Luxury tax and the likelihood of signing Ron

Yes, the full amount of T-Mac's salary (whether or not covered by insurance) counts against the salary cap and the luxury tax.

Yes, the Rockets are already close to the luxury tax threshold before signing any free agents or draft picks.

Yes, Les Alexander WILL go over the luxury tax in order to add a "significant player". One would think that Ron Artest (17 ppg, 5 rpg) counts as a significant player. While the Rockets won't bend over backwards to pay up for Artest in a free agent market that will not provide him with many other lucrative offers, they will exceed the luxury tax threshold to keep him.

But the Rockets' luxury tax situation (making every additional dollar of salary count double) will make it VERY difficult to keep Von Wafer at anything close to what Wafer will want. He's going to look for a multi-year deal at at least $3-4M per year. The Rockets will not be able to afford him at that price (which would cost them $6-8M next year and possibly beyond). Hence, the selection of Jermaine Taylor at #32. Taylor will likely only cost the Rockets at or slightly above the rookie minimum salary (~$458k). Combine this with the fact that the Rockets will not be able to offer Von ANYTHING (above the league minimum for Von, which would be ~$885k) until Ron Artest's situation is resolved (since the Rockets would need to keep their full MLE available to sign an Artest back-up plan), and it's not looking too good for Von Wafer being in a Rockets uniform next year.

Bottom line: The Rockets will likely be okay going over the luxury tax to re-sign Ron Artest will won't be too willing to do so to re-sign Von Wafer. In the Rockets' minds, Von would be best served to re-sign for the league minimum next year and then take his chances again in 2010 when the Rockets will have Early Bird rights on Wafer and can re-sign him for up to the MLE amount without tapping into their actual MLE.

Unless Morey pulls some magic out of his hat this summer, I think we will probably see a trade of Brian Cook ($3.5M) plus a future pick/cash considerations for nothing to a team under the cap or a team under the luxury tax with a large enough trade exception.

 

think we will probably see a trade of Brian Cook ($3.5M) plus a future pick/cash considerations for nothing to a team under the cap or a team under the luxury tax with a large enough trade exception.

You pay a team the equivalent of his salary to take him so he is essentially free to them? just cap space and a roster spot? How's that for Brian's ego?


How does the MLE work for finding a backup center? assuming we sign Ron at a a rate that gives us 0 cap space. It should be enough to get some quality right?

 

Yeah, I don't think the team goes over the Luxury tax. I think they try to resign Artest though.

But I can see a situation where McGrady is traded and the team takes in less salary per year basis.

 

we have ron's bird rights so we can sign him and not be affected by luxury tax right? that could help if we sign him after signing other players first or am i not getting this whole bird right thing?

 

I might be wrong, but I believe the Bird Rights allow us to make a higher qualifying offer without regards to the SALARY CAP, not the luxury tax which must be paid anytime you exceed it no matter the circumstance.

Anyhow, we're re-signing Ron. There's no way he gets a better offer than to play with us. The situation is just too ideal. Go look at that NBA.com draft review video for some good arguments why.

 

I believe the Bird Rights just allow us to go over the cap to resign him. I think we'd still pay the LT if his contract put us over the threshold.

 

Is the same true with the MLE and all other exceptions?

 

1. It doesn't matter if the Rockets are over the tax threshold now or any time before the end of the 2009-2010 season. The Rockets have frequently been a bit over the threshold and simply made deals to dump enough salaries to get under.

2. This season, if nothing else, one obvious thing the Rockets can do to get under the tax threshhold or at least to avoid paying as much tax as they otherwise would have is to dump the salaries of Barry and Cook at the trade deadline. Barry makes $2 million. Cook is at $3.5 million. By the Feb. Trade deadline less than half of the salary remains to be paid. The Rockets should be able to easily pay somebody up to $3 million in cash to take each of the contracts of their books in a win-win deal-- the other team pays less in salary than they get from Rockets, the Rockets avoids more in tax+salary than they pay. They can always throw in a 2nd rounder or something if need be (they did with Steve Francis).

