A look at the 2010 cap situation/ why would Pierce opt out?

[Chris]

Now that Rondo is locked up for next season, at somewhere likely between $9 and $12 million (depending how they structured the contract), the C's salary structure for next year is really starting to take shape.  So I think it is time we take a look at what the salary structure will look like. 

Hopefully by doing this, we can completely put to rest any ideas of the C's having cap space, and also take a closer look at the possibility of Pierce opting out/renegotiating.

For the purpose of this analysis, lets assume next seasons Salary cap drops $2.7 million to $55 million (a modest drop compared to what some speculate it could drop to), and the luxury tax threshold drops to $66.6 million.  This would also put the MLE at $5.58 million.

Assuming Rondo's contract is spread evenly over the 5 years, at $11 million each year, here are next years commitments (from storytellerscontracts.com):

Pierce- $21.5 million (player option)
Garnett- $18.8 million
Rondo- $11 million
Rasheed- $5.9 million
Perkins- $4.9 million
Davis- $2.5 million
Walker- $0.9 million (not fully guaranteed)
First round draft pick- $1 million (estimated

So that means, if Pierce does not opt out, they have $66.5 million committed to 7 players.  I would assume they would assume that they would use the entire MLE to fill out the roster, so that would put them at $72.08 million, and an actual cost (after luxury tax) of $77.56.

And then of course, we are still missing a major piece...Ray Allen.  So assuming the C's were to sign him to a contract starting at $9 million, that then puts the C's at $82.08 million, and an actual cost of $97.56.  Add in a few vet minimum contracts to fill out the roster, and it puts them right at about $100 million.

This is almost identical to the C's actual cost this season (which I calculated at $98.14 million)

So the question is, who benefits if Pierce opts out and restructures?

Obviously, ownership would benefit from it, in pure cash savings.  If Pierce were to take a pay cut of say, $6.5 million next year, to come in at an even $15 million, that would save ownership about $13 million next season, when you consider luxury tax, and would put the actual costs at somewhere around $87 million.  That is a huge amount of savings in a time where every penny counts. 

The problem is, how does it benefit Pierce.  Obviously, he wants to do whatever he can to help the team stay at the top for as long as possible...but does saving ownership $13 million really help the team on the floor?  It does not bring them anywhere close to being under the cap, and they are still well over the luxury tax as well.  It doesn't even make it that much easier for them to make trades, because they still need to be able to match salaries, so in any deal, they would likely be sending out as many salaries as they are bringing in. 

I suppose it could make it more palatable for them to bring back guys like House, Daniels, and Scal, while still using the MLE.  But again, it is all just a matter of cash, so why should Pierce be giving up his own cash, just so the owners (who are much richer than him) can save their own?

The answer of course comes at the end of the deal for Pierce.  In order for Pierce to agree to do something like this, is if ownership finds a way to make up for that $6.5 million on the back end of his contract.  So Pierce needs to look at the market in two years, and try to figure out how much he thinks he is worth on his next (and possibly final) contract.  If ownership would be willing to tack that $6.5 million on the end of his deal, when the team may not be so far into the luxury tax, and when he would likely be making much less than the $21 million he is making now, in order to save them the extra cash on the bottom line next year, then it would make sense.

So for example, if Pierce feels that after next season, he should be getting a 2 year, $20 million deal, then he could opt out, and sign a 3 year, $40.5 million deal.  If its broken down as $15 million the first year (saving ownership $13 million), and then $12.75 each of his last two seasons, it means Pierce did not lose any money, but he allowed ownership to save a good amount of cash, and possibly even put that cash into the team next year.

[Donoghus]

Nice post, Chris.

This definitely magnifies the upcoming Pierce situation and the implications his current contract or future new contract would have on the Celtics future.

[BudweiserCeltic]

I really think they'll end up restructuring his deal, in favor of a 4 year or so contract.

[wdleehi]

I think they just extend Pierce.


Hopefully with a shrinking contract.

[Donoghus]

Personally, I think Pierce would be nuts to opt out.

He has to work out some sort of understanding with management to be "rewarded" down the road if he opts out for the benefit of the team.  Naturally, the solution might be a backloaded contract which evens out the money in the long run or something. 

