Andrew Bynum Signs with the Indiana Pacers

February 1st, 2014 2 comments

The Indiana Pacers added size and depth Saturday when they signed center Andrew Bynum to a contract for the reason of the season.

The Pacers had $2.15 million left of their full-midlevel exception. However, starting January 10, it has been prorating down at a rate of 1/170 per day. As of Saturday, it was valued at $1.859 million, which was roughly equivalent to the amount by which the Pacers were below the luxury tax threshold.

They ended up using $1 million of it on Bynum, earning him $441K more than the minimum.

The move still gives the Pacers additional room below the tax to make roster moves, if necessary.

Bynum, who will join the Pacers next week, will back up All-Star Roy Hibbert along with Ian Mahinmi. Also featuring power forwards David West and Luis Scola, the Pacers will have some of the best depth in the N.B.A. at the big man positions.

The move also kept Bynum away from the rival Miami Heat, who beat the Pacers in seven games in last season’s Eastern Conference finals.

Five teams were interested in Bynum, including the Heat, but it was the Pacers who had a roster spot and the space under the luxury tax to add him now.

The Heat had the ability to match and outbid the Pacers for Bynum because they have all of their $3.183 million taxpayer mid-level exception still remaining, which has been prorated down to $2.752 million as of Saturday.

However, the Heat currently have a full roster of 15 players and a luxury-tax bill of $15.5 million, meaning signing Bynum would have been expensive.

Matching the offer from the Pacers would have cost the Heat $3.2 million, increasing total payroll obligations to nearly $108 million for the season, though that figure is still below the team’s projected payroll prior to the Joel Anthony trade.

There were methods the Heat could have employed to reduce that cost substantially.

Trading away both Roger Mason Jr. and Toney Douglas, if such trades were possible, would have created a cash flow positive scenario for the Heat, even after paying Bynum his million. It would have also opened up an additional roster spot with which to attract a wing player who specializes in long-range shooting and defense.

In the end, however, the Heat were only willing to offer Bynum the minimum, at a cost, when including the tax, of $1.1 million. It wasn’t enough.

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Miami Heat at the NBA Trade Deadline

January 21st, 2014 No comments

The Feb. 20 N.B.A. trade deadline is now officially less than a month away.

The Miami Heat started their dealings early this season, shipping Joel Anthony to the Boston Celtics along with a million dollars and two draft picks (one second-rounder and another that was originally Philadelphia’s and will likely become a pair of second-rounders). In return, the Heat got a player from Golden State, but this deal wasn’t about Toney Douglas as much as it was about the benjamins.

Anthony, who lost his role to Chris Andersen last season and had been a reclusive presence on the court ever since, ultimately became a casualty of the Heat’s cash crunch and managing partner Micky Arison’s desire to creep closer to the luxury-tax line. He didn’t get there, not with this deal, but it did save him around $20 million, and it did eliminate one of the obstacles to reshaping the roster after this season, when LeBron James, Dwyane Wade and Chris Bosh can all opt out of their existing contracts.

Now, it’s conceivable that only Norris Cole ($2.0 million) and Udonis Haslem ($4.6 million option) will be under contract on July 1, as Arison, Pat Riley and the Heat try to retain James, Wade and Bosh, and perhaps Mario Chalmers, Ray Allen, Michael Beasley and even Greg Oden.

That’s the long-term vision.

The short-term? The trade did nothing to advance the cause. The Heat, championship material as they are currently constructed, nonetheless have various needs that have yet to be addressed.  Read more…

Miami Heat Trade Joel Anthony in Three-Team Deal

January 15th, 2014 No comments

The Miami Heat have traded center Joel Anthony to the Boston Celtics, as part of a three-team deal, in exchange for guard Toney Douglas from the Golden State Warriors.

The Heat also sent the Celtics $1 million in cash and a pair of draft picks to complete the deal: A 2016 second-round pick and a lottery protected first-round pick originally acquired from the Philadelphia 76ers that will become a pair of second-rounders in 2015 and 2016 if the Sixers fail to make the playoffs this season and next.

The trade isn’t about Joel Anthony and isn’t about Toney Douglas.

It’s also not about Greg Oden, who appears to be on the verge of moving into the Heat’s rotation, or about Andrew Bynum, and how money freed up from today’s trade might make such a signing more financially palatable.

