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…

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.

As we were all calmly processing the news that Chris Bosh will be joining Dwyane Wade here in Miami, and as we were all eagerly awaiting the conclusion of the Lebron James saga, Commissioner David Stern shocked us all by announcing Wednesday night that the salary cap for next season will be $58,044,000, nearly $2 million more than was projected just two months prior.

The new number, although a considerable increase from initial doomsday projections of $50.4 million issued one year ago, hasn’t created much fanfare around the league. That’s probably because it has absolutely no effect on 2/3 of its teams. But it could very well have a major impact for the Heat in its off-season planning. Read more…

UPDATE: The salary cap will be higher than the $56.1M projection, according to a league executive. The moratorium ends on Thursday morning at 12:01 AM and it will be when the NBA releases its official cap figure for the 10-11 season.

Well, it’s unofficially official. Dwyane Wade and Chris Bosh each has publicly declared his intention to sign with the Miami Heat.

That leaves Lebron James as the only member of the triumvirate yet to make a decision.

There has been much discussion as to whether the Heat can actually afford to pay him the max within the confines of the salary cap. Of course, that depends on what the salary cap is.

The latest estimates provided by Commissioner David Stern, on April 16, called for a cap of $56.1 million. The final figure is expected to be released by tonight.

Keep these two figures in mind:

$55,986,936: If the cap meets or exceeds this figure, the Heat will be able to offer three max contracts IF it moves Michael Beasley and Mario Chalmers

$56,367,721: If the cap meets or exceeds this figure, the Heat will be able to offer three max contracts IF it moves Michael Beasley

Draft night appears to be nothing more than a precursor to July 1 for Pat Riley and the Miami Heat this year.

Already poised to be a major player in the free agent sweepstakes that begin next week, Miami has just freed up an additional $3.4 million in extra spending money.

On Wednesday, the Heat traded guard Daequan Cook and the No. 18 pick in the upcoming draft to the Oklahoma City Thunder in exchange for the No. 32 pick. The trade clears not only Cook’s $2.2 million salary for next season, but it also removes the $1.2 million the Heat had to budget for its first round pick.

More activity is likely, with the Heat still looking to clear additional space. The team’s first priority will be to move the burdensome contract of James Jones, but that appears nearly impossible to do. Michael Beasley and Mario Chalmers could also be dealt. In the case of Chalmers, Miami need not worry about structuring a trade. A receiving team could utilize the minimum salary exception to acquire the second year guard.

Unless Miami makes a trade to move back up into the first round, it seems clear that the Heat prefers to rebuild in free agency, without the troubles of another potentially misguided first round selection.

The team still has four second round picks with which to work – Nos. 32, 41, 42 and 48. Look for Miami to construct a trade – possibly up, but more likely out – with some of them. For the rest, upon each player’s selection, he would become the property of the Heat for up to a year. The Heat is not required to offer a guaranteed contract to any of them in return. Unlike first round picks, second rounders do not reduce a team’s cap space immediately upon selection.

The draft is scheduled to start tomorrow at 7:00 pm, and should run through midnight. By the time it is over, the Heat will have gained additional clarity on its roster for next season. Center Joel Anthony is required to inform the team, by no later than tomorrow night, if he has chosen to exercise his player option in the amount of $885,120. If he does not do so, his contract will – by default – be terminated. It seems likely that Joel will opt out.

The team will decide whether or not to keep James Jones by June 30.

The Heat figures to enter the off-season with two players under contract, Michael Beasley and Mario Chalmers, and a total guaranteed payroll of $7,672,629. With the cap projected at $56.1 million, Miami figures to have some $48,427,371 of available room. Read more…

We’ve all been operating under the assumption of a $56.1 million projected salary cap, which was provided by Commissioner Stern prior to the playoffs. How did he come by that figure?

During July Moratorium, the league will project both basketball-related revenues (“Projected BRI”) and player benefits for the upcoming season. They will then look at the previous season’s Projected BRI to see if it was below the actual results (“BRI”). They will use these two data points to calculate the salary cap.

The league will take 51% of Projected BRI, subtract projected benefits, and make adjustments if the previous season’s BRI was below projections. They will then divide the result by the number of NBA teams to arrive at the cap.

( Projected BRI * 51% – Projected Benefits – (Projected BRI – BRI from last season, only if positive) ) / 30

This season’s BRI is almost certain to fall below original projections. I estimate that last July the league projected BRI growth of 1.6%. At the same time, they issued a warning that BRI could fall as much as 5%-10%, leading to original salary cap forecasts of $50.4 million to $53.6 million. The revised BRI decline of 0.5% then led to a bump in forecasts to $56.1 million.

Why would the league forecast BRI growth of 1.6% and issue a warning it could fall by as much as 10% at the same time?

The answer lies in how Projected BRI is determined. Read more…

Given the constraints imposed by the number $56.1 million, we’re all searching for ways in which the collective bargaining agreement would allow the Heat to exceed the salary cap.

Most of us understand that a team’s free agents continue to count against the salary cap. The charge is called a “free agent amount,” or more commonly a “cap hold.” To release such cap holds and free up additional cap space, a team only has to renounce its free agents. A renounced player no longer counts toward team salary.

One astute reader has brought up a perhaps little-known fact. After renouncing a player, a team can still trade the player in a sign-and-trade agreement.

So can the Heat simply renounce all of its free agents, utilize the resulting cap space to sign outside free agents, and thereafter exceed the cap pursuant to sign-and-trade agreements with renounced players?

