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Trader Joe
06-25-2008, 08:34 AM
It has been my understanding that when a player and team agree to buyout then that players contract is removed from the teams cap number.
I was wondering a few things...

A.) Am I correct in my understanding?
B.) If so, hooray, if not what actually happens? If they stay on your cap figure how is a buyout any different than waiving a player?

count55
06-25-2008, 08:58 AM
It has been my understanding that when a player and team agree to buyout then that players contract is removed from the teams cap number.
I was wondering a few things...

A.) Am I correct in my understanding?
B.) If so, hooray, if not what actually happens? If they stay on your cap figure how is a buyout any different than waiving a player?


I don't believe this is correct. Adonal Foyle is still on Golden State's cap figure through 2009-2010, though the final year is only at $700k. Here's the note from Shamsports.com:


Adonal Foyle: Re-signed to a 6 year, $51 million contract in July 2004. Only $1 million of final season guaranteed. Accepted a buyout of about 70% of the remainder in August 2007.

In the case of Jamaal Tinsley, since his contract is fully guaranteed, I believe we'd be on the hook for pretty much all of it. It looks like GS got such a sweet deal (70%) because of the lack of guarantee in the last year.

As to the difference between that and waiving a player, I think it is strictly timing. In the case of James White, we paid him throughout his contract, whereas GS would've (likely) given Foyle a lump sum payment. This only affected the cash transaction and not the cap/tax impacts.

I'll look for more specific documentation, and someone will correct me if I'm wrong on this, but a buyout gets us nothing much but Tinsley gone, along with the effective useful loss of his salary slot.

count55
06-25-2008, 09:02 AM
Correction

Here's Larry Coon's answer in the FAQ (http://http://members.cox.net/lmcoon/salarycap.htm#60):


60. How do buy-outs affect a team's salary cap?

The agreed-upon buy-out amount (see question number 59) is included in the team salary instead of the salary called for in the contract. If the player had more than one season left on his contract, then the buy-out money is distributed among those seasons in proportion to the original salary. For example, say a player had three seasons remaining on his contract, with salaries of $10 million, $11 million and $12 million. The player and team agree to a buyout of $15 million. The $15 million is therefore charged to the team salary over the three seasons. Since the original contract had $33 million left to be paid, and $10 million is 30.3% of $33 million, 30.3% of the $15 million buyout, or $4.545 million, is included in the team salary in the first season following the buyout. Likewise, 33.33% of $15 million, or $5 million, is included in the team salary in the second season, and 36.36% of $15 million, or $5.455 million, is included in the team salary in the third season.

The distribution of the buy-out money is a matter of individual negotiation. Changing the number of years in which the money is paid does not change the number of years in which the team's team salary is charged. In the above example in which the player's contract is bought out with three seasons remaining, the buyout amount is always charged to the team salary over three seasons. It does not matter if the player is actually paid in a lump sum or over 20 years (a spread provision).


Still, if Tinsley has an even competent agent, he'll hold out for the Net Discounted Cash Flow value, which would be $16-18mm. We'll get stuck with most of it, but it does now look like there would be some small-to-moderate cap/tax benefit, (but probably no cash benefit, financially speaking).

Sorry for the earlier incorrect post.

2minutes twowa
06-25-2008, 09:14 AM
I do believe the number the Pacers would pay him can also be influenced by whether JT signs with another team. I could be wrong, but I think the Pacers would just have to make up the difference.

count55
06-25-2008, 09:18 AM
I do believe the number the Pacers would pay him can also be influenced by whether JT signs with another team. I could be wrong, but I think the Pacers would just have to make up the difference.

Well, he can't actually sign with another team until he's bought out. Most of the players that have been bought out that I can think of either are out of the league (like a Foyle) or shopped around after the buyout for a team (Francis, Webber).

I think negotiating with other teams prior to a buyout would constitute tampering and be a violation of the league rules. Plus, there's really no incentive for either Tinsley or the other team to give the Pacers a break.

