Spurs Salaries and Luxury Tax Situation.

[Bruno]

Whenever a team sign a player or do a trade, there aren't only basketball considerations but also financial considerations. Only the basketball side matters for fans but if you want to understand moves made and have an idea about what moves will be done, you had to look at the financial side.
Basketball is the Yang, money is the Yin.


Spurs 09-10 salaries :

Players with a guaranteed salary :
Spurs have 15 players with a fully guaranteed contract.
Salaries for these 15 players are :
Tim Duncan: $22,183,220
Richard Jefferson: $14,200,000
Tony Parker: $12,600,000
Manu Ginobili: $10,728,130
Antonio McDyess: $4,500,000
Roger Mason: $3,780,000
Matt Bonner: $3,256,500
George Hill: $1,081,680
Ian Mahinmi: $989,670
DeJuan Blair: $850,000
Keith Bogans: $825,497 (he also get $207,845 from the league)
Malik Hairston: $736,420 (cost $825,497 against the tax)
Alonzo Gee: $150,000
Garrett Temple: $111,000 (cost $111,685 against the tax)
Curtis Jerrels: $59,217 (cost $106,829 against the tax)
Marcus Haislip: $462,808 (bought out)
Michael Finley: $1,882,353 (bought out)
Curtis Jerrells: $75,000 (waived, his contract was $75K guaranteed)
Cedric Jackson: $26,917 (10 days contract, cost $48,559 against the tax)
Garrett Temple: $26,917 (10 days contract, cost $48,559 against the tax)
Marcus Williams: $25,000 (waived, his contract was $25K guaranteed)
The total salary for these 15 players is $78,550,359 ($78,730,987 against the tax)

Spurs 10-11 salaries :

Players with a guaranteed salary :
Spurs will have 6 players with a fully guaranteed contract and without team or player options.
Salaries for these 5 players are :
Tim Duncan: $18,835,381
Tony Parker: $13,650,000
Manu Ginobili: $11,854,584
Antonio McDyess: $4,860,000
DeJuan Blair: $918,000
George Hill: $854,389
The total salary for these 6 players is $50,972,354

Players with a player option:
Richard Jefferson has a early termination option with a salary of $15,200,000.

Players with a partially or non-guaranteed salary:
Malik Hairston has a $854,389 fully non-guaranteed salary for 2010-2011.
Curtis Jerrels, Alonzo Gee and Garrett Temple have a $762,195 fully non-guaranteed salaries. Gee's contract becomes $100K guaranteed on July 1st, $200K guaranteed on November 25th and $300K guaranteed on December 20th.Temple's contract becomes $35K guaranteed on July 1st, $110K guaranteed on August 5th.
These 4 players contracts are a great trade asset for the 2010 summer.

Spurs payroll:
We can expect that Jefferson won't opt out. In this case, Spurs payroll will be $66.2M for 7 players.


The Luxury Tax:

What is the luxury tax?
The luxury tax is a mechanism whose first goal is to reduce the differences between the richest and the poorest franchises.
In Early July, the league calculates a threshold based on an evaluation of its revenue for the next season. At the end of the season, teams whose payroll is higher than the luxury tax threshold pay a dollar for each dollar above the threshold. The money given by all the taxpayers is then divided. Each team bellow the tax gets 1/30th of this money and the rest is either equally divided between all the franchises or used to help franchise(s) with serious financial troubles.

The double penalty system:
A team above the tax is two time penalized. First, they had to pay the $ for $ tax. Second, they don't get 1/30th of the luxury tax money given by NBA teams.
This system has two consequences:
- The $ for $ tax pushes teams with payroll significantly higher than the luxury tax threshold to lower their payroll.
- The redistribution system pushes teams that are just above the tax to go just under. What is problematic for a team $100K above the tax isn't the additional $100K to pay in tax but the $3M you don't get during the redistribution.

Luxury tax threshold in 09-10:
The 2009-2010 luxury tax threshold is $69.92M

Total luxury tax paid in 09-10:
This number is really important for a team close to the luxury tax level because it determines how hard they should try to stay/go under the threshold.
A team below the tax will get about $4M in redistribution this year.

Impact of the luxury tax on Spurs for 09-10:
Spurs will pay $8.7M in luxury tax for 09-10.
The Ratliff trade and buy outs for Haislip and Finley have helped Spurs to save some money. Between the luxury tax savings and the salaries not given, Spurs have saved about $3.1M with these 3 moves.
Spurs also haven't taken the cheapest road to fill the end of the roster: they have tried some players with 10 days contract and have filled the 15 roster spots. These moves have cost them about $600K.

