Caponomics: Your 2013 Milwaukee Bucks free agency and salary cap primer

Given the consistent mediocrity of the past two decades of Bucks basketball, there's something reassuring and inspiring about the hope and possibility that the summer brings.

What if the Bucks somehow find a future superstar in the late lottery?!?

Hey, maybe they'll swing a big trade!

We got cap space baby!

Call it hope or delusion, but at least it's something. And more than ever before, our collective hopes of improvement are tied to the cold realities of the NBA's rather complex collective bargaining agreement. So before we dive headlong into the NBA's annual free agent feeding frenzy on Monday, I wanted to start with a more basic summary of the Bucks' current cap situation and define the key concepts that you'll be hearing us reference over and over.

To start, there's no shortage of fantastic resources out there to give you a snapshot of the Bucks' salaries (StoryTellerContracts and Sham Sports are my faves). But those are only the starting point for understanding the actual cap space that a team can use to sign free agents. If you really want to get into the details of the CBA, Larry Coon's CBAFAQ.com is a terrific resource organized by topic which can answer 99% of cap-related questions (though you may need some patience to wade through it). Most fans don't care enough about the cap legalese to do that, which is understandable. So as a starting point let's take a quick look at the Bucks' current cap situation and go over the key concepts to help make sense of it.

Let's start with a table of current player obligations from 12/13 and beyond--note that this includes a $4.3 million qualifying offer for Brandon Jennings, which may or may not end up on the Bucks' books when all is said and done. Also note that this excludes cap holds, which are placeholders counting against the Bucks' cap space while players are free agents. More on that a bit later. The 12/13 numbers apply through the end of June, with the 13/14 numbers kicking in on July 1.

Now let's go over some of the key terms to keep in mind:

• Bird/unrestricted free agent. You've probably heard us throw these terms around a ton by now, and they're critical to understanding how teams have to evaluate whether to re-sign their own players or go after new ones. Unrestricted free agents have the ability to sign with any team they like (subject to cap constraints, natch), and this summer the Bucks' UFAs include Monta Ellis, J.J. Redick, Mike Dunleavy, Marquis Daniels, Sam Dalembert, and Joel Przybilla.
  
  Bird rights refer to the ability of a team to re-sign its own players without regard for whether they have the cap room to do so. It also allows for longer contracts (five years vs. four) and bigger annual raises (7.5% of the first year salary vs. 4.5%), all of which is meant to help teams keep their best players. But veterans only have full Bird rights when they're coming off a contract of at least three seasons without having been waived in that period (being traded is fine, as would a series of shorter contracts adding up to three years without changing teams). That's why the Bucks do have the ability to use full Bird rights with Redick and Ellis but not with Dunleavy, Daniels, Dalembert and Przybilla. The latter group has a weaker set of Bird rights which aren't likely to be relevant for the Bucks given a) only Dunleavy is of much interest and b) the Bucks can also use cap space to re-sign them rather than exceptions.
• Restricted free agency. First round picks coming off their rookie deals (read: Brandon Jennings) and other veterans with three or fewer seasons are restricted free agents, which provides players less freedom than UFAs. You know how we always talk about the Bucks being able to match any offer for Jennings in free agency? His RFA status is why. So long as the Bucks make a modest one-year qualifying offer (see below), the Bucks retain the right to match any offer sheet Jennings signs with another team.
  
  However, note that if Jennings does sign an offer sheet, then the Bucks effectively only have two options: match the offer sheet and retain Jennings, or decline to match and let him walk. The Bucks would not have the option of matching the offer sheet and then trading him immediately to another team, and would have to wait three months before trading him at all. They also can't trade his "rights": with the 12/13 trade deadline having passed back in February, any player who's going to be a free agent or could be via an option can't be traded. That's why they couldn't have dealt him on draft night. Moreover, if Jennings takes the QO he would have a no-trade clause for one year, and under no circumstance could he be traded to the team that signed him to an offer sheet during that one-year period. Previous Bucks RFAs have been a rather mixed bag: Charlie Bell in 2007 (signed offer sheet with the Heat that the Bucks unfortunately matched), Ramon Sessions in 2009 (signed offer sheet with the Wolves that the Bucks declined to match), and Luc Mbah a Moute in 2011 (signed offer sheet with Denver that the Bucks matched).
• Qualifying offer. Think of the qualifying offer as a fall-back option for a restricted free agent. Teams must offer their RFAs a QO in order to maintain their right to match another team's offer sheet, but they can't force the player to take it. However, the player can agree to take the QO at any point up until early October, which then allows him to become an unrestricted free agent the following season. If a player is dead set on leaving his team, the QO is a last-resort in case he can't convince them to let him walk or agree to a sign-and-trade.
  
