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The Bucks' Dilemma: Re-Signing Ramon Sessions (Chapter 2)

Now that we're all experts on the luxury tax, let's start thinking about restricted free agents Ramon Sessions and Charlie Villanueva.  Bucks fans should be semi-experts on RFAs after the Charlie Bell saga two years ago, but Villanueva and Sessions are in slightly different situations than Bell--both practically and from a CBA standpoint.  Because their situations are fairly different and I think Sessions is more important, I'll start with him today and leave Villanueva for later.  I've tried to check all the information in here against the stuff at Larry Coon's CBA FAQ, but if you notice anything that doesn't make sense please leave a comment or drop us an email.

RFA Basics: Arenas Rulers

There are two broad categories of restricted free agents: former first rounders and all other players out of contract with three or fewer seasons in the league.  Let's start with the "everybody else" category which includes Sessions (and Charlie Bell a couple years ago).  Also, note that Mo Williams was not a restricted free agent when the Bucks re-signed him to that six year, $52 million deal two summers ago.  I've seen a number of media outlets suggest Mo was an RFA, but that wasn't the case.  Having spent four seasons in the league, Mo was unrestricted but no team with cap space had any interest in him.  So when the Heat offered a five-year MLE deal, Mo successfully used that as leverage to get the Bucks to bid well over that amount.

Perhaps the most important thing about Sessions' situation is the "Gilbert Arenas rule."  The idea behind the Arenas provision is to prevent teams from losing breakout players (normally second round picks) who become free agents after one or two seasons.  Because teams gain Bird rights on players only after having them under contract for three or more seasons, the Warriors could not exceed the salary cap to re-sign Arenas when he became a restricted free agent in 2003 (he was a two year vet at that time).  The Wizards had cap space, so they simply offered him more than the MLE (which was the most the Warriors could offer) and Golden State could do nothing to lose their young star.

Thanks to changes in the 2005 CBA, the loophole exploited by the Wizards to get Arenas is now mostly closed.  Sessions cannot receive an offer sheet from another team with a first year salary greater than the MLE--even if a team has the cap space to offer significantly more.  That effectively caps what the Bucks will have to pay for his services next year, though the CBA also doesn't prevent the Bucks from offering him more if they somehow freed up more cap space (not likely).  The MLE is currently $5.585 million, so that gives a rough baseline for the most Sessions can get in 09/10 salary via another team's offer sheet.  Technically, Sessions is an Early Bird free agent, which gives the Bucks the right to go over the cap to re-sign him for up to the average player salary (the MLE).  They don't actually need to use their MLE to re-sign Sessions.

There is however still a loophole to offering more than an MLE-deal.  For example, a team with cap space equaling $10 million could offer Sessions a deal starting at the MLE but then ballooning by more than the normal 8% raises in the third year of the deal.  You can read more about it at the invaluable CBA FAQ, but I can't recall this loophole ever being used (let me know in the comments if I'm missing something here).  That makes sense given it's basically unheard of for a player to go from the second round to star status in just two years.  As we've seen with Michael Redd and Mo Williams, the road from second rounder to all-star usually takes a while.

A couple more details are worth mentioning.  To maintain their Early Bird rights, the Bucks have to make Sessions a qualifying offer worth the greater of 125% of his current salary ($711,517) or the minimum salary for a two year veteran plus $175,000.  By my math that comes out to $1,000,497, so the Bucks have to offer Sessions that at the beginning of the summer to keep their matching rights. 

For someone like Sessions that's obviously a formality, though it could come into play later on if the two sides reach a contract stalemate.  For instance, if the Bucks only offered Sessions multi-year deals and he desperately wanted out of Milwaukee, then he could simply accept the QO, play one year at that bargain basement salary and then be an unrestricted free agent the following summer.  In this case the QO is likely too low to be a viable option for Sessions, but it's far more relevant for high draft picks whose QOs are much higher.  For instance, Ben Gordon is playing on a QO this year for $6.4 million (not too shabby) and Villanueva's QO of $4.6 million next year could also be an option if he can't find a better deal.  More on that in the next couple days.

Restricted Free Agency in Practice

While fans often love the idea of giving offer sheets to other teams' up-and-coming players, GMs are generally less enthusiastic.  Perhaps there's some sort of unwritten  code of conduct--don't help my free agent get more money and I'll return the favor--but there's also a practical component to it.  If you do extend a player an offer sheet then their old team has a week to match it, during which time the offer sheet counts against whatever cap space you might have.  Given how quickly many FAs sign during the free agency period, that week of uncertainty could mean sacrificing a chance at other attractive targets.  However, the longer a player remains unsigned, the less the effective costs of making the offer. 

There's also likely information asymmetries at work.  Many RFAs are young players who haven't been full-time players or have only gotten major minutes for limited periods, meaning that their current teams probably know a lot more about their games and maturity levels than opposing teams' scouts.  For instance, plenty of teams liked Amir Johnson when he was a RFA two years ago, but going so far as to make him an offer sheet was full of risk.  Having seen him practice for two years, the Pistons knew a lot more about him than anyone else, so other teams naturally were afraid to bid: offer too little and the Pistons simply match, but offer too much and the Pistons might let you have him for more than he's worth (the dreaded winner's curse).  Either way the odds of getting a good player at a good price are very low.  This situation also applied to Sessions somewhat, though his opportunity to get major minutes in Ridnour's absence will give other teams a better look at his game.  It's possible the Bucks could have "hidden" Sessions had Redd and Ridnour stayed healthy, but with Sessions needing to play major minutes that's no longer possible.

