Cap Geeks! Cap Geeks!

[franklin]

https://espn.go.com/blog/truehoop/post/_/id/22025/inside-collisons-unique-contract-extension

Sources with knowledge of the contract specifics told ESPN.com that the value of the four-year extension that starts in the 2011-12 season is a modest $11 million and change. Highly favorable numbers for the Thunder.

However ...

The Thunder -- as a team slightly more than $6.5 million under the salary cap before re-signing Collison -- took advantage of that below-the-cap status to unexpectedly award Collison all of their space as a signing bonus that takes his 2010-11 compensation to a whopping $13.3 million.

Signing bonuses in extensions are usually pro-rated through the life of the contract. Teams under the cap, though, can apply the entire signing bonus at the time the extension is signed, as long as the bonus doesn't exceed the available cap space.

If this loophole wasn't closed then the Jazz can do this next summer with Hayward or Favors. I.e. if Hayward's worth $9mm/per then give him $10mm up front & start year 1 around $8mm with salary drops down to around $5mm in year 4. This doesn't hurt Hayward's long term salary either as he will be eligible for the 25% max either way.

KOC is a fan of Presti so I wouldn't be surprised if this is already on his mind, especially with his statement on preserving cap space. This is also a genius way to spend up to the minimum team salary requirements while preserving that $34mm in space all the way until the deadline.

The idea of having Hayward and Favors on extra cheap deals in their seventh year is too good to be true, so what am I missing?

 

[Dr. Jones]

Interesting. Thanks for sharing. I'm not a cap geek, but I enjoy reading posts of those that are.

 

[PrinceJL]

none of our 4 youngsters are going to do that but i've been proposing that we front-load Al's contract the first 2 years!

 

[GVC]

https://espn.go.com/blog/truehoop/post/_/id/22025/inside-collisons-unique-contract-extension



If this loophole wasn't closed then the Jazz can do this next summer with Hayward or Favors. I.e. if Hayward's worth $9mm/per then give him $10mm up front & start year 1 around $8mm with salary drops down to around $5mm in year 4. This doesn't hurt Hayward's long term salary either as he will be eligible for the 25% max either way.

KOC is a fan of Presti so I wouldn't be surprised if this is already on his mind, especially with his statement on preserving cap space. This is also a genius way to spend up to the minimum team salary requirements while preserving that $34mm in space all the way until the deadline.

The idea of having Hayward and Favors on extra cheap deals in their seventh year is too good to be true, so what am I missing?

Incredible. Really increases the likelihood the Jazz extend Gordo and Sexy this summer.

 

[Lion's Roar]

I didn't know about that loophole and I don't know if it's in place. But a few things that put a monkey's wrench into things:

#1 If Derrick Favors gets paid somewhat in the vicinity of what ppl are envisioning the bonus would probably put his salary over the Maximum allowed for a player with his experience and that can't happen.

#2 DF and GH extension can be negotiated this year until Oct. 31st but only kick in in 2014-15 and not next year. That means that the Jazz can't guarantee that they will have cap-space to use by that time.

#3 To have REAL cap space the team has to renounce the rights to all it's FA's. That means they give up the ability of first refusal (RFA) and bird or early-bird rights over their own players.

#4 The Jazz would get such a great financial hit by giving up those signing bonus it would be quite something to give up some $20M in one day. That would mean that the Jazz would have to ask for money and pay a fee to the banks meaning the contracts would count more than their value. And if one considers the value of money over time the Jazz would lose even more out of inflation related losses.

 

[Lion's Roar]

That could work in Jefferson's or Millsap's, or Mo Williams contracts if and when they get presented an offer by the team. I also think that is in Marvin's best interest to not exercise his Player option. His due to make $7.5M next year. He could possibly not exercise it and sign up a 4 year $20M deal with $5M each year over 4 seasons ala Richard Jefferson. They get a smaller salary in year 1 but the go from $7.5M guaranteed money to $20M in guaranteed money. Basically it's an insurance policy. They reduce their salary but get their hands in a much higher value in guarantee money.

 

[GVC]

You mis-read what the Thunder did with Collison. They gave him a bonus in 10/11 for an extension that starts in 11/12. That is, the Jazz could extend Gordo and favors this summer, and give them 15% of their total compensation up front. Their cap hit in subsequent seasons, then, would be lowered.

https://www.cbafaq.com/salarycap.htm#Q73

 

[GVC]

Also, #73 states that bonuses are still limited to 15% of the total compensation. Collison's bonus was for much more than that. Can anyone clarify how that was possible?