Evaluation of the luxury tax threshold in 10-11:
The 10-11 luxury tax level will be calculated in July 2010 and based on the basketball related income in 09-10. With the economical crisis, this income is very difficult to evaluate.
In July 2009, the league sent a memo with projections of the luxury tax threshold between $61.2M and $65M.
In December 2009, people were more optimistic with $54M as projected salary cap. It means that the luxury tax threshold will be around $66M.
In April 2010, salary cap projections again raises to reach $56.1M. It means the luxury tax threshold should be at $68.4M.

Impact of the luxury tax on Spurs for 10-11:
If Jefferson picks his option, Spurs should be about $2.2M below the tax with 7 players under contract. Spurs will end up in the luxury tax territory even if they fill their roster with cheap players. The question is now: how far is the ownership ready to go into luxury tax territory?


After 2010-2011:

Players under contract for 2011-2012:
5 players have contracts for 2011-2012:
- Tim Duncan with an early termination option of $21,300,000.
- Manu Ginobili with $12,981,038 salary.
- Antonio McDyess with a $5,220,000 salary. Only $2,640,000 is guaranteed until July 1st 2011. This contract could end up as a nice trade asset in June 2011.
- George Hill with a $1,540,463 salary. This year is a team option that must be picked before November 1st 2010.
- DeJuan Blair with a $986,00 salary. Only $500K are guaranteed.

Players under contract after 2011-2012:
Only Dejuan Blair and Manu Ginobili are under contract in 2012-2013. Ginobili has a $14,107,492 salary. Blair has a $1,054,000 salary that is fully non-guaranteed until November 1st 2012 and becomes fully guaranteed after that.

What can we say about that:
It's nearly impossible to draw some conclusions give that it is in more than 2 years and that the CBA will change in 2011.
Spurs will likely enter in a rebuilding cycle soon so not having too much long term contracts is a good thing.

PS: Salaries numbers comes from ShamSports. Thanks to Sham for his great work.

[Mel_13]

Absolutely awesome summary of the Spurs financial status. Should be required reading before constructing scenarios.

[Bender]

great write up... I learned a lot.

[GooberNuts]

Thanks for this. Really helpful information

[TheProfessor]

That was epic. Thank you.

This thread should be cited any time someone asks a salary cap question.

[duncan228]

Fantastic Bruno. Thank you. The money side can be confusing, you've created a perfect guide to help understand it.

[Bruno]

Thanks to all.

[tomtom]

Excellent read thanks

[objective]

if Gist and/or Sanikidze were signed to the minimum, do they still count towards the tax as 2nd rounders, or does the second round charge only factor in with present picked 2nds, like only 2009 2nds get the lesser charge for 09/10?

[Obstructed_View]

I've been thinking that this offseason's chance of being decent hinges on Finley. If he leaves, the youth movement can commence with one decent free agent brought in. The Spurs have plenty of young talent that fits right into those roster slots, and the salaries should match right up.

If he stays, the Spurs are going to be forced to either scrap next season or start giving up players and 2010 cap room.

[Spursmania]

Thank you, Bruno.

[Libri]

I was looking for this.

[lurker23]

Thanks for the summary Bruno, great job.

I had a question in the Michael Finley thread, I was curious if you (or someone else) knew the answer:

Originally Posted by lurker23

Question on Finley's contract: this past season, he had what was effectively a no-trade clause because he had Bird Rights and was on a one-year contract. If he picks up this option, does he still have those veto rights, or do they go away under some technicality similar to "he is now on a two-year contract." ?

Either way, since July 1 is a key date for Finley's contract and Fabricio's, do you feel that they will try to put some pressure on Finley to decide as soon as possible?

[Amuseddaysleeper]

Wow Bruno, fantastic post.

Thanks for putting this together

[timvp]

Great job, Bruno. I was going to do a salary thread but this is much better and more comprehensive

At least all Spurs fans admit there is a "plan" this time around. It used to be hard to get Spurs fans to believe that there was a 2004 Plan and a 2008 Plan.

lurker23, yes, Finley can be traded after he picks up his option. He'll no longer have any trade protection.

Regarding Oberto, it's too bad the date on his contract isn't August 1. July 1 basically means the Spurs would have to trade him on draft day. Bruno, do you know if the Spurs and Oberto can agree to push that back to August 1 to make it easier to trade him? I've heard of pushing those types of dates back but I'm not sure that is allowed in this situation. And I'm guessing Oberto's agent wouldn't do it since it doesn't really help Oberto at all.

