The Current Finacial Situation 9/25/10

[Twin Towers]

People need to stop adding in next years salary of Diaw and taking that away from the savings from this year by the way.

We are talking about savings from this year. And if we spend 8 Million over the tax than we pay 16 Million. Its dollar for dollar (luxury tax). Trading AK away will save us double of whatever we go over the tax at least. There is no refuting that. You can add the couple million or so once we get out of the luxury tax also.

You can also add in the money we would get from being under the luxury tax. The Luxury tax benefit if you wanna call it that. To say the ceiling is 9 Million this year is insane. If you want to add the savings from this year and next than go ahead but it doesn't make much sense for the argument. It saves us at least 16 Million.

It saves us 16-20 Million THIS YEAR. This is a luxury tax argument. You cannot argue that we do not save at least 16 Million in luxury tax penalties and salary. That is fact.

 

[BabyPeterzz]

No ****?

Go read the post again until you understand it.

Thanks for a **** load speculatory garbage. And being a complete douche bag about it made it even more unreadable.

Or I'm drunk....

 

[Golfman]

People need to stop adding in next years salary of Diaw and taking that away from the savings from this year by the way.

We are talking about savings from this year. And if we spend 8 Million over the tax than we pay 16 Million. Its dollar for dollar (luxury tax). Trading AK away will save us double of whatever we go over the tax at least. There is no refuting that. You can add the couple million or so once we get out of the luxury tax also.

You can also add in the money we would get from being under the luxury tax. The Luxury tax benefit if you wanna call it that. To say the ceiling is 9 Million this year is insane. If you want to add the savings from this year and next than go ahead but it doesn't make much sense for the argument. It saves us at least 16 Million.

It saves us 16-20 Million THIS YEAR. This is a luxury tax argument. You cannot argue that we do not save at least 16 Million in luxury tax penalties and salary. That is fact.

Exactly. This will save a ton of money this year. Plus, Diaw is not a terrible player, I would say worth about 4-5 million per year. So, we have to pay him about 4 million more next year than he's worth, so what? We save around 16-20 million this year.

Do I think we are better this year because of this? No. But sometimes a small market team has to do what they can to save some $$$, and I completely understand it.

 

[Twin Towers]

Sirkickyass: Lets just say Diaw was an expiring contract. And we had 9 Million to spend in free agency or a trade. We most likely would either get an overpaid player through a trade or signed old veterans for a small amount of money. The chances of those guys making a way bigger impact than diaw is very slim. It would most likely be comparable (I am speculating just like you did in your post). And we would for sure not just sit on our hands and not spend that money. So you can't say 9 Million being taken away from this years savings because we wouldn't have had to spend it with AK's contract. You can't speculate who we would spend that money on and how those players would perform because we don't know who they are.

This is why taking 9 Million from next years contract away from the savings from this years savings does not make sense. You cannot say that we would get way better talent with the saved money and you cannot say that they would be way better than Diaw. That is total speculation. That is a moot point to argue.

 

[sirkickyass]

People need to stop adding in next years salary of Diaw and taking that away from the savings from this year by the way.

Your home budget must be a disaster if you honestly think charges next year don't matter in determining how much a person "saves."

 

[sirkickyass]

Sirkickyass: Lets just say Diaw was an expiring contract.

He's not. End of story. If he was then the number would be a lot closer to $20 million.

And we had 9 Million to spend in free agency or a trade. We most likely would either get an overpaid player through a trade or signed old veterans for a small amount of money. The chances of those guys making a way bigger impact than diaw is very slim. It would most likely be comparable (I am speculating just like you did in your post).

Actually my speculation relates to how you assess probabilities. It also points out that if everything doesn't go exactly perfectly the Jazz will forefeit the luxury tax benefit this year. You can't argue that. It's a fact. The only way to avoid it would be to further dump salary.