2minutes twowa
06-25-2008, 09:30 AM
Well, he can't actually sign with another team until he's bought out. Most of the players that have been bought out that I can think of either are out of the league (like a Foyle) or shopped around after the buyout for a team (Francis, Webber).

I think negotiating with other teams prior to a buyout would constitute tampering and be a violation of the league rules. Plus, there's really no incentive for either Tinsley or the other team to give the Pacers a break.

I'm not sure how it works. Didn't we sign Flip after he received a buyout from Detroit?

count55
06-25-2008, 09:45 AM
I'm not sure how it works. Didn't we sign Flip after he received a buyout from Detroit?

Actually, Flip's contract with the Pistons appears to have been expiring at the end of the year (2007-2008), so they I think they just waived him and ate the salary.

Then he considered both us and the Clippers before joining us a week or so after he had been waived.

Naptown_Seth
06-25-2008, 10:28 AM
Waivers only: If you waive a guy and he is picked up BEFORE CLEARING (10 days normally IIRC, but I think at another point/situation it's longer) then the new team is on the hook for ALL OF IT. Cap hit and actual pay.

If Lebron was waived he wouldn't clear because teams wouldn't wait to let someone else have him just to save money. As I recall the Pacers took on Orien Greens deal when Boston waived him because they thought he was valuable enough to go get before someone else did.

With Tins if you waived him no team would see his salary value near what he's actually paid so he'd clear. Then teams would bid on him for a lower amount and he's have his pick. He'd get his old Pacers money (and that's on the Pacers cap) plus the new salary (which goes against the new team's cap). Since he's already getting paid he's comfortable taking less in order to get into a good situation.


Excuse any mistakes, Foretaz taught me plenty (being a jerk most of the time but still) but the financials are tricky.

Bball
06-25-2008, 10:40 AM
Waivers only: If you waive a guy and he is picked up BEFORE CLEARING (10 days normally IIRC, but I think at another point/situation it's longer) then the new team is on the hook for ALL OF IT. Cap hit and actual pay.

If Lebron was waived he wouldn't clear because teams wouldn't wait to let someone else have him just to save money. As I recall the Pacers took on Orien Greens deal when Boston waived him because they thought he was valuable enough to go get before someone else did.

With Tins if you waived him no team would see his salary value near what he's actually paid so he'd clear. Then teams would bid on him for a lower amount and he's have his pick. He'd get his old Pacers money (and that's on the Pacers cap) plus the new salary (which goes against the new team's cap). Since he's already getting paid he's comfortable taking less in order to get into a good situation.


Excuse any mistakes, Foretaz taught me plenty (being a jerk most of the time but still) but the financials are tricky.

I'm under the impression the Pacers would only be on the hook (if Tins cleared waivers) for the difference in his Pacer contract and his new contract. Is that what you're saying?

Actually, if so, if Tins' agent refused to accept a buyout below the full value of the contract then waiving Tins would save the Pacers some pocket change.

-Bball

JayRedd
06-25-2008, 10:41 AM
I do believe the number the Pacers would pay him can also be influenced by whether JT signs with another team. I could be wrong

You are wrong. That has no effect. Count's Larry Coon post is accurate.

We will end up giving JT approximately $18 million and it will be stay on our cap for three years at around $6 million per. So while Herb techincally saves $3 million, it doesn't really led to any practical cap savings.

If waiving someone didn't cause them to stay on your cap completely then Dolan would have bought out half of the Knicks roster already.

count55
06-25-2008, 10:45 AM
Waivers only: If you waive a guy and he is picked up BEFORE CLEARING (10 days normally IIRC, but I think at another point/situation it's longer) then the new team is on the hook for ALL OF IT. Cap hit and actual pay.

If Lebron was waived he wouldn't clear because teams wouldn't wait to let someone else have him just to save money. As I recall the Pacers took on Orien Greens deal when Boston waived him because they thought he was valuable enough to go get before someone else did.

