As the 2009 NBA Draft approaches several teams will be looking at possible trades either up, down, or trades involving picks, players, and future draft picks. A few things are important to fully understand how trades occur and how difficult it really is in a legal sense to make these deals happen. What makes it so challenging and yet at the same time fair is the NBA’s Salary Cap which is defined by the Collective Bargaining Agreement (CBA) between the NBA and the NBA Players Association.
The NBA’s Soft Cap
The NBA has a soft salary cap which differs from a hard cap in that there are exceptions which allow teams to exceed the salary cap under a variety of conditions. Because of the ’soft cap’ there are very few teams who are actually under the cap during the season. Every July, after the July Moratorium, the league projects what is called Basketball Related Income (BRI) for the upcoming season and subtract the projected benefits and divide by 30 (NBA teams) to arrive at the cap. This year the moratorium is July 1-8, which means that teams may not sign (most) free agents nor can they make any trades during this period.
Free agents (FA) become free on July 1st but cannot sign with teams until the cap has been set, which is usually the day after the moratorium ends. This year the cap should be set and FA’s allowed to sign starting on July 9th. Negotiations between teams and players (and their agents) will continue to take place during the moratorium but nothing will be finalized until the moratorium ends. I wonder who’ll be that first FA to sign with a new team at midnight?
Once the official salary cap has been set, teams will know exactly where they stand in relation to the cap and how much money they’ll have to spend in the free agent market. Until that time, teams will undoubtedly estimate the cap in an effort to plan for their draft efforts, re-signing their own FA’s, and prepare to sign new FA’s from other teams. So what happens when a franchise opts to over spend and explore just how ’soft’ the cap is? Big spenders are charged a Luxury Tax.
The Luxury Tax limit is also based on a percentage of the BRI and is a known prior to teams signing FA’s so when a team goes over the limit and thus faces the penalty, they are making a conscious decision to do so.
What allows teams to go over the cap are the various exceptions they can utilize and in most instances those exceptions involve signing Free Agents. When re-signing their own players you’ll hear of a player who has his “Bird Rights” (yes, Larry) which means he’s been with the same team for 3 years. You may also recall hearing terms such as Early Bird or Non-Bird to describe a FA’s status. Other exceptions teams have are things like Bi-Annual exceptions or Mid-Level which are special options for teams to use to sign a player every other year (Bi-Annual) or at the Average Salary (for Veterans).
Okay, now that I’ve put you to sleep, a lot goes into making trades and setting a roster. Hopefully I can explain a little about Options and how the CBA governs trades in part 2 and wake you up in time for the draft!
-Chris Denker
Tags: basketball, Collective Bargaining Agreement, Denker, nba, nbadraft, Salary Cap, trade