The Pierce opt-out option (again) - Peter May

[Jeff]

help me out with the math here, is Peter May on to something or grasping?

http://sports.espn.go.com/boston/nba/columns/story?columnist=may_peter&id=4964861

What makes the situation interesting is that if Pierce does nothing, he would be an unrestricted free agent in the summer of 2011. And that is when all signs point to a lockout, with the owners, once again seeking protection from themselves in the form of tighter salary controls and, perhaps, even a hard salary cap. There even has been talk of removing the mid-level exception.

So suppose Pierce plays next season and finishes out his contract. In July of 2011, he'd be 34, not exactly the ideal age for free agency. And with the prospect of a lockout, he could be out a season and then be looking to sign a new deal at the age of 35. He'd also likely be looking at a completely new set of rules as well, which conceivably could squeeze him even more.

Therefore, it might be a sound strategy to trade one year for three, even if one of those three years might result in nothing because of a lockout. Or Pierce might simply play out the season and then, like everyone else, get a year's vacation. Under that scenario, he loses nothing because he has no contract. And Kevin Garnett would also be eligible for free agency post-lockout, as his final contract year would be nixed by the work stoppage.

Ok, so worst case scenario if he doesn't opt out is this.

2011 - $21.5M
2012 - $0
2013 - Pierce decides to retire early and play poker with Antoine
total gross income = $21.5M

now, what scenario would make opting out better?  What would he possibly be able to get from the Celtics as a free agent?

at this point, the Celtics would be highly overpaying if they went over something like $10M a year for him

so if the NBA still locks out for a full year and Pierce signs for around $10M a year for 3 years, one of those years is still wiped out and he walks away with about the same cash he'd be getting in one year.

in addition, the team would likely want to sign someone this summer with their extra cash - which might eat into the amount they could give him and I seriously doubt they'd want to sign up for more than 3 years unless the annual amounts trail off considerably

don't get me wrong, if we can swing something with Paul that makes sense and is legal, I'm all for it - but I just don't get how the math works

[Jeff]

so if Pierce opts out and we renounce all free agents, that puts our payroll at just 41,198,290

http://www.hoopdata.com/salaries/BOS.aspx

add in 2 draft picks and 6 roster cap holds (about 4.2M), and you get a new balance of $45,407,918, which still only leaves us $7.6M under a projected cap of $53M which might be too high anyway

[Jeff]

my brain hurts, I give up

this will never happen

[Lucky17]

Opting out is not about getting the Celtics under the salary cap.

It's about reducing the payroll and the luxury tax.

The savings from a restructured contract for Pierce would offset the increase in Rondo's salary, and also free up money to resign guys like Ray, Nate, etc.

[rondohondo]

so if Pierce opts out and we renounce all free agents, that puts our payroll at just 41,198,290

http://www.hoopdata.com/salaries/BOS.aspx

add in 2 draft picks and 6 roster cap holds (about 4.2M), and you get a new balance of $45,407,918, which still only leaves us $7.6M under a projected cap of $53M which might be too high anyway

 cant boston just sell their draft picks?

Washington sold Bill Walker to Boston for 3 mil

[Who]

Paul Pierce won't opt out without a guaranteed contract offer from Wyc + Danny.

That contract offer will remove any hopes of cap space even if Pierce does opt out.

[Who]

so if Pierce opts out and we renounce all free agents, that puts our payroll at just 41,198,290

http://www.hoopdata.com/salaries/BOS.aspx

add in 2 draft picks and 6 roster cap holds (about 4.2M), and you get a new balance of $45,407,918, which still only leaves us $7.6M under a projected cap of $53M which might be too high anyway

 cant boston just sell their draft picks?

Washington sold Bill Walker to Boston for 3 mil

I think it (the Bill Walker pick) was a couple of hundred thousand. Not $3 million.

$400k-$450k is my best recollection.

[Roy Hobbs]

Opting out is not about getting the Celtics under the salary cap.

It's about reducing the payroll and the luxury tax.

The savings from a restructured contract for Pierce would offset the increase in Rondo's salary, and also free up money to resign guys like Ray, Nate, etc.

Yep.  An opt out and extension might be beneficial for both sides, but not for the sake of cap space.  Rather, it would be all about saving luxury tax.  For instance, if Pierce agrees to a 3 year, $45 million contract at $15 million per year, that would save ownership $6 million in salary next season, and $6 million in luxury tax.  If ownership re-invested that $12 million into the team (by, for instance, utilizing the MLE, or taking on salary in a trade), it could be a win-win for everyone.

[rondohondo]

so if Pierce opts out and we renounce all free agents, that puts our payroll at just 41,198,290

http://www.hoopdata.com/salaries/BOS.aspx

add in 2 draft picks and 6 roster cap holds (about 4.2M), and you get a new balance of $45,407,918, which still only leaves us $7.6M under a projected cap of $53M which might be too high anyway

 cant boston just sell their draft picks?

Washington sold Bill Walker to Boston for 3 mil

I think it (the Bill Walker pick) was a couple of hundred thousand. Not $3 million.

$400k-$450k is my best recollection.

but that would still free up cap space right? we wouldnt get the money we sell them for as cap space, but it would be 2 less players to be on the payroll .

[Jeff]

Opting out is not about getting the Celtics under the salary cap.

It's about reducing the payroll and the luxury tax.

The savings from a restructured contract for Pierce would offset the increase in Rondo's salary, and also free up money to resign guys like Ray, Nate, etc.

