ducks
10-20-2005, 09:27 AM
Nuggets to be money players?
Denver contemplates paying luxury tax or losing star players
By Chris Tomasson, Rocky Mountain News
October 20, 2005
LOS ANGELES - In 2003, the Indiana Pacers were strong contenders for the NBA title but were reluctant to pay the luxury tax. So they let All-Star big man Brad Miller go in a sign-and-trade for below market value, and there have been no victory parades in Indianapolis.
In the summer, the Phoenix Suns were coming off the best record in the NBA but cringing at the prospect of paying the tax. So they parted with highly regarded swingman Joe Johnson in a sign-and-trade for what might turn out to be less than market value.
Now, the Denver Nuggets are surfacing as a possible title contender. But they have an escalating payroll and many NBA observers wonder what will happen with the team as it closes in on possibly paying the tax.
The Nuggets have until Oct. 31 to sign talented big man Nene to a contract extension that would begin in 2006-07. If he doesn't sign by then, he will become a restricted free agent after the season.
The general belief is the Nuggets, wanting to buy time, won't lock up Nene by Oct. 31. If he gets a big contract, the Nuggets could be staring at a luxury-tax situation next season or in 2007-08.
It's not just Nene waiting to collect big bucks from the Nuggets. Forward Carmelo Anthony is line for a contract extension for 2007-08 that could start at the maximum of about $13 million.
"I think it's possible that if they signed Nene, they could be in the luxury tax in 2006-07," said Dan Rosenbaum, a University of North Carolina at Greensboro economics professor who is recognized as a salary-cap expert. "It would be really close. But in 2007-08, they'd be dead in the water (assuming Anthony also is signed)."
Nene is believed to be seeking a deal worth as much annually as the six-year, $64 million contract Philadelphia 76ers center Samuel Dalembert received in July. Nuggets coach George Karl anticipates Nene getting a "hell of a contract."
As the days wind down toward the deadline, the Nuggets are crunching numbers. They're looking at payrolls several years down the road.
"We spend a lot of time on that," said general manager Kiki Vande- weghe, whose team faces the Los Angeles Lakers in a preseason game tonight at the Staples Center. "Planning. It's a big part of what we do."
The Nuggets have four players - Kenyon Martin, Marcus Camby, Andre Miller and Earl Watson - earning $5 million or more this season with four or more years remaining on their contracts. As the Nuggets contemplate the possibility of handing out more big deals, the key question is whether they are willing to eventually pay the tax.
The luxury tax is a dollar-for-dollar penalty on teams with a payroll beyond a certain threshold. In addition to paying extra dollars, teams over the threshold don't share in the initial distribution of money that goes to teams not paying the tax.
Many NBA insiders wonder if owner Stan Kroenke will be willing to pay the tax. In an e-mail, Kroenke did not directly comment on that but indicated a willingness to build a championship-caliber team with what he called "effective spending."
"Obviously, we've shown with all of our teams that we are willing to do whatever it takes to field championship-caliber teams," wrote Kroenke, whose major-league portfolio also includes owning the NHL's Colorado Avalanche and being co- owner of the NFL's St. Louis Rams.
"Both the Avs and the Rams have been at the top of their range in their respective leagues and they have both won championships. But as an organization, we focus on effective spending, not free spending. There are many examples of teams in all sports - basketball, hockey, football and baseball - that have high payrolls that don't make the playoffs.
"Maintaining a reasonable payroll and placing the best team on the floor is not necessarily mutually exclusive. In any business, containing cost is important, but you do not have to deteriorate your product to do so."
The Nuggets are not candidates this season to pay the tax. They will have a payroll of about $56 million, above the salary cap of $49.5 million but below the luxury-tax threshold of $61.7 million.
But a possible big contract for Nene could have a significant impact on the 2006-07 payroll. And the Nuggets have the potential of being over the luxury tax in 2007-08 if a large Anthony contract goes on the books.
"They could be in a situation in which they're stuck unless they traded Nene or they made some trades for expiring contracts," said Rosenbaum, noting a trade of Nene during the season wouldn't bring back a lot because his salary is $3.04 million.
The Nuggets have 10 players under contract for 2006-07, counting $50.15 million against the cap. That doesn't include bonuses worth up to $3.89 million to Camby, whose bonuses count $2.25 million this season against the cap.
Throw in a big contract by Nene and the Nuggets could have a payroll of more than $60 million with a few more roster spots to fill. Rosenbaum projects the 2006-07 tax threshold to be about $61.4 million.
In 2007-08, the Nuggets' payroll could skyrocket. If Nene gets a large contract and Anthony signs for the maximum, the Nuggets could be paying out more than $70 million, well above Rosenbaum's projected tax threshold of $64 million.