The other thing you don't seem to realize is that I gave you the forumla I used so you can figure it out based upon any numbers you want to use. The speculative amounts I guessed (total tax bill for next year and probability of being a tax payer) only account for approx. $1.1 million of the difference. The rest are all functionally guarantees.

This is why taking 9 Million from next years contract away from the savings from this years savings does not make sense. You cannot say that we would get way better talent with the saved money and you cannot say that they would be way better than Diaw. That is total speculation. That is a moot point to argue.

You're better off with a blank slate than you are with $9 million on the books. It makes the Jazz less flexibile financially and less flexible in terms of their roster going forward. You and Locke assign that at a cost of $0.

That's a ****ing fantasy land assessment. Any reputable accounting firm in the country would assess the savings to the Millers at $9 million maximum and discount based on probabilities from there. I look at these types of accounting reports all the time as they relate to expenditures and charge-offs.

The $20 million estimate in a statement by a public company would be actionable fraud.

 

[Twin Towers]

Your home budget must be a disaster if you honestly think charges next year don't matter in determining how much a person "saves."

I did not say it does not matter.

Luxury tax savings and next years salary cannot be added or subtracted together. It does not make any sense especially in this case when you know that the money would be spent on other players. So the only way to know it is to speculate who we would get next year (letting AK's contract expire) compared to what Diaw gives us. And its total bull **** to even talk about something like that.

This isn't like buying a more expensive air conditioner that is more energy efficient so you save money next year. You can't compare our lifestyles and a personal budget to the a NBA teams salary and luxury tax penalty. Too many factors that are completely different and effect them in major ways.

 

[sirkickyass]

I did not say it does not matter.

Luxury tax savings and next years salary cannot be added or subtracted together. It does not make any sense especially in this case when you know that the money would be spent on other players. So the only way to know it is to speculate who we would get next year (letting AK's contract expire) compared to what Diaw gives us. And its total bull **** to even talk about something like that.

This isn't like buying a more expensive air conditioner that is more energy efficient so you save money next year. You can't compare our lifestyles and a personal budget to the a NBA teams salary and luxury tax penalty. Too many factors that are completely different and effect them in major ways.

The argument here, and the reason for talking about the savings to the Millers by Lock and the media, is about financial viability for the owners. Operating profits and expenses are running sums. Next year absolutely matters.

If the argument is about the bottom line, let's really talk about the bottom line. The bottom line is that it saves significantly less than $20 million over any term longer than one year. That's a fact.

 

[Twin Towers]

Actually my speculation relates to how you assess probabilities. It also points out that if everything doesn't go exactly perfectly the Jazz will forefeit the luxury tax benefit this year. You can't argue that. It's a fact. The only way to avoid it would be to further dump salary.

What does this even mean? If it doesn't go exactly perfectly?

If we are under the luxury tax we get the benefits. What would change that once we are under it?

 

[Twin Towers]

The argument here, and the reason for talking about the savings to the Millers by Lock and the media, is about financial viability for the owners. Operating profits and expenses are running sums. Next year absolutely matters.

If the argument is about the bottom line, let's really talk about the bottom line. The bottom line is that it saves significantly less than $20 million over any term longer than one year. That's a fact.

Believe me I understand everything your saying. How the total savings today would be 9 Million. But you can't say that is the end of the story. You have to look at how that money would be spent next year. I fully get your accounting argument but this is a totally different application. And its a very detailed one. And only a detailed accounting analogy with the same variables would make sense (to me at least).

The questions is.........Is AK worth keeping this year? (even though we lose at least 16 Million this year) compared to spending 9 Million on diaw next year but most likely not being in the luxury tax?

We can at least agree on the statement above I think. But there is no resolution for an opinion on which one hurts us more.

 

[sirkickyass]

What does this even mean? If it doesn't go exactly perfectly?

If we are under the luxury tax we get the benefits. What would change that once we are under it?

What if we turn into the golden State warriors and guys get injured?

If we even have to sign one D-leaguer to the minimum we go over the line and forfeit the tax payout. That's how thin the margin is.

