w&s's "Ming Lowest Paid #1" numbers might be Les's Max Offer

I made passing mention to this in w&s thread and other threads about Nachbar's payout, but it is rather long explanation of the CBA, so I thought I'd start a new thread. Despite the original numbers in w&s's thread that measure 3yr contracts to 4yr contracts, it looks like the reporter quoted in the thread could actually be reporting our maximum possible offer to Yao Ming, thus truly making him the lowest paid #1, <b>yet Les Alexander technically paying Yao as much as he can.</b>

Huh?
Right!

In that thread of w&s, <b>Topfive</b> made a nice observation that how could the numbers reported by w&s be a first offer? Why didn't the Rocket's and Ming/Sharks/Agents/CBA work out the numbers earlier, that something else must be happening.

<b>Short, non-Capologist Explanation</b>
Below is the longer technical explanation, but the quick explanation is that the Sharks can cut into Ming's base salary as a payoff that exceeds the $350K limit that the Rockets can pay. Exceeding the $350K payment is allowed as a so-called "signing bonus" to rookies that the rookies never see. (Normally, bonuses are not allowed for Rookies, except as payoffs for rights over foreign players.) The reason this so-called signing bonus would cut into Ming's base salary is that the sum of the bonus and base salary cannot exceed the Rookie max salary for a #1 pick.

What this says is that there is a rookie scale that we all know about. Teams can offer 80% of that or as much as 120% of that. For veterans, described in other CBA articles, signing bonus, loans or performance bonuses are limited. For Rookies, you can also have <b>some</b> of this added money, but ONLY at the expense of a higher starting base. In other words, it is one or the other. You either negotiate a higher starting base (which is best for players), or you ask for Unlikely Bonuses (performance bonuses) or assignment (trade) bonuses.

<b>Buyout Exceeding $350K is Probably the Issue with Ming</b>

It further says (which I bolded) that no rookie can get a signing bonus or loan, except in limited cases. One case is paying off a foreign team in excess of the $350,000 that the league allows the team to pay without charging it as player salary. If you look at the referenced article in that quote concerning the $350k, anything exceeding $350K would be "deemed Salary (as a signing bonus)." Further in the CBA, you will find that signing bonuses are limited to 25% of total compensation. Long story short, 25% above a rookie's base salary can be used as payoff for rights to a foreign player; however, the sum of that payoff and the base salary cannot exceed the Rookie Scale maximum for the player.

<b>Base Salary vs Buyout Pay as a Signing Bonus</b>

Here are my calculations:

The minimum and maximum starting salary Ming can negotiate is 80% to 120% of his Rookie Scale Schedule of $3.215 million:
<font size="2" face="courier">
min => 80% of $3,215,200 = $2,572,160
max => 120% of $3,215,200 = $3,858,240</font>

Ming can make $18m over 4yrs as a max. So his buyout can top out at $3.6m (25% of total). That can be spread across all yrs to avoid exceeding his allowable top salary. The Sharks would get all that, while Ming's base compensation get pushed down.

So, somewhere between 80% and 120% is Yao base, and anything above that and up to the max, the Sharks can negotiate with Les. Whatever the Sharks get, knocks down Mings base.

<i>guesses at Ming's salary removed, since there are too many variables. But I'm guessing the w&s reporter was right, except for his calculation for 4th yr compensation, which must be a 26.1% raise.</i>

 

deleted as I found my answer.

 

Funny guys. hehe

NJRocket, if w&s's reporter is correct, and my assumption that we are using a signing bonus for a buyout is correct, then we are offering Ming the Max we can. That's comforting then that we are paying all we can, depite it being the lowest base ever for a rookie #1.

So, I'd say yes. This is nothing to worry about.

 

michecon,

Your question is probably just one of semantics in how people report contracts.

Technically any buyout pay that exceeds the $350K that teams can directly pay as a buyout is "deemed Salary (in the form of a signing bonus) to the player."

That is a direct quote for the CBA. The money goes directly to the other team, and the player never touches it, but it counts against his salary, which means his maximum allowable pay goes down, so in effect, he does pay it.

 

w&s,

That link doesn't go to a thread that mentions the recent report that you cited?

$10.4m would equal his standard rookie scale exactly. The difference between that and 120% of it that (which he could get as a maximum pay schedule that Kwama Brown got) is either yet to be negotiated (meaning the Rockets sent a first offer) or already negotiated as a buyout signing-bonus of 20% paid to the Sharks.

My guess is the 20% difference is an NBA-allowed, buyout payment to the Sharks that is being taken out of Ming's maximum allowable salary.

by the way: your 4yr total that you reported seems mathmatically in error. You can't go from $10.4 to $14m between the 3rd yr and 4th. Did the reporter cite that number of $14.0m for 4 years in the same article that he mentioned $10.4 for 3yrs?

 

windandsea,

It is incorrect for the reporter to say the 3rd year total is $10.4 and the 4th yr total is $14.0. That would make both the 3rd and 4th yr ~$3.6m The 4th yr salary is guaranteed to be 26.1% higher than the 3rd year. It doesn't work; he is mistaken.

As for Ming paying the Sharks. What I presented in this thread is that he doesn't really pay the Sharks; the Rockets can give the Sharks a buyout as high as 25% of Ming's pay--as long as he doesn't exceed his maximum rookie scale pay.

That buyout is maxed at $3.6 million. Ming might have to pay more, as you say. But what I'm saying is it might be inaccurate to assume all of it is coming out of his base salary as cited by you. The bonus is above any reported base pay.

I recommend that everyone consider reevaluating the numbers of what Ming pays (or gets).

<b>Allowing 25% Signing Bonus to transfer as Foreign Player Buyouts Could be a Tax-Free Payment System by the NBA</b>

The NBA rule that allows a team to exceed the $350K contribution to a foreign team at the expense of player salary seems to be a manuever to avoid US taxes gauging that buyout. Instead of Pau Gasol or Ming actually paying out of pocket (after taxes), they instead take less base salary and designate the rest as a buyout amount. The team seems to transfer bonuses directly to the foreign team before employee taxes.