The Nuggets have eight players under contract or with contract options for 2007-08 worth a cap figure of $46.6 million. And that doesn't include Camby's possible bonuses.
"I know, in general, most owners don't want to be taxed," said Karl, estimating between 75 percent and 85 percent of owners don't want to pay the tax. "It's not a comfortable place. But is there a trade or a situation or a circumstance to win a championship in which Stan would go the extra? . . . What I know of Stan, he'd probably say yes. But I also know he wants to be an intelligent businessman."
Vandeweghe said Kroenke is "obviously committed to win." He cited Kroenke's history in handing out contracts with the Nuggets, including the seven-year, $92.5 million deal Martin received in 2004, and with his other teams.
The Rams, who won the Super Bowl after the 1999 season with Kroenke on board, have shown a willingness to pay for top players. The Avalanche, which won the Stanley Cup in 2001 after Kroenke bought it and Nuggets in July 2000, traditionally has had one of the NHL's highest payrolls.
In 2003-04, the last season before the NHL had a salary cap, the Avalanche had the fifth-highest payroll, at $63 million. The team payroll is down to $37.9 million because the NHL has implemented a hard salary cap of $39 million.
"Stan is a businessman, first and foremost," Avalanche general manager Pierre Lacroix said. "So if you are fiscally responsible in your actions, he'll be supportive. That's what he told me when he took over."
The difference in the old days of the NHL and the current days of the NBA is the NHL had no luxury tax.
About eight teams figure to pay the tax this season. With the total tax pool projected to be about $100 million, teams not paying the tax will get an initial one-thirtieth cut.
Tax-paying teams also will lose out right away on about $3.3 million before getting an equal cut of remaining tax dollars.
If the Nuggets decide not to pay the tax, a core player could get traded.
Andre Miller joined the Sacramento Kings in 2003 on a seven- year, $68 million deal, and the Pacers only received journeyman Scot Pollard and an expiring contract in Danny Ferry.
Johnson joined Atlanta on a five- year, $70 million deal with the Suns receiving Boris Diaw and two conditional first-round picks.
"It will be tough," Camby said of the Nuggets' salary situation. "But that's the nature of the business. It's not like New York, where everybody is overpaid. Whether (the Nuggets will) pay the luxury tax remains to be seen. But it will probably be a given that in a couple of years, the team won't be together. It's like that (throughout the NBA)."
The Nuggets don't have to make an immediate decision on whether they will pay the tax. But it might be hard to avoid if they decide to extend Nene by Oct. 31.
ETC.: It appears Voshon Lenard will be the starting shooting guard. "I think Andre (Miller, the starting point guard) and 'Vo' fit great together," Karl said . . . Nene said he expects to play tonight after missing the first three preseason games because of a strained right hamstring. Karl is hopeful Greg Buckner (strained groin) also will play. Camby is out because of a sore left foot and Bryon Russell might not play because of a sore knee . . . Assistant Scott Brooks, who will fill in when Karl is suspended for the first three regular-season games, will coach tonight while Karl sits in the stands. "I'm just going to keep it the same," Brooks said.
Soaring salaries
The payroll of the Denver Nuggets for the next three seasons with salary-cap and luxury-tax projections after this season by sports economist Dan Rosenbaum of the University of North Carolina at Greensboro:Year Contracts Salary cap Luxury tax What it means
2005-06 Fourteen players under contract for a salary cap amount of $55.74 million. If a 15thplayer among those in camp makes the roster, the maximum additional cap is $719,363. $49.5 million $61.7 million The Nuggets are in no danger of paying the luxury tax this season.
2006-07 Ten players under contract for $50.15 million. That includes Carmelo Anthony's$4.69 million option, which probably will be picked up by Oct. 31, and Greg Buckner's $1.85 million player option. It does not include possible bonuses for Marcus Camby worth up to $3.89 million and other small possible bonuses. $50.7 million $61.4 million If Nene signs a contract extension by Oct. 31 or as a restricted free agent in theoff-season, that could push the Nuggets into the luxury tax. Other free agents in the off-season will include Francisco Elson, Voshon Lenard, DerMarr Johnson and Buckner if he opts out.
2007-08 Eight players with contracts for a cap figure of $46.6 million. That includes EarlBoykins' $3 million player option and team options of $1.32 million on Julius Hodge and $1.01 million on Linas Kleiza. It does not include possible bonuses for Marcus Camby worth up to $3.79 million and other small possible bonuses. $52 million- $54 million $64 million If Nene signs a big contract as does Anthony, who is up for a first-seasonmaximum contract worth about $13 million, the Nuggetswould figure to be well into the luxury tax. Even without a Nene signing, a large Anthony contract could push the team into the tax.
