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A misconception about the poison pill contract

Discussion in 'Houston Rockets: Game Action & Roster Moves' started by CincyRocket, Jul 17, 2012.

  1. Joe Joe

    Joe Joe Go Stros!
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    Since Lin is an Early Bird Free Agent that is a Restricted Free Agent, the Knicks can use Early Bird exception to match any offer even if the Early Bird Exception isn't big enough. Weird rule. Gilbert Arenas provision isn't really needed to protect Knicks because of this rule.

    http://www.cbafaq.com/salarycap.htm#Q25
     
  2. DonatasFanboy

    DonatasFanboy Member

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    We don't know for sure. But one way that seems reasonable to explain it:

    1. Lets say NY gets to "average" it to 8 mil per (and it could even be over 10 mil per if the contract is 5-5-15-15). They are in effect abusing all the cap rules. They get to resign their own guy to a huge deal without having cap space or full Bird rights.
    Not fair for teams that manage their cap more carefully. Mainly for smaller market teams.
    Also, it encourages spending by rich teams.

    2. Lets say we do the opposite. The Rockets DON'T get to average the contract. Do they sign Lin to 8 mil per, if there's 15 mil in year 3? I'm not so sure. What about Asik? That's an almost certain 'no'.
    So, why would Lin or Asik be punished just to make it more convenient for the Bulls or the Knicks?
    Why would the Rockets be penalized, when they managed their cap space better?

    It's a dilemma. And i think the current solution is fair. The Knicks/Bulls keep the right to match. But the cap/Bird rights mechanism doesn't get ignored either. The Knicks and the Rockets are in a different payroll position, and they are treated differently.
     
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  3. BimaThug

    BimaThug Resident Capologist
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    Incorrect. The Arenas rule IS what allows the Knicks to match an offer sheet greater than for the Early Bird exception amount. That's why Larry Coon links the reader to both the restricted free agency and Gilbert Arenas rule questions immediately after the sentence you are citing.
     
  4. DonatasFanboy

    DonatasFanboy Member

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    Arenas exception = much bigger amount than the Early Bird exception (in cases like Lin or Asik).
     
  5. zzpot

    zzpot Member

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    I have know Idea what the rule is, all I know is Morey is and always will get credit and blame for the exact trade, idea or deal/non deal every time.

    ie.. dwight deal does not go through... He will get praised as a god and will be thanked by many that he did not fall into a desperation trap and trade/or sink the ship to get him.

    Ok same deal we get dwight and people will scream and beat their kids and wifes that Morey should be shot dead on sight even if all he did was give up 2 moon pies and an RC cola for dwight to sit out till ready to play or for the entire year and then resign with us.

    No matter what... people are going to bytch.

    Morey can never win untill the storey is told and analysed at the slone sporst dealy thingy
     
  6. BimaThug

    BimaThug Resident Capologist
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    Good answer.

    --Allowing the player's former team (Knicks) to basically ignore the salary cap rules in order to get more favorable cap treatment for a contract they'd otherwise not even be able to offer themselves would be unfair.

    --Disallowing outside teams from being able to average the cap hit over the life of the contract would essentially "chill the bidding" on such free agents, as they would inherently have "poison pill" status on the open market. No way the players union would stand for that.


    The loophole is not in the amount of the contract, it is in LIMITING IT TO THREE YEARS. When the league and the union created the Arenas rule, the assumption was that such free agents would command maximum-length contracts (then, five-year deals). The rule regarding annual permitted raises was also different. (See Larry Coon's FAQs on Arenas Rule in 2005 CBA: http://www.cbafaq.com/salarycap05.htm#Q38)

    The thought was that the cap hit from Years 3 through 5 would be spread out enough so as not to completely obliterate the matching team's cap in any one year. However, that all changed in the new CBA, which both (a) further limited the length of contracts for outside free agents and (b) greatly increased the luxury tax penalties.

    By making the offer sheet a three-year deal (instead of the now-maximum four years), the balloon payment is concentrated into a single season. It also just so happens that the season in question in our current situations with Lin and Asik (2014-15) will be the first season in which the "repeater" tax will apply to teams who paid luxury tax each of the prior three seasons (the Knicks and the Bulls being two teams likely to fall within this category).

    Devious. Mischievous. Brilliant.

    Way to creatively abuse the competition, Daryl!
     
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  7. Joe Joe

    Joe Joe Go Stros!
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    I've always taken the GA provision as the provision that limits the first two years salaries to the MLE, but it is probably in that provision as well.
     
  8. BimaThug

    BimaThug Resident Capologist
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    The Arenas rule limits the first two years of any offer sheet SO THAT the player's former team can use either Early Bird rights or the MLE to match the offer sheet.

    Without the Arenas rule, there would be nothing to prevent another team from just signing a player to a starting salary above the average player salary (~$5.38M, the max to sign a young RFA using Early Bird rights).