3. Alternatively, TMac's expiring contract is so huge that they can work the +/- 25% margins to reduce their cap level signifiantly toward the trade deadline.

In any case, the Rockets don't have to worry about being under the tax threshhold after a signing/trade, all they have to worry about is to not go over by so much that it's not possible to get back under.

 

You've got the bird rights thing - I think you're missing the distinction between salary cap and luxury tax.

The above 2 replies should clear it up though!

 

My guess is that management will try really hard to trade TMac for a player or multiple contracts that add up to 85-90% of his contract. This way, we can get a good player in return and sign Ron at the same time without going out the threshhold. I don't think Von will be back though.

 

Correct me if I'm wrong here - but is Lux Tax is calculated on the amount of payroll AT THE END of the season? (or at the trade deadline?)

ie - we could go over up to $80-85million in salaries to start the season, but make sure we get back under luxury tax level later in the season if that was seen as neccessary.

The thing about McGrady's deal being mostly insured is that, yes, it counts against the salary cap and to calculate luxury tax BUT it's not money that we're actually spending.
eg. Assuming he misses 1/2 the season injured and unable to play, we'd save in the order of $10-12 million --> meaning that we could go over luxury tax level by $5-6million without it costing the team more

(yes - I realise we'd miss the benefit of receiving back our share of the tax).

 

Consider this about the luxury tax, Les might be willing to pay it this year because the reward for staying under the cap will be less.

http://insider.espn.go.com/nba/draft2009/insider/news/story?page=09DraftBuzz-090625

Les just spent 6 million in draft picks. So if going over the cap a little will provide as much value as those draft picks, I think he will do it right now. Especially since staying under the cap isn't as big a reward as in the past.

And the rockets always have the ability to get back under the tax later in the year by dumping contracts (like we did with Steve last year) to teams with cap space/exceptions.

So I suspect that we'll re-sign ron and sign/trade for anyone else that would help this team even if it means going over the luxury tax. And if things really don't work out then Morey will make a deal later in the season to get under the LT.

 

Morey seems to find a way to work around the luxury tax each year. He has his work cut out for him now. Add to the fact that we're gunning for Ricky Rubio. I'm not saying we're gonna get him, but if we do, there's about another $3,000,000 when you sign him.

I expect Von Wafer is gone, and I don't care too much, given that our two new guys look like they can replace him easily.

Ron Artest? God only knows. Unless you can pull something like trading Shane to some under-the-salary-cap team (back to Memphis, or to hometown Detroit) and take back smaller dollars in return, and not lose too much in that process, or some other clever move somewhere.

Because if (when) we trade Tmac, if we don't get at least one sizable expiring contract (Kenny Thomas, any of the garbage on the Knicks), we really can't afford to keep Ron. We have guys looking for raises next year.

 

I have to think the driving force behind Les' current willingness to be aggressive and "predatory" is his desperation to keep Yao interested in resigning with Houston.

I'm sure there are other factors like, perhaps, the economy in Houston not being hit as hard as other places, the fact that the Rockets were profitable last year and the fact that he always wants to win a title but his desire to keep Yao in Houston is the primary reason he may be willing to go above and beyond his normal spending habits. If necessary, he may not even force Morey to get payroll under the LT threshold by the end of next season.

I know this has been brought up before but who agrees/disagrees with this assessment?

 

That and the fact that you should always try to exploit the weakness of your competitors. Their hurtin' a little, you're not so much; so you pay under value for their assets ... and turn around and crush them with them.

It's OK to be ruthless in basketball, nobody starves or dies.

 

Wafer's bounced around because of the question marks regarding his attitude and behaviour.

This time around it was more than just red flags being raised... That concern cost them a playoff game.

 

Completely unfounded suppositional hyperbole.

Prove it.

 

Adelman sending Wafer to the locker room, then Morey sending Wafer to the team bus, all during a playoff game isn't enough?