Explaining Free Agency: By The Numbers (And Knicks Scenarios For 0'10)

Explaining Free Agency: By The Numbers (And Knicks Scenarios For 0'10)
M.D. Wright
7.1.10

I need to school some'a yah, because I swear I hear nothing but video game scenarios when it comes to these free agent signings. I blame ESPN partly for all of the fodder, because I think a lot of their willfully erroneous reporting  of the salary cap situations of the Bulls and Heat (neither can sign two max salary players, despite everything that has been said over the past two weeks) has fueled the rampant speculation.

First of all, the Knicks are the ONLY team that can offer two max contracts. The Heat can only do so if Wade becomes a free agent (and he doesn't have Bird Rights). Even if he does so, the Heat must re-sign him and any two "max players" who were to go to to Miami would need to settle for 90% of the maximum salary (based off their previous contracts which expired on June 30, 2010 when they either became unrestricted or exercised out of their player options to extend their previous deals). Why this isn't being reported properly is beyond me.

Same with the Bulls. I hear James Johnson and Luol Deng being mentioned as sacrificial lambs with regards to clearing off the remaining space the Bulls need to be able to sign two guys. For one, James Johnson is on his rookie scale contract. That won't clear enough space. Deng is set to make a little over $11M in 2010-2011, but coming off an injury-riddled season and only being slightly above average as is, who wants that contract? Especially when all sane (which describes 28 of the 30 GMs in the NBA if you're scoring at home) GMs know the Bulls are doing this to land LeBron James and Chris Bosh? Contrary to what people thought about the Grizzlies/Lakers trade in early 2008, which wasn't gift-wrapped (the Lakers gambled, mortgaged their future by giving up multiple draft picks -- one of which was used to draft OJ Mayo, an expiring contract worth $9M in Kwame Brown, the rights to Marc Gasol -- who may end up being better than his brother Pau and Javaris Crittendon in the process -- ALL to take the risk that Pau Gasol would acclimate to the Lakers' triple post offense quickly enough to be successful -- he did and so they won back to back titles. But it was a huge risk for a guy who was viewed as middling and grossly overpaid at $21M per leading up to the 2008-2009 season).

First of all, the NBA's Collective Bargaining Agreement has several "Exceptions" written into the language. With all the rumors, speculation and armchair GMs swearing up and down that they know something, I have to dispel this garbage with some hard facts that will either preclude or enable teams to make deals.

Secondly, the Heat may indeed find suckers to take on Michael Beasley and Mario Chalmers (while surrendering draft picks and cash considerations in the process) in order to clear off the space they  need to sign the two players they covet, but just as is the case with the Bulls, who is going to willfully help Pat Riley out while crippling their team in the process with two do-nothing players whose contracts, even when they expire, don't even enable the trade partner with the Heat to even sign a player above the Mid-Level Exception?

Segue.

The "Exceptions" are plentiful, let's get right to them.

Mid-Level Exception

A team is allowed to sign one player to a contract equal to the average NBA salary, even if the team is over the salary cap already, or if the signing would put them over the cap. This is known as the Mid-level exception (MLE). The MLE may be used on an individual free agent or split among multiple free agents, and is available to any team that exceeds the salary cap at the beginning of the offseason. The Mid-Level Exception for the 2008-09 NBA season was $5.585 million. The MLE is $5.854 million for the 2009-10 NBA regular season.

An example would be the Toronto Raptors' acquisition of Jason Kapono during the 2007 off-season, and the Los Angeles Lakers' signing of Ron Artest in 2009.

Bi-annual Exception

The bi-annual exception may be used to sign any free agent to a contract starting at $1.672 million. Like the mid-level exception, the bi-annual exception can also be split among more than one player, and can be used to sign players for up to two years, with raises limited to 8% per year. This exception was referred to as the "$1 million exception" in the 1999 CBA, although it was valued at $1 million for only the first year of the agreement.

An example of the bi-annual exception was the Los Angeles Lakers' signing of Karl Malone to a contract before the 2003-04 season.

Rookie Exception

The CBA allows teams to sign their 1st-round draft choices to rookie "scale" contracts even if their payroll exceeds the cap.

Larry Bird Exception

Perhaps the most well-known of the NBA's salary cap exceptions, it is so named because the Boston Celtics were the first team permitted to exceed the salary cap to re-sign one of their own players (in that case, Larry Bird). Free agents who qualify for this exception are called "qualifying veteran free agents" or "Bird Free Agents" in the CBA, and this exception falls under the auspices of the Veteran Free Agent exception. In essence, the Larry Bird exception allows teams to exceed the salary cap to re-sign their own free agents, at an amount up to the maximum salary. To qualify as a Bird free agent, a player must have played three seasons without being waived or changing teams as a free agent. This means a player can obtain "Bird rights" by playing under three one-year contracts, a single contract of at least three years, or any combination thereof. It also means that when a player is traded, his Bird rights are traded with him, and his new team can use the Bird exception to re-sign him. Bird-exception contracts can be up to six years in length.