  Keep in mind it's very rare for decent players to sign QOs--Ben Gordon might be the most notable exception, which isn't saying all that much. Generally if a player is good enough for a team to want to sign him long-term, he takes the money. Newsflash: young players and their agents tend to like money. And they don't like turning money down and risking injury or a decline in market valuation, both of which present major downsides to playing under a QO. Jennings could be an interesting exception if he's determined to leave Milwaukee, though it's not clear what kind of market there may be for his services this summer--or that it would improve in 2014. Either way, there's nothing particularly good for anyone about taking the qualifying offer--it generally says the player wants out, the team doesn't believe they're worth a long-term commitment, or both. Moving that player is also complicated because the player can veto any trade, which is actually linked to the fact that a player on a QO does not carry Bird rights over to his new team. That's not good for the player, and it also makes him a less valuable asset to the team acquiring him (especially if they're over the cap).
• Cap holds. OK, this is an important one and often misunderstood. The catch to maintaining Bird rights on a player is that the player still counts against the team's cap space even if he's not under contract. This is simply a means of preventing teams from piling up a bunch of expiring deals, raiding others' free agents with cap space and then signing their own free agents with Bird rights after their cap space is exhausted. Sham Sports has an excellent, more detailed breakdown here.
  
  The bottom line is that free agents only stop counting against a team's cap number when one of three things happens: a) they re-sign (and the new deal becomes their cap number) b) they sign with another team or c) the team renounces the Bird rights for that player. Unsigned first round picks also count against the cap even before they are signed, so for the Bucks and their 15th overall pick that means an additional $1.5 million cap hold for Giannis Antetokounmpo until he signs his new deal. First rounders can be signed for up to 120% of their cap holds, which virtually always happens, so Giannis will actually count slightly more against the cap after he signs.
  
  Lastly, if a team has fewer than 12 spots filled by either contracts or cap holds, additional cap holds equal to the rookie minimum (a shade under $500k each) are added to get to at least 12 players under contract or with holds. Again, this is to limit teams' ability to create cap space by simply lining up a roster full of expiring deals.
• The moratorium. The salary cap last season was just north of $58 million, with latest projections it will be around $58.5 million this year (that's what I'll assume in all of the cap calcs). Similarly, the luxury tax will likely be somewhere above $70 million, and there's also a salary floor set at 90% of the cap, which projects to around $53 million (thanks to Preston Schmitt for reminding me to include this). But note that those numbers aren't set until the so-called "moratorium" at the beginning of July, when the league bean-counters crunch the numbers and determine the level of the salary cap, luxury tax threshold, mid-level exception, max contract numbers, etc. Teams can negotiate with free agents during the moratorium--so the feeding frenzy will start tomorrow--but only deals not dependent on the cap level (like rookie deals) can officially be signed until the salary cap parameters have actually been established.
  
  For that same reason you'll hear about trades agreed to around draft time which can't be made official until after the NBA calendar turns over and new cap numbers are in play. For instance, the Bucks will be able to have significant cap space this summer, which they could use to acquire players via trade without having to ship out roughly matching salary. That's a nice luxury to have and can be used to take advantage of teams needing to shed salary in order to get under the luxury tax. But the Bucks technically won't be able to create any cap space until July 1, so they while they could have negotiated that kind of deal earlier, they couldn't actually consummate a trade of that sort until July.
• Cap room. Note that when you hear people talk about how much cap space a team can potentially open up, they often ignore cap holds altogether. Whether that's a remotely accurate way to portray the situation depends on the team and free agents in question; when the Heat were pursuing LeBron James and Chris Bosh in 2010, it didn't make sense to ignore Dwyane Wade's significant cap hold since they desperately wanted to keep him, too. The same can't be said of the 2013 Bucks and the nearly $9 million cap hold related to Sam Dalembert's Early Bird rights (so that's the last time I'll mention it).
  