In order to get that money everything has to go perfectly. Fes has to sign for the QO and no more. We have to have no injury replacements during the year. We can't do any deals that add any salary during the season. Etc.

 

[Twin Towers]

What if we turn into the golden State warriors and guys get injured?

If we even have to sign one D-leaguer to the minimum we go over the line and forfeit the tax payout. That's how thin the margin is.

In order to get that money everything has to go perfectly. Fes has to sign for the QO and no more. We have to have no injury replacements during the year. We can't do any deals that add any salary during the season. Etc.

But we still get the Luxury tax benefits (the payout at the end of the season is what i was talking about).

 

[sirkickyass]

But we still get the Luxury tax benefits (the payout at the end of the season is what i was talking about).

No we wouldn't. Having to sign a D-leaguer pushes us over the line. A Fes deal closer to $2 million pushes us over the line.

One thing not going perfectly costs the Jazz the cost of the contract + the level over the LT + the loss of money from the payout.

One thing goes wrong and 20-40% of the supposed financial benefit of the trade (no matter who's estimates you believe) evaporates.

 

[homeytennis]

Cory Violette, Lance Allred and Kevin Kruger would show up at the minimum. Super luxury tax savings.

 

[Twin Towers]

No we wouldn't. Having to sign a D-leaguer pushes us over the line. A Fes deal closer to $2 million pushes us over the line.

One thing not going perfectly costs the Jazz the cost of the contract + the level over the LT + the loss of money from the payout.

One thing goes wrong and 20-40% of the supposed financial benefit of the trade (no matter who's estimates you believe) evaporates.

That is way too much speculation though. We don't know if Fesenko will get 2 Million this year and an injury is very unlikely (1 injury doesn't hurt us. Only 2 would put us into a place where we need to sign someone). Jazz would most likely just sign 10 day contracts throughout the year to stay at 13. And i've seen D-Leaguers get paid 400,000 for the year. Would a contract around that price still put us over?

And in your accounting did you take Gaines off the total salary (since he will be released)?

 

[sirkickyass]

That is way too much speculation though. We don't know if Fesenko will get 2 Million this year and an injury is very unlikely. Jazz would most likely just sign 10 day contracts throughout the year to stay at 13. And i've seen D-Leaguers get paid 400,000 for the year. Would a contract around that price still put us over?

And in your accounting did you take Gaines off the total salary (since he will be released)?

Look above:

Post trade: $68.34 million guaranteed (i.e. no Gaines, Jeffers, Evans, etc)

Margin for tax is $70.37 - $68.34 = $ 2.03 million

If Fesenko signs for the QO that gives the Jazz only $.98 million in breathing room.

In order to have even the $.98 million they have to release ALL non-guaranteed players. Not just Gaines. That means no Evans, no Jeffers, no Thompson.

That's 13 players under contract, one of which is already injured (Memo). Functionally, we'd have only 12 players. That's a razor thin margin for error and almost no money to operate with. If we keep a single rookie player on the non-guaranteed list it goes down to only $.5 million breathing room. If it's only Jeffers it goes down to about $.2 million breathing room.

If we keep any combination of two we're essentially at 0 or already over to start the season.

If Fes gets an offer from the Rockets we have to match we're probably already at zero before we talk about anyone else.

Injuries happen in this league and the margins we're talking about are so small that a single D-League signing could push us over. One major injury (Bell for example) and we're definitely going into tax town.

Counting on getting a big payout for being under the tax is a fantasy unless the Jazz plan on dumping more salary during the season. And that's an ******* move to the fans after doing a piss poor AK trade.

 

[NUMBERICA]

I'm really enjoying having someone that put in the work and having an intellect superior to mine say what's been bouncing around my head about this whole thing.

But... I still have absolutely no understanding why we're not supposed to count Diaw's salary for next year. I haven't heard an argument for it that can't also be used for going to a place like Check City. AKA stupid as ****.