Losing that first round pick in the Thomas trade isn't so nice right now but the solace is that the Spurs probably would have traded it away anyways. At least with 37 the Spurs actually have reason to pick a player and keep him on the roster.

And yeah, I agree with OV that this summer could come down to Finley. Perhaps Pop can talk him out of picking up that second year. Who knows, maybe he'll opt out in hopes of landing somewhere else for the LLE for two years. Business-wise, it could make sense. He's coming off a season where he shot abnormally well and that combined with his health means he could land his final multi-year deal. After this coming season, I can't imagine he'd get more than the minimum.

[lurker23]

Originally Posted by timvp

lurker23, yes, Finley can be traded after he picks up his option. He'll no longer have any trade protection.

And yeah, I agree with OV that this summer could come down to Finley. Perhaps Pop can talk him out of picking up that second year. Who knows, maybe he'll opt out in hopes of landing somewhere else for the LLE for two years. Business-wise, it could make sense. He's coming off a season where he shot abnormally well and that combined with his health means he could land his final multi-year deal. After this coming season, I can't imagine he'd get more than the minimum.

However, can't Finley picking up his option be a positive? If the Spurs encourage him to decide before the draft (so that they can more fully assess all their options on draft day), and he chooses to take the $2.5 mil, he becomes another trade chip the Spurs have. I'd argue that with Finley's current production, his expiring contract of $2.5 mil would have more trade value than Bonner's or Thomas's contract, and about as much as RMJ's.

[Bruno]

Originally Posted by objective

if Gist and/or Sanikidze were signed to the minimum, do they still count towards the tax as 2nd rounders, or does the second round charge only factor in with present picked 2nds, like only 2009 2nds get the lesser charge for 09/10?

What is important is the status of the player when he signs his contract. If Sanikidze or Gist sign a minimum contract, they won't do it as FA but as 2nd round picks. Their contracts will count as 2nd rounder against the tax.

If Spurs makes moves that push them really near or over the luxury tax, players like Gist and this year second round picks will have a serious edge over Hairston and Williams only because of their respective cost against the tax.

Originally Posted by timvp

Bruno, do you know if the Spurs and Oberto can agree to push that back to August 1 to make it easier to trade him? I've heard of pushing those types of dates back but I'm not sure that is allowed in this situation. And I'm guessing Oberto's agent wouldn't do it since it doesn't really help Oberto at all.

They can postponed the guaranteed deadline if both sides sign a document. Lakers did it in 2005 with Divac's partially guaranteed contract.

And as you and lurker23 have said, it would help Spurs if Finley made his choice before the draft day and/or Oberto agreed to push back the date where his contract becomes fully guaranteed.

[lurker23]

I could be wrong, but the more and more I look at this situation, the more and more I smell a draft day trade. The three second round draft picks (especially 37) are nice little nuggets to have in a trade, and with their many expiring contracts, they could easily trade for a player who makes $5 mil, or $8 mil, or $11 mil, or $15 mil. The flexibility is endless.

[lurker23]

Here's a question: the NBA has a rule against trading away your first round draft pick in consecutive years. However, if I recall correctly, that goes away as soon as your traded pick is made. So, if the Spurs first rounder in 2010 is a necessity in a particular deal, the earliest that trade can be made is right after OKC picks at 25, correct?

[Bruno]

Originally Posted by lurker23

Here's a question: the NBA has a rule against trading away your first round draft pick in consecutive years. However, if I recall correctly, that goes away as soon as your traded pick is made. So, if the Spurs first rounder in 2010 is a necessity in a particular deal, the earliest that trade can be made is right after OKC picks at 25, correct?

I don't know exactly when is the soonest Spurs can trade their 2010 pick during the draft day but it isn't really a problem.
Spurs and the other team can agreed on a trade during the draft and make it official by sending papers to the league a couple of hours after the draft.

[lurker23]

Originally Posted by Bruno

I don't know exactly when is the soonest Spurs can trade their 2010 pick during the draft day but it isn't really a problem.
Spurs and the other team can agreed on a trade and make it official by sending papers to the league a couple of hours after the draft.

But I guess the bottom line is that after the draft the 2010 first round draft pick becomes a tradeable asset.

Not that I'm a fan of trading our first rounder every single year, but trading the 2010 first rounder might be more palatable than trading, say, George Hill.

[Mel_13]

As we watch the FO attempt to improve the quality of the supporting cast this summer, a little perspective and history is in order. The challenge to accomplish their mission will be greater this summer than any recent year.

