NBA Salary Cap For 2015-16 Hits $70.0M, Luxury Tax At $84.7M

July 8th, 2015 3 comments
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On Thursday July 9 at 12:01 a.m. ET, the NBA’s 2015-16 season begins. That’s when the league’s salary cap, luxury tax threshold, maximum salaries and other figures all adjust to their new values; when free agents can be can signed; and when players can be traded.

Most NBA business ceases for the first several days of July as the league conducts its annual audit to determine its revenues from the previous season. With that figure in hand, the league huddles with the players association to project revenues for the coming season, and uses it to calculate the new cap, tax and related figures.

Revenues for the now-completed 2014-15 season came in at an all-time record $4.84 billion, up 7.0 percent from the previous year (the highest annual growth rate for the league over a full season in the last eleven years), smashing projections for the season issued last year at this time (off of which the salary cap was based) by a whopping $132 million!

On that basis, the league then projected revenues from sources other than national TV rights to increase by the standard 4.5 percent and added them to the revenues call for in the national TV rights deals (which were set when the deals were signed in 2007), which came to a total of $5.04 billion.

To get the salary cap for the season ahead, the league takes 44.74 percent of that projected revenue amount, subtracts projected benefits, and divides by 30 (the number of teams in the league). The luxury tax uses a similar formula, but is based on 53.51 percent of projected revenues. Adjustments are then made to the cap if players received either too little or too much in salaries and benefits for the just completed season relative to the finalized revenue figure.

The players are contractually guaranteed to receive an exactly 50 percent share of initial revenue forecasts that were determined when the CBA was originally negotiated in 2011, plus or minus 60.5 percent of the amount by which actual revenues exceed or fall short of the forecasts, with a lower limit of 49 percent of actual revenues and an upper limit of 51 percent of actual revenues.

To ensure players do not receive more than their fair share of league-wide revenues, 10 percent of players’ salaries is withheld from their paychecks and deposited into an escrow account. At the end of each season, the players’ guaranteed share of revenues is compared to the amount they were actually paid in salaries and benefits. If the players received more than their fair share of revenues, then the overage is returned to the teams from the escrow account. The players then receive any escrow money that remains. To help ensure such an overage does not happen again, if there is an overage and the system is getting close to exceeding what the league can get back through the escrow system, then the following season’s salary cap (and tax level) may be reduced in order to put on the brakes.

For the 2014-15 season, $218.6 million was deposited into the escrow account.

If the players received less than their fair share of revenues throughout the season in the form of salaries and benefits, the league returns the full amount of the escrow and simply cuts the players a check for the difference. To help ensure such an underpayment does not happen again, the league increases the following season’s salary cap and tax level equal to the amount of the shortfall divided by the 30 teams in the league. The artificially inflated salary cap promotes higher spending on player salaries, and thus decreases the likelihood of a shortfall in the following season.

The system is designed such that the salary cap for each team is set at 44.74 percent of revenues, but the players are actually entitled to receive between 49 and 51 percent of revenues (the exact percentage is tied to the league’s financial performance).

In the past, this has never really been a problem. The NBA has a soft salary cap. Almost every team in the league used to exceed the salary cap by a large enough amount every season – many even exceed the luxury tax – that the players always wound up receiving their fair share of revenues. Typically, in fact, the players wound up getting far more than to which they were entitled, and the league’s escrow system would knock them back down.

Lately, however, it has become a far more significant problem. Punitive new cap rules — hard caps, increasing luxury tax consequences, etc. — coupled with more destructive roster construction models have caused teams to dramatically ratchet down their spending. For the first time ever, two teams failed to reach the league-wide minimum team salary requirement this past season. Eight teams ended the season below the salary cap (excluding cap holds). On the high end, a recording-tying low of five teams were taxpayers this year by a cumulative record-breaking low of just $26 million.

With league-wide revenues of $4.84 billion for the 2014-15 season, $180 million higher than the $4.66 billion originally forecasted when the CBA was negotiated, players were entitled to 50.39 percent of revenues, or $2.44 billion, in salaries and benefits. Throughout the season, they received just $2.38 billion, a $57.3 million shortfall.

The league will therefore return to the players the full $218.6 million from the escrow account, and cut a check for the additional $57.3 million shortfall. It will mark the largest shortfall check sent to players in league history.

The shortfall, in turn, caused an increase to the salary cap for the 2015-16 season of $1.9 million.

