Front-loading contracts.

[JSD]

Aside from how outrageous Rashard Lewis's contract is, The most perplexing thing is the fact it's backloaded and with no team options.

Thorpe could have set Lewis's contract up to decrease as Dwight Howard's contract increased. This simple distributing adjustment of money would have allowed flexibility in the future years.

Why aren't more teams Front-loading contracts? I would think Agents and teams would prefer it...

Pros - For Player and Agent.

- More money can be used for investment early in the contract allowing for better financial foreshadowing.

Cons - For Player and Agent.

- The value of the dollar might increase in time

Pros - For NBA Team

- Future Flexibility
- Avoiding Luxery Tax

Cons - For NBA Team

- If the value of the dollar decreases

What am I missing


It benefits all parties to have front loaded contracts, and through this practice I believe we would have a better product in the NBA.

[Roy Hobbs]

I don't think they could have done that in Lewis' case, because they gave him a max contract.  That means, they gave him the maximum allowable starting salary, and the maximum allowable raises every year.  It wouldn't have been possible for them to give him a higher starting salary than they did.

In terms of contracts for less than a max salary, front-loading is something that should be considered; I know the Bulls have done this on several of their contracts (Wallace, Hinrich).  I think Camby's last year salary also decreases on his current deal.

I think one reason that more contracts aren't front-loaded is that you need to be able to fit the first year salary under your salary cap.  So, it's easier to pay somebody $10 million in their first year, and move up to $15 million by their fifth year, than it is to do that in the inverse; a team might have $10 million in cap room, but not $15 million.

As an aside, from what I understand annual decreases in a contract are limited to a maximum of 8% from the prior year's salary under the contract.  This does not apply to extensions, however (which is why KG's salary can decrease next season by such a substantial amount.)

[JSD]

I don't think they could have done that in Lewis' case, because they gave him a max contract.  That means, they gave him the maximum allowable starting salary, and the maximum allowable raises every year.  It wouldn't have been possible for them to give him a higher starting salary than they did.

In terms of contracts for less than a max salary, front-loading is something that should be considered; I know the Bulls have done this on several of their contracts (Wallace, Hinrich).  I think Camby's last year salary also decreases on his current deal.

I think one reason that more contracts aren't front-loaded is that you need to be able to fit the first year salary under your salary cap.  So, it's easier to pay somebody $10 million in their first year, and move up to $15 million by their fifth year, than it is to do that in the inverse; a team might have $10 million in cap room, but not $15 million.

As an aside, from what I understand annual decreases in a contract are limited to a maximum of 8% from the prior year's salary under the contract.  This does not apply to extensions, however (which is why KG's salary can decrease next season by such a substantial amount.)

I was under the assumption that a max contract was a whole number (including the increases of a typical contract) that could increase or decrease yearly by around 10% (I believe its either 8% or 10.5%)

So for Hypothetically:

Player X got a 100 million max contract (which includes everything including annual raises)

Year 1 - 22
Year 2 - 21
Year 3 - 20
Year 4 - 19
Year 5 - 18

Would work as oppose to the inverted conventional way.

 

[action781]

I've also wondered this a lot.  I don't know if teams ever really prepare for this when making a contract, but I wonder what % of players paid over the league average get traded in the last year of their contract?  Or what % of players get traded period?  If you sign a player to a back loaded contract, you are guaranteeing your team to get the player for his cheapest years.

[Roy Hobbs]

I don't think they could have done that in Lewis' case, because they gave him a max contract.  That means, they gave him the maximum allowable starting salary, and the maximum allowable raises every year.  It wouldn't have been possible for them to give him a higher starting salary than they did.

In terms of contracts for less than a max salary, front-loading is something that should be considered; I know the Bulls have done this on several of their contracts (Wallace, Hinrich).  I think Camby's last year salary also decreases on his current deal.

I think one reason that more contracts aren't front-loaded is that you need to be able to fit the first year salary under your salary cap.  So, it's easier to pay somebody $10 million in their first year, and move up to $15 million by their fifth year, than it is to do that in the inverse; a team might have $10 million in cap room, but not $15 million.

As an aside, from what I understand annual decreases in a contract are limited to a maximum of 8% from the prior year's salary under the contract.  This does not apply to extensions, however (which is why KG's salary can decrease next season by such a substantial amount.)

