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Posts Tagged ‘Chicago Bulls’

Chicago Bulls: Salary Cap Maneuvering in Action

February 7th, 2014 3 comments

Update (June 7): The Bulls didn’t follow my advice. They did waive Erik Murphy as I speculated. But they added more players too quickly, and ended up rolling the dice with regard to the bonuses of Joakim Noah and Taj Gibson. Noah made All-NBA First Team, and earned his $500,000 bonus. Gibson didn’t make the All Defensive First or Second Teams. As a result, the Bulls missed the tax by just $291,164. 

This post has nothing to do with the Miami Heat but I, as a salary cap person, love intricate luxury tax maneuvering. The situation described herein is about as fascinating as it gets for me. It should be noted that the idea for this post was not my own. It stemmed from an incorrect post I read elsewhere, for which I happily provided the correction, and then decided to write a unique version for myself, with my own story line, and drawing my own conclusions. This post is long and it’s tedious, but the end result is utterly spectacular (well… spectacular for people who are amazed by how teams maneuver around luxury tax issues).

Most of us assumed that when the Chicago Bulls acquired the contract of the unremarkable Andrew Bynum in trade last month, it was to drop them below the luxury tax.

It was. But the process has been far more complicated than most of us, apparently including Bulls management themselves, realized.

For a long time, it appeared as if Bynum would be shipped off to Los Angeles, so that the Lakers could capitalize on his unintendedly valuable contract.

The nature of Bynum’s contract essentially meant that he was auditioning for the Cleveland Cavaliers from the date he was signed on July 19 all the way through the guarantee deadline on January 7, an audition he failed. Bynum’s deal called for a $12.25 million salary this season, of which only $6.0 million was guaranteed. Next season’s salary of $12.54 million was fully unguaranteed. Therefore, a two year contract was really just a six month commitment. But it also meant that any team which acquired his $12.25 million salary in trade could immediately thereafter terminate his contract, thus reducing his salary and resulting cap charge from $12.25 million to $6.0 million.

The Lakers have been luxury tax payers for six straight seasons. They were in position to leverage that $6.25 million delta to sneak below the tax for this season, producing huge up-front savings. And because they are unlikely to be taxpayers next year as they tear down their roster and rebuild, two consecutive years below the tax would have had an added benefit – no “repeater taxes,” which are paid by taxpaying teams that were also taxpayers in at least three of the previous four seasons, for the Lakers for the entire life of the current CBA, which will almost certainly be terminated after the 2016-17 season.

It was a potentially massive financial windfall for the Lakers at a cost of just the expiring contract of Pau Gasol (and another irrelevant throw-in to make the math work).

The Cavs had been after Gasol since this past summer, when they had extensive discussions with the Lakers, and were more than eager to make the swap. But the Lakers were demanding more for Gasol than just the massive financial savings. The Cavs refused.

That’s when the Bulls swooped in.  Read more…

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Can the Bulls surround Rose and Noah with three max free agents?

July 3rd, 2010 1 comment

If Dwyane Wade’s reported uncertainty has us all panicked, reports like this one have our hearts stopping outright.

I wouldn’t tell you not to worry about Wade. Nobody truly knows, possibly including Dwyane himself, what his decision will ultimately be.

I can, however, tell you unequivocally: Don’t worry about the possibility of the Chicago Bulls adding three max contract players (the ones set to make $16.6 million) while keeping Derrick Rose and Joakim Noah.

Why? Because the possibility stretches the limits of human sanity beyond all reasonable measures.

Daniel Leroux of RealGM writes:

First we have the 125% rule. This rule indicates that any team can take on 125% of the contract values they send out in a trade, plus $100,000 of buffer room. As such, take the maximum contract value above, divide it by 1.25 and subtract $100k from that total and you get $13,175,126. This is the minimum value a team at or over the cap could send in contracts for a max-level player while satisfying this rule. However, cap space can also be used to reduce this number if it is available.

He was absolutely correct… right up until that very last sentence. And that one sentence destroys the philosophy.

Let me explain. Read more…

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A Look at the Competition

June 28th, 2010 5 comments

Note: From 8:00 am on 6/28 to 8:00 pm on 6/28, the Vegas lines in regards to landing LeBron James have changed dramatically. The Heat’s odds have increased to 2/1 from 5/1. At the same time, the Bulls’ odds have reversed to 1/3 from 1/5. This is the first time the Heat has been in the second place in the race for the King!

