5/17/2005 Insider - Collective bargaining issues

sunsfn

Registered User
Joined
Oct 3, 2002
Posts
4,522
Reaction score
0
Updated: May 17, 2005, 6:59 PM ET
Contract length a deal breaker?

By Chad Ford


Trying to pin down the exact positions of either side in the midst of collective bargaining isn't easy or precise.

Insider has talked to numerous sources on both sides of the negotiation to try to paint the most accurate picture possible of where things stand.

While the negotiations and compromises talked about are really a moving target, here's where we believe they are now:


Age limit

Currently, players are eligible to declare for the NBA draft after their high school senior class graduation if they are from the United States. If they are international players, they must be 18 years old by the night of the draft. For several years, commissioner David Stern has been vocal in support of an age minimum of 20 for players to be eligible for the draft. Union director Billy Hunter has been just as vocal opposing the limit.

In February, it appeared that the players had warmed to the age-limit idea to the point that several sources believed an age limit would become part of the new collective bargaining agreement. Since then, however, several prominent players have come out and publicly opposed it. Player agents also have been adamant that the union not accept Stern's proposal.

Said one source close to the negotiations, "I think David is the only one left on either side who really wants this to happen."

But that doesn't mean the proposal is dead. The players might be willing to agree to a compromise that sets the age limit at 19, two sources close to the union told Insider.

According to sources, under the current league proposal, high school players would have to wait two years after their high school class graduated before becoming eligible for the NBA draft. International players could not declare for the draft until the age of 20.

The rule likely would go into effect for the 2006 NBA draft.

If an age limit is implemented, it would dilute the draft dramatically for the next several years. If the rule had gone into effect last year, for example, 11 of the first 19 players selected would have been ineligible. Underage players such as LeBron James, Carmelo Anthony, Amare Stoudemire, Chris Bosh and Dwight Howard would've been ineligible for the draft, had the rule been in effect earlier.

It would take several years for the talent pool to restock. By 2008, however, the draft would be stronger, giving teams an extra couple of years of scouting before having to make crucial – and expensive – decisions on players.

The league's main interest in establishing an age limit, however, is economic. With the rare exception of a player such as LeBron, it is difficult to market players who are coming straight from high school. Two years of college publicity gives fans a chance to get to know players before they join the NBA.

"Everything is an economic issue," Stern said in February when asked about an age limit. "I mean that sincerely. Because it affects our business, in terms of our responsibility, the way we are viewed, the players' maturity and how they deal with the community.

"On a broader sense, everything we are talking about, even though it may turn out to be about a minor league or D League or age limit, it all relates to the operation of this league, and at the bottom, it sort of all could be referred to as an economic question."

If the league does institute such a rule, it likely will be challenged in court. However, the league is confident the rule will hold up as long as it was collectively bargained. The NFL successfully defended a recent suit by running back Maurice Clarett. In May, a three-judge appeals panel said federal labor policy allows NFL teams to set rules governing when players can enter the league, stopping Clarett from entering last year's NFL draft.


Contract length

This issue could be the deal breaker. Currently, players can sign a fully guaranteed contract for a maximum of seven years if they re-sign with their current team. Players signing with a new team in free agency can sign six-year deals.

This is a sticking point for owners, who often get stuck with the bill for players who become injured or don't pan out. Teams have few options if they want to part with a player with a bad contract. They can hope he retires, try to trade him (usually taking back another bad contract in return) or try to buy out the contract.

This fall, several players, including Howard Eisley and Eddie Robinson, were bought out for significant sums. The problem for owners is they have to pay a player who winds up playing for another team. They also cannot get the player off the books until the contract originally would have expired. Once a team buys out a player, the buyout amount remains on the books until the original deal expires.

This has grown into a major problem. This season, the Bulls and Nets will be paying more than $15 million in salaries to players who aren't on their current rosters. Three other teams – the Bucks, Celtics and Grizzlies – owe more than $10 million in salaries to players not with the teams. A number of other clubs, including the 76ers, Wizards, Rockets, Mavericks and Suns, also owe significant amounts to players who are playing elsewhere.