To arrive at its salary cap and luxury tax figures, the league took its $5.04 billion revenue projection, multiplied it by 44.74 percent and 53.51 percent respectively, subtracted projected benefits, and divided the result by 30. It then added the $1.9 million adjustment to the final tallies. On that basis, the new salary cap and tax thresholds were set.

The new salary cap has been set at $70.00 million, an 11.0 percent increase from last season. That is substantially larger than the $66.3 million initial projection from last year at this time (which contained no salary-related adjustment) and the $67.1 million project issued last April (which contained a $500K salary-related adjustment).

The new luxury tax line been set at $84.74 million, a 10.3 percent increase from last season. That is substantially larger than the $80.7 million initial projection from last year at this time (which contained no salary-related adjustment) and the $81.6 million projection issued last April (which contained a $500K salary-related adjustment).  Read more…

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Miami Heat Pursue LaMarcus Aldridge

July 3rd, 2015 3 comments
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Updated (11/11/15): When Pat Riley requested a meeting with LaMarcus Aldridge last summer, we were all trying to figure out his intentions. It did not feel believable that Riley would trade Chris Bosh for Aldridge in a player-for-player swap, but nothing else even seemed remotely plausible. So what was Riley thinking? 

According to various media reports, Riley’s intention was to try to convince Aldridge to accept a one-year deal with the Heat at the $3.4 million taxpayer mid-level exception (a whopping $16.3 million discount from his maximum salary for which he ultimately signed), after which the Heat would utilize its bountiful cap space in the summer of 2016 to provide a long-term contract that would make him whole (which, given the projected rise in the salary cap and his would-be status as a 10-year NBA veteran, both of which would significantly increase his maximum potential salary in the summer of 2016, was imminently possible). 

The reports are intriguing in that, if true, Riley’s approach could have constituted (at least in my humble opinion) a rather severe violation of salary cap rules, but even more-so intriguing because the Heat at the time already had what appeared to be its center of the future in Hassan Whiteside. Was Riley contemplating scenarios that didn’t include Whiteside?  

Had Aldridge acquiesced, the Heat would not have had enough cap space in the summer of 2016 to re-sign both Aldridge and Whiteside at the max, if that is what each ultimately would have demanded. And with a promise made to Aldridge (presumably one Riley would keep), it would appear Whiteside’s long-term future in Miami would have been placed at severe risk.

Fortunately, things worked out for the best. Aldridge chose to sign a long-term contract with the Spurs. The Heat now has more than enough cap space to re-sign Whiteside as an unrestricted free agent next summer, solidifying what could become the best frontcourt in all of basketball. 

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No sooner than did the Miami Heat’s major free agency dealings seemingly come to a conclusion did the organization decide to take another swing for the fences. Heat president Pat Riley is flying to Los Angeles to have dinner with Portland Trail Blazers power forward LaMarcus Aldridge.

Wait. What? How is that even possible?

The heavily lifting portion of the Heat’s summer was seemingly predicated on the contract decisions of three men: Luol Deng, Goran Dragic and Dwyane Wade. Wade seemingly completed the picture when he agreed to a one-year, $20 million contract. Deng had previously exercised his $10.2 million player option, while Dragic accepted a five-year, $86 million deal.

These actions leave the Heat with an estimated team salary of $94.3 million for the 2015-16 season, well in excess of the $67.1 million projected salary cap level and $12.8 million above the $81.6 million luxury tax threshold.

Unlike other suitors, such as the San Antonio Spurs, Los Angeles Lakers and Phoenix Suns and, the Heat do not have the necessary salary cap space to sign Aldridge outright. Therefore, should the it wish to acquire Aldridge, the Heat would need to execute a sign-and-trade transaction with the Trail Blazers. And with it will come some severe restrictions.

The latest CBA contains a new feature: the implementation of an “apron” that is slotted $4 million above the tax line. That would put the apron at $85.6 million. Teams are prohibited from exceeding the apron, even by a single penny, if they engage in certain transactions. On that list: using the $5.5 million midlevel exception, using the $2.1 million bi-annual exception, and acquiring another team’s free agent by means of a sign-and-trade.

The apron is a brick wall on spending, one that cannot be crossed for any reason. A team cannot exceed it even for a moment, and even if it were to subsequently drop back down below it. Merely approach it, and it becomes harder to make trades that bring in more salary than they send out, or even sign minimum-salary players when injuries strike. It is a menace constantly floating in the distance.

