heat fan.

The more revenue the league makes, the higher the salary cap and luxury tax threshold.

The cap and tax are calculated based on projected amounts of revenue (called “BRI”) and benefits for the upcoming season. The calculations take 44.74% and 53.51%, respectively, of this projected BRI, subtract projected benefits, and divide by the number of teams in the league. Adjustments are then made if, in the previous season, the players made less or substantially more in salaries and benefits than the split which was agreed to in the CBA.

The NBA was anticipating a projected BRI for the 2013-14 season of $4.48 billion as recently as July. That, in turn, produced an estimated salary cap of $60 million and an estimated luxury tax threshold of $73 million.

Things appear to have changed quite dramatically.

While it is not entirely clear to what extent Stern was rounding when he threw out the $5 billion number (or if he was even referring to BRI specifically), his reference to a 20% increase from 2010-11 levels still suggests a rather staggering $4.58 billion in BRI for the current season.

And if this season’s revenues are $4.58 billion, then next year’s revenue forecast would presumably be higher than that. At a modest 4% growth rate, the league’s initial growth rate target for next season, projected BRI for 2013-14 would then be set at roughly $4.76 billion. Two weeks into game action, revenue forecasts for next season appear to have increased by over $280 million!

If these BRI projections prove correct, the 2013-14 salary cap would jump to $64 million and the luxury tax threshold to $78 million.

That’s an unexpected $5 million boost to the tax level. That may not sound like much, but it’s massive when considering the league’s new progressive tax system kicks in next season. At the Heat’s current payroll level, such an increase amounts to tax savings for Heat owner Micky Arison of between $9 million and $13 million.

That’s money that could potentially be re-deployed. At this increased luxury tax level, and with some offseason maneuvering, the Heat could potentially utilize its mini-midlevel exception and still keep its total payroll (including salary, tax and amnesty obligations) below the $98 million level at which it is spending this season. That would be huge, particularly given that we started the season thinking this was the best the Heat was ever going to be, that the future was all about maintaining rather than retooling.

And things could get even better.

Remember that uniform advertising plan that was going to be implemented starting next season? Well, it’s reportedly dead. At least for now. Why? I wish I could say it’s because of the strong national movement opposing it. It is, after all, an awful idea. The real reason, though, has a familiar undercurrent to it: apparently the plan is dead because the owners couldn’t agree on how to share the profits.

But things could change. They could figure it out. And if they do, it could mean big incremental dollars. Deputy Commissioner Adam Silver said that the league as a whole could gain $100 million in additional revenue by selling small 2-inch-by-2-inch patches on the jerseys of each team. That’s a potential $2 million incremental increase to both the cap and the tax.

Is an $80 million luxury tax threshold likely for next season? No. But it’s possible.

Not bad for a league claiming to be in dire financial distress less than one year ago.

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It’s Time for the Miami Heat to Pursue Andray Blatche

August 15th, 2012 No comments

Dwight Howard didn’t get traded to Miami. Greg Oden probably isn’t going to play in 2012-13. Mehmet Okur appears destined to return to his native Turkey. And the Heat passed up the chance to wait out Samuel Dalembert.

The Heat still needs a center.

In the future lottery-protected first round pick acquired from Philadelphia, the Heat has an asset with which to try to address the issue in trade. The problem is that it’s the Heat’s only significant trade asset. The team can’t offer a first round pick of its own until 2017 at the earliest. And its second round picks are just about worthless.

The biggest issue, however, is that any potential trade requires the Heat to trade away matching contracts. And the contracts of thirtysomethings Mike Miller, Udonis Haslem and Joel Anthony – the team’s most likely trade candidates, players the Heat should be overjoyed to move free of charge simply for tax purposes – are all toxic; each likely holding negative trade value. Any value the Philly pick would have to a trade partner would be more than offset by the toxic Heat contract it would be required to take on for salary matching purposes. Why, then, would any trade partner offer anything of value in return?

A trade simply isn’t very likely.

And that means that if small-ball doesn’t work, the Heat will find itself in a bind.

Haslem is not ideally suited to play alongside Chris Bosh on the front line. Anthony’s limited offensive repertoire and lack of rebounding prowess create as many problems as his presence on defense solves.

Chris “Birdman” Andersen would be an ideal fit for what the Heat are or should be trying to do — as a shock-blocker, two-way rebounder, finisher at the rim and, perhaps most importantly, a tremendous jolt of energy — but he is currently facing bizarre and serious criminal allegations. Signing a player under such a murky investigation is probably not going to pass muster for the Heat, at least  not until more details emerge that support what we suspect, that Andersen is purely a victim of some type of extortion scheme.

It’s time for the Heat to get a little creative. It’s time to take a risk.

It’s time to consider Andray Blatche.  Read more…

Dwight Howard Traded to the Miami Heat

August 10th, 2012 3 comments

LOS ANGELES (AP) – The Dwight Howard saga took a shocking and final turn Friday afternoon, when a second blockbuster trade, this time involving the Miami Heat, was completed.

“This is just crazy,” Yahoo! Sports NBA columnist Adrian Wojnarowski said. “The Dwightmare is over. It all happened so fast. Two trades. I’m stunned. Howard will end up on the Miami Heat and form what is now being dubbed The Even Bigger Four,” Wojnarowski continued.

Howard was traded from the Magic to the Lakers earlier in the day, in a four-team trade that involved the Nuggets and Sixers. The reported deal sent Howard, Chris Duhon and Earl Clark to the Lakers; Andre Iguodala to the Nuggets; Andrew Bynum and Jason Richardson to the Sixers; and Aaron Afflalo, Al Harrington, Josh McRoberts, Nikola Vucevic, Moe Harkless and Christian Eyenga to the Magic. Orlando also received five draft picks over the next five years, including first round picks from each of the other teams and second round picks from the Nuggets and Lakers.

