Cap & Trade

The official salary cap number for the 2010/11 season was just announced — and it is provides some good news for Pacers fans.

Most recently projected to be about $56 million, the final tally is actually $58.044 million.

Indiana is already well above the cap, but this means the luxury tax threshold (the number that is essentially a hard ceiling for a cash-strapped team like the Pacers) is also higher — which, at $70.307 million, gives the Pacers a few more options this Summer to add talent.

It doesn’t allow them to be real players in the free agent market, but they now have at least $2.35 million to mess around with, according to ShamSports. Now, this number does include the rookie deal for Paul George, but does not account for the Pacers’ looking-more-and-more-like-a-steal, second-round pick Lance Stephenson or looking-like-he-could-make-the-team-maybe, second-round pick Magnum Rolle. Second-round pick contracts can be negotiated individually so it’s tough to tell exactly how much more those two, if signed, will account for, but we can expect them to each make well under $1 million. (For reference, Spurs 2009 #37 pick Dejuan Blair reportedly made $850,000 last year, Hornets 2009 #43 pick Marcus Thornton reportedly made $457,588 and Rockets 2009 #44 pick Chase Budinger reportedly made $725,000.) This number also does include some non-fully-guaranteed money for Josh McRoberts and AJ Price, however — although cutting both players tomorrow would only save Indiana about $1.1 million combined, so I wouldn’t expect Larry Bird to axe two fan favorites for such measly savings (unless AJ’s injury isn’t progressing at all by opening night).

If you do all that math (seriously, don’t bother) basically, what this all means is that the Pacers are free to use as much of the mid-level exception (worth $5.765 million) as they choose to sign new players. This is no different than before, but if they can pull off a trade or two in the next few weeks that has them shedding a few million dollars and inching further and further away from the dreaded luxury tax, they might now actually be able to use most of that figure instead of less than half of it.

If they make, I dunno, the completely hypothetical and terrible deal of, say, Troy Murphy and Jeff Foster for Elton Brand, the Pacers would free up another $2.3 million in cap room. Add this to the, say, $1.4 million left over after signing the rookies and the Pacers would have $4 million to try to entice Ray Felton, JJ Redick, Anthony Morrow or Nate Robinson. Trade TJ Ford for someone else who makes a little less than he does and Indy could even get up to around $5 million to play with. Obviously, it would also free them up to make any trade where they took back a little salary rather than just sign someone outright as well.

In short — and I’m completely burying the lede here — this higher-than-expected cap number gives the Pacers a little bit more flexibility to improve this Summer in free agency, if they start getting creative, but it doesn’t really do all that much.

Still, it’s a good thing.

As my pappy always used to say, having an additional few million dollars of salary cap flexibility is better than not having it.

Don’t get too excited — the Pacers are still highly hamstrung by the salary cap. But, still, putting some houses on Baltic is better than owning the Water Works.

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On Friday, Chris Sheridan reported some positive news regarding next year’s salary cap figure:

The New York Knicks and other teams hoarding salary-cap space for this summer’s free-agent market received surprisingly good news Friday when they were told at the league’s board of governors meeting that the 2010-11 cap is projected to be $56.1 million.

That figure was $2 million to $3 million more than most teams had been expecting and $5.7 million more than the league forecast last July as a worst-case scenario.

This is somewhat exciting news for some teams, including the New York Knicks, and it will make for a more interesting summer for NBA fans in general.   Larry Coon gives his view of what it means to the much anticipated Free Agent Summer of 2010 over on ESPN.

For the Pacers, this news could be considered more relieving than exciting.  This new cap figure means that the Luxury Tax threshold will be at $68 million, instead of the the previously projected $65 million.  If you include the $5.5 million cap hit remaining for Jamaal Tinsley, Indiana has a cap figure for the 2010-2011 season of about $65.7 million before signing any of their draft picks.

Though the Pacers final draft position is yet to be determined, it is safe to assume that they will be picking 10th (87% chance).  The rookie salary scale for the #10 pick this year is about $1.9mm, but the player can be signed for anywhere between 80 and 120% of that number.  The overwhelmingly standard practice is to sign for 120%, so this will add about $2.2 million.

The Pacers have their own 2nd round draft pick, and it is possible that they will get Dallas’ 2nd round pick (from the Shawne Williams trade).  Dallas has until June 1st to decide whether to give us their pick from this year or next.  Since this year’s pick would be #57, I believe it’s safe to assume that they’ll go ahead and give us the pick.

If we assume that the Pacers sign their #10 pick, and both 2nd round picks at the league minimum of just under $0.5mm each ($0.9mm combined), that would put their total committed salary of $68.9 million, or about $0.9 million over the tax threshold.

Fortunately for the Pacers, the teams actual salary is based on their payroll as of the last day of the season, so they can go into the season over the threshold, and still avoid the tax.  The good news about the higher cap is that the Pacers should be able to use the 125% + 100k exception to reduce their payroll by the $1.0mm or so necessary.  That rule says that they could send out up to 125% + $100k more in salary in a trade than they take back.  They could also strike a deal with a team under the salary cap to trade a player and take no salary back.

Had the cap stayed at the lower projections, the Pacers would have been forced to make a deal similar to the Harping trade Utah made earlier that season.  In that trade, Utah was forced to package rookie guard Eric Maynor to get Oklahoma City to take on Harpring’s salary.  It did save Utah $10 million, but it cost them a promising young prospect.

At the higher cap/tax number, the Pacers are no longer facing sending out a future 1st or a Roy Hibbert to get someone to take one of our big expiring contracts to get under the tax.  They can either use the 125% exception, as noted above, or they could make a smaller deal.  For example, they could trade Solomon Jones and his $1.5mm contract, along with a future 2nd rounder to some team under the cap (the $56.1 million cap, not the $68.0 million tax) for cash considerations or the rights to some International Player who will likely never play in the NBA.

Of course, should the Pacers end up in the top three (a scant 4% chance), then that would increase their cap/tax issue by anywhere between $1.9 and $2.9 million.  Of course, that’s what we call one o’ them there “good” problems to have.

For more detail, please visit our Salary Central.

Like the Pacers, we at 8pts9secs wanted to avoid this luxury tax.  I would have put up a picture of a cap, but I didn’t want to piss anybody off.

Related Topics: Cap & Trade

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