Mike Monroe: Labor agreement has tax issues

[Kori Ellis]

Mike Monroe: Labor agreement has tax issues
Web Posted: 07/31/2005 12:00 AM CDT

http://www.mysanantonio.com/sports/b...e.2d104d2.html

San Antonio Express-News

Heavy lifting.

The NBA finally got copies of the new collective bargaining agreement to its teams early Saturday morning. It is a do ent with more than 600 pages.

In 72 hours, team executives have to absorb the essential differences from the old agreement as they relate to player contracts moving forward. Specifically, they have to understand the nuances of the new deal as they relate to free agents before the new signing period begins at roughly noon on Tuesday.

All you really need to know is this: The new salary cap is $49.5million, which the Spurs will exceed; and the new luxury tax threshold is $61.7million, which the Spurs won't reach. That means they can continue to get paid for the fiscal irresponsibility of other teams, such as the Dallas Mavericks and the New York Knicks, who have tried to overpay their way to on-court success. Those teams have to pay, dollar for dollar, for their player payrolls above $61.7million, and the monies collected are redistributed to those teams below the threshold.

But those redistributions won't be as hefty in the future, owing to the so-called amnesty clause in the new agreement that allows teams a one-time-only opportunity to waive a player contract and be relieved of luxury-tax liability. The Mavericks, for example, presumably will waive Michael Finley and be relieved of at least $51million in luxury-tax payments over three seasons, though they will still have to pay Finley the $51million that remains on his deal, and they won't be allowed to re-sign him until his current contract expires.

There are teams that have held the line on player payments that are more than a little upset about the amnesty clause — and for good reason. It makes sense only for those teams above the luxury-tax threshold, which means it rewards only those teams that violated the spirit of the old agreement by relieving them of financial burden they knew they were taking on when they signed players that would push them above the threshold.

Plus, in a real way, it punishes those teams that remained below the threshold by reducing future shares of the luxury-tax redistribution.

The Mavs reportedly are trying to trade Finley to an Eastern Conference team — they prefer that he not go to one of their Western rivals, especially the Phoenix Suns — before they have to impose the amnesty clause in the new agreement, but the principle of the amnesty clause remains.

And if Finley is waived, does he end up in Phoenix, which may be on the verge of losing Joe Johnson? And if he does, is that fair to a team like the Spurs, the Suns' No. 1 rival in the West?

It is beginning to look like a Johnson sign-and-trade deal is more likely than the scenario in which the Suns match whatever offer Johnson receives from the Atlanta Hawks, especially after Johnson on Friday told ESPN.com's Marc Stein that he prefers to "move on" to another team and that the Suns not match the Atlanta deal. The Suns, of course, continue to insist they will match any deal Johnson is offered, even a "front-loaded" offer from the Hawks.

There is as much bluffing going on around Johnson as there was during the 2005 World Series of Poker a couple of weeks back. But if Johnson doesn't sign an offer sheet from the Hawks in the next couple of days, go "all in" on the proposition that the Suns will negotiate a sign-and-trade with Atlanta.

Meanwhile, expect the Spurs to announce the re-signing of power forward Robert Horry and the signing of Argentine center-power forward Fabricio Oberto on Tuesday. We have known for a while that those players agreed to terms with the reigning champs.

What we don't know is whether another team is going to make a substantial offer for restricted free agent Devin Brown or if the Spurs will sign Sacramento Kings restricted free agent Maurice Evans to an offer sheet the Kings would have seven days to match.

Get well soon: Best wishes for a complete recovery to Denver Nuggets coach George Karl, who underwent a five-hour operation Thursday to remove a cancerous prostate.

Karl angered Spurs fans during the first round of the playoffs when he criticized Manu Ginobili's style of play, so perhaps he had that in mind when he went out of his way to set the record straight last time I saw him, at the Las Vegas summer league a few weeks ago.

At that time, I had no idea about Karl's cancer.

"I was just trying to get in (Ginobili's) head a little," Karl said then. "I love the way that guy plays. I wish everybody in the league played as hard as he does."

[Aggie Hoopsfan]

All you really need to know is this: The new salary cap is $49.5million, which the Spurs will exceed; and the new luxury tax threshold is $61.7million, which the Spurs won't reach. That means they can continue to get paid for the fiscal irresponsibility of other teams, such as the Dallas Mavericks and the New York Knicks, who have tried to overpay their way to on-court success. Those teams have to pay, dollar for dollar, for their player payrolls above $61.7million, and the monies collected are redistributed to those teams below the threshold.

This must have gotten changed in the final version. Everything I have read since they reached the agreement verbally said that ALL teams would get a cut of the new lux tax revenues.

[Kori Ellis]

Or Monroe is just wrong.

[TexasAggie2005]

How can he be so sure we won't reach the luxury tax threshold? Last I checked, we were pretty close (59ish?) with a few roster spots to fill.

[Aggie Hoopsfan]

I read his comments about the Spurs not being over the lux tax as referring to the tax threshold for the just concluded season (2004-2005).

In which case, he's correct - Spurs definitely come in under the lux threshold.

[Kori Ellis]

I read his comments about the Spurs not being over the lux tax as referring to the tax threshold for the just concluded season (2004-2005).

In which case, he's correct - Spurs definitely come in under the lux threshold.

What?

I'm reading it as he thinks the upcoming season's payroll will not exceed the threshold - that's why he's talking about $61.7M -- that's for the upcoming season.

[Felonius Monk]

I read it the same way you do, Kori.

From the thread announcing the signing of the agreement:

For the first time, NBA teams will know the tax level in advance for the upcoming season. For the 2005-06 season, that level has been set at $61.7 million.

From Monroe's article:

The new salary cap is $49.5million, which the Spurs will exceed; and the new luxury tax threshold is $61.7million, which the Spurs won't reach.

