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Caponomics: What the cap and tax numbers mean for the Bucks

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Sharpen your pencils and adjust your glasses, nerds: the NBA's new cap figures are in. Overall, the salary cap ($58.044 million) and luxury tax ($70.307 million) are both around $2 million higher than the NBA had projected, which is great news for teams trying to lure max free agents (Miami, Chicago) and relieving to teams over or flirting with the luxury tax threshold.

The Bucks are within striking distance of the tax--probably around $4-6 million under depending on the structure of John Salmons' deal--so the news will give John Hammond and company a bit more breathing room as they continue to wheel and deal over the summer and up to the trade deadline. But does it really affect the Bucks' summer strategy? Probably not.

Excluding the reported Salmons/Gooden deals, the Bucks officially have less than $50 million committed next year, under the cap by a decent margin. But the cap hold on Salmons alone is close to $10 million, putting the Bucks over the cap even before you add the holds for first rounder Larry Sanders and Luke Ridnour. And they can actually spend more money on free agents by staying over the cap and using their exceptions (Bird rights on Salmons, mid-level on Drew Gooden) vs. if they renounced all their own free agents and cleared a modest amount of cap space. So yeah...they're over the cap.

And while the higher tax threshold isn't a bad thing, it doesn't mean they suddenly have more money to sign a free agent backup point guard...unless they can bring back Ridnour, which is looking less and less likely. If they don't bring back Ridnour then they have no more than the $2.08 million bi-annual exception to offer a backup PG, the same as we had been assuming all along. They could also try trading for another guard now or later this fall, but cap wise there's really not enough money available to get a quality player via free agency.

As for Ridnour, we mentioned yesterday that John Hammond is sounding rather pessimistic about the Bucks' chances of re-signing the 29-year-old free agent, with increasing talk of Ridnour getting cap space scraps and a potential starting gig from either New York or Miami. Because they have his Bird rights, the Bucks can go over the cap to sign Ridnour for as much as they want. But that could also put them over the luxury tax threshold, which we know the Bucks have been loathe to do. Besides that, it's not clear the Bucks want to win a bidding war for Ridnour anyway, especially given his age and the slim chances that he replicates the uncharacteristically productive numbers of a year ago.

So how much money could they spend on Ridnour and other free agents without going over the tax? Well, it mainly depends on what Salmons' contract looks like, but below I've laid out the Bucks' cap situation and all the key assumptions:

  • Salmons' deal is flat. Note that I have not seen anything to suggest this is actually the case, but if Salmons earns $39 million over five years then it's an average $7.8 million per season. If the Bucks wanted to minimize the first year cap impact of Salmons' deal, they could start the deal at around $6.45 million and escalate it annually at the max 10.5% of the first year salary and still have the total deal be worth $39 million. If that's the case, then the Bucks would be an additional $1.35 million under the tax next year compared to the scenario below. Alternatively, they could front-load the deal, in which case there would be less money available under the tax. I'm showing the flat scenario simply because it's between the two.

    There are pros and cons to each structure. An escalating deal frees up more cash under the tax this year, which would be good if they wanted (and were able) to re-sign Ridnour. It would also mean less guaranteed money, since the final year of the deal is only $1 million guaranteed. For example, a flat $39 million deal would have $32.2 million guaranteed while an escalating deal would have around $30.8 million guaranteed.  In contrast, a front-loaded deal would mean less deadweight down the road as Salmons' game declines, making it somewhat easier to trade him. Pick your poison.
  • Gooden gets the full MLE. Gery Woelfel reported yesterday that the deal would start at the MLE and escalate slightly thereafter with a total value of $31.8 million, implying 5.15% annual raises on the new MLE of $5.75 million. A max MLE deal with 8% raises would actually come out to $33.4 million, but I'll use Woelfel's number until I hear otherwise. Call me an optimist.
  • Max scale for Sanders. First round picks can sign for 80-120% of the CBA-defined scale amount for their draft slot, but in practicality they always sign for the max amount...there's basically nothing to negotiate. That would put Sanders at slightly over $1.73 million next year.
  • Rookie min for 2nd rounders. In contrast to the deals signed by Luc Mbah a Moute and Jodie Meeks the past two summers, the Bucks can't offer second rounders Darington Hobson and Tiny Gallon more than a minimum two year deal because a) they don't have cap space b) they've already used their MLE on Gooden and c) a BAE deal can't be for more than two seasons. Since they didn't use the full MLE the past two years, the Bucks cleverly used a portion of it to give both LRMaM and Meeks more than the minimum in exchange for a bargain basement, NG'ed third year. But without the MLE or cap space at their disposal, the Bucks are essentially stuck offering their "other" rooks the standard minimum two year contract. They can however still negotiate varying amounts of guaranteed dollars.
  • Darnell Jackson gets cut. Jackson's deal is non-guaranteed and it's hard to imagine him sticking around unless the Bucks move one of their power forwards--Ersan Ilyasova and Mbah a Moute being the most obvious candidates. They really don't have to move one of those guys--they're cheap and all complement each other well--but it sounds like something the Bucks are considering, particularly if they're nervous about their backup PG situation. Jackson's situation is similar to Salim Stoudamire's last summer--he got picked up at the end of the regular season and had the summer to earn a roster spot, but was eventually cut at no cost to the Bucks when he was deemed surplus to requirements.