Yep.  An opt out and extension might be beneficial for both sides, but not for the sake of cap space.  Rather, it would be all about saving luxury tax.  For instance, if Pierce agrees to a 3 year, $45 million contract at $15 million per year, that would save ownership $6 million in salary next season, and $6 million in luxury tax.  If ownership re-invested that $12 million into the team (by, for instance, utilizing the MLE, or taking on salary in a trade), it could be a win-win for everyone.

but if he opts out, can they offer him $15M? do they have that kind of space?  he doesn't get to keep his bird rights if he opts out, does he?

[Lucky17]

Opting out is not about getting the Celtics under the salary cap.

It's about reducing the payroll and the luxury tax.

The savings from a restructured contract for Pierce would offset the increase in Rondo's salary, and also free up money to resign guys like Ray, Nate, etc.

Yep.  An opt out and extension might be beneficial for both sides, but not for the sake of cap space.  Rather, it would be all about saving luxury tax.  For instance, if Pierce agrees to a 3 year, $45 million contract at $15 million per year, that would save ownership $6 million in salary next season, and $6 million in luxury tax.  If ownership re-invested that $12 million into the team (by, for instance, utilizing the MLE, or taking on salary in a trade), it could be a win-win for everyone.

Exactly.

And I think Wyc and Danny will approach Pierce with that kind of logic this offseason.

Pierce would still get his payday, retire a Celtic, and help the team continue to be competitive through the re-allocation/re-investment of financial resources gained through the restructuring.

[Who]

so if Pierce opts out and we renounce all free agents, that puts our payroll at just 41,198,290

http://www.hoopdata.com/salaries/BOS.aspx

add in 2 draft picks and 6 roster cap holds (about 4.2M), and you get a new balance of $45,407,918, which still only leaves us $7.6M under a projected cap of $53M which might be too high anyway

 cant boston just sell their draft picks?

Washington sold Bill Walker to Boston for 3 mil

I think it (the Bill Walker pick) was a couple of hundred thousand. Not $3 million.

$400k-$450k is my best recollection.

but that would still free up cap space right? we wouldnt get the money we sell them for as cap space, but it would be 2 less players to be on the payroll .

Oh yes, sorry, I was just talking about the fee for Bill Walker.

When a team drafts a player there is no contract in place. There is a cap hold for first round picks due to their guaranteed rookie scale contract but none for second round picks (since there's no guaranteed contract). So if the Celtics sold their first round pick they'd free up an additional $850k to $1.05 million in cap space minus the cost ($475k cap hold) of an additional open roster spot which is about half that amount.

So selling the pick frees up about $500k. Not much.

[Lucky17]

Opting out is not about getting the Celtics under the salary cap.

It's about reducing the payroll and the luxury tax.

The savings from a restructured contract for Pierce would offset the increase in Rondo's salary, and also free up money to resign guys like Ray, Nate, etc.

Yep.  An opt out and extension might be beneficial for both sides, but not for the sake of cap space.  Rather, it would be all about saving luxury tax.  For instance, if Pierce agrees to a 3 year, $45 million contract at $15 million per year, that would save ownership $6 million in salary next season, and $6 million in luxury tax.  If ownership re-invested that $12 million into the team (by, for instance, utilizing the MLE, or taking on salary in a trade), it could be a win-win for everyone.

but if he opts out, can they offer him $15M? do they have that kind of space?  he doesn't get to keep his bird rights if he opts out, does he?

It's an early termination option. I think Garnett did the same thing immediately upon arriving in Boston via the trade. I may be wrong, though.

http://members.cox.net/lmcoon/salarycap.htm#Q50

[Jeff]

Opting out is not about getting the Celtics under the salary cap.

It's about reducing the payroll and the luxury tax.

The savings from a restructured contract for Pierce would offset the increase in Rondo's salary, and also free up money to resign guys like Ray, Nate, etc.

Yep.  An opt out and extension might be beneficial for both sides, but not for the sake of cap space.  Rather, it would be all about saving luxury tax.  For instance, if Pierce agrees to a 3 year, $45 million contract at $15 million per year, that would save ownership $6 million in salary next season, and $6 million in luxury tax.  If ownership re-invested that $12 million into the team (by, for instance, utilizing the MLE, or taking on salary in a trade), it could be a win-win for everyone.

Exactly.

And I think Wyc and Danny will approach Pierce with that kind of logic this offseason.

Pierce would still get his payday, retire a Celtic, and help the team continue to be competitive through the re-allocation/re-investment of financial resources gained through the restructuring.

I think I can live with that.  At that point, it is really just shuffling the financial deckchairs.  I suppose it gives us more ability to take on future salary, but it doesn't do much for us adding talent next year

[Chris]

I think the problem with this whole thing comes down to which is more important to this team.  Savings next season, when they are going to be well into the luxury tax, and could use some extra breathing room to use the MLE and resign Ray...or cap flexibility in 2012, after KG and Sheed come off the cap, and they are working under the rules of the new CBA?

I honestly can't answer that.  But if they are willing to risk their cap flexibility in 2012, then I think it makes sense from both sides for Pierce to opt out, and take a deal in the 3 year/$36 million range.  That would save the C's somewhere in the range of $15-17 million in real money (including luxury tax) this season, and it would give Pierce piece of mind to know that he will not have to be begging for a job when the new CBA is in place.  

Of course, the problem with this is that it will tie the C's hands in 2012, if they want to be rebuilding.  This is the kind of contract that can really strap them going forward...but it might be too good to pass up from a business-side.  

It will be interesting to watch, but my money is on him not opting out.