  The value of a cap hold itself varies depending on the player's experience and the value of his prior deal, but it's typically some percentage over and above his prior contract. For example, J.J. Redick's cap hold this summer will be $9.3 million (150% of his prior deal), while Ellis' is a whopping $16.4 million. Which leads us to a second important point: Bird rights are most useful for teams at or near the cap who need to keep their star players. Those are the guys teams actually want to give five-year deals with max raises to. Moreover, teams near the cap get more value from Bird rights because letting a guy walk doesn't give them any benefit in terms of opening up cap space. In many cases, the option is either sign that guy or be stuck replacing him with a much cheaper free agent (using the mid-level or minimum, typically). On the flip side, it's precisely these sorts of "well, we can't spend the money elsewhere"-type situations that lead to John Salmons getting $32 million in guaranteed money. And so it goes. Below is what the Bucks' cap number will look like once free agency starts, assuming Monta rides off into the sunset, we ignore the Bucks' other FAs, and cap holds for Redick and Jennings' QO are maintained. The second table is probably the easiest to use if you want to play around with possible summer signing scenarios.
  

  Putting aside the question of whether the Bucks should actually try to re-sign their free agent guards, everyone can agree that neither Ellis nor Redick deserves five years or max raises. And the Bucks actually have less cap flexibility while maintaining their Bird rights on both guys because Redick and Ellis' cap holds are much larger than what they'll earn with their next contracts. So it's probably easier to ignore their potential cap holds when thinking about cap scenarios since the Bucks don't really need Bird rights to retain either guy (and odds are both leave regardless). The only reason to maintain their cap holds initially is in the event another team wants to sign them but doesn't have the cap space to do so--in that event, a sign-and-trade may be possible. But I wouldn't hold my breath on that.
  
  There are a number of moves like this that the Bucks could make in order to free up cap space. So for example: if the Bucks simply wanted to open up as much cap space as possible, they could take the following actions: renounce Redick, renounce Jennings, and amnesty Gooden in order to open up over $30 million in cap space. Whether they could actually spend that much money effectively is of course an entirely different story, and gets to the problem of cap space in small markets. Whatever happens, the Bucks will have to add at least $20 million in payroll this summer in order to meet the minimum payroll threshold--otherwise they'll be charged the difference and the rest of the money will be distributed to the guy who are on the roster.
  
  One final note: technically speaking there's no reason for the Bucks to actually renounce any cap hold until they need to. In other words, if they actually negotiate a big shiny new contract with Josh Smith [looks around nervously], then they can go through the formality of renouncing J.J. Redick's cap hold. But so long as they're not putting the money to use in free agency, keeping those cap holds doesn't really have any downside. It's not actual money they're paying, and it maximizes the flexibility to make moves--such as a sign-and-trade deal.

• Early termination option. ETOs are basically player options; they allow a player to void the final year of his contract and become an unrestricted free agent. Monta Ellis exercised his ETO by June 20 rather than play one more year at $11 million, which was a fairly convenient date since it was a week before the draft.
  
• Player options and team options. These are fairly self-explanatory. ETOs and option dates vary by contract but have to occur by June 30, since that's when the NBA calendar turns over and free agency begins. Keep in mind that free agents and players who can become free agents through any type of option can't be traded, so guys like Ellis, Jennings and Redick couldn't be dealt until July 1 (and only then in a S&T). But since the Bucks' season ended, they've actually been free to trade players currently under contract to other teams whose seasons were also over.
• Amnesty provision. The amnesty provision was included in the most recent CBA (December 2011), allowing teams to waive one player who was on their roster at that time without having his salary count against their cap and tax numbers. Other teams can then bid on the player in order to claim him, with these bids typically only a fraction of their original salaries. The original team is then on the hook to pay the remainder of the original salary, so in sum it's basically on the team to eat the original deal. The Bucks have yet to use their amnesty provision, with Drew Gooden (two years, $13 million remaining) the only player who could feasibly be amnestied. Timing is important: teams can only elect to use the provision during the moratorium, so they need to determine if they will benefit from the additional cap/tax room by the end of the moratorium. Most big signings are agreed to during this period, so it's not a complete guessing game, but it still requires some guesswork.
• Other exceptions. All teams below the tax "apron" (around $75 million) receive a full mid-level exception ($5.15 million) and bi-annual exception ($2.02 million) on July 1, and these exceptions count against the cap like any of the previously mentioned cap holds. In practice, any team using cap space will then renounce them and instead pick up what's known as the "room mid-level," which was incorporated into the last CBA as a little bonus exception for teams that have cap space. So even if the Bucks create cap space and sign a bunch of guys that takes them over the cap, they can still use the room mid-level to sign an additional player to a starting salary of $2.652 million for up to two years. Given the number of bodies the Bucks need to add to the roster, that could be important if the Bucks are able to make any big signings.