 

[InGameStrategy]

That is way too much speculation though. We don't know if Fesenko will get 2 Million this year and an injury is very unlikely (1 injury doesn't hurt us. Only 2 would put us into a place where we need to sign someone). Jazz would most likely just sign 10 day contracts throughout the year to stay at 13. And i've seen D-Leaguers get paid 400,000 for the year. Would a contract around that price still put us over?

And in your accounting did you take Gaines off the total salary (since he will be released)?

I think that what SKA is implying (perhaps not intentionally) is that one reason that Utah was not willing to offer more than the QO to Fesenko is that if the trade goes down, anything more than the QO might still keep the Jazz out of luxury tax territory. (The other reason, some would argue, is that Fesenko sucks.)

As for Gaines, his salary is probably relatively negligible.

 

[InGameStrategy]

He's not. End of story. If he was then the number would be a lot closer to $20 million.



Actually my speculation relates to how you assess probabilities. It also points out that if everything doesn't go exactly perfectly the Jazz will forefeit the luxury tax benefit this year. You can't argue that. It's a fact. The only way to avoid it would be to further dump salary.

The other thing you don't seem to realize is that I gave you the forumla I used so you can figure it out based upon any numbers you want to use. The speculative amounts I guessed (total tax bill for next year and probability of being a tax payer) only account for approx. $1.1 million of the difference. The rest are all functionally guarantees.




You're better off with a blank slate than you are with $9 million on the books. It makes the Jazz less flexibile financially and less flexible in terms of their roster going forward. You and Locke assign that at a cost of $0.

That's a ****ing fantasy land assessment. Any reputable accounting firm in the country would assess the savings to the Millers at $9 million maximum and discount based on probabilities from there. I look at these types of accounting reports all the time as they relate to expenditures and charge-offs.

The $20 million estimate in a statement by a public company would be actionable fraud.

In fairness to the Jazz, they didn't make such a statement. And we aren't even stakeholders (except fans).

Even though David Hacke--I mean Locke--has been accused of being a company shill at times, he's the one pushing the big numbers.

I still think that this is much ado about accounting, because $5 million to $9 million savings is still a big chunk of cheese--even if you lose a multi-year starter in the process.

 

[Stifle Tower]

I'm really enjoying having someone that put in the work and having an intellect superior to mine say what's been bouncing around my head about this whole thing.

But... I still have absolutely no understanding why we're not supposed to count Diaw's salary for next year. I haven't heard an argument for it that can't also be used for going to a place like Check City. AKA stupid as ****.

One argument is that a team could step up and offer Diaw the MLE for 5 years. Do you think he'd opt out of $9M for 1 season if he could get, say, $35M for 5 years?
But let's not speculate; let's assume the Jazz make no other moves (like dumping Price's salary before the deadline a la Brewer). And let's also assume the Jazz CAN'T get under the tax threshold.

The savings still amounts to $7M ($8M difference between AK/Diaw in 2010, $8M in tax, less Diaw's $9M next season). And POSSIBLE revenue sharing from the league of $4-$5M IF they manage to get under and stay under the tax threshold.

sirkicky likes to toss around the fact he's a lawyer and the Jazz are committing fraud by "throwing costs forward." Well, I'm in finance and you also have to consider "replacement cost." For example, if someone is making $200K and leaves and you replace him/her with someone making $100K, the "real savings" is $100K. So if Diaw makes $9M next season, then you have to ask what the Jazz would have done had he not been on the team. Would they back up Millsap with a D-Leaguer or rookie? Or would they try to sign, at the very least, a solid veteran? I think the latter would be the case. I've got to believe they'd want another good 4/5 on the team. And they could go either way: i.e. consider Jefferson or Okur the back up 4 and sign a 5 or sign a pure PF. So take that $9M and deduct a fair price for a back up. Is that $3M, $4M. maybe the MLE? Let's assume it's at the lower end. Now the true "savings" of not having Diaw on the team next season would be $9M-$3M (estimated replacement cost) or around $6M.