I mean, if the Jazz can just give those two unlimited bonuses (under the cap), the Jazz will be in ridiculously good shape if they can't find any big name free agents to sign. Just give $20-30mm to favors and Gordo up front, then pay them the remaining $70-80mm or so over 5 years (this is assuming they get $20mm per year combined...a fairly liberal estimate, I think). That'd be crazy.

 

[franklin]

You mis-read what the Thunder did with Collison. They gave him a bonus in 10/11 for an extension that starts in 11/12. That is, the Jazz could extend Gordo and favors this summer, and give them 15% of their total compensation up front. Their cap hit in subsequent seasons, then, would be lowered.

https://www.cbafaq.com/salarycap.htm#Q73

Yeah. They also can't bump their rookie scale salaries up like OKC could with Collison, who was in his eighth season and eligible for the 25% of cap maximum salary. Sucks dumping new salary onto an existing season is closed too. So much potential for the Jazz.

I need to get a copy of the new CBA so I can find the Jazz some loopholes. Mr. Bob Hyde, call me.

 

[GVC]

Yeah, I don't think the Jazz can take advantage of this, as rookie scale contracts can't be renegotiated.

 

[Lion's Roar]

Yeah. They also can't bump their rookie scale salaries up like OKC could with Collison, who was in his eighth season and eligible for the 25% of cap maximum salary. Sucks dumping new salary onto an existing season is closed too. So much potential for the Jazz.

I need to get a copy of the new CBA so I can find the Jazz some loopholes. Mr. Bob Hyde, call me.

GH and DF are eligible for 25% of the cap.

 

[Lion's Roar]

Also, #73 states that bonuses are still limited to 15% of the total compensation. Collison's bonus was for much more than that. Can anyone clarify how that was possible?

I mean, if the Jazz can just give those two unlimited bonuses (under the cap), the Jazz will be in ridiculously good shape if they can't find any big name free agents to sign. Just give $20-30mm to favors and Gordo up front, then pay them the remaining $70-80mm or so over 5 years (this is assuming they get $20mm per year combined...a fairly liberal estimate, I think). That'd be crazy.

Can't. Really scratching my head at this one. The contract would have to be in the $43.3M range for such a big bonus to be paid.

 

[GVC]

For non-rookie extensions, you can give the player a bonus up to the amount of cap space you have available (limited by the max salary for that player's years of service) when the extension is signed (applied to the remaining year on the existing contract, and not the years of the extension). This functions as a renegotiation of the remaining years of the contract, so isn't limited by the 15% rule. Unfortunately, this provision is not available in rookie contract extensions, as rookie scale contracts can not be renegotiated. Bummer.

If the Jazz strike out in free agency this summer, and can acquire a player they want to extend in a trade, however, they can use this mechanism to lock him up for a reasonable amount in the years of the extension (by giving him a ridiculous signing bonus). If Marvin were working out, he'd be a perfect candidate...

 

[franklin]

For non-rookie extensions, you can give the player a bonus up to the amount of cap space you have available (limited by the max salary for that player's years of service) when the extension is signed (applied to the remaining year on the existing contract, and not the years of the extension). This functions as a renegotiation of the remaining years of the contract, so isn't limited by the 15% rule. Unfortunately, this provision is not available in rookie contract extensions, as rookie scale contracts can not be renegotiated. Bummer.

If the Jazz strike out in free agency this summer, and can acquire a player they want to extend in a trade, however, they can use this mechanism to lock him up for a reasonable amount in the years of the extension (by giving him a ridiculous signing bonus). If Marvin were working out, he'd be a perfect candidate...

With subsequent year cuts limited to 40% (D'Oh!). Team has to be under the cap. Contract has to be 3rd year of a 4 year deal.

They should consider bumping Marvin 20-30% next year then cutting extending with a cut of 40%, 7.5%, 7.5%. Or trade for expiring 4 year deals where a new contract at around $5mm-6mm average could be churned into 3-4mm deals.

 

[NUMBERICA]

For non-rookie extensions, you can give the player a bonus up to the amount of cap space you have available (limited by the max salary for that player's years of service) when the extension is signed (applied to the remaining year on the existing contract, and not the years of the extension). This functions as a renegotiation of the remaining years of the contract, so isn't limited by the 15% rule. Unfortunately, this provision is not available in rookie contract extensions, as rookie scale contracts can not be renegotiated. Bummer.

