Hollinger: Salary Cap could drop in 2010

[Casperian]

http://sports.espn.go.com/nba/columns/story?columnist=hollinger_john&page=All-Star-Notebook-090215

Finally, let me share a juicy tip from a league source on the state of the salary cap: Basically, it's going to be worse than a lot of people expect, and the luxury tax level next year is going to be even lower than several teams are planning for now; the implications are going to be huge as we head into next year.

Here's the more interesting part of what I was told -- it may just be the tip of the iceberg. The salary cap (and thus the tax level) could potentially drop massively in 2010; my source used the term "bloodbath."

This would have huge effects on the pursuit of big-game free agents, of course, but also on the luxury tax level for that season … which could push many more owners over the line and potentially lead to fire sale-type trades.

All of which is a prelude, of course, to the labor negotiations for a new collective bargaining agreement in 2011. If money gets as tight as some project, this could get ugly.

Do you think this is likely to happen?

If so, how will it affect the Celtics?
What could be the impact on the 2010 FA market?

UPDATE:
The NBA borrows $175 million for the clubs

http://www.sportsbusinessjournal.com/article/61537

The NBA is set to borrow $175 million Feb. 26, marking one of the first league financings since the implosion of the credit markets last fall.

The money, which will be available to 15 teams, supplements an existing $1.7 billion leaguewide credit facility that uses the NBA’s media contracts as collateral to secure loans for the clubs. The NBA surveyed its teams, and 15 responded they would like to tap into the new borrowing.

[Fan from VT]

Well, since the cap is based on a percentage of revenue, and revenue is definitely going to be down, I'd say yes, the cap will shrink. This won't affect the C's much because they are not in a position to be under any kind of cap for a long time.

This year's cap is around 58 mill. Celtics payroll is at 80 mill this year, 74 mil the next. In the '10 offseason, the Celtics Payroll drops to 44 mill...if they let everyone except Perk, Pierce and KG go. You have to figure Rondo gets an extension, raising payroll to at least 50 mill, and if the cap shrinks, that could conceivably give the Celtics about 4 million in room with 4 players on the roster. Not going to happen. They'll probably extend Powe/Davis, pick up options for Giddens and Walker, as well as add rookie salaries. Bye bye cap. The only way the Celtics will be adding players is via trade. Fortunately, if teams are really worried about the cap/tax, then Ray's '10 expiring contract starts to look really enticing. I'd much rather the C's use that to get some younger players this next offseason than they just sign him to an extension. It stinks, but the C's will really hapve to try to move Ray this offseason, in my opinion. He's going to be too old to extend after that and no one will really want him in a sign and trade at his age. The C's could extend him cheaply, but then there's no way to add impact players and that's an old roster. As I said above, I really think the C's will move ray and take back 1 or 2 younger players with longer contracts. It's the only way for the C's to add younger impact players, and if other teams are worried about payroll, it could be possible.   


Where it hurts the C's is the luxury tax. If the tax lowers as well (I don't think it should, it seems unfair to suddenly drop the tax line on teams), then there's less motivation for the C's owners to maintain current payroll, therefore meaning less incentive to replace Allen's big contract with other, long term deals, meaning they'd be more likely to let him walk to stay under the cap (meaning we'd be looking at a roster of Rondo, Pierce, KG, Perk, Giddens, Walker, Powe/Davis, a MLE free agent and one more rookie or so, with Pierce and KG being around 34 or so), or just extend ray cheaply, at about 35 yrs. old.

[indeedproceed]

Yeah this could be HUGE. I'd hate to be NJ, the Knicks, or any of the multitude of teams trying to sign big names under the cap. This just made the chances of Lebron, Bosh, or Wade being traded to very slight, and the odds of their teams resigning them higher.

[Fan from VT]

I forgot to mention, one way the shrinking cap could help the C's is that if other teams' cap room disappears, then it means that more free agents will be looking for MLE deals rather than bigger deals. This would put the C's on even footing, financially, with other teams.



In addition, a lot of the above reasoning is why it's really not that far-fetched an idea to consider trading Ray Allen, especially this offseason. Even when his contract expires, there is absolutely no way the Celtics will be able to add a real impact free agent. The only way the Celtics can bridge the gap from this era to the next without some serious rebuilding/tanking would be to trade Ray for a good player or two and/or picks.

[the_Bird]

In addition, a lot of the above reasoning is why it's really not that far-fetched an idea to consider trading Ray Allen, especially this offseason. Even when his contract expires, there is absolutely no way the Celtics will be able to add a real impact free agent. The only way the Celtics can bridge the gap from this era to the next without some serious rebuilding/tanking would be to trade Ray for a good player or two and/or picks.

Not far-fetched at all; Danny's always said the original Big 3 should have been broken up while they still had value, and Ray's always been the one who *could* be traded (can't trade Pierce, and KG makes everything else happen).  The hope is that, if he IS traded, it's with the idea of spending those dollars on another young talent, not just to free up enough $$ to pay Rondo.

I wouldn't be shocked if Ray signs an extension at the end of the season, though, and I wouldn't be shocked if, like KG, he takes a slight pay cut in exchange for getting two or three more guaranteed years.