The owners' original proposal wanted contracts shortened to three or four years. According to several sources, the owners in the past few weeks have softened their stance a little and are now willing to agree to maximum contract lengths of four and five years.

So far, the union has agreed to compromise a little, shortening the maximum number of contract years to five or six. However, the players don't seem to be willing to move any further without major economic concessions from the owners.

"If they want to get rid of that extra year," one source close to the union told Insider, "it's going to cost them. That's a major issue for the players. We've already given up one year. I think it's enough. If they want to get rid of the escrow tax or something, then we can talk about reducing those lengths further."


Raises

For months, players and management remained far apart on this issue. Under the current CBA, players are allowed maximum raises of 12.5 percent per year if they re-sign with their current teams and 10 percent if they sign with new teams in free agency.

The effect of those raises can be devastating to a franchise over time. For example, the Los Angeles Lakers, who last summer signed Kobe Bryant to a seven-year contract with 12.5 percent raises, are on the hook for $14.175 million this year. In 2010-11, they owe him $24.8 million.

Owners contend the raises are out of whack with the current financial realities. Last year, the salary cap stayed flat. In years past, it has increased by small, incremental amounts. If salaries are rising 10 percent per year and the cap is rising 3 percent, teams that are avoiding the luxury tax now won't be so lucky in three or four years.

Some clubs have tried to counter this trend by offering players flat contracts. However, very few agents or players are agreeing to them.

To curb the growth of salaries, owners have proposed rolling back the maximum raises to 5 percent for players who re-sign with their current teams and 4 percent for players who sign with a new teams in free agency.

This is a major sticking point for veteran players, who count on those nest-egg balloon payments at the end of their careers. So far, the players are holding firm to the current numbers of 12.5 and 10 percent.

According to sources, the owners have softened their stance on this issue during the past few weeks to the point that it's unlikely the raise structure will be changed significantly.


The mid-level exception

Some GMs feel the mid-level exception, more than any other "soft-cap" device in the CBA, is responsible for the out-of-control salaries in the league. The mid-level exception is available every year to teams that are above the league's salary cap. It's based on the average salary of players in the league – currently $4.9 million. Teams can use the exception to sign players for a maximum of six years with 10 percent raises.

Derek Fisher, for example, signed a six-year deal with the Warriors last summer that totaled $37 million. Although his starting salary this year is $4.9 million, it escalates to $7.4 million in 2009-10.

Owners argue that the exception has blown a huge hole in the cap. Because teams can use the exception every year, the numbers really start to add up. Owners believe lowering the mid-level exception and implementing shorter contracts will bring things under control.

Everyone still wants the loophole – they just don't want to be able to drive a semi through it.

Currently, the owners are looking to split the mid-level exception in two pieces. Teams could sign two players with the exception: one for 75 percent of the exception, the other for 25 percent. Under current exception figures, teams would have a $3.7 million slot and a $1.2 million slot.

Right now, most teams are forced to offer the full $4.9 million to top players in free agency. That number would be lowered to $3.7 million. Most teams would choose not to use the $1.2 million exception, in effect lowering payroll.

Combine that with the shortened contract length the sides are working toward, and the mid-level exception won't be nearly as problematic.

A typical mid-level exception contract would be four years, $20 million, compared with six years, $40 million. It's a big difference.


The salary cap

The current CBA puts a salary cap in place based on basketball-related income. The cap is set at 48 percent of BRI. Last year, that came to $43.87 million. According to sources, the owners have agreed to increase that percentage, in effect raising the salary cap. Sources claim the cap could rise to $50 million next year under current proposals. This is a big concession to the players. With a larger cap, more teams will be able to spend on contracts each summer.