    Note that the Bucks don't need to cut Jackson to sign a backup PG, but if they perhaps wanted to also sign a veteran center then Jackson would have to go. I'd love to see Kurt Thomas back for the minimum as the 15th roster spot, but I'm not holding my breath. And it's worth noting that the Bucks have carried three legit PGs on the opening night roster each of the past two seasons, so it's also possible they add two cheap PGs, especially if they're not sold on Hobson as an emergency/3rd string PG.  

For this season, the tax level shouldn't be an obstacle to signing Ridnour--unless his price goes up to the point where you wouldn't want the Bucks bringing him back anyway. My guess is the Bucks aren't too hot on giving Ridnour a monster deal, but stranger things have happened. And if Ridnour is indeed gone, they would be left with the BAE to find a lukewarm body like Eddie House, Anthony Johnson, or Travis Diener. Trades are also a possibility, but that's a whole 'nother 3,000 word column.

The key takeaway beyond 2010 is that the Bucks still have room to add a sizable chunk of salary in 2011--provided there's actually a 2011 season. Redd's expiring deal means the Bucks have less than $50 million committed in 11/12, which goes to show that all of the Bucks' recent spending shouldn't tie their hands too badly going forward. All the signings this summer will obviously eat into cap space that would have otherwise been available next summer, but there are a couple problems with waiting for 2011. First, we have no idea what's going to happen with the CBA, which means all that delicious cap space next summer might not even exist. Who knows? Second, the free agent pickings next summer are relatively slim, so you could make a good case that it simply isn't worth passing on solid players like Salmons and Gooden who could help the Bucks win this year. The market may be inflated at the moment, but if you want to add free agents...well, that's reality. And if you just won 46 games and have the choice of paying a lot for solid free agents this year or next year, might as well get on with it, right?

While more trades this summer wouldn't surprise me, the big remaining question is what to do with Redd's expiring contract. The Bucks could yet find a trade partner willing to take on Redd's deal before it expires, but you'd expect it to come closer to the deadline when teams are in salary-dumping mode. It's also very possible the Bucks simply let it expire rather than take on more long-term salary, but keep in mind that being over the cap means that Redd's salary won't simply convert into cap space if they hang onto it. I imagine it will really come down to what's available and whether the Bucks are in a buying mood at the deadline. While fans love to hear there's a hard and fast "plan," there's no way for a team like the Bucks to simply plan the addition of a superstar. As we've seen this summer, even big markets have zero guarantee that cap space will net a real star. All you can do is stay flexible financially and hope an opportunity comes along to make a deal, as Hammond saw in Detroit with Rasheed Wallace. Flexibility netted them Salmons at the trade deadline and Maggette this summer, so we're already seeing how an opportunistic approach can result in talent acquisition.

As it stands, the Bucks have quietly  positioned themselves to make a run at home court in the first round of the playoffs regardless of what happens the rest of the way in free agency. I don't think anyone is ready to say they're contenders for the conference title, but on paper they're looking more and more like a team that can threaten 50+ wins if they can stay healthy and maintain the chemistry they showed a year ago. Redd's deal along with cheap young assets like Ilyasova and Mbah a Moute give Hammond some ammo if he sees an opportunity to make another big upgrade during the season, but.the Bucks are good enough to make noise even without it.

Exciting times, no?