[Casperian]

Good posts, TP.

This is what concerns me the most:

Where it hurts the C's is the luxury tax. If the tax lowers as well (I don't think it should, it seems unfair to suddenly drop the tax line on teams), then there's less motivation for the C's owners to maintain current payroll, therefore meaning less incentive to replace Allen's big contract with other, long term deals, meaning they'd be more likely to let him walk to stay under the cap (meaning we'd be looking at a roster of Rondo, Pierce, KG, Perk, Giddens, Walker, Powe/Davis, a MLE free agent and one more rookie or so, with Pierce and KG being around 34 or so), or just extend ray cheaply, at about 35 yrs. old.

The way this team is currently constructed, top- and bottomheavy with KG´s and Pierce` big, long contracts, we would be unable to sign good free agents. Who knows how big the drop will be, but the term "bloodbath" indicates a really massive drop of the tax level. As you already said, the owners could be forced to let Ray Allen, maybe even Rondo, walk for nothing. That´s a scary thought, please someone tell me I´m overreacting here.

[Fan from VT]

Good posts, TP.

This is what concerns me the most:

Where it hurts the C's is the luxury tax. If the tax lowers as well (I don't think it should, it seems unfair to suddenly drop the tax line on teams), then there's less motivation for the C's owners to maintain current payroll, therefore meaning less incentive to replace Allen's big contract with other, long term deals, meaning they'd be more likely to let him walk to stay under the cap (meaning we'd be looking at a roster of Rondo, Pierce, KG, Perk, Giddens, Walker, Powe/Davis, a MLE free agent and one more rookie or so, with Pierce and KG being around 34 or so), or just extend ray cheaply, at about 35 yrs. old.

The way this team is currently constructed, top- and bottomheavy with KG´s and Pierce` big, long contracts, we would be unable to sign good free agents. Who knows how big the drop will be, but the term "bloodbath" indicates a really massive drop of the tax level. As you already said, the owners could be forced to let Ray Allen, maybe even Rondo, walk for nothing. That´s a scary thought, please someone tell me I´m overreacting here.

They'd never let Rondo walk for nothing. And, worst case scenario, I think they'd use bird rights to extend Ray at a reasonable deal.

[Fan from VT]

In addition, a lot of the above reasoning is why it's really not that far-fetched an idea to consider trading Ray Allen, especially this offseason. Even when his contract expires, there is absolutely no way the Celtics will be able to add a real impact free agent. The only way the Celtics can bridge the gap from this era to the next without some serious rebuilding/tanking would be to trade Ray for a good player or two and/or picks.

Not far-fetched at all; Danny's always said the original Big 3 should have been broken up while they still had value, and Ray's always been the one who *could* be traded (can't trade Pierce, and KG makes everything else happen).  The hope is that, if he IS traded, it's with the idea of spending those dollars on another young talent, not just to free up enough $$ to pay Rondo.

I wouldn't be shocked if Ray signs an extension at the end of the season, though, and I wouldn't be shocked if, like KG, he takes a slight pay cut in exchange for getting two or three more guaranteed years.

I'm hoping that due to Boston's history and strong fan base the Celtics will be less vulnerable to luxury hits than many other teams. Not invincible, and I'm sure they'd want to get nearer the limit, but I don't think they'd be forced to take the phoenix route and give away Kurt Thomas WITH picks just to cut salary. Because of this, I'd be willing to bet that Rondo stays no matter what, and Ray is either traded for players that a cash-strapped team no longer wants or extended at a much cheaper rate.

[wdleehi]

Forget using the MLE next year. 

How many guys can you sign with the league minimal? 

[the_Bird]

In addition, a lot of the above reasoning is why it's really not that far-fetched an idea to consider trading Ray Allen, especially this offseason. Even when his contract expires, there is absolutely no way the Celtics will be able to add a real impact free agent. The only way the Celtics can bridge the gap from this era to the next without some serious rebuilding/tanking would be to trade Ray for a good player or two and/or picks.

Not far-fetched at all; Danny's always said the original Big 3 should have been broken up while they still had value, and Ray's always been the one who *could* be traded (can't trade Pierce, and KG makes everything else happen).  The hope is that, if he IS traded, it's with the idea of spending those dollars on another young talent, not just to free up enough $$ to pay Rondo.

I wouldn't be shocked if Ray signs an extension at the end of the season, though, and I wouldn't be shocked if, like KG, he takes a slight pay cut in exchange for getting two or three more guaranteed years.

I'm hoping that due to Boston's history and strong fan base the Celtics will be less vulnerable to luxury hits than many other teams. Not invincible, and I'm sure they'd want to get nearer the limit, but I don't think they'd be forced to take the phoenix route and give away Kurt Thomas WITH picks just to cut salary. Because of this, I'd be willing to bet that Rondo stays no matter what, and Ray is either traded for players that a cash-strapped team no longer wants or extended at a much cheaper rate.

I think a lot of this comes down to how the team does in the playoffs this year.  They win another title - they nucleus stays intact.  They lose a heartbreaker in seven games to the Cavs/Spurs/Lakers?  Probably the same.

