How does the one time ability to cut players change the value of expiring contracts? Here are my thoughts but I'm not sure I'm right. Expiring contracts are valuable because the offer teams cap relief in the near future. A way to escape luxury tax or to create flexibility to sign FA's. The new CBA's ability to cut players and save luxury tax would appear to cut into the value of expiring contracts. Separate but related question. Very basic i think. Is it true that we could offer Stromile Swift whatever we want, in excess of the cap, if we're willing to eat luxury tax? Or can you exceed the cap only to re-sign your own players? please explain because this dramatically impacts GM behavior with the new CBA cut provision What I'm thinking is that the Rockets could be very competitive for Swift if they're not limited to the MLE by rule (only by lux tax and Les' wallet). We can easily cut Spoon to pull us back under the luxury tax. while Les might have to pay a little extra because he is carrying both Spoon's and Swift's deals, that's far less than getting hit with the lux tax to boot. My sense is that if his staff says Swift is the missing piece, Les would go for it. Anyway, I'd appreciate some knowledge.
I'm not a guru, but can answer both questions on a simple level. Perhaps someone of more expertise can give an in-depth explanation. 1) This is a one time opportunity for teams. Teams will have the ability to get out of the luxury tax of one player, but they still have to pay him through to the end of his contract, must cut him and cannot re-sign him. Yes, this will reduce the value of our expiring contracts this summer. But, if they have more than one contract they'd like to get out of, they'll still have value, and in addition, they'd be able to get out of paying the players contract after a year, not just the luxury tax. So, it'll still help some teams get under the luxury tax bracket where they are paying double on a player, and some teams who are trying to get under the salary cap so they can sign a bigger player. 2) No, they can't go above the salary cap to sign a player. They are then forced to use exceptions to go above the salary cap.
So then what exceptions do we still have left to use on FAs? I thought a few, or all, expired around draft time, within a year of the date they are originally given. I want to be mad at this but there must be some advantages in letting these things expire...anyone?
The only thing that has expired is a <$3 million trade exception from the McGrady trade. That one couldn't be used on FAs, only in a trade, and was of limited usefulness. Don't worry about it too much. We have 2 other small TEs like that one that will not expire for a while yet. For free agents, we'll have the MLE like everyone else, that's worth about $5 million. And there's a million dollar exception which is actually around $1.5 million, I think. And, you can sign guys to the minimum.
Q: How does the one time ability to cut players change the value of expiring contracts? A: There are too many variables to provide an absolute answer. Let's look at 1 scenario....Micheal Finley. If Dallas releases Finley, they owe him ~$51m over the next 3 years. He is guaranteed that. And since DAL will still be above the LTax threshhold all 3 years remaining years, waiving him saved them ~$51m (the $ for $ LTax). Total cost = $51m in salary (less the intangible of player abilities). Now, should they trade Finley this summer for $15.9m in expiring contracts, their salary hit is $15.9m (same as Finley) and they have additional $15.9m $ for $ LTax hit. Total cost...$15.9m in salaries + $15.9m in LTax hit less the differential in player abilities for 1 year. Or $31.8m. On the surface, it seems like trading Finley for expiring contracts is more cost effective. But that's only one side of the equation. Any trading partner above the LTax threshhold or trading partner that will be above the threshhold once they extend or re-sign their own other FA's will have to tack on Finley's LTax $ for $ hit on the remaining $51m. Not a good prospect. To put this in terms of the Rockets, 2006-07 will have a maxed TMac, a maxed Yao, probably Juwan, Luther Head and whomever we sign for with the MLE this summer. The total for these 5 players is in the vicinity of $35m. Add in Finley and you get to $50m real quickly for 6 players. Clearly, adding Finley for expiring contacts will likely push the Rockets above the LTax threshhold. I tend to imagine (in a trade for expiring contracts) picking up the Finley's, Webber's and Grant's of the world tends to benefit their former team more than their aquiring team.
This one time opportunity to cut players may devalue the expiring contracts a little, but on the other hand, I think they actually increase the value of any trade exemptions (of which the Rockets have a few small ones)... As teams utilise this opportunity to reduce their luxury tax, the pool of available free agents actually increases. All of a sudden, you have Finley, Houston and other high calibre players added to the list of available free agents. This means that for teams already under the cap, it is more attractive to get even further under the cap this year than in any other year. Hmm maybe this does mean that expiring contracts are still very valuable - for example a team with player A with a 5 year contract making $X might trade this player for an expiring contract - and then sign a free agent B for 5 years at $X.. in effect getting player B whom they covet for just 1 year of luxury tax hit instead of 5. With an expanded pool of free agents - this makes it more likely that there is a team fitting the above scenario - making the Rocket's expiring contracts very valuable if they wanted player A.