The Heat has a team salary which is currently well beyond the apron, which means that if it were to pursue a sign-and-trade, it would need to shed salary either prior to or as part of it. But before the Heat pursues any salary-dumping options, it first needs to know how much it will be required to purge. That, in turn, would depend upon the first year salary Aldridge would command in the contract the Heat would acquire.

As a nine-year NBA veteran, Aldridge would be eligible to receive a maximum starting salary of $19 million. The figure will be finalized when the salary cap is set on July 8th.

Sign-and-trade contracts must be for at least three seasons (not including any option year) and no longer than four seasons. With such a long commitment, it seems unlikely Aldridge would take any discount to that amount, particularly when considering two things: (i) maximum salaries are projected to spike 33 percent next season and (ii) maximum salaries increase 17 percent for 10-year veterans. Both are increases of which Aldridge would not be able to take advantage. Which means that by locking himself into a three-year deal this summer, his first year salary will be 36 percent lower than that which a player of his tenure could secure next summer.  Read more…

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Dwyane Wade and Luol Deng Player Option Decisions Loom

June 28th, 2015 3 comments
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Update (7/1/15): Luol Deng has exercised his player option. Dwyane Wade declined his option but his return is all but assured. The larger question is to what type of contract the Heat will sign him.

Ken Berger at CBS reported yesterday that the 2015-16 salary cap could jump as much as $2 million higher than the league’s latest projection of $67.1 million, which was made some time ago. Such an increase could have a meaningful impact on the Heat’s plans for Wade.

If the 2015-16 salary cap increases from $67.1 million to as much as $69.1 million, the tax threshold would increase from $81.6 million to as much as $83.8 million.  

How much would a $2.2 million increase in the tax threshold help the Heat? If it were to offer Wade a one-year contract at the $22 million max, its payroll would reach into the neighborhood of $100 million. With an $100 million payroll, the tax obligation would fall from $58 million to $49 million. That’s a savings of $9.4 million! 

Layer in a potential trade of Josh McRoberts, Chris Andersen or Mario Chalmers and Heat’s total payroll obligations, including repeater tax obligations, could fall to $12X million. 

And since the luxury tax is calculated as of the last day of the regular season, any potential trades don’t need to happen now (though the clarity would certainly be reassuring). Trading, say, the $1.6 million in salary obligations remaining on the $5.0 million expiring contract of Andersen at the trade deadline — for which the Heat could offer up to $3.4 million in cash and/or a possible 2018, 2020 or 2021 second round draft pick — would save a whopping $18.4 million in taxes for a team with an $100 million payroll (plus the $1.6 million in salary savings, less any cash sent). However, the Heat would need to find a trade partner with enough cap room (or a large enough trade exception) to take on Andersen’s $5.0 million cap hit without sending anything back in return, and that gets harder to find as more time passes.

Winding up with total payroll obligations of $12X million is a hefty some of money, to be sure – a would-be all-time record in total payroll obligations for the Heat – but this is not your typical spending problem. It would be just a one-time issue. The Heat will become very affordable next year, all but assured not to cross the tax threshold. Which would guarantee it does not pay “repeater tax” rates again until at least the 2019-20 season (pending rule changes). Also bear this in mind: the new TV deal, which starts in 2016-17, will itself instantly increase owner PROFITS by an average of $18 million per year, and rising annually. So, would Arison be willing to endure the cost of giving Wade the max for one year?

What would offering Wade a one-year contract at the $22 million max mean for the Heat? The Heat could enter the summer of 2016 with Dragic (PG), Winslow (SG/SF) and Bosh (PF) under contract, and up to $42 million of cap space to spend on Whiteside (C) and another player (assuming a McRoberts trade and an $89.1 million salary cap). Of that $42 million, Whiteside’s max would be $21 million but, at this point, one could reasonably suspect he would command far less. Which leaves enough room for…

That has to be math that the Heat organization itself is doing, right? Would they offer Wade one-year at the max? Would Wade accept?

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The wait is almost over.

NBA free agency officially begins at 12:01 am on July 1. But for the Miami Heat, the uncertainty starts to be clarified 23 hours and 58 minutes before that.