Early Bird Exception

This is the lesser form of the Larry Bird Exception. Free agents who qualify for this exception are called "early qualifying veteran free agents," and qualify after playing two seasons without being waived or changing teams as a free agent. Using this exception, a team can re-sign its own free agent for either 175% of his salary the previous season, or the NBA's average salary, whichever is greater. Early Bird contracts must be for at least two seasons, but can last no longer than five seasons. If a team agrees to a trade that would make a player lose his Early Bird Rights, he has the power to veto the trade.

A much-publicized example for this was Devean George, who vetoed his inclusion into a larger trade during the 2007-08 season that would have sent him from the Dallas Mavericks to the New Jersey Nets.

Non-Bird Exception

Free Agents who qualify for this exception are called "non-qualifying free agents" in the CBA, meaning they do not qualify under either the Larry Bird Exception or the Early Bird Exception. Under this exception, teams can re-sign a player to a contract beginning at either 120% of his salary for the previous season, or 120% of the league's minimum salary, whichever amount is higher. Contracts signed under the Non-Bird exception can last up to six years.

OTHER EXCEPTIONS

Minimum Salary Exception: Teams can sign players for the NBA's minimum salary even if they are over the cap, for up to two years in length. In the case of two-year contracts, the second-season salary is the minimum salary for that season. The contract may not contain a signing bonus. This exception also allows minimum-salary players to be acquired via trade. There is no limit to the number of players that can be signed or acquired using this exception.

Traded Player Exception: If a team trades away a player with a higher salary than the player they acquire in return (we'll call this initial deal "Trade #1"), they receive what is called a Traded Player Exception, also known colloquially as a "Trade Exception". Teams with a trade exception have up to a year in which they can acquire more salary in other trades (Trade #2, #3, etc) than they send away, as long as the gulf in salaries for Trade #2, #3, etc are less than or equal to the difference in salary for Trade #1. This exception is particularly useful when teams trade draft picks straight-up for a player; since draft picks have no salary value, often the only way to get salaries to match is to use a trade exception, which allows trades to be made despite unbalanced salaries. It is also useful to compensate teams for losing free agents as they can do a sign and trade of that free agent to acquire a trade exception that can be used later. Note this exception is for single player trades only, though additional cash and draft picks can be part of the trade.

Disabled Player Exception: Allows a team that is over the cap to acquire a replacement for a disabled player who will be out for either the remainder of that season (for in-season injuries/deaths) or the next season (if the disability occurs during the offseason). The maximum salary of the replacement player is either 50% of the injured player's salary, or the average salary, whichever is less. This exception requires an NBA-designated doctor to verify the extent of the injury.

Note that while teams can often use one exception to sign multiple players, they cannot use a combination of exceptions to sign a single player.
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Now that I have put that out there, THE KNICKS HAVE BIRD RIGHTS ON DAVID LEE.

Why is this important? Because it dispels the notion that we cannot sign any players. The Knicks have 7 players under contract. The Heat only have 3 (before Wade opts out, IF he does). The Bulls only have 5. The Knicks have more tangible cap space than either one, because as I have mentioned many times before (and reiterated by explaining the exceptions in detail for the lackwits who refuse to cognate simply logic nor simply READ), we can sign TWO MAX CONTRACT PLAYERS, regardless of a sign and trade -- before even doing anything with Lee. We don't HAVE to trade him to Toronto (although the Raptors would like it, so would the Suns -- since they can possibly lose Stoudemire for nothing). We can sign him after signing two max players, to a near-maximum contract and exceed the salary cap in doing  so, because that's what the whole Bird Rights clause was all about 20 years ago when it was instituted. But the idiots bellyaching the most on message boards and the talking heads on ESPN have yet to mention this, when it looms LARGE in this free agent market for 0'10.

Not to mention the full mid-level exception to add a player along the lines of Richard Hamilton (who plays the same position as Ben Gordon and is expendable) and Mike Miller and a host of other secondary wing players who would jump at the chance to win alongside of James and Bosh -- added to the youth of Douglas, Lee, Gallinari and Chandler.

After those players, the Knicks can make a qualifying offer to Sergio Rodriguez to ensure a steady backup, and/or trade Eddy Curry (who exercised his player option for 2010-2011 the other day -- and is set to become an unrestricted free agent next July at $12M; cap space for teams next offseason = big value), one of the 2010 picks in this year's draft by the Knicks, the Rockets' 1st round lottery-protected pick for next year and even cash considerations to either New Orleans (Chris Paul) or Denver (Carmelo Anthony).

I'm still waiting for ESPN or any other sports outlet to report these very real possibilities and not impossibilities such as James, Bosh and Wade playing together in Miami (with 7 total players and no bench whatsoever) or Rose, James, Bosh, Noah and whoever (when the Bulls will not have takers for Deng's contract to even make it happen to begin with -- and again, as with Miami -- NO BENCH WHATSOEVER).

Rob Parker is one of the few people who wrote an article even scratching the surface on this and it didn't even receive 100 comments (Miami and Chicago rumor-based columns received 3,000 apiece), and almost all of the comments on Parker's column were Knick bashers and people from outta town who have inferiority complexes to New Yorkers.

Hmmmmm.