I was under the assumption that a max contract was a whole number (including the increases of a typical contract) that could increase or decrease yearly by around 10% (I believe its either 8% or 10.5%)

So for Hypothetically:

Player X got a 100 million max contract (which includes everything including annual raises)

Year 1 - 22
Year 2 - 21
Year 3 - 20
Year 4 - 19
Year 5 - 18

Would work as oppose to the inverted conventional way.

 

No.  A "max contract" really means a "max starting salary" plus "max annual raises".  If the team was allowed to pay the player $22 million in year one, then it could give him increased annual raises from there.  In your scenario, though, it appears as though the max salary in year one is really $18 million, which means (by definition) that the most the team can pay him is that $18 million, not $22m.

[JSD]

I've also wondered this a lot.  I don't know if teams ever really prepare for this when making a contract, but I wonder what % of players paid over the league average get traded in the last year of their contract?  Or what % of players get traded period?  If you sign a player to a back loaded contract, you are guaranteeing your team to get the player for his cheapest years.

That is true but you also get a less attractive contract to trade when the the time is right...

When a contract is signed a GM should always assume that the player is going to get worse and prepare for it by paying for the goods up front. If The NBA doesn't allow this they should....

[JSD]

Roy, I don't doubt you but where are you getting this information?

Also, if you are correct do you believe the scenario I presented would help teams? Would GM's be taking advantage of this method?

[action781]

I've also wondered this a lot.  I don't know if teams ever really prepare for this when making a contract, but I wonder what % of players paid over the league average get traded in the last year of their contract?  Or what % of players get traded period?  If you sign a player to a back loaded contract, you are guaranteeing your team to get the player for his cheapest years.

That is true but you also get a less attractive contract to trade when the the time is right...

Well, not necessarily.  Most teams trading for a player in the expiring year of a contract aren't looking to get a valuable player on the court.  They are often just trying to dump salary to clear room for to sign a big free agent next offseason.  In some cases, the more salary they can acquire (and likewise dump), the better.

[JSD]

I've also wondered this a lot.  I don't know if teams ever really prepare for this when making a contract, but I wonder what % of players paid over the league average get traded in the last year of their contract?  Or what % of players get traded period?  If you sign a player to a back loaded contract, you are guaranteeing your team to get the player for his cheapest years.

That is true but you also get a less attractive contract to trade when the the time is right...

Well, not necessarily.  Most teams trading for a player in the expiring year of a contract aren't looking to get a valuable player on the court.  They are often just trying to dump salary to clear room for to sign a big free agent next offseason.  In some cases, the more salary they can acquire (and likewise dump), the better.

Right and I agree but from 2 years out for instance we could be talking about an 8 -10 million dollar difference.

[Roy Hobbs]

Roy, I don't doubt you but where are you getting this information?

Also, if you are correct do you believe the scenario I presented would help teams? Would GM's be taking advantage of this method?

See questions 11, 12, 46, and 47 here.  It talks about maximum starting salaries, and then raises.

In terms of front-loading contracts in general, I think it can be good in a lot of situations.  Certainly, the way Chicago structured its contracts makes a lot of sense, because it gave them a healthier cap situation (they just screwed up by signing Ben Wallace).  Unfortunately, it's not a realistic avenue for a lot of teams (for instance, players signing a MLE contract expect annual raises, and they can't get that in a front-loaded contract, etc.)

[JSD]

Roy, I don't doubt you but where are you getting this information?

Also, if you are correct do you believe the scenario I presented would help teams? Would GM's be taking advantage of this method?

See questions 11, 12, 46, and 47 here.  It talks about maximum starting salaries, and then raises.

In terms of front-loading contracts in general, I think it can be good in a lot of situations.  Certainly, the way Chicago structured its contracts makes a lot of sense, because it gave them a healthier cap situation (they just screwed up by signing Ben Wallace).  Unfortunately, it's not a realistic avenue for a lot of teams (for instance, players signing a MLE contract expect annual raises, and they can't get that in a front-loaded contract, etc.)

Yes, One of Joe D's best non moves...


Well Roy thanks for your input. you single handedly destroyed my premise and/or thread.