Heat guard Dwyane Wade and forward Luol Deng have until 11:59 pm on June 29 to decide whether to exercise the player options – for $16.1 million and $10.2 million, respectively – on their contracts. If the deadline passes and the Heat has not heard back, both players by default will have chosen to join guard Goran Dragic in opting out and becoming unrestricted free agents.

If Wade and Deng both opt out, the Heat would start the summer with as much as $19 million of room below the projected $67.1 million salary cap. But, realistically, it won’t have any cap room at all.

That’s because the Heat is expected to quickly resolve the free agency status of Dragic.

Dragic has indicated that he enjoys Miami, and will remain with the Heat if his financial goals are met. The Heat paid a steep price to get him, headlined by two future first round draft picks, which tells you everything you need to know about how willing they will be to pay him his money. Dragic will be eligible to receive a five-year deal, with a total payout of as much as $108 million. If he gets it, his contract would start at $18.9 million, and rise to $20.2 million for the 2016-17 season.

For a player entering his age 29 season, however, it could prove to be an overpay, even with the cap due to rise dramatically next year. A smaller deal that pays out the max in the first year, declines by the max in the second year, before again maxing out for the final three years would be a nice concession by Dragic, in that it would give the Heat more flexibility for the summer of 2016 but still pay out a lofty $97 million. That may still seem like a hefty sum, but it would represent a 10 percent discount from a max contract, and a whopping 30 percent discount from a potential max contract a player of his tenure could sign the following summer. If he acquiesces, his contract would still start at $18.9 million, but his 2016-17 salary would fall to $17.4 million.

If the Heat re-signs Dragic, it would still be capped out even if Wade and Deng decline their options. Utilizing cap space, therefore, is not a realistic option for the Heat this summer.  Read more…

Miami Heat Select Justise Winslow With No. 10 Pick in the 2015 Draft

June 26th, 2015 No comments
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The foundation of the Miami Heat’s future championship aspirations rests largely on the shoulders of poinbt guard Goran Dragic and center Hassan Whiteside.

Dragic loves to attack the basket. He’s an aggressive guard who keeps defenders backpedalling as he slashes to the rim. He has excellent body control and does a tremendous job of slipping past defenders and finishing through contact. He is the only guard in the NBA to have shot better than 50 percent from the field in each of the last two seasons. If the defense collapses to stop him, he is just as likely to hit his corner three-point shooters as he is his roll-man on the pick-and-roll or a big man down low.

Whiteside has become the poster child of a fan base seeking out hope for the future. He has rewarded us all with boundless energy, youthful exuberance, and quick ascent. In his limited time last season, Whiteside rampaged through the NBA with reckless abandon, utilizing his massive 7-foot-7-inch wingspan to throw down monstrous alley-oop dunks, snatch rebounds out of the sky from high above the rim, swat basketballs as Godzilla would planes, and generally wreak havoc on both ends of the floor. His skill in the pick-and-roll and on the glass is undeniable. But his potential extends far beyond that. His low-post game, his ability to make the right pass when the situation calls for it and his overall feel for the game are all still developing, and could as he progresses make him one of the elite low-post scorers in the whole of the NBA.

Dragic and Whiteside figure to become focal points of the Heat offense for years to come. They figure to be highly successful in plying their trade, but only if they have the floor space with which to do so. Whiteside needs it to maneuver freely down low. Dragic needs it to create clear driving lanes for himself and open looks for others.  Read more…

Is Kevin Durant at the Root of Dwyane Wade-Miami Heat Divide?

June 2nd, 2015 7 comments
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The sharp divide between Dwyane Wade and the Miami Heat represents a unique challenge for team president Pat Riley.

For the past 12 years, the Wade name has been synonymous with that of the Heat organization. Wade has often been viewed as an extension of it and perhaps its most vital member. He has advocated for it. He has delivered it fans, players, titles and money. He has sacrificed a great deal of personal earnings for the benefit of it.

Riley would love to reward him for everything he has done. But in a world of salary caps and luxury taxes, where championship aspirations are a way of life, doing so becomes a sentiment that is far more easily felt in theory than delivered in practice.

Wade has unquestionably been the biggest star of the Heat’s past. But Riley needs to consider its future. Time marches on. Skill-sets erode. Injuries mount. What is best for Wade may no longer be what is best for the Heat organization, and that’s where things get dicey.

Riley has always dreamed big. In the past decade, he’s acquired Shaquille O’Neal and LeBron James — arguably the NBA’s two greatest post-Michael-Jordan era players — and paired them with Wade to secure the franchise’s five NBA finals appearances and three titles.