But then, in a shocking development, the Lakers traded the newly-acquired Howard to the Miami Heat. The finalized deal has Howard going to the Heat in exchange for Joel Anthony, Mike Miller, Dexter Pittman, Udonis Haslem and James Jones. The Heat will also confer a package of draft picks.

Financial considerations played a big part in the deal for Los Angeles. After the completion of the initial trade for Howard, the Lakers projected to have payroll obligations of at least $128 million for the coming season, including $29 million in luxury taxes. For the 2013-14 season, the numbers were even more staggering. Based on Howard’s maximum salary demands, and at the league’s currently projected $73 million tax threshold, payroll obligations were projected to be around $190 million. Add in a projected revenue sharing bill of around $50 million and you get a whopping $240 million total – more than the combined payroll, luxury tax and revenue sharing obligations of five NBA teams from last season. That amount proved to be too much, even for the mighty Lakers.

The Lakers’ subsequent trade eases the financial burden considerably. Both Miller and Jones have reportedly given assurances that they will immediately retire, freeing the Lakers of nearly $22 million in future salary commitments to the duo. The remaining three players will make just $9 million this season, approximately $11 million less than the $20 million Howard is set to earn. That’s a savings of $22 million this season alone when including the tax. But the real savings comes the following season, with the Lakers projected to save more than $60 million.

The kicker in the deal involves the draft picks that will be conferred. Preliminary reports have the Heat sending to the Lakers ten first round draft picks and ten second round draft picks over the next ten years.

League rules prohibit a team from sending out all of its future first round draft picks in consecutive years as well as trading picks more than seven years into the future, which would seemingly invalidate the deal. However, Commissioner David Stern issued an exception in this particular situation, which allowed the trade to be completed.

Said Stern: “We put new rules in place to allow this trade to happen because of its importance not only to the Miami Heat but also to the entire NBA. We have a singular focus, and that is to generate more total revenues than any other pro sports league. We fucked up last year when we imposed that ridiculous lockout. We weren’t about to do it again. That should have been evident when we approved the motion to add hideous advertisements to team uniforms starting in 2013. So when the opportunity to get Howard to Miami arose, we naturally had to approve it. The Heat will now be the most marketable team in all of sports. Whether you love them or hate them, you’ll all be watching every minute of Heat basketball for years to come.”

Howard has reportedly agreed to sign a three-year extension with the Heat, at an average salary equal to that of Dwyane Wade’s final three seasons. However, per league rules, the extension cannot be officially executed for six months.

Howard becomes the latest member of the Heat to take a discount to play in Miami. Howard’s extension will total $62 million, $6 million less than he was eligible to receive. Just about every player on the roster has now taken a discount to take his talents to South Beach.

When asked to comment, Heat president Pat Riley initially declined. He instead pointed to his slicked-back hair.

He went on to say “I’m just glad to get rid of all those draft picks.”

The Heat now figures to enter the season as the prohibitive favorite to win the title, just hours after the Lakers were immediately thrust into that role.

Miami’s lineup features four players widely considered among the best in the world at their respective positions – Dwyane Wade, LeBron James, Chris Bosh, and now Howard. Incumbent starter Mario Chalmers figures to round out the starting five.

In his introductory news conference, Howard promised to bring to the Heat new and innovative ways to chastise his starting point guard. Past references made by Wade and James about Chalmers being their “little bitch” are weak and outdated, he said.

In response to the series of trades, Cavaliers majority owner Dan Gilbert has filed a formal complaint with Commissioner Stern. The paper on which the complaint was written was reportedly utilized by Stern as toilet paper. Sources say Stern felt the crumpled paper was rough and not very comforting to his anus.

A parade has been scheduled in Miami for Sunday at noon. It will air, in part, as a 30-minute special on ESPN entitled “Another Decision.”

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Addressing the Miami Heat Need At Center

July 16th, 2012 4 comments

We’re NBA champions.

And we’ve gotten better. It’s a beautiful thing. This Miami Heat team is nearly perfect.

Nearly.

For the third straight season the Heat finds itself in need of a center — one who is both reasonably sized and knows how to rebound a basketball.

While we applaud head coach Erik Spoelstra’s decision to embrace a ‘position-less’ half court offensive philosophy that has Chris Bosh in that role, it is perhaps a less than ideal strategy over the course of a largely meaningless but still very grueling 82-game regular season.

And it’s a strategy not without its risks. Though the strategy (which essentially entails surrounding the Big Three with two wing players rather than a true center) has produced phenomenal results over the past two regular and post seasons, it has been tested over a grand total of just 568 minutes, the equivalent of fewer than 12 games. The Heat has gone all-in on an approach that is still very much unproven.

While ‘position-less’ might be a nice term to throw around, what it really boils down to is an accommodation for the team’s lack of size, and a lack of skill, at the five spot. The approach could prove costly against more physically imposing front lines.

Pat Riley has, at least for now, put his faith in seldom-used third year center Dexter Pittman to fill the void. Riley cemented his belief by choosing to guarantee Pittman’s contract for the upcoming season.

But Pittman isn’t the answer. Neither is Joel Anthony.

So we are left sifting through a slew of uninspiring alternatives.

Darko Milicic. Eddy Curry. Hamed Haddadi. Joel Przybilla. Joey Dorsey. Nazr Mohammed. Ronnie Turiaf. Tony Battie. Etc.

Not one is a difference maker.  Read more…

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