[email protected] or 303-892-5125
http://www.rockymountainnews.com/drmn/nuggets/article/0,1299,DRMN_20_4172297,00.html
Denver contemplates paying luxury tax or losing star players
By Chris Tomasson, Rocky Mountain News
October 20, 2005
LOS ANGELES - In 2003, the Indiana Pacers were strong contenders for the NBA title but were reluctant to pay the luxury tax. So they let All-Star big man Brad Miller go in a sign-and-trade for below market value, and there have been no victory parades in Indianapolis.
In the summer, the Phoenix Suns were coming off the best record in the NBA but cringing at the prospect of paying the tax. So they parted with highly regarded swingman Joe Johnson in a sign-and-trade for what might turn out to be less than market value.
Now, the Denver Nuggets are surfacing as a possible title contender. But they have an escalating payroll and many NBA observers wonder what will happen with the team as it closes in on possibly paying the tax.
The Nuggets have until Oct. 31 to sign talented big man Nene to a contract extension that would begin in 2006-07. If he doesn't sign by then, he will become a restricted free agent after the season.
The general belief is the Nuggets, wanting to buy time, won't lock up Nene by Oct. 31. If he gets a big contract, the Nuggets could be staring at a luxury-tax situation next season or in 2007-08.
It's not just Nene waiting to collect big bucks from the Nuggets. Forward Carmelo Anthony is line for a contract extension for 2007-08 that could start at the maximum of about $13 million.
"I think it's possible that if they signed Nene, they could be in the luxury tax in 2006-07," said Dan Rosenbaum, a University of North Carolina at Greensboro economics professor who is recognized as a salary-cap expert. "It would be really close. But in 2007-08, they'd be dead in the water (assuming Anthony also is signed)."
Nene is believed to be seeking a deal worth as much annually as the six-year, $64 million contract Philadelphia 76ers center Samuel Dalembert received in July. Nuggets coach George Karl anticipates Nene getting a "hell of a contract."
As the days wind down toward the deadline, the Nuggets are crunching numbers. They're looking at payrolls several years down the road.
"We spend a lot of time on that," said general manager Kiki Vande- weghe, whose team faces the Los Angeles Lakers in a preseason game tonight at the Staples Center. "Planning. It's a big part of what we do."
The Nuggets have four players - Kenyon Martin, Marcus Camby, Andre Miller and Earl Watson - earning $5 million or more this season with four or more years remaining on their contracts. As the Nuggets contemplate the possibility of handing out more big deals, the key question is whether they are willing to eventually pay the tax.
The luxury tax is a dollar-for-dollar penalty on teams with a payroll beyond a certain threshold. In addition to paying extra dollars, teams over the threshold don't share in the initial distribution of money that goes to teams not paying the tax.
Many NBA insiders wonder if owner Stan Kroenke will be willing to pay the tax. In an e-mail, Kroenke did not directly comment on that but indicated a willingness to build a championship-caliber team with what he called "effective spending."
"Obviously, we've shown with all of our teams that we are willing to do whatever it takes to field championship-caliber teams," wrote Kroenke, whose major-league portfolio also includes owning the NHL's Colorado Avalanche and being co- owner of the NFL's St. Louis Rams.
"Both the Avs and the Rams have been at the top of their range in their respective leagues and they have both won championships. But as an organization, we focus on effective spending, not free spending. There are many examples of teams in all sports - basketball, hockey, football and baseball - that have high payrolls that don't make the playoffs.
"Maintaining a reasonable payroll and placing the best team on the floor is not necessarily mutually exclusive. In any business, containing cost is important, but you do not have to deteriorate your product to do so."
The Nuggets are not candidates this season to pay the tax. They will have a payroll of about $56 million, above the salary cap of $49.5 million but below the luxury-tax threshold of $61.7 million.
But a possible big contract for Nene could have a significant impact on the 2006-07 payroll. And the Nuggets have the potential of being over the luxury tax in 2007-08 if a large Anthony contract goes on the books.
"They could be in a situation in which they're stuck unless they traded Nene or they made some trades for expiring contracts," said Rosenbaum, noting a trade of Nene during the season wouldn't bring back a lot because his salary is $3.04 million.
The Nuggets have 10 players under contract for 2006-07, counting $50.15 million against the cap. That doesn't include bonuses worth up to $3.89 million to Camby, whose bonuses count $2.25 million this season against the cap.
Throw in a big contract by Nene and the Nuggets could have a payroll of more than $60 million with a few more roster spots to fill. Rosenbaum projects the 2006-07 tax threshold to be about $61.4 million.
In 2007-08, the Nuggets' payroll could skyrocket. If Nene gets a large contract and Anthony signs for the maximum, the Nuggets could be paying out more than $70 million, well above Rosenbaum's projected tax threshold of $64 million.
The Nuggets have eight players under contract or with contract options for 2007-08 worth a cap figure of $46.6 million. And that doesn't include Camby's possible bonuses.