They get taken out by a younger, more athletic team like Atlanta?  They look like they're wearing down?  You might see them make a more-dramatic move.

What I'm afraid of is...  Ray will never have more value than this summer, when he's a decent-sized expiring contract and can still play at an elite level.  If they don't win it all, it's going to be awfully tempting to convert that into someone younger....

[Fan from VT]

In addition, a lot of the above reasoning is why it's really not that far-fetched an idea to consider trading Ray Allen, especially this offseason. Even when his contract expires, there is absolutely no way the Celtics will be able to add a real impact free agent. The only way the Celtics can bridge the gap from this era to the next without some serious rebuilding/tanking would be to trade Ray for a good player or two and/or picks.

Not far-fetched at all; Danny's always said the original Big 3 should have been broken up while they still had value, and Ray's always been the one who *could* be traded (can't trade Pierce, and KG makes everything else happen).  The hope is that, if he IS traded, it's with the idea of spending those dollars on another young talent, not just to free up enough $$ to pay Rondo.

I wouldn't be shocked if Ray signs an extension at the end of the season, though, and I wouldn't be shocked if, like KG, he takes a slight pay cut in exchange for getting two or three more guaranteed years.

I'm hoping that due to Boston's history and strong fan base the Celtics will be less vulnerable to luxury hits than many other teams. Not invincible, and I'm sure they'd want to get nearer the limit, but I don't think they'd be forced to take the phoenix route and give away Kurt Thomas WITH picks just to cut salary. Because of this, I'd be willing to bet that Rondo stays no matter what, and Ray is either traded for players that a cash-strapped team no longer wants or extended at a much cheaper rate.

I think a lot of this comes down to how the team does in the playoffs this year.  They win another title - they nucleus stays intact.  They lose a heartbreaker in seven games to the Cavs/Spurs/Lakers?  Probably the same.

They get taken out by a younger, more athletic team like Atlanta?  They look like they're wearing down?  You might see them make a more-dramatic move.

What I'm afraid of is...  Ray will never have more value than this summer, when he's a decent-sized expiring contract and can still play at an elite level.  If they don't win it all, it's going to be awfully tempting to convert that into someone younger....

part of me thinks he's got to go this offseason no matter what. Let's say he stays through next year, to the '10 offseason. That means that offseason we have 3 people under contract: KG, Pierce, Perkins. They come to 44 mil. There will be no 1st rounder in '09 but there will be in '10. Let's say Rondo is extended at about 7 mil per year. Lets say that they pick up options on Walker and Giddens. Let's say they've extended Powe at 3 mil per year instead of Davis, since to extend Davis they'd have to eat into the MLE while Powe is exempt due to Bird Rights, and Pruitt at about 1.5. Add in 2 second rounders (1.5 total) and 1 first rounder (1.5 mil or so) That brings the Payroll to 59-60 mil for the following roster:

Rondo
??
Pierce (33)
KG (34)
Perkins

Powe
Walker
Giddens
Pruitt
misc. 2nd rounder ('09)
misc. 2nd rounder ('10)
misc. 1st rounder ('10)

So if Ray stays, then you're left with the above roster with 4 spots left to fill and only the MLE to do so. To me, that's a shaky place to be. If you extend Ray at, say, 7 mill per year, then that means you're starting a 35 year old shooting guard and the payroll is up to 67 million, before '09's MLE addition and before '10's MLE addition. So if you extend Ray, even at a big discount, you could be looking at being locked into paying the luxury tax for the above roster, the 3 main pieces of which have all begun their decline already. This is why I think ray must get moved in this offseason for some younger pieces/good picks.

[the_Bird]

I know what you're saying, but if they're a championship team or REALLY close to a championship team, it's going to be very hard to break that up.  Who's going to be available to fill in Ray Allen's salary slot (especially if Ray's going to re-up at around $7M/year, which is the figure I've had in my head as well) that's not going to be a major downgrade?  Before his injury, I though a Ray-for-Michael Redd trade made sense for both squads (Bucks save money, we get a Ray-like player that's a few years younger), but you'd hesitate to do that deal until you see Redd back on the court. 

My fear is that Danny basically tells us - "We have our Big Three; Pierce, KG, and Rondo!" and that they let Ray's spot go to a lesser, cheaper player.  Couldn't necessarily blame them given the economic climate (Boston's pretty sensitive to the financial sector), but that stuff sucks as a fan.

[Fan from VT]

That's true, but given the Celtics' roster inflexibility (few tradeable contracts of significant size, only the MLE to improve) I find it hard to believe that the same roster will continue to be championship contenders as our 3 best players continue to decline in skill as our main rivals in the east (Lebron in cleveland or wherever, Orlando) all have their major players on the upside of their careers.

It's a simple fact that Pierce, Allen and KG are losing stuff from their games. I think they are still contenders this year, but the odds of them making the finals again are worse than they were last year, and will be even worse the following year as the Cavs continue to improve.


For example, what if, this offseason, Golden State looks ahead, decides they don't like their financial situation approaching the continued recession, and offers Ellis and Biedrins for Ray's 1 remaining year.

[Casperian]

I didn´t want to make a new thread, so I updated the OP.