Three days until free agency begins.

Nine days until the salary cap, luxury tax and mid-level exception numbers are released.

Ten days until players can be signed.

The Miami Heat is poised to make a big free agent splash, but several cap space teams have equally high hopes. Here’s a look at the key competition: Read more…

Bulls move Hinrich, No. 17 to Washington for cap space

June 24th, 2010 7 comments

Per Ric Bucher:

The Chicago Bulls have a deal in place that would move Kirk Hinrich and the 17th pick to the Washington Wizards, freeing up enough cap space to pursue two maximum-salary players in this summer’s free-agent market, sources with knowledge of the Bulls’ plans said Thursday.

It wasn’t immediately clear what Washington would send to Chicago in the trade.

The deal can’t be officially consummated until July 8, when the Wizards will have room under the salary cap to absorb Hinrich’s $9 million contract without having to send back anything of similar value.

Since it’s a good-faith deal for the time being, there remains a chance it could fall apart. But according to one source, the Sacramento Kings are prepared to make a similar deal with the Bulls in the Wizards’ stead if that were to happen.

Despite the report, the trade doesn’t quite get the Bulls the required cap room for two max contract players. The last cap estimate provided by Commissioner David Stern was $56.1 million at the start of the playoffs. The Bulls would have enough room for a $13,838,492 offer after signing one maximum free agent.

That number is below the second max threshold by $2,730,417 — an amount which can not be bridged without saving money by moving Luol Deng. James Johnson and Taj Gibson combine to make $2,831,280, but they’d have a $947,208 roster charge coming back if they’re traded, so the Bulls would still be shy by $846,345.

Read more…

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Why LeBron James Should Consider the Chicago Bulls

May 18th, 2010 No comments

Oh no! LeBron James called Derrick Rose!

While I wouldn’t necessarily hit the panic button just yet, the Bulls clearly offer a compelling value proposition.

If LeBron’s exclusive criterion in selecting his future destination is to have championship-caliber pieces placed around him – as he claims it to be – his choices would appear to be readily apparent. Friend and mentor Charles Oakley said it best. “Chicago or Miami.”

If I were Bulls owner Jerry Reinsdorf, my pitch would be synthesized into one sentence: Anything the Heat can do, we can do better.

And depending on how you believe he can manipulate his roster, he would be right.

For all of the bantering about coaching stability, about living in the shadow of Jordan versus sharing the spotlight with Wade, about the warmth of South Beach versus the beauty of Chi-town, all of these issues are inherently subjective in nature. So let’s set them aside for the moment and focus strictly on the numbers.

The Bulls have six players under contract for next year: Derrick Rose, Kirk Hinrich, Luol Deng, Taj Gibson, James Johnson and Joakim Noah. They will make a combined $31,850,976 in guaranteed payroll next season.

LeBron would eat up another $16,568,908.

The Bulls also have the 17th pick in the first round of the upcoming draft. Unsigned first round picks are included in team salary immediately upon their selection. For the 17th pick, the amount will be $1,302,600. But, of course, the Bulls don’t have to use it. It can always be traded. So let’s not count the pick.

That’s seven total players and a total team salary of just $48,419,884.

At the currently projected $56.1 million salary cap, the Bulls would also still be left with $5,312,096 to spend on any single complementary piece (after incorporating roster charges).

So that’s Rose, Hinrich, James, Gibson and Noah, with Johnson and Deng on the bench and an as yet undecided $5 million man.

Impressive! But perhaps that’s still not enough to trump a Miami Heat value proposition that includes the likes of Dwyane Wade and Chris Bosh.

But here’s where it gets interesting.

If Luol Deng, with his $11,345,000 contract, were to be deemed superfluous in a LeBron James scenario, the Bulls could try to move him. And if Kirk Hinrich, with his $9,000,000 contract, were to be deemed superfluous behind Derrick Rose, the Bulls could try to move him too. Yes, their contracts are inflated. But they’re not ridiculous. And the Bulls have a ton of assets with which to sweeten a potential deal or two. And with more cap space available around the NBA this offseason than can appropriately be utilized, something stupid is bound to happen.

Read more…