The trade is, more than anything else, a continuing recognition that the harshest elements of the new Collective Bargaining Agreement will take its toll on how the Heat do business.

This past summer, it was the amnesty release of Mike Miller. Then it was declining to utilize the mid-level exception. Now it’s moving Anthony’s untenable contract off the books, a move, when accounting for his 2014-15 salary will save the Heat at least $20 million.  Read more…

Miami Heat Are Talking Trade, But With Limited Assets to Offer

January 12th, 2014 4 comments

Update (12/16): What many fans aren’t appreciating is the critical nature of moving the contract of Joel Anthony. Without removing that contract, given the introduction of the repeater tax, it will not be financially reasonable to expect Heat owner Micky Arison to keep and improve upon the current roster next season. And, for those that are assuming so, he cannot rely upon any of the Big Three opting out of contracts over which he has no control. The Heat therefore needs to stay as flexible in maintaining is assets as possible. While using a draft pick to attract Jordan Crawford, who could be a nice fit, might seem like a nice addition, it will not happen unless the Heat can part with Anthony in the trade, whom the Celtics will absolutely not take. It is realistically not worth contemplating trades that involve the Heat surrendering non-player assets in trades that do not unload Joel Anthony. 

With every game Dwyane Wade misses due to his balky knees, the Miami Heat struggle to win, in part because they don’t have much depth at the shooting guard position. With that in mind, Miami is reportedly talking with other teams about a possible trade.

The more significant aspect to the Heat’s struggles is the lack of a defensive anchor and a rebounder at the center position. The Houston Rockets are telling other teams that they intend to trade disgruntled center Omer Asik by December 19. Asik would look very nice opposite Chris Bosh on the Heat front line if the Heat is able to put forth a compelling trade package and, at the same time, stomach the massive payroll and tax implications.

The Heat’s most likely chips in any trade are forward Udonis Haslem and center Joel Anthony, who both have fallen out of the rotation but also carry the drawback of time on their contracts beyond this season. Anthony, making $3.8 million this season and owning a player option for the same amount in 2014-15, has zero trade appeal to other teams. Haslem, making $4.3 million this season with a player option for $4.6 million in 2014-15, doesn’t figure to have a whole lot more appeal (his contract also contains a 15% trade bonus which, by league rule, he cannot waive, but would nonetheless only apply to this season).

The Heat could presumably also look to trade anyone else, other than the Big Three and Ray Allen, if the right deal came along.

Beyond player assets, the Heat could also offer up to $3.2 million in cash, the maximum annual cash limit for the 2013-14 season.

Finally, they can offer draft considerations. But, given the pick obligation they still owe to satisfy the LeBron James sign-and-trade from the Cleveland Cavaliers, any pick trades would be severely limited at this point.

The trading of N.B.A. draft picks is restricted by a series of intricate rules that have been put in place in order to protect teams that are trading away the picks from themselves. History suggests that teams need these protections so as not to unwittingly destroy their own franchises.  Read more…

Should the Miami Heat Take Interest in Andrew Bynum?

January 7th, 2014 No comments

In a move that has the Chicago Bulls thinking about the future but could have major implications for the Miami Heat in the present, the Bulls executed a significant trade with the Cleveland Cavaliers Tuesday morning. They sent forward Luol Deng to the Cavs in exchange for center Andrew Bynum, three future draft picks and huge payroll savings.

The Bulls get a first round draft pick owed to the Cavs by the Sacramento Kings, which is top-12 protected in 2014, top-10 protected from 2015 through 2017, and, if not conveyed, converts to a 2017 second round pick if it is in the top 55 and nothing if not. They also get second round picks in 2015 and 2016, acquired by the Cavs from the Portland Trail Blazers. Finally, the Bulls will be able to swap positions with the Cavs in the first round of the 2015 draft as long as the Cavs’ pick is outside the top 14.

In addition to the draft picks, the Bulls will recognize huge payroll savings because Bynum’s current $12.25 million salary is only $6 million guaranteed. The trade will cut about $7.8 million off their cap and get them out of the tax. Chicago will save about $6.8 million in salary payouts and $12.3 million in taxes, as well as qualify for a tax distribution (paid to teams below the tax from half of the tax proceeds of teams above the tax) currently estimated at $3.2 million. That’s more than $22 million in instantaneous savings(1).