In the financial history of the Spurs, the 2005-2006 season marks a significant divide. The 2005 CBA and the new Luxury Tax went into effect. That was also the year that Tony's 66M extension kicked in. Since that year the Big 3 have had the three highest salaries on the team. The budget for the supporting cast has essentially become the money left under the tax after paying the Big 3.

While the Spurs have increased their budget each year since then at the same rate that the tax limit has increased, the automatic increases in the salaries of the Big 3 have increased at a greater rate. As a result, the budget for the supporting cast has decreased since then both in real dollars and as percentage of the overall budget.

Here are the numbers (Lux Tax Limit - Big 3 Salary = budget for supporting cast)

2005-2006 (61.7 - 31.7 = 30M or 48.6% of the Tax limit)
2006-2007 (65.4 - 35.1 = 30.3M or 46.3% of the Tax limit)
2007-2008 (67.9 - 38.6 = 29.3M or 43.2% of the Tax limit)
2008-2009 (71.1 - 42.1 = 29M or 40.8% of the Tax limit)
and using Bruno's guesstimate in the OP
2009-2010 (71 - 45.5 = 25.5M or 35.9% of the Tax limit)

So while the Spurs had almost half of their budget to devote to a supporting cast in 2005-2006, they will have little more than a third of the budget this summer for the same purpose.

Taken one step further, the Spurs have contractual obligations of 23.4M to eight current supporting players. The task for the FO is to make deals that will transform that ineffective eight man group into a much more effective 10-12 man group while spending no more than a total of 25.5M. That, fellow Spurs fans, is a very tall order. Transforming the current bunch into a championship-contending supporting cast will be even harder.

[Bukefal]

Thanks, very interesting, informative read, especially about the luxury tax!

[mountainballer]

did ever a championship team come out of the free agency? I can't remember. as Bruno mentioned, there are 3 way to improve: trades, draft and free agency.
but if we look at the championship teams of the last years, all of them were built by draft and trades. (I'm talking about the cornerstones, not the role players)
Spurs only by draft (Tim, Tony, Manu), Celtics, Heat, Pistons, Lakers, Bulls by a combination of picks and trades.
the last FA signing I remember that turned into a top three player on a championship team was Billups, but he wasn't a big money signing, back then he was the typical MLE signing.
all the other max signings out of cap room didn't turn teams into champs. very often they didn't even improve the team.
I think free agency is good for finding complementary players, but not for building the foundation of a big team.
the reason is simple. to be able to make a max signing, the team needs to be below the cap that far, that there usually isn't enough depth left. you may add a star, but to finish the whole building, the team usually doesn't have the potential left.
trades are a different thing. via a combination of contracts, you can get those players, that are crucial to finally win it all. see Shaq to Heat. KG+RA to Celtics. Sheed to Pistons. maybe Gasol to Lakers. maybe Mo Willams to Cavs.
that's why I'm not a fan of all the free agency scenarios.
if the Spurs in fact reduce the team to just Tony and Tim and a few rookie contract players, they will very likely find themself without a top FA and even if they do find a decent player, they would be to thin to compete. (we need to see that a big signing 2010 automatically means that Manu is no longer with the team)
improvement via trade is the much better strategy. and this will be the year to do it, there will be more star players on the market for dump packages than ever. Spurs might not be as lucky as the Pistons in 2004 or the Lakers in 2008, but a nice player can be all theirs, if they pull the trigger. I'm absolutely sure that another title can only be won, if the Spurs keep the big three together (pray for Manu's health) and add one significant piece. forget the 2010 free agency. 2012 will be the year to re start from scratch. till then they have 3 more shots. if they take some risk this summer.

[Amuseddaysleeper]

Originally Posted by mountainballer

did ever a championship team come out of the free agency? I can't remember. as Bruno mentioned, there are 3 way to improve: trades, draft and free agency.
but if we look at the championship teams of the last years, all of them were built by draft and trades. (I'm talking about the cornerstones, not the role players)

In terms of championship, the closest I can think of is the pretty big overhaul the Miami heat had after the 2005 season (Riley even got criticized for trading so many players that already were on an established ECF team). At least I'm pretty sure it was after 2005 and not 2004.

[loveforthegame]

Bruno, thanks for the informative post. It's extremely helpful for those of us who don't understand all the ins and outs. Best job I've seen.

If I remember correctly, Finley let the FO know his decision a few days before the draft the last time he had a PO. I suspect he does so again especially if he's picking it up.