    You are correct in saying that the Knicks will use Early Bird rights to MATCH the Lin offer sheet. But it is the Arenas rule that makes the offer sheet such that New York even is CAPABLE of matching with Early Bird rights. The Arenas rule very much applies in this case.
     
  9. Joe Joe

    Joe Joe Go Stros!
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    From Coon's part I cited, "This is true even if the starting salary for the Early Bird exception is lower than the starting salary of an offer sheet, which is based on the Non-Taxpayer Mid-Level exception." Based on this statement, it seems that even if the 104.5% of average player salary from previous season dropped below the MLE (they are pretty close), a team could still match an offer sheet with the Early Bird Exception even though the Early Bird Exception isn't normally big enough. I think the clause "which is based on MLE" is just to explain the limits of the offer sheet and not to limit early bird exception's ability to match a salary greater than the early bird exception.
     
  10. BimaThug

    BimaThug Resident Capologist
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    Okay, I think I understand what you are saying. But ALL of that is still within the context of the Gilbert Arenas rule. Look at the parenthetical immediately prior to your quoted sentence. It's a link to the Arenas rule FAQ. Larry Coon is just speaking about the Early Bird exception overall; and that particular paragraph involves how Early Bird rights relate to restricted free agents in general and to Arenas rule free agents.

    The bottom line is that the Arenas rule applies in the Lin situation.

    If you still don't believe me, then I don't know what else I can say. I suppose you can ask Larry Coon yourself. :p
     
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  11. Deckard

    Deckard Blade Runner
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    I don't usually comment in a thread about doing this sort of thing (I think it's bad form to announce in public that you're giving a member a "pat on the back," and even worse form, by far, to ask for it, so this is a rare exception on my part), but the OP got whatever "pat on the back" my bazillion posts impart upon the dude. This thread was truly an excellent idea, and badly needed, in my opinion. Kudos to CincyRocket! And kudos to Bima for nailing everything down.
     
  12. Nolen

    Nolen Member

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    Big thanks to Bimathug for clarifying! You rock.
     
  13. Rockets2K

    Rockets2K Clutch Crew

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    like Deck, I don't usually spend a post just to praise someone(I normally do that thru rep, but greenies must be spread to give to him again), but if we had MVP voting for CFBBS, Bima would be a lock.

    Thanks for giving us your time, intelligence and patience:)
     
  14. CincyRocket

    CincyRocket Member

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    Thanks for the props, Deckard....though I agree Bima was the MVP of this thread.
     
  15. Joe Joe

    Joe Joe Go Stros!
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    I know Arenas rule applies. I didn't mean to get into semantics. Me Joe Joe not good with words. The point I was trying to make is that making the first year match the MLE is pointless for Early Birds if you are going to let team match any contract regardless of whether the the first year of offer exceeds 104.5% of the average player salary or not.
     
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  16. CincyRocket

    CincyRocket Member

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    I guess what I'm trying to say is... Instead of everyone painting Morey as being diabolical (which just about everyone has been) I am surprised that the NY Knicks are not getting more heat for not offering Lin an extension. Clearly they were not in tune with his situation/Arenas rule/2014Tax.

    Anyone that offered Lin a contract would have had to use the 5/5.2/x structure creating a poison pill in the third year (assuming a decent contract). The 5/5.2/9/9 mil that we were originally reported to offer would have cost the knicks way more money than if they would have just extended him at 6-7 million per year (which is reported to be what they could have signed him for).

    In retrospect the knicks not extending him (and waiting for an offer to match) was an absurdly incompetent move and left the door open for the entire NBA. Though Morey's maneuvering was genius the knicks have only themselves to blame.
     
  17. DonatasFanboy

    DonatasFanboy Member

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    Contracts under 4 years can't be extended.

    The Knicks' (and the Bulls with Asik) only move was to let him reach restricted free agency, and then they only had two possible moves:
    - offer Lin a limited Early Bird contract. Basically, 4 years 22-23 mil. Obviously, Lin wants more.
    - wait for a team like the Rockets to come in an make a better offer via Arenas clause. Then match it.

    There's a third option in theory, which is to get significantly under cap, in which case the Knicks could make any offer they want, up to 4 years 58 mil. But it's obviously not viable in this case.
     
  18. stylus8088

    stylus8088 Member

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    Can someone clarify this: Does Houston pay Lin ~5/~5/~15 or ~8/~8/~8?
     
  19. aelliott

    aelliott Member

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    They actually pay 5/5/15 but it's counted against the cap as 8.3/8.3/8.3
     
  20. BimaThug

    BimaThug Resident Capologist
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    The Rockets will PAY Jeremy Lin based on the same structure the Knicks would have paid him: $5M in Year 1, $5.2M in Year 2, and $14.9M in Year 3.

    However, Lin's CAP FIGURE on the Rockets' books will be approximately $8.4M in each of the next three seasons.

    (Had New York matched, though, Lin's cap figure would have been the same as his actual salary in each year.)
     

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