I just don't know if Pierce will go for it. 

[BudweiserCeltic]

I think they just extend Pierce.


Hopefully with a shrinking contract.

wdleehi's flavor of the day, "a shrinking contract" lol.

I really doubt there would be any sort of shrinking contract, that just seems like a lack of trust. You just play with the overall numbers, and then fit the salary as best you can in a way that it both benefits the team and the player.

There's already some precedence here with the KG situation. Although, if I recall correctly, KG had no opt-out option in his final year (might be mistaken), he did agree to an extension with an obvious pay cut in the early years in favor of a 5 year contract. I can see Pierce doing something similar.

Personally, I think Pierce would be nuts to opt out.

He has to work out some sort of understanding with management to be "rewarded" down the road if he opts out for the benefit of the team.  Naturally, the solution might be a backloaded contract which evens out the money in the long run or something. 

I just don't know if Pierce will go for it. 

Well, if he can get guaranteed money for longer years right off the bat, that's really enticing, particularly with old players and job security. Anything can happen on a year to year basis, and a long contract is very good motivation if it came to that.

But 21 million is a ton of money.

[JSD]

The problem is, how does it benefit Pierce.  Obviously, he wants to do whatever he can to help the team stay at the top for as long as possible...but does saving ownership $13 million really help the team on the floor? 

What do you mean by this? If Pierce opts out and signs a 4 year deal for $15 per ($60 Million) he's getting $39 Million more guaranteed... I've been saying it all along, Paul opts out and re-signs. It benefits both him and the Celtics.

[Chris]

The problem is, how does it benefit Pierce.  Obviously, he wants to do whatever he can to help the team stay at the top for as long as possible...but does saving ownership $13 million really help the team on the floor? 

What do you mean by this? If Pierce opts out and signs a 4 year deal for $15 per ($60 Million) he's getting $39 Million more guaranteed... I've been saying it all along, Paul opts out and re-signs. It benefits both him and the Celtics.

You are absolutely right, if he gets a deal like that, he does benefit.  But there have been plenty of people proposing he opt out to take something like a 3 year, $35 million deal.  And it just does not make any sense for him.

My biggest point that I wanted to make here was that by opting out, Pierce will not be directly helping the team get, or remain better.  He will be helping the owners save a little extra cash next year, while they are deep in the luxury tax.  So he is not going to do it simply out of loyalty, or because he wants to "win".  He will do it because it will ultimately benefit him financially.

[nickagneta]

Very interesting look at things.

Couple of things I would throw out:

- I think Rondo's salary will be an escalating one with 10.5% raise increases each year. I think that makes the most sense for staying fiscally competitive during the Big Three Era. That would mean, If my calculations are correct a salary for Rondo of $9.09 million next year. A bit of a savings.

- The C's will have to decide what to do next year with Perkins. He will become an unrestricted free agent after next year and my guess is that that will be addressed this summer. It's one thing to let Ray Allen expire this year. He's a 34 year old aging SG. Perk will be a 27 year old, All-Defense 2nd team quality center that can put up 10/10/3 blocks on just about any and every night if given minutes. His extension will need to be addressed. If a Pierce renegotiation savings is going anywhere, it is going to procure perk's services for the next 5 years beyond next year.

- If Sheldon Williams can continue to play his role as effectively as he has been, I could see the C's extending him a two year deal with 8% increases over what he was paid this year.

- I also don't see why they wouldn't resign Eddie House, unless of course they bring in a better 3 point shooting guard than Eddie for less money.

-Also, I think the C's will take at least one flyer on a vet minimum contract, the way they did this year with Sheldon, for a player to try to re-establish themselves in the league.

- I think that are going to be a lot more options for filling out the roster on the cheap without Pierce needing to opt out for the C's to stay competitive for a championship, including, the trading of Scal, Tony, Walker, Giddens and maybe Baby this year to bring in players who still have a year or two left one their current contracts.

[JSD]

The problem is, how does it benefit Pierce.  Obviously, he wants to do whatever he can to help the team stay at the top for as long as possible...but does saving ownership $13 million really help the team on the floor? 

