sarahhecht

May 23

Cap Space And Bird Rights Explained

By sarahhecht Posted in: 2012draft, birdrights, freeagency, NicolasBatum, salarycap
As the Trail Blazers continue forward into a summer of ample opportunity, the complicated and somewhat confusing pieces that form the offseason puzzle are easier to understand and postulate on when we’ve got a strong understanding of how they work.

First we discussed the NBA Draft Lottery and which picks the Trail Blazers could end up with. Now it’s time to explain cap space and Bird rights, two more important assets in the Trail Blazers arsenal this offseason.

Cap Space and Free Agency

The NBA salary cap is the ceiling that an NBA team cannot exceed in spending on player salaries. The purpose is to ensure parity in the league so wealthy teams can’t “buy championships” by simply outspending their smaller rivals and hoarding super stars. It’s also a cost-controlling measure.

With this limit in place—no lower than $58 million for the 2012-2013 season—teams have to be very careful and strategic about how they spend their cash. A common term heard when referencing how much a team can spend is “cap space.” This is the dollar amount difference between the salary cap and the total of a team’s committed contracts. For example, if the salary cap is $58 million and a team has $40 million in contracts, they have $18 million in cap space to spend.

The Trail Blazers are well positioned in terms of cap space heading into this summer and the flexibility they have is by design. The moves Portland made at the trade deadline—trading Gerald Wallace and Marcus Camby for expiring contracts and draft picks—were executed with gaining assets and cap space as the primary goals.

The hard number Portland has to work with is virtually impossible to determine but the “controllable” cap space (what can be determined based solely on transactions done by the Trail Blazers without influence of any other team) falls in the range of $14-$24 million.

The low end of the spectrum would include exercising qualifying offers to restricted free agents, Jamal Crawford opting into the second year of his contract and drafting all four projected picks of the draft (two first rounders at 6 and 11 and two second at 40 and 41.) The high end would be reached if the Trail Blazers cleaned house by renouncing all available cap holds, Jamal opting out and trading picks. These are just a few examples and by no means contain ALL of the options and requirements to meet the numbers. I’m just trying to give you a ballpark idea. Also, keep in mind there’s a low possibility one of these extremes becomes a reality and a much higher possibility they land somewhere in the $15-$25 million range of spending.

What exactly could that kind of cash garner the Trail Blazers in free agency? Quite a bit. You could easily nab a big name free agent and solid surrounding pieces with the range of potentially available cap space in Portland.

Bird Rights and Nicolas Batum

Now you may be wondering why you hear about teams going over the salary cap. The cap in the NBA is a “soft cap.” This means there are exceptions that allow teams to exceed the cap. And while many may exceed the cap through use of these various exceptions there’s another limit they’re wary of. That limit is the luxury tax which in essence is a consequence for going too far over the cap. Next season the luxury tax line will be no less than $70 million and for every dollar a team spends above that mark they’ll pay one dollar in tax. Starting in 2013-2014 the tax levels will become move punitive than the current 1:1 becoming even more of a deterrent for overspending.

The most important of the salary cap exceptions, and one you will likely see the Trail Blazers attempt to utilize this summer, is the Larry Bird exception, more commonly referred to as “Bird rights,”

The Larry Bird exception allows a team to exceed the salary cap to re-sign their own free agents—it’s called the Larry Bird exception because the Boston Celtics were the first team ever allowed to exceed the salary cap to re-sign their own player, Larry Bird. To earn Bird rights a player must have played at least three seasons without changing teams as a free agent or being waived by a team. Players can retain their status as a Bird free agent if they are traded and then the new team can use the exception. Another important aspect of the Bird exception is contract length. A player’s current team has an edge in contract negotiations because they can offer the Bird player a longer contract. In the new CBA this is a five-year deal while all other teams can offer a maximum contract length of four years.

This exception would apply to for the Trail Blazers with Nicolas Batum. He is a restricted free agent this season and because he’s played for Portland for four seasons he is a Bird free agent. A scenario that could see Portland exercise the Bird exception would play out if the Trail Blazers were to spend all of their available cap space before re-signing or matching a contract for Batum. (Portland has until June 30th to extend Batum a qualifying offer to gain the right to match any contract he’s offered in free agency.) This would be a great option for the Trail Blazers because it would maximize the amount of money the team could spend within the rules of the salary cap.

As a side note: The NBPA (National Basketball Players Association) is currently in the midst of seeking arbitration to clarify Bird rights to include players who were waived by a team and then picked up off the waiver wire instead of clearing waivers and becoming free agents. As of now those players do not retain their Bird rights. This arbitration will affect the Trail Blazers in the case of J.J. Hickson, who Portland picked up off waivers after he was released from the Sacramento Kings. He is currently a restricted free agent with no Bird rights.

Offseason Opportunity

To wrap it up in a nice little bow here are the pieces the Trail Blazers are working with this summer. Keep in mind these assets can be combined in a multitude of ways.

- $14-$24 million in cap space, enough cash to land a big-name free agent
- Two first round lottery picks (one via New Jersey as long as it’s not 1-3)
- Two second round draft picks, 40 and 41
- Two restricted free agents, Nicolas Batum and J.J. Hickson, if the team extends them qualifying offers by June 30th

In the grand scheme of things Portland has quite a bag of tricks at their disposal to make a slough of deals in an effort to put a contenting team on the court for the 2012-2013 season.

I’m sure you have questions. Swing away.

5 Comments

  1. Hey Miss Sarah; Do you get the feeling I just wait for your blogs since I usually answer first or second.
    I don't have many questions right at this moment because you explained them pretty well.
    The one big question is if we give JJ a QO, we have to match anybody else's offer to keep him if we can do so without going over the salary cap, providing the Union doesn't win Arbitration's. Is that the way it is?

    by Hg on 5/23/2012 11:36 AM
  2. Correct. If we extend J.J a QO and the rule stays as is and J.J. does NOT have Bird rights, to match a contract we would have to be under the salary cap.

    by sarahhecht on 5/23/2012 12:20 PM
  3. Thanks Sarah. Wow. You really helped me understand that much better.

    by SalvatorePDX on 5/23/2012 1:20 PM
  4. Awesome! Glad it worked!

    by sarahhecht on 5/23/2012 1:37 PM
  5. Yay, now we just need to teach everyone about cap holds, mid-level exceptions, room mid-level exceptions, bi-annual exceptions, and the Gilbert Arenas rule and then they could really act like virtual GM's.

    by cmeese47 on 5/25/2012 12:40 PM
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