In order to recognize the savings, the Bulls will terminate Bynum’s contract shortly. He’ll then be placed on waivers at 5:00 pm, where he’ll remain for the following 48 hours, during which time other teams may assume his contract. No team in the league has the necessary cap space (or a large enough trade exception) to claim him. At 5:00 pm on Thursday, Bynum will become an unrestricted free agent.

Rumor has it that he wants to join the Los Angeles Clippers or the Heat.

Should the Heat be interested? Absolutely!  Read more…

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

December 29th, 2013 No 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.  Read more…

Through Severe Knee Injuries, Dwyane Wade Continues to Endure

November 17th, 2013 No comments

dwyane-wade-knees

Despite his passion for the game, Dwyane Wade was not much more than an average basketball player as a youngster. Initially, he made a bigger impression on the football coaches at H.L. Richards High School in Oak Lawn, on the South Side of Chicago, than he did on basketball coach Jack Fitzgerald’s squad.

A gritty cornerback and wide receiver, Wade showed promise on the gridiron, but he couldn’t kick his obsession for basketball. He idolized former Chicago Bulls star Michael Jordan. So he spent his second season with the Bulldogs on the sophomore basketball team.

Determined to earn time on the varsity squad, Wade worked out rigorously before his junior year in the summer of 1998, improving his ball-handling skills and his outside shot. Wade’s body cooperated, too, as he shot up four inches to six-feet, two-inches tall.

Always a tenacious rebounder, Wade now had the size and skills to excel in all phases of the game. Recognizing an emerging star, Fitzgerald made the junior his go-to guy. Wade did it all for the Bulldogs. If Richards needed to break the press, Fitzgerald put the ball in Wade’s hands. If the team needed a hoop in close, Wade got the ball in the post. For the year, he averaged 20.7 points and 7.6 rebounds, and opened eyes all around Chicagoland.

He responded to the extra attention with an even more marvelous senior season. Wade went for a double-double almost every game that year, averaging 27.0 points and 11.0 rebounds while leading his team to a 24-5 record and a berth in the title game of the Class AA Eisenhower Sectional of the 1999-00 Illinois High School Association (IHSA) State Championship (though without the acclaim of former Heat player Patrick Beverley, who made it all the way to the final four of the Class AA State Championships with his Marshall high school team in 2005-06, or Derrick Rose, who won the Class AA State Championship with his Simeon high school team in 2005-06 and 2006-07). Wade set school records for points (676) and steals (106) in a season that year.

The college scholarship offers didn’t come pouring in, though.

Wade dreamed of playing for Michigan, inspired by the Fab Five. But some of the schools looking at Wade, Michigan included, stopped looking when his first ACT score was low. Fearing he wouldn’t be able to cut it academically, most backed off.

“My first set of scores wasn’t bad,” Wade said. “They were disastrous. They sucked.”

Due to his academic problems, Wade was recruited by only four college basketball programs for the incoming class of 2000 –  DePaul, Illinois State, Bradley and Marquette. Each remained interested in Wade even though he struggled to get his ACT up to the qualifying standard. In three tries, he never did.

The Golden Eagles nonetheless accepted Dwyane as a partial qualifier, meaning he could practice with the basketball team as a freshman but not suit up for games due to a lack of compliance with the NCAA’s Proposition 48.

Academically ineligible for play during his freshman year at Marquette, Wade sought tutoring to improve his writing skills in order to regain eligibility. When he became eligible to play the following year (2001–02), he led the Golden Eagles in points (17.8), rebounds (6.6), assists (3.4), steals (2.5) and blocks (1.1), and guided the team to a 26-7 record and its first NCAA tournament berth since 1997.

Wade had displayed not only perseverance but also toughness, playing the latter half of the season through injury. After the season, in March 2002, Wade underwent arthroscopic surgery on his left knee to deal with a small tear in his lateral meniscus. The torn portion of the meniscus was removed, and Wade was back on the court training for his junior year within weeks.  Read more…

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Revenues, Salary Cap and Tax Projections for Next Season All Rising

November 8th, 2013 No comments

The N.B.A.’s revenues are apparently booming right alongside the broader economy.