As you might expect, the answer is no. By renouncing a player, a team gives up its right to use the Larry Bird exception to re-sign that player. The Heat would therefore have no mechanism, other than via cap space, to pursue a sign-and-trade of a renounced player.

There are four primary mechanisms which the Heat will be able to utilize in order to exceed the cap. Read more…

Commissioner David Stern shocked us all last month when he revealed that the league’s projection for the 2010/11 salary cap had changed to $56.1 million – a substantial increase from its earlier projections of as low as $50.4 million.

In the past few days, the good news has continued to pour in for the Heat.

Early indications that Riley’s strategy to rebuild in the 2010 offseason are promising. Chris Bosh is clearly up for grabs, after being shut out of the playoffs. Joe Johnson has expressed a desire to play in South Florida, and his sub-par playoff performance would have you believe he can no longer command a maximum contract. Raja Bell has been even more direct in his praise, suggesting that Riley need only to call him and make an offer. Carlos Boozers’ ousting from the playoffs was so abrupt one would have to think he will be considering his alternatives, as he rests comfortably in his Miami-area summer home. Several teams reportedly have varying forms of interest in the underachieving Michael Beasley, which could be useful when the time comes. And, best of all, Lebron James is about to bow out early from the playoffs, which could prompt free agency’s biggest-ever prize to take a closer look at The Big Apple (Here’s a funny pitch from New York Magazine) or The Big Party (as Shaq would have you believe).

Hidden beneath the surface, however, is a bit of bad news.

The playoffs have been shockingly uncompetitive.

The NBA now appears to be the league where sweeps happen. The Magic, Lakers and Suns all swiftly dispatched their second-round opponents, leaving only the Cavaliers and Celtics as entertainment value.

Regardless of whether Lebron is able to pull his team out from the doldrums and force a decisive Game 7 in Cleveland, the first two rounds of the playoffs will have the fewest number of games played since the NBA expanded to a best-of-seven first round format. The first two rounds of the playoffs will be either 62 or 63 games long, down from the seven-season average of 67.7 from 2003 to 2009. The previous low was 64 during the 2007 playoffs.

Even if the Cavs/Celtics series goes to seven games, along with each Conference Finals series and the NBA Finals, the 2010 NBA playoffs will fall short of average for total games in all rounds of the playoffs (84.7). In fact, the all-time low of 79 games — also set during the 2007 playoffs — is in serious jeopardy.

That’s bad news for Heat fans. Revenues generated by NBA playoff games, in all their various forms, directly affect the NBA’s Basketball-Related Income (or “BRI”) for the 2009/10 NBA season. This BRI, in turn, directly affects next season’s salary cap.

Depending on how Riley deals with his upcoming roster decisions, the Miami Heat could require a salary cap as low as $55,825,160 (and certainly no higher than $57,932,930) in order to be able to offer three maximum contracts.

The announcement of a $56.1 million projection was very encouraging. However, given that the projection was made prior to the start of the playoffs, it is safe to assume the record-setting pace of the playoffs was not incorporated.

In a postseason where every dollar generated counts, the dollars just aren’t flowing.

Now that the Heat has been eliminated from contention, it is a bittersweet feeling to continue watching the playoffs. But there is still plenty to root for.

Next season’s salary cap is based on revenues generated by the league this season. That includes playoff ticket sales, concessions and parking. The longer each playoff series goes, the higher the upcoming cap will be. While the Heat didn’t do anything to help itself – bowing out in just five games – playoff attendance is actually up year-over-year. That could be a good sign.

Last month, Commissioner David Stern said the league is projecting the salary cap to come in around $56.1 million, good news for a Heat team looking to sign top stars during this summer’s expected free agency bonanza. While that figure would still be lower than this season’s $57.7 million cap and only the third time it’s ever fallen, it’s far better than estimates from last summer, when the league sent a memo to teams warning them of a potential sharp drop to between $50.4 million to $53.6 million.

But if the playoffs prove to be more profitable than projected in April, it would certainly be possible for the cap to rise even further. That’s quite meaningful for the Heat. Every dollar rise in the cap is another dollar that can be given to that potential third elite player, after offering max contracts to both Wade and a sidekick.

There are also subplots that should be considered. Each of the Heat’s potential primary targets, with the exception of Chris Bosh, has led his team into the second round of the playoffs. Any such successes can only provide more impetus for teams to offer up more money to retain their stars, and provide more incentive for these players to consider the status quo.

The message is this. Root for the Celtics, Magic, Lakers and Spurs to win their second round match-ups… in seven games.

Now that the Miami Heat is eliminated from the playoffs, the 2010/11 rebuilding plan is officially underway.

The Heat is now allowed to pursue trades with other teams not currently in the playoffs. Off limits are any players who will become free agents or who have team or player options. That means no Bosh discussions just yet. But it does mean the Heat can start to desperately pursue suitors to take over the contracts of James Jones and Daequan Cook, and perhaps Michael Beasley.

The only team which can create cap space for trades is Oklahoma City. The Thunder could create as much as $2.4 million of cap space before the current season officially ends on June 30. Therefore, if the Heat aims to send out contracts without taking on contracts in return, it will need to find teams with large enough traded player exceptions to accommodate such trades.

The next big dates to keep in mind:

June 24 – 2010 NBA draft
June 25 — Last day for Joel Anthony to exercise his player option
June 30 — Last day for the Heat to exercise its team option on Mario Chalmers
June 30 — Last day for the Heat to waive James Jones, or his contract becomes guaranteed
June 30 — Official end of the 2009/10 regular season
July 1 — Free agency begins for all teams
July 8 — Free agent contracts can be signed