With Tins if you waived him no team would see his salary value near what he's actually paid so he'd clear. Then teams would bid on him for a lower amount and he's have his pick. He'd get his old Pacers money (and that's on the Pacers cap) plus the new salary (which goes against the new team's cap). Since he's already getting paid he's comfortable taking less in order to get into a good situation.


Excuse any mistakes, Foretaz taught me plenty (being a jerk most of the time but still) but the financials are tricky.

No, you're spot on with this. In my efforts to figure out exactly what happened in the case of a buyout, I forgot about somebody having to clear waivers first. For my own edification, I consulted our friend Larry Coon (http://http://members.cox.net/lmcoon/salarycap.htm#54) again:


54. What are waivers?

It's a temporary status for players who are released by their team. A player released between August 15th and the end of the regular season stays on waivers for 48 hours. A player released at any other time stays on waivers for seven days. During the waiver period other teams may claim a waived player. If more than one team tries to claim the player, the team with the worst record gets him. If a player on waivers is claimed, the new team acquires his existing contract and pays the remainder of his salary. There is also a fee of $1,000, payable to the league office, for claiming a waived player.
A team can claim a waived player only if one of the following is true:

The team is far enough under the salary cap to fit the player's entire salary.


The team has a Disabled Player exception for at least the player's salary (see question number 19).


The team has a Traded Player exception for at least the player's salary (see question number 69).


The player's contract is for one or two seasons and he is paid the minimum salary.
If no team claims a waived player, he is said to have "cleared waivers." The player may sign with a new team of his choice, and the player's prior team continues to pay the guaranteed portion of the terminated contract (see question number 90 for more information). The player's salary with his new team is a matter of negotiation. Few players are actually claimed while on waivers, since the team claiming a waived player inherits his entire contract. It is far more common for teams to wait for the player to clear waivers, and then sign him to a much smaller (even minimum salary) contract.

If a player is waived after March 1, he is ineligible to be included in the playoff roster of any team that signs him for the remainder of that season.

If a team trades a player and the player is waived by the receiving team, the player's original team cannot re-sign that player for 30 days (during the season) or 20 days (during the offseason) following the date of the trade.


--------------------------------------------------------------------------------

55. Do released players count against the cap? What is set-off?

Released (waived) players with guaranteed contracts continue to be included in team salary. Players whose contracts are not guaranteed are included in team salary in the amount they made while they were with the team. Players on non-guaranteed "summer contracts" are not included in team salary unless they make the regular season roster.

The team and player may negotiate a revised payment schedule to be utilized in the event the player is waived. This revised payment schedule may call for the guaranteed portion of the player's contract to be paid over a longer or shorter period of time than originally specified in the contract, or even as a lump sum. This is often referred to as a "spread provision." Also see question numbers 59 and 60. Even if the payment schedule is altered, the team's team salary is charged for the same number of seasons as specified in the original contract.


If another team signs a released player who had a guaranteed contract (as long as the player has cleared waivers -- see question number 54), the player's original team is allowed to reduce the amount of money they still owe the player (and lower their team salary) by a commensurate amount (this is called the right of set-off). This is true if the player signs with any professional team -- it doesn't even have to be an NBA team. The amount the original team gets to set off is limited to one-half the difference between the player's new salary and the minimum salary for a one-year veteran (if the player is a rookie, then the rookie minimum is used instead).


For example, suppose a fifth-year player is waived during the 2005 offseason, with one guaranteed season remaining on his contract. If this player signs a $1 million contract with another NBA team for the 2005-06 season, his original team gets to set off $1 million minus $641,748 (the minimum for a one-year veteran in 2005-06), divided by two, or $179,126. If this player had a $5 million salary with his prior team, then his prior team would be responsible for the remaining $4,820,874. Note that between his prior team and new team the player will earn a combined $5,820,874, which was more than he made prior to being waived.


There was some controversy about what happens to player options if the player is released before the option can be exercised. See question number 50 for details


Wow...this stuff is almost intentionally obtuse.

count55
06-25-2008, 10:49 AM
We will end up giving JT approximately $18 million and it will be stay on our cap for three years at around $6 million per. So while Herb techincally saves $3 million, it doesn't really led to any practical cap savings.