During the negotiations that ended the lockout in December 2011, the players union and team representatives jointly created revenue forecasts for the league that extended from the 2012-13 season all the way out through the 2020-21 season.

Those forecasts are quite important because they form the basis off of which to determine how the league’s revenues earned in the years to come are split between the players and owners. Starting in 2012-13, players are guaranteed to receive 50% of those forecasted revenues, plus (or minus) 60.5% of the amount by which actual revenues exceed (or fall short of) those forecasts, with a lower limit of 49% of actual revenues and an upper limit of 51% of actual revenues.

When the accountants tabulated the results for the 2012-13 season last July, they determined that the league earned $4.293 billion in revenue, which, despite representing a massive 12% increase over the last full N.B.A. season in 2010-11, fell short of the initial forecasts by $15 million. That shortfall meant the players were only entitled to 49.96% of revenues.

On the basis of these stellar yet slightly disappointing results, the league issued official projections for the 2013-14 season in July, off of which the current salary cap and luxury tax are based, of $4.471 billion, a projected annual growth of 4.1% – again an impressive number, but $10 million short of initial forecasts. That shortfall, if it holds true when revenues are finalized in July 2014, would mean that the players are only entitled to 49.98% of revenues.

At the same time, the league issued preliminary guidance for the 2014-15 season, so as to help its member teams in planning for the future. Preliminary guidance is only meant to be illustrative, and is of no binding effect until it becomes an official projection one year later. The cap and tax guidance provided were $62.5 million and $76.1 million, respectively, which was based on a preliminary 2014-15 revenue projection of $4.672 billion, a 4.5% annual increase over the $4.471 billion projection for this season. That figure is actually $12 million greater than the initial forecast from December 2011. If it were to hold true when the numbers are finalized in July 2015, it would mean that the players would be entitled to 50.03% of revenues next season. But there’s a long way to go between now and then – almost two full years.

Just a week into the season, the league has already provided its first update. It’s good news. Projected revenues for the 2014-15 season have jumped from $4.672 billion to $4.700 billion, which is now a whopping $40 million higher than originally forecasted in December 2011. If that holds true when the numbers are finalized in July 2015, the players would be entitled to 50.09% of revenues for the 2014-15 season.

More importantly to Miami Heat fans, as the revenue estimates for the 2014-15 season increase, so too do the cap and tax projections, which are always based on revenue projections taken in the first week of July for the upcoming season. They started at $62.5 million and $76.1 million, respectively, in July. They’re now at $62.9 million and $76.6 million. That may not sound like such a big increase, but that slight boost alone could produce tax savings to owner Micky Arison of approximately $2 million or more. And things figure to only get better from here.

The salary for this season is $58.679 million, and the luxury tax level is $71.748 million. It would now appear that, despite the fact that the cap and tax figures were calculated based on 51% of revenues in the last collective bargaining agreement and are now based on just 44.74% of revenues, a 12.27% reduction, because league-wide revenues are rising so sharply, we are going to achieve all-time record cap and tax levels next season, shattering the old records by a massive 7% each.

The N.B.A. is certainly thriving. While individual teams like the Heat may choose to lose money in support of a winner, the league as a whole would appear to be a massive profit machine. And things figure to get a whole lot better in the near future. The N.B.A.’s national television contracts with ESPN/ABC and TNT, which pay an average of $930 million annually over the life of the eight-year contract, extends through the 2015-16 season. Some industry experts expect that figure to at least double when the new deal is finalized. That could add around a billion dollars in incremental revenues every season, which would have a profound impact on cap and tax figures down the road. At least for now, the future appears bright for the country’s greatest professional sports league.

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League-Wide Spending is Down, Keeping Luxury Tax Projection Up

October 27th, 2013 No comments

Those among us who have been biding our time until the start of the 2013-14 NBA season by creating hypothetical machinations whereby the Miami Heat maintains and extends its current dominance into the 2014-15 season and beyond are quietly getting some good news.

League-wide spending is down.

Which means salary cap and luxury tax projections for next season are staying up.

The league is currently projecting a 2014-15 salary cap of $62.5 million and a tax level of $76.1 million. Pending league-wide revenue performance during the course of the season, these projections seem fairly safe for now.