The luxury tax

The infamous luxury tax is something for which neither side cares. However, it's Stern's biggest stick in beating the owners into submission for out-of-control spending. Last season, teams whose payroll exceeded $54.6 million paid a dollar-for-dollar tax on the amount they were over the threshold. For example, the Knicks' payroll last season was $94.4 million. That means they paid the league $39.8 million in tax penalties. The total taxes paid by teams last season amounted to more than $157 million.

The luxury tax kicks in when total player salaries exceed 61.1 percent of total basketball revenues. That threshold jumped to 63.3 percent this season – giving the owners their first shot in a long time at a season without a luxury tax.

The tax probably is not going away, regardless of what both sides might want. The latest proposal from the league, according to sources, pushes for a "super tax." Owners who exceed the salary cap by more than a certain percentage would be penalized $2 for every dollar they are over the tax threshold.

That's actually a bigger penalty than is now in place and something to which the players have been staunchly opposed. The union believes this would amount to a "hard cap" because the penalty is so severe that few teams would dare exceed it.

The league is looking for the stiffer penalty for two reasons. First, it believes the current penalties have not been enough to deter many owners from exceeding the threshold and paying the luxury tax. Twelve teams paid it last season. Second, the extra revenue derived from the tax would make up for the costs incurred by raising the cap and reducing the amount players pay into escrow accounts (see below).

Currently, it appears that the owners have been willing to compromise on the "super tax" to the point that it would affect only the most egregious spenders, such as the Knicks. They would move the threshold back so far that few teams would ever cross it. Under the current proposal being debated, the "super tax" wouldn't touch 90 percent of the teams in the league, making it more palatable to the players.


Player escrow account

Currently, players must pay 10 percent of their salaries into an escrow account each season. If, at season's end, the total amount of player salaries exceeds 57 percent of the league's total basketball-related income, that money goes to the owners. If it doesn't exceed 57 percent, the players get their money back. For the past two seasons, salaries have been hovering at more than 60 percent of BRI, and the owners who have kept their payrolls below the league's luxury-tax threshold (and a few that fall within a certain "cliff threshold") have gotten millions back from the players.

As you can imagine, the players want this to end. They already pay an enormous amount in taxes. Factor in the 10 percent that's taken off the top, and a player's take-home pay is far less than what it appears on paper.

Owners are reluctant to make the change. The windfall teams got last year from the escrow tax and fees paid by owners who were over the luxury-tax threshold put roughly $8 million back in the pockets of those owners who were under the tax or in the cliff threshold.

For several teams, that rebate meant the difference between turning a profit and posting a loss for the season.

Right now, sources claim the owners might be willing to compromise by phasing down the amount players pay into the escrow account from 10 percent to 5 or 6 percent. They are unwilling to eliminate it completely, however.

This is a major sticking point for both sides. While owners are pushing for a number of items that will get their finances under control over the long term – remember these proposals won't be retroactive; they would only apply to contracts going forward – they also are unwilling to take huge financial hits now to get it done.

That's why the phaseout is important to the owners. It means they give up less money now and more once the system begins improving.

There's also another significant development in this area. Under current rules, the NBA has sole discretion over the use of the escrow money. Currently, it redistributes the cash (and luxury tax revenues) to teams that are under the luxury tax threshold. In essence, Donald Sterling gets a bonus for being cheap.

The union hates this rule and tried (unsuccessfully) to litigate it in court. The players feel as though withholding the escrow money is yet another tax on teams over the threshold. Not only are they paying money in but they're losing out on money in the form of a rebate. The league has been willing to negotiate this issue.


Contracts

The NBA minimum wage, currently starting at $385,277 and increasing each year a player is in the league, will increase significantly, sources say. This is an obvious concession by the league and should placate a large constituency of players who consistently sign deals for minimum wage.

Rookie salary scale

Currently, first-round picks are tied into a league salary scale. When a first-round pick signs a contract, the first three years are guaranteed, with a team option for the fourth year. Players are paid a set amount based on where they were selected in the draft. The current proposal, according to sources, modifies that deal in favor of the owners. Under the new rules, first-round picks would get the first two years of their contract guaranteed. The third and fourth years of the contract would be team options.