What do you mean by this? If Pierce opts out and signs a 4 year deal for $15 per ($60 Million) he's getting $39 Million more guaranteed... I've been saying it all along, Paul opts out and re-signs. It benefits both him and the Celtics.

You are absolutely right, if he gets a deal like that, he does benefit.  But there have been plenty of people proposing he opt out to take something like a 3 year, $35 million deal.  And it just does not make any sense for him.

My biggest point that I wanted to make here was that by opting out, Pierce will not be directly helping the team get, or remain better.  He will be helping the owners save a little extra cash next year, while they are deep in the luxury tax.  So he is not going to do it simply out of loyalty, or because he wants to "win".  He will do it because it will ultimately benefit him financially.

Or he could be opting out for more projected money...

For one to truly evaluate Paul's decision he or she would have to project how much Pierce would make after next season after his $21 Million expires.

Picks up option:

2011 - $21 Million
2012 - $12 Million
2013 - $12 Million
2014 - $12 Million
----------------------------------
57 Million

Opts out:

2011 - $15 Million
2012 - $15 Million
2013 - $15 Million
2014 - $15 Million
---------------------------------------
60 Million

[Chris]

The problem is, how does it benefit Pierce.  Obviously, he wants to do whatever he can to help the team stay at the top for as long as possible...but does saving ownership $13 million really help the team on the floor? 

What do you mean by this? If Pierce opts out and signs a 4 year deal for $15 per ($60 Million) he's getting $39 Million more guaranteed... I've been saying it all along, Paul opts out and re-signs. It benefits both him and the Celtics.

You are absolutely right, if he gets a deal like that, he does benefit.  But there have been plenty of people proposing he opt out to take something like a 3 year, $35 million deal.  And it just does not make any sense for him.

My biggest point that I wanted to make here was that by opting out, Pierce will not be directly helping the team get, or remain better.  He will be helping the owners save a little extra cash next year, while they are deep in the luxury tax.  So he is not going to do it simply out of loyalty, or because he wants to "win".  He will do it because it will ultimately benefit him financially.

Or he could be opting out for more projected money...

For one to truly evaluate Paul's decision he or she would have to project how much Pierce would make after next season after his $21 Million expires.

Picks up option:

2011 - $21 Million
2012 - $12 Million
2013 - $12 Million
2014 - $12 Million
----------------------------------
57 Million

Opts out:

2011 - $15 Million
2012 - $15 Million
2013 - $15 Million
2014 - $15 Million
---------------------------------------
60 Million

I guess I am hessitant to believe the C's are going to offer Paul an extension that long, particularly at that kind of money.  I would be surprised if they went beyond 3 years (including next year), unless it was at significantly smaller numbers.

- I think Rondo's salary will be an escalating one with 10.5% raise increases each year. I think that makes the most sense for staying fiscally competitive during the Big Three Era. That would mean, If my calculations are correct a salary for Rondo of $9.09 million next year. A bit of a savings.

I agree with this.  Although I could also see them go the other way, and make it a de-escalating contract, in order to give them more cap room when the other guys start expiring...but I agree that the escalating contract is more likely, due to luxury tax issues.

- The C's will have to decide what to do next year with Perkins. He will become an unrestricted free agent after next year and my guess is that that will be addressed this summer. It's one thing to let Ray Allen expire this year. He's a 34 year old aging SG. Perk will be a 27 year old, All-Defense 2nd team quality center that can put up 10/10/3 blocks on just about any and every night if given minutes. His extension will need to be addressed. If a Pierce renegotiation savings is going anywhere, it is going to procure perk's services for the next 5 years beyond next year.

As I have mentioned in other threads, I agree that this will be a huge issue next summer.  I think the C's are going to do everything they can to get him locked up next summer to a reasonable deal, and if they can't get it done, I expect them to shop him hard.  I think if he is not signed by next summer, he is all but gone, because someone is going to give him more than he is worth on the open market.

[wdleehi]

The problem is, how does it benefit Pierce.  Obviously, he wants to do whatever he can to help the team stay at the top for as long as possible...but does saving ownership $13 million really help the team on the floor? 