The cap and tax levels are set by calculations based on projected amounts for revenue (termed BRI) and benefits for the upcoming season. The projected BRI is negotiated by the league and players’ association. Each year the sides meet to agree on an amount. Barring any adjustments that are necessitated, they typically use the projected revenues from national broadcast rights (which is determined in advance), plus the BRI for the previous season (other than national broadcast rights) increased by 4.5%.

The salary cap calculation takes 44.74% (53.51% for the tax level) of the league’s projected BRI, subtracts projected benefits and then divides the total by the number of teams in the league. Adjustments are then made if total salaries and benefits paid to the players in the season prior were significantly higher or lower, as a percentage of league-wide revenues, than was agreed in the CBA.

The current 2014-15 projections assume a 4.5% increase in revenues. They are based on an estimated $4.672 billion of projected BRI and $217 million in projected benefits (including $47 million of benefits, or 1% of BRI, to be allocated to the player benefits pool). They assume no salary-related adjustments.

The rest is basic math. Simply multiply the projected BRI by the respective percentages for the cap and tax threshold, subtract projected benefits, and divide the difference by 30. That’s it. Read more…

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Miami Heat Should Pursue Michael Beasley on Training Camp Contract

September 4th, 2013 No comments

Update (10/26): The Heat did indeed sign Michael Beasley to a make-good, training camp contract on September 11 and Beasley has made the opening night roster. His contract remains fully non-guaranteed until January 10, which essentially means he gets paid by the day. 

Who is Michael Beasley? Can he help a team win basketball games?

It’s all a matter of perspective.

***

The Phoenix Suns would tell you rather emphatically that he’s toxic.

They’ll point to his struggles off the court.

Beasley was arrested in August for suspicion of drug possession after an officer detected the smell of marijuana coming from his vehicle, the third of three serious legal issues this year alone for the troubled forward who has yet to be cleared in a sexual assault case being investigated by Scottsdale police. In January, a woman accused Beasley and another man of assaulting her in Beasley’s home. No one has been charged. Just two weeks after the claim was made, police cited Beasley for several offenses including speeding, driving on a suspended Arizona license, driving without a vehicle license plate, and driving with an expired registration. Beasley was reportedly traveling 71 miles per hour in a 45-MPH zone at 1:10 am in a Mercedes which had a gun with one bullet loaded inside the chamber.

They’ll point to his lack of production on the court.

Beasley’s production has declined in each of his five seasons in the league. He had his worst year yet for the Suns last season, scoring just 10.1 points per game on 40% shooting as the team’s projected number one scoring option and putting out virtually no effort on defense. His struggles individually contributed largely to the failures of the team as a whole, causing the Suns to spiral to the fourth worst record in the league, leading to the firing of head coach Alvin Gentry midway through the year, and when things had completely fallen apart by year’s end, resulting in the firing of General Manager Lance Blanks.

The Beasley free agent signing was a disaster for the Suns franchise. They waived him yesterday, less than 14 months after he signed his three-year, $18.0 million contract with a promise to turn his life around. He was set to make $6.0 million in 2013-14 and $6.3 million in 2014-15, although only $3.0 million was guaranteed in the latter year.

In conjunction with his release, Beasley agreed to a $7.0 million buyout. He will be paid $4.7 million of that total by the Suns this season, and an additional $778K for each of the next three seasons.

Suns President Lon Babby issued a statement upon Beasley’s release that read, “The Suns were devoted to Michael Beasley’s success in Phoenix. However, it is essential that we demand the highest standards of personal and professional conduct as we develop a championship culture. Today’s action reflects our commitment to those standards.”

New General Manager Ryan McDonough added, “We have high standards for all of our players. We expect them to represent the team and the community in a positive manner both on and off the court.”

It was the equivalent of the Suns telling Beasley directly “We don’t want you anywhere near our franchise anymore.”

Beasley has never lived up to his selection as the No. 2 overall pick in the 2008 NBA draft, either personally or professionally, nor has he lived up to the $28.0 million he’s guaranteed himself thus far into his NBA career. In this context, it would appear as if the logical choice would be for him to simply fade away from the league in a cloud of marijuana smoke.

Read more…

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