If the Jazz strike out in free agency this summer, and can acquire a player they want to extend in a trade, however, they can use this mechanism to lock him up for a reasonable amount in the years of the extension (by giving him a ridiculous signing bonus). If Marvin were working out, he'd be a perfect candidate...

So am I understanding correctly that the Jazz can't do this with any of the 2013 UFAs (Millsap, etc) but could have last summer and didn't?

 

[franklin]

So am I understanding correctly that the Jazz can't do this with any of the 2013 UFAs (Millsap, etc) but could have last summer and didn't?

No. The team has to have cap room.

They can't do it this summer either because they are $9mm over the cap this season.

You can also see by the 40% rule that renegotiating the last season upward and then dropping by 40% has limited the Nick Collison loophole. i.e. Raising Marvin from $7.5 to $9, then dropping him to $5.4mm, $4.995, $4.59. The final year cap room savings based on average salary is only about $900k. Better than a kick in the *** but nothing to write home about.

 

[franklin]

For fun speculation, if Orlando took Jefferson off the Jazz hands with their Howard TE then the Jazz would have $6mm in cap room. They could renegotiate Sap to $14.6 this season then sign him to an extension of $8.76, $8.103, $7.446, for an average of $10.1.

That's one helluva tradable contract and probably worth giving up that [nearly worthless] GSW pick to convince Orlando to do it.

 

[GVC]

No. The team has to have cap room.

They can't do it this summer either because they are $9mm over the cap this season.

You can also see by the 40% rule that renegotiating the last season upward and then dropping by 40% has limited the Nick Collison loophole. i.e. Raising Marvin from $7.5 to $9, then dropping him to $5.4mm, $4.995, $4.59. The final year cap room savings based on average salary is only about $900k. Better than a kick in the *** but nothing to write home about.

The Jazz will be under the cap come the summer, and could potentially use the provision with Marvin (and no one else). Hopefully KOC/Lindsay are looking for players, with contracts below their value, that can be acquired in a trade and then extended.

Also, the Marvin renegotiation could go up more via a signing bonus, as in the case of Collison, this summer, no? The last year of Collison's contract was worth $6.75mm (before renegotiation), the first year of his extension is worth only $3.27mm. What makes that a 40% drop, I assume, is the distribution of the bonus over the 4 years of the extension (which are not included in cap calculations). Is this correct?

 

[GVC]

I'm actually having trouble understanding how Collison's contract isn't in violation of the provision. In a renegotiation, salaries can not be amended downward. For Collison, this means his 10/11 salary is at least $6.75mm. The salary over the renegotiation and extension (ignoring the signing bonus for now), assuming this minimum, is:

10/11: $6 750 000
11/12: $3 272 997
12/13: $2 929 332
13/14: $2 585 668
14.15: $2 242 003

How is the $6 500 000 signing bonus allocated to fit within the 40% rule (it was paid, and counted against the cap in 10/11)? If it applied evenly across all 5 years, the drop from 10/11 to 11/12 is slightly more than 40% (if my calculations are correct).

 

[franklin]

Also, the Marvin renegotiation could go up more via a signing bonus, as in the case of Collison, this summer, no? The last year of Collison's contract was worth $6.75mm (before renegotiation), the first year of his extension is worth only $3.27mm. What makes that a 40% drop, I assume, is the distribution of the bonus over the 4 years of the extension (which are not included in cap calculations). Is this correct?

I think they are separated. The renegotiation upward is a bonus in reality but is not considered a bonus for future year cap purposes like a typical signing bonus would be. The 40% drop is new CBA language as far as I've found and most likely put in to address what I call the Collison Loophole (or Andre Blatche). My reasoning is because a normal signing bonus on Collison's contract would have been limited to 20%, or $3.506mm, and spread over the contract evenly for cap purposes. Instead, his renegotiation paid $6.5mm and nothing was spread over the extension years for cap purposes.

The Jazz could potentially pay Marvin a renegotiation upward next year plus give him the 15% maximum up front bonus on the total 3 year extension. Salaries would still be $5.4mm, $4.995, $4.59 for cap purposes but an additional $2.247 would be paid out up front. I don't know if the renegotiation "bonus" can be mixed with a signing bonus though.



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There is another loophole that would lower Marvin's final year. If the final season is not guaranteed then the bonus is spread over the other two seasons for cap purposes. The final year salary in my example above could be lowered to $3.84mm, but Marvin would have to agree to the non-guaranteed final season.