What do you mean by this? If Pierce opts out and signs a 4 year deal for $15 per ($60 Million) he's getting $39 Million more guaranteed... I've been saying it all along, Paul opts out and re-signs. It benefits both him and the Celtics.

You are absolutely right, if he gets a deal like that, he does benefit.  But there have been plenty of people proposing he opt out to take something like a 3 year, $35 million deal.  And it just does not make any sense for him.

My biggest point that I wanted to make here was that by opting out, Pierce will not be directly helping the team get, or remain better.  He will be helping the owners save a little extra cash next year, while they are deep in the luxury tax.  So he is not going to do it simply out of loyalty, or because he wants to "win".  He will do it because it will ultimately benefit him financially.

Or he could be opting out for more projected money...

For one to truly evaluate Paul's decision he or she would have to project how much Pierce would make after next season after his $21 Million expires.

Picks up option:

2011 - $21 Million
2012 - $12 Million
2013 - $12 Million
2014 - $12 Million
----------------------------------
57 Million

Opts out:

2011 - $15 Million
2012 - $15 Million
2013 - $15 Million
2014 - $15 Million
---------------------------------------
60 Million

How do you convince Pierce that he will only make 12 million a year after this year?

[JSD]

The problem is, how does it benefit Pierce.  Obviously, he wants to do whatever he can to help the team stay at the top for as long as possible...but does saving ownership $13 million really help the team on the floor? 

What do you mean by this? If Pierce opts out and signs a 4 year deal for $15 per ($60 Million) he's getting $39 Million more guaranteed... I've been saying it all along, Paul opts out and re-signs. It benefits both him and the Celtics.

You are absolutely right, if he gets a deal like that, he does benefit.  But there have been plenty of people proposing he opt out to take something like a 3 year, $35 million deal.  And it just does not make any sense for him.

My biggest point that I wanted to make here was that by opting out, Pierce will not be directly helping the team get, or remain better.  He will be helping the owners save a little extra cash next year, while they are deep in the luxury tax.  So he is not going to do it simply out of loyalty, or because he wants to "win".  He will do it because it will ultimately benefit him financially.

Or he could be opting out for more projected money...

For one to truly evaluate Paul's decision he or she would have to project how much Pierce would make after next season after his $21 Million expires.

Picks up option:

2011 - $21 Million
2012 - $12 Million
2013 - $12 Million
2014 - $12 Million
----------------------------------
57 Million

Opts out:

2011 - $15 Million
2012 - $15 Million
2013 - $15 Million
2014 - $15 Million
---------------------------------------
60 Million

How do you convince Pierce that he will only make 12 million a year after this year?

It would be after the 2011 season. At that time he's a 34 year old free agent SF with few options:

- Resign with the Celics using Bird-rights
- Settle for the MLE elsewhere.

Based on this, the Celtics locking him up for around $10-12 Million is more than a reasonable guesstimation. DA isn't going to play hardball (renounce) and a sign and trade isn't realistic either (The latter of which rarely happens in the NBA today anyway). Taking away the fact it wouldn't be a desirable location for Paul, no team under the cap is going to sign him because they'd be rebuilding around young talent.

Sooooo... Aside from Paul opting out and resigning this off-season, under what scenario are you predicting he makes over $12 million in 2012? I don't see it and I'd imagine his agent doesn't either. That's why opting out now makes so much sense for both parties. Paul gets to wrap up his career in Boston making good money with the Celtics having flexibility now and in the future. It's a win/win.

[Drucci]

Thanks and TP for this thread and your explanations, Chris. Now I understand why he would be foolish from Pierce to opt out to get a lower deal since it doesn't really benefit in the terms "we can sign more players" but "only" the owners money issues (Pierce's new and cheaper contract would be a big relief for them, we can't overlook that).

I know we're far away from next summer but I would like the C's to re-sign Ray for 7 million $ per season for 2 or 3 years, and to re-sign House and Marquis (hopefully benefiting from loyalty and commitment issues by them, allowing the C's to have more cash to spend on other players).

[Jon]

I'm interested in seeing what Paul has in mind when he talks about a new deal.  He's spoken about taking a paycut for long term security, but I'm curious what his idea of a paycut happens to be.  My feeling is that it's probably closer to 2-3 million dollars than 8-10 million.