Well, apparently, per the earlier Larry Coon post, we would save $3 million against the cap, pro-rated over the length of the contract. Edit: I'm sorry...I misread your post, JR...that's exactly what you said...I was just confused by the last part of the sentence.


The agreed-upon buy-out amount (see question number 59) is included in the team salary instead of the salary called for in the contract. If the player had more than one season left on his contract, then the buy-out money is distributed among those seasons in proportion to the original salary. For example, say a player had three seasons remaining on his contract, with salaries of $10 million, $11 million and $12 million. The player and team agree to a buyout of $15 million. The $15 million is therefore charged to the team salary over the three seasons. Since the original contract had $33 million left to be paid, and $10 million is 30.3% of $33 million, 30.3% of the $15 million buyout, or $4.545 million, is included in the team salary in the first season following the buyout. Likewise, 33.33% of $15 million, or $5 million, is included in the team salary in the second season, and 36.36% of $15 million, or $5.455 million, is included in the team salary in the third season.

So...JT would be hit our cap/tax for $18 mill over the next three years vs. $21.6. I'd still prefer dealing him because it would leave us with the salary slot that could be used as filler or expiring later. Sure, it's not much, but otherwise, that's $18mm of dead space that can't be used for anything. In a "Soft-cap" situation, the salary slots are almost as important as actual cap space.

Anthem
06-25-2008, 10:49 AM
I do believe the number the Pacers would pay him can also be influenced by whether JT signs with another team. I could be wrong, but I think the Pacers would just have to make up the difference.
That's only for a waiver.

We could waive Tinsley, and after he cleared waivers (which he would), any new contract he signed would be deducted from the amount we owe him.

If we bought him out, however, he's totally on his own. Any contract he signs is unrelated to us.

RomanGabriel
06-25-2008, 10:50 AM
[quote=Naptown_Seth;741449]


Excuse any mistakes, Foretaz taught me plenty (being a jerk most of the time but still) but the financials are tricky.

Did anyone ever track down Foretaz?

count55
06-25-2008, 10:52 AM
That's only for a waiver.

We could waive Tinsley, and after he cleared waivers (which he would), any new contract he signed would be deducted from the amount we owe him.

If we bought him out, however, he's totally on his own. Any contract he signs is unrelated to us.


To slightly adjust this, the amount that would be deducted from our cap would be his new contract less the league minimum for his years of experience. In other words, if somebody signed him for the min (after waivers), we would get no reduction in cap.

ABADays
06-25-2008, 12:37 PM
I am so spiteful. If there is no benefit to the Pacers I would just keep him and let him sit - somewhere, not on the bench. No playing for 3 years would end his career. I just don't believe in "buying out" someone at that rate who has been slightly better than a POS for us. By design I might add.

Anthem
06-25-2008, 03:30 PM
I am so spiteful. If there is no benefit to the Pacers I would just keep him and let him sit - somewhere, not on the bench.
Yeah, I thought the same thing. Wild, huh?

count55
06-25-2008, 03:39 PM
Yeah, I thought the same thing. Wild, huh?


I am so spiteful. If there is no benefit to the Pacers I would just keep him and let him sit - somewhere, not on the bench. No playing for 3 years would end his career. I just don't believe in "buying out" someone at that rate who has been slightly better than a POS for us. By design I might add.

Problem is, you basically lock up that roster spot...I'm not saying that we'd definitely be able to put somebody there that's worthwhile, but I'd love to have the option of carrying 3 useful (ok...usable) guys on the inactive list rather than having one spot that is just dead.

Plus, as long as he's here, he's going to be an issue. I don't favor buying him out, but I think your approach might be just like grounding a kid...who are you punishing? Him or Us?

JayRedd
06-25-2008, 03:44 PM
Nor is the NBA Players Association going to be very happy with a decision to ruin someone's career based on "spite" either.

The only option for Herb if he's not going to let him suit up is to negotiate a buy-out and save himself $3 million-ish.