Like others in this thread, it looks to me like the Spurs could bump up against the Lux Tax threshhold ... especially if they offer anyone else more than the minimum. Under the current agreement (and I'm assuming it hasn't changed in the new one .. which may of course be a bad assumption), teams are pay only the minimum for a 4th year player and the league pays the rest. The excess is not included in team salary. So perhaps the Spurs sneak in under the threshhold if they sign only minimum players for the remaining 4 to 5 slots.

If that's true, it contradicts Monroe's thoughts that the Spurs may make a substantial offer to Devin or a compe ive offer to the Clip's Maurice Evans.

[TheWriter]

Since we signed Horry via his early bird rights, his first year deal doesn't count against the cap, correct?

[Felonius Monk]

Since we signed Horry via his early bird rights, his first year deal doesn't count against the cap, correct?

It counts against the cap. http://members.cox.net/lmcoon/salarycap.htm#18

25. Does the Larry Bird exception mean that free agents can be signed and not count against the cap?
All salaries are included in team salary (and count against the cap). The Bird exception simply says a team can exceed the cap to sign certain players. The new salary applies toward the team salary just like the salaries of the team's other players. So if a team is over the cap and uses the Bird exception to re-sign its own free agent, it will end up farther over the cap.

[exstatic]

Something I read said that minimum salary contracts will not count towards the tax threshhold. In that case, the Spurs could easily fill out the last few spots and not pay the tax. Or, since everything (except this) I've read said that all teams will get the distributions of the tax, they could ooch over the tax a bit, and use their "refund" to pay the few million that they go over.

[BigDiggyD]

Or Monroe is just wrong.

My vote is on that one. It flies in the face of everything I have read from multiple sources on the new deal.

While no one has been able to say if the luxury tax distributions will be even among all teams or adjusted on a scale based on if/how far you are over the threshold, but they all say you get something.

Where the new deal supposedly has its teeth, is in the fact that every team over the threshold is guaranteed to have to pay the tax every year. In the prior CBA you didn't have to pay the tax unless the entire league's average cap was over the line. This worked out to only two years out of the six of the prior CBA that any team had to pay any tax regardless of how much they spent. A lot of teams were willing to roll the dice on that fact.

This, I believe is the reason the "Amnesty" clause is in effect. It gives teams a one-time shot to get in compliance with the new rules if they so choose.

This is also the reason why there will be a "catastrophic injury" exemption that kicks in after a couple of years of a player being out. Also, it might explain the new "minimum salary" exemption where some or all of these players salaries will not count against the luxury cap since there will be a hard line that if you cross you will pay a penalty every year, there will be times where you have no choice (injuries) but to fill spots on your roster with these type players.

This should help curtail spending. In years past you may have seen a team willing to spend an extra few million over the luxury line because their resident capologist said that there would not be a tax imposed that year ("Someone get Presti on the line!! I need to know if we can pay this guy!!"). Now you will have to s out dollar-for-dollar a tax, every time you go over the line. Of course, now you get to know what that line is at the beginning of the off-season as opposed to after the season.

[Rick Von Braun]

This should help curtail spending. In years past you may have seen a team willing to spend an extra few million over the luxury line because their resident capologist said that there would not be a tax imposed that year ("Someone get Presti on the line!! I need to know if we can pay this guy!!"). Now you will have to s out dollar-for-dollar a tax, every time you go over the line. Of course, now you get to know what that line is at the beginning of the off-season as opposed to after the season.

As long as there are teams waaay above the tax threshold, teams could still afford going slightly over the tax threshold.

My understanding of the new rules, based on what I have read on the press, is that the redistribution of tax/escrow money goes to all the teams in the same proportion independently of their salary/payroll situation.

This means that teams slightly above the tax threshold paying a couple of million dollars will still receive money (net flow positive), since they are being subsidized by the big spender teams anyway.

[Aggie Hoopsfan]

I've read said that all teams will get the distributions of the tax, they could ooch over the tax a bit, and use their "refund" to pay the few million that they go over.

This is what I've been saying for weeks now. I think Monroe whiffed on this one.

When I put pen to paper the Spurs could go up to 4 million over the lux tax threshold and still make the penalty back thanks to the other teams way over the tax.

[Kori Ellis]

So, AHF what were you talking about earlier in this thread when you said he was referring to the concluded season?

[Aggie Hoopsfan]

Who knows at that point, I had just gotten back from The Loon (crazy _allas bar).

I think I was trying to make sense of Monroe's complete whiff on the details of the new CBA.

[Kori Ellis]

Who knows at that point, I had just gotten back from The Loon (crazy _allas bar).

It's so funny. I almost posted, "I assume AHF is drunk by the time of this post"

[Extra Stout]

Does Monroe just not do his homework in the offseason?

[waly.mg]

Karl angered Spurs fans during the first round of the playoffs when he criticized Manu Ginobili's style of play

Really

[50 cent]

Who knows at that point, I had just gotten back from The Loon (crazy _allas bar).

I think I was trying to make sense of Monroe's complete whiff on the details of the new CBA.

The LOON!!!

I live right down the street from the Loon and know a lot of the people that work there. Do you live in Uptown AHF?

[Aggie Hoopsfan]

Dude, I'm at Haverwood and the Tollway (I don't know if that qualifies as 'Uptown', I'm not up on all the Dallas jargon yet).

It's like a 2 minute drive to that bar district (Loon, Flying Saucer, etc.). Good times (from what I remember).

[50 cent]

Haverwood is in North Dallas/Plano which is nowhere close to Uptown. The Loon/West Village/McKinney Ave. area is considered to be Uptown.

I live in Uptown right behind Hotel ZaZa.