It would not be difficult to suspect that he has visions of grandeur once again – this time with his sights set on 2016, when Kevin Durant hits the market in the first summer under a new TV deal that could send the NBA salary cap skyrocketing to $89.0 million.

To facilitate such a vision, Riley would prefer that Wade opt into the final year of his contract for next season at $16.1 million, which would provide the Heat with maximum flexibility for the summer of 2016. But this requires Wade to have a ton of trust, and the leap of faith that Riley will ultimately take care of him.

Wade would prefer the security of one final multi-year contract to close out his Hall of Fame career to the uncertainty of exercising the lone season remaining on his current deal.

The rift has led to speculation that Wade’s future with the Heat could be in doubt.

Read more…

Dwyane Wade’s Contract Negotiations with Miami Heat Stall

May 29th, 2015 9 comments
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What was thought to be a relatively straightforward summer for the Miami Heat has hit a snag over contract talks with Dwyane Wade.

Wade must decide by June 29 whether to opt out of the final year of a contract that would pay him $16.1 million next season.

The star shooting guard hinted last month that he intended to exercise his option, a heavily-preferred scenario for the Heat organization. However, the 33-year-old is now considering the possibility of opting out in order to secure one last lucrative long-term deal, and is reportedly willing to test the open market and leave the Heat, if necessary, in order to get it.

There is believed to be a sizable gap between what Wade is demanding and what the Heat is offering. That impasse has led to speculation that Wade’s long-term future with the Heat is in doubt.

Despite the uncertainty, it seems highly unlikely that the Heat would part ways with the biggest star in its history. Neither Wade nor the Heat would want such an outcome (nor would any other team in the NBA which Wade would consider likely be willing to pay him what he seeks anyway). Such tensions are merely a tactic employed by either party to gain leverage during the very early stages of what figures to be a challenging multi-month negotiation. But there are real concerns that underlie such posturing.

Wade’s desire for one last big contract from the Heat can easily be justified: He has guided the Heat to five NBA finals and three titles, he played a critical role in luring LeBron James and Chris Bosh to Miami, he has comported himself with class over the course of a brilliant twelve-year career, and he has sacrificed substantial salary in order to give the Heat flexibility over the past five years.

Last summer, in order to give the Heat flexibility to augment its roster, Wade opted out of the final two years of a contract that would have paid him $41.8 million. He instead accepted a rather shocking two-year, $31.1 million deal, which included a player option for next season.

As a result, over the first five years of what might have otherwise been the full six-year maximum contract we were all eager to give him to stay in the summer of 2010, Wade has now sacrificed a total of $18 million for the betterment of his team. If he were to exercise his option, that sacrifice would increase to $27 million.

It only seems natural, then, that Wade would want a show of appreciation in return.

Wade reportedly wants to opt out this summer, with the hope that the Heat would give him a three-year deal that would extend past his 36th birthday. The Heat would love to give it to him in theory, but paying him what he’s seeking would present significant challenges in practice.  Read more…

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Addressing The Heat’s Need for Floor Spacing

May 20th, 2015 No comments
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Long since departed were the glory days of the Big Three era, the thrill of competing deep into June, the sparkle from all the championship rings, as the 2014-15 Miami Heat staggered to the finish of a brutal season replete with injuries, exhaustion and ineffectiveness.

Despite competing in the dismal day-off-is-a-game-won Eastern Conference, the journey from LeBron’s departure to lottery arrival took just one excruciating season. It was a season paved with crushing injuries. Yet even with the season-ending meniscus tear to Josh McRoberts in November, the season-ending pulmonary embolism of Chris Bosh in February, the nicks and bruises that limited what was left of the battered rotation in the months that followed, and the 30 starting lineups head coach Erik Spoelstra was forced to utilize as a result, the Heat still managed to grossly underachieve along the way to its first pre-playoff exit since 2008.

There were plenty of issues that caused this spectacular underachievement, but perhaps the most enduring was the Heat’s inability to consistently score the basketball. It’s an issue which needs to be addressed this summer. It’s an issue which requires a multi-dimensional approach, to include both personnel and system changes.