"I know, in general, most owners don't want to be taxed," said Karl, estimating between 75 percent and 85 percent of owners don't want to pay the tax. "It's not a comfortable place. But is there a trade or a situation or a circumstance to win a championship in which Stan would go the extra? . . . What I know of Stan, he'd probably say yes. But I also know he wants to be an intelligent businessman."
Vandeweghe said Kroenke is "obviously committed to win." He cited Kroenke's history in handing out contracts with the Nuggets, including the seven-year, $92.5 million deal Martin received in 2004, and with his other teams.
The Rams, who won the Super Bowl after the 1999 season with Kroenke on board, have shown a willingness to pay for top players. The Avalanche, which won the Stanley Cup in 2001 after Kroenke bought it and Nuggets in July 2000, traditionally has had one of the NHL's highest payrolls.
In 2003-04, the last season before the NHL had a salary cap, the Avalanche had the fifth-highest payroll, at $63 million. The team payroll is down to $37.9 million because the NHL has implemented a hard salary cap of $39 million.
"Stan is a businessman, first and foremost," Avalanche general manager Pierre Lacroix said. "So if you are fiscally responsible in your actions, he'll be supportive. That's what he told me when he took over."
The difference in the old days of the NHL and the current days of the NBA is the NHL had no luxury tax.
About eight teams figure to pay the tax this season. With the total tax pool projected to be about $100 million, teams not paying the tax will get an initial one-thirtieth cut.
Tax-paying teams also will lose out right away on about $3.3 million before getting an equal cut of remaining tax dollars.
If the Nuggets decide not to pay the tax, a core player could get traded.
Andre Miller joined the Sacramento Kings in 2003 on a seven- year, $68 million deal, and the Pacers only received journeyman Scot Pollard and an expiring contract in Danny Ferry.
Johnson joined Atlanta on a five- year, $70 million deal with the Suns receiving Boris Diaw and two conditional first-round picks.
"It will be tough," Camby said of the Nuggets' salary situation. "But that's the nature of the business. It's not like New York, where everybody is overpaid. Whether (the Nuggets will) pay the luxury tax remains to be seen. But it will probably be a given that in a couple of years, the team won't be together. It's like that (throughout the NBA)."
The Nuggets don't have to make an immediate decision on whether they will pay the tax. But it might be hard to avoid if they decide to extend Nene by Oct. 31.
ETC.: It appears Voshon Lenard will be the starting shooting guard. "I think Andre (Miller, the starting point guard) and 'Vo' fit great together," Karl said . . . Nene said he expects to play tonight after missing the first three preseason games because of a strained right hamstring. Karl is hopeful Greg Buckner (strained groin) also will play. Camby is out because of a sore left foot and Bryon Russell might not play because of a sore knee . . . Assistant Scott Brooks, who will fill in when Karl is suspended for the first three regular-season games, will coach tonight while Karl sits in the stands. "I'm just going to keep it the same," Brooks said.
Soaring salaries
The payroll of the Denver Nuggets for the next three seasons with salary-cap and luxury-tax projections after this season by sports economist Dan Rosenbaum of the University of North Carolina at Greensboro:Year Contracts Salary cap Luxury tax What it means
2005-06 Fourteen players under contract for a salary cap amount of $55.74 million. If a 15thplayer among those in camp makes the roster, the maximum additional cap is $719,363. $49.5 million $61.7 million The Nuggets are in no danger of paying the luxury tax this season.
2006-07 Ten players under contract for $50.15 million. That includes Carmelo Anthony's$4.69 million option, which probably will be picked up by Oct. 31, and Greg Buckner's $1.85 million player option. It does not include possible bonuses for Marcus Camby worth up to $3.89 million and other small possible bonuses. $50.7 million $61.4 million If Nene signs a contract extension by Oct. 31 or as a restricted free agent in theoff-season, that could push the Nuggets into the luxury tax. Other free agents in the off-season will include Francisco Elson, Voshon Lenard, DerMarr Johnson and Buckner if he opts out.
2007-08 Eight players with contracts for a cap figure of $46.6 million. That includes EarlBoykins' $3 million player option and team options of $1.32 million on Julius Hodge and $1.01 million on Linas Kleiza. It does not include possible bonuses for Marcus Camby worth up to $3.79 million and other small possible bonuses. $52 million- $54 million $64 million If Nene signs a big contract as does Anthony, who is up for a first-seasonmaximum contract worth about $13 million, the Nuggetswould figure to be well into the luxury tax. Even without a Nene signing, a large Anthony contract could push the team into the tax.
[email protected] or 303-892-5125
http://www.rockymountainnews.com/drmn/nuggets/article/0,1299,DRMN_20_4172297,00.html