We've seen a few examples of teams testing the offer sheet waters in recent years, most notably the Charlotte Bobcats.  Anderson Varejao and Carl Landry bickered with the Cavs and Rockets, respectively, before using the Bobcats' willingness to provide an offer sheet as a means of breaking the deadlock.  Of course, neither player wrangled a huge payday out of the situation, but that's not all that players are after.  Varejao got three years and $17.4 million, but just as importantly he can opt out after this season and become an unrestricted free agent. Landry meanwhile got just three years and $9 million, as the Rockets attempted to use fears about Landry's surgically-repaired knee to throw other teams off the scent. 

Though teams are usually loathe to throw offer sheets on the table that they expect to have matched, It wasn't too surprising for the Bobcats to throw money at Varejao/Landry or for the Grizzlies to give Josh Smith an offer sheet last year. Both teams had cap space and nothing to spend it on since the plum free agent options were already gone by that time.

So What Might Sessions Actually Get?

Before his recent hot run, Sessions might have used Lou Williams' five year, $25million deal as a comparable RFA deal from last summer as a benchmark.  But if he keeps up his recent play, those type of dollars might be a bargain from a Bucks' perspective.  Depending on his self-confidence and risk tolerance, Sessions could be content with that sort of long-term deal or he might prefer a shorter deal that allows him to become an unrestricted free agent sooner. Then again, if the economy completely tanks the free agent market the Bucks could benefit by getting Sessions for less.

For reference, the Bucks can offer him six years with 10.5% raises off the starting salary, meaning their max MLE deal would be for six years and $42.3 million.  Other teams meanwhile can offer only five years and 8% raises, or $32.4 million.  While I think re-signing Sessions should be the number one priority for the summer, I won't fault the Bucks for being a bit wary of another six year deal considering what happened with the Dan Gadzuric and Mo Williams signings.

Offering the MLE makes little sense as a starting salary, even if the Bucks think Sessions is their long-term starter at the point.  It might make the most sense for both sides to do three or four years at an average of $5-6 million, which would price in a slight premium over other two-year vets from recent years.  But don't expect the negotiations to start at that level, and obviously all this assumes Sessions continues to play very well for the rest of the season. GMs have typically low-balled RFAs as an initial negotiating tactic, forcing them to either take a lower figure or resort to creative leveraging.  And the x-factor will be the economy, which may or may not have a price-depressing effect on this summer's contracts.

Bell used a couple of tactics to manufacture leverage during his negotiations, first flying to Greece to show the Bucks he was willing to play for Olympiakos instead of stay in Milwaukee for less. And when the Bucks called his bluff, he issued a come-and-get-me plea to other teams, going so far as to suggest he would no longer be able to play up to his full potential in Brew City (and it turned out to be true for about 15 months).  The Bucks clearly misplayed their hand back in '07, unnecessarily low-balling Bell and eventually having to pay more because of it.

In contrast, Hammond was part of a Pistons front office that re-signed Johnson for three years and $11 million (and without any melodrama), so the hope is that Hammond can bring some of that same negotiating finesse to the Bucks.  It appears the Bucks have ditched their legal team approach that got them in trouble with Bell, so hopefully reason wins out.  Either way, the Bucks will likely begin the summer by announcing their intention to match any offer for Sessions, the usual stance by any team with even the slightest hint of interest in re-signing a restricted free agent.  After all, the more likely you are to match any offer, the less likely it is that anyone else will test your resolve.  But the key is having credibility.

What Does it Mean for the Tax?

Unfortunately, even a favorable price on Sessions--say $4 million as a starting salary of his next deal--leaves the Bucks at $68.4 million in committed salary for eleven players.  I'm including the player options on Malik Allen ($1.3 million) and Francisco Elson ($1.7 million) since neither is likely to get more than that on the opening market.  Despite their relatively small salaries, those two guys staying could prove disastrous if nothing else happens between now and Thursday, but let's hope it doesn't come to that.

Importantly, that $68.4 million number excludes Villanueva, the Bucks' first round pick, and perhaps one other minimum salary player (ie a second rounder) to round out a 14-man roster.  If the tax stays at $71.15 million that means the Bucks would have just $2.715 million to spend on those three, and given Villanueva can accept the one-year qualifying offer for $4.6 million, the odds of staying under the tax appear bleak.  Moreover, a mid-first round pick would have an 09/10 salary of around $1.5-2.0 million, so that's another reason to think the pick could be sold if nothing else changes.  That's especially true if John Hollinger's latest notes on the cap/tax levels prove true:

Basically, the situation will be worse than many people expect, and the luxury-tax level next season will be set even lower than what several teams are currently planning for. The implications will be huge as we head into next season.

Here's the more interesting part of what I was told: Next season's luxury tax might just be the tip of the iceberg. The salary cap (and thus the tax level) could drop massively in 2010; my source used the term "bloodbath."

This would have huge effects on the pursuit of big-game free agents, of course, but also on the luxury-tax level for that season … which could push many more teams over the line and lead to fire-sale-type trades.

The biggest danger is that the Bucks go into the summer with everyone else knowing they can't re-sign both Villanueva and Sessions, which is precisely why you've been hearing about so many Richard Jefferson salary dump ideas. If that happens then the Bucks can talk all they want about matching offers for the pair--they simply won't have much credibility when they say it.

And now for the real question: what do you think the Bucks should do?