The Heat have already secured a promising start to its rebuilding process. They’ve addressed, and rather emphatically, the two positions – point guard and center – which have troubled them most in recent years. The foundation of the Heat’s future championship aspirations rests largely on the shoulders of point guard Goran Dragic and center Hassan Whiteside.  Read more…

Miami Heat Secure No. 10 Pick in 2015 NBA Draft

May 19th, 2015 No comments
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The Miami Heat officially received its expected consolation prize on Tuesday night for missing the 2014-15 playoffs by a single game: the tenth pick in the 2015 NBA Draft, which will be held on June 25 in New York City.

After finishing the regular season with a 37-45 record, the tenth-worst in the league, the Heat had an 87.0 percent chance to secure the pick.

The challenge for Pat Riley and the front office will now be to utilize the pick to identify a player who can address critical areas of need off the bench for the Heat next season, but perhaps equally importantly develop into a starter for 2016 and beyond.

Heat Lottery Picks

Miami’s 11 previous lottery picks.

The Heat has had a good deal of success with its lottery selections in the past (e.g., Dwyane Wade, fifth pick in 2003), but such success has been far from guaranteed (e.g., Michael Beasley, second pick in 2008).

This marks the twelfth time in team history that the Heat has held a lottery pick, and just the fourth since the turn of the century. The expansion-era Heat held six consecutive such picks from 1988 through 1992 (including two in 1990) and, after trading away what would become a lottery selection in 1993, two more in 1994 and 1995.

With its only two previous tenth overall picks in team history, the Heat drafted Kurt Thomas in 1995 and Caron Butler in 2002.

With the stakes rather high this time around, the Heat are hoping for similar success. The current Heat team is both extremely expensive and deeply flawed, with an obvious need for depth at the wing positions, in the form of players who can space the floor and play solid defense. The Heat may not have too many options to address those needs in the years ahead. It will very likely have only the smaller $3.4 million taxpayer mid-level exception with which to improve this summer and will very likely bypass using it, and a significant portion of the expected salary cap flexibility for the summer of 2016 could be allocated toward securing the services of Hassan Whiteside for the long-term. A high draft pick this year represents a unique opportunity for the Heat: the chance to snag a very good player at a very inexpensive price for at least the next four years.  Read more…

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A Preliminary Look at the Miami Heat Offseason

April 18th, 2015 4 comments
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“I know one thing about the Miami Heat organization. We don’t just sit around and hope. We get to work.”

That was Dwyane Wade speaking to the media, describing what his team’s front office will do this summer to improve upon a team which, despite the loss of its best player and the significant injuries it thereafter endured, still managed to grossly underachieve along the way to its first pre-playoff exit since 2008.

But it won’t be easy. Pat Riley will face severe salary cap limitations and luxury tax restrictions as he sets out to improve the Heat’s roster.

All 15 players on the Heat roster are under contract through next season, but the status of seven of them has yet to be determined. Wade, Luol Deng and Goran Dragic have player options which need to be exercised by June 29, Michael Beasley has a team option on his minimum salary contract which needs to be exercised by June 29, and James Ennis, Tyler Johnson and Henry Walker have non-guaranteed minimum salary contracts that can be terminated cost-free at any point prior to August 1. Hassan Whiteside also has a non-guaranteed contract at the minimum salary, but his status as a continuing member of the Heat organization is certain.

Assuming Wade exercises the option on a contract that will pay him $16.1 million next season (as he has said he will do), the Heat will start the offseason well above the projected $67.1 million salary cap unless two things both happen: Luol Deng declines his $10.2 million option and Goran Dragic leaves.

Dragic will opt out of the final year of his four-year contract that would have paid him $7.5 million. He has indicated that he enjoys Miami, and will remain with the Heat if his financial goals are met. The Heat paid a steep price to get him, headlined by two future first round draft picks, which tells you everything you need to know about how willing they will be to pay him his money.  Read more…

NBA Issues Updated Salary Cap Guidance to Teams

April 17th, 2015 No comments
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I have a request. I write primarily for myself. I don’t do it for recognition. I don’t get compensated for it. It feels rather awful to see my work being exploited for the personal gain of others. If you would like to leverage it, I ask that you please properly source it (or, at the very least, donate).

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 will finalize the total revenue haul for the past season and, on that basis, project the revenues for the year ahead.

They will 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 latest projections suggest that the revenue haul for this season is expected to be 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. Today’s announcement suggests the league is now expecting that when they are finalized in July, revenues will come in at approximately $4.76 billion.  Read more…

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