[CAP calculation]Lowry's Contract re-Examined

As soon as the news of Cav's contract offer to Lowry came out, I was in a very confused mode: why offer 24M in 4 years?

-- my confusion was not related to whether I think Lowry is over-valued or under-valued by this contract (just to be clear, I think that was a great contract for the rox and Lowry's contributions easily tops that), but rather to a fact that many Cap experts have pointed out:

24M in 4 indicates a 4 year standard contract starting at about $5.35M this year. ​

With this year's MLE set at around $5.85M, why did Cavs only offer 5.35? what are they trying to save the extra 500k for? If you are lowry, wouldn't you be pretty pissed about that?

With reports that Cavs tried to offer a SnT to the Rox but Rox turned it down, the Cleveland front office must know that we have a pretty good chance of matching whatever they throw out to Lowry. So if they were not offering a standard MLE contract to Lowry, there must be some reason that they think whatever they offered could somewhat discourage rox from matching it.

In search for a logical reason for such a curious figure, I tried to work out several non-standard contract scenarios that would fit with the reported 24M, 3+1 year contract, as well as the possible intention of "making rox hard to match".

I wouldn't go into tiny details of the contract calculation, but after deciding several commonly used tricks like "Front Loaded Contract" would not suit the above stated purpose, I was able to find a possible explaination as to why a 24M contract was offered:

Instead of a $5.35M, 8% annual increase standard contract that was being widely speculated and assumed,

A full MLE contract, with a 8% annual increase, and with a 17.5% signing bonus (max allowed to RFAs) was probably what was offered to Lowry.

Again, I won't go into calculation details. If any one is interested, Larry Coon's salary cap FAQ was what I based my calculations from:
http://members.cox.net/lmcoon/salarycap.htm#Q65

With a 17.5% signing bonus, a full MLE contract (with 3 years and a team option at 4th year) will look like this:

Signing Bonus: $4,225,000
Starting Salary: $4,446,000 (Note that the starting salary is significantly lower than a standard MLE contract without the signing Bonus)
2nd year Salary: $4,801,000
3rd year Salary: $5,157,000
4th year Salary: $5,513,000 (team option)

This adds up to a total contract worth of $24,142,000 (with about $18.6M guaranteed), which coincides with the reported figure.

With a huge upfront signing bonus, such a contract was probably the best way for the cavs to try to deter Morey from matching it. -- Obviously, it didn't succeed. -- and in this case, this is the cap impact of such a contract to our salary cap situation in the next few years:

This year: Lowry's contract counts as $5,854,000 ( Starting salary + 1/3 of his bonus, and coincides with the MLE)
2010-11: $6,210,000 (2nd year Salary + 1/3 of his bonus)
11-12: $6,565,000 (3rd year Salary + 1/3 of his bonus)
12-13: $5,513,000 (last year Salary, bonus is no long counted)


I could not confirm whether this is indeed the contract that Lowry received, but by all indications, it seems much more logical to a straight forward contract starting at $5.35M.

If this is indeed the case, congratulations to Lowry for making almost $9M this year! His play deserved for a huge pay day and I'm looking forward to see him being an important part of us in the future

 

thanks guys. I guess that ends the discussion.