This is another proposal to which the union is adamantly opposed.


Roster space

Currently, teams can have a maximum of 15 players on their rosters, with a minimum of 11. Under current proposals, the minimum would be raised to 14. This is another concession by the league. The owners also have agreed to do away with the injured list, changing to inactive and active lists. That means teams no longer will have to fake player injuries in order to manage their roster.


Trade rules

For years, both GMs and players have been complaining about restrictive trade rules that mandate all trades be within 115 percent and $100,000 of each other. That restricts player movement to the point that many deals become impossible. Expect the league to loosen those trade rules significantly under the new CBA. That includes widening the gap between salaries traded and received to 125 percent.


NBA minor league

There has been a movement among GMs for some time to see the league turn the National Basketball Development League into something that looks more like a real minor league. Stern told Insider in April 2004 that such a league already was in the works, with the possibility of the NBDL expanding to 15 teams and each team being affiliated with two NBA teams. In February, Stern reiterated his commitment to creating a true NBA minor league.

"One of the things we'd like to do is have young players subject to having their contracts assigned, but we understand that there can be differences of opinion on that issue," Stern said.

Creating a minor league has been an issue in the bargaining process. The players and league must collectively agree to a system. Hunter said he's still not convinced the NBA needs a minor league.

However, sources say it's likely the idea will move forward. Here are a few details currently on the table:


Each NBA team would send young players to a designated NBDL team, along with an assistant coach to monitor the players' development.
Stern plans to expand the league beyond the Southeast to as many as four regional pods, starting with the Southwest. If the league expands to 15 teams, two NBA teams would share each NBDL team.
First-round picks would continue to be paid at the rookie wage scale. This was a key concession to players who didn't want owners to use the league as a way of cutting player salaries.
Teams would retain the rights to all of their players and could recall them at any time.
Players with three or fewer years of experience in the NBA could be sent down to the NBDL. Veterans could not be assigned to an NBDL team.

The bottom line

The NBA is in better financial shape than it was before the current 1999 CBA kicked in. The luxury tax and escrow accounts have curbed spending, though not to the degree the owners would like. With the NHL embroiled in a nasty lockout, the last thing either NBA side wants is a work stoppage.

"Our players are making a substantial sum of money," Hunter said in February. "The league appears to be thriving and we would be foolish to not make every effort to make a deal and to be separated by something that shouldn't be something that prohibits that from occurring.

"We think there's a possible window of opportunity for which we can generate a lot of good will."

With both sides bickering over the details and a lockout looming, are the league and the players really willing to risk damaging that good will?


----------
 
Last edited:
OP
OP
S

sunsfn

Registered User
Joined
Oct 3, 2002
Posts
4,522
Reaction score
0
---------------------------------
Roster space

Currently, teams can have a maximum of 15 players on their rosters, with a minimum of 11. Under current proposals, the minimum would be raised to 14. This is another concession by the league. The owners also have agreed to do away with the injured list, changing to inactive and active lists. That means teams no longer will have to fake player injuries in order to manage their roster.
-----------------------

If Sarver did anything wrong this year other than not signing JJ to a long term contract, limiting the team to 12 players was it.

He did not think he should pay extra players a salary if they could not play. The problem is that those couple extra players save court time in practise for the starters, and also the suns starters were playing more minutes than other teams.
During the year the suns could have probably signed a veteran back-up P.G. to give Nash some rest, and kept him throughout the year to give him rest in practise.
 
OP
OP
S

sunsfn

Registered User
Joined
Oct 3, 2002
Posts
4,522
Reaction score
0
elindholm said:
I think this identical column was posted a couple of months ago.

On ESPN Insider this article is there and it is dated today, which usually means it is a new article, or there is an update to it..........?

Sometimes I wonder why I take the time to post this stuff at all with comments like yours! :mad:
 

elindholm

edited for content
Joined
Sep 14, 2002
Posts
26,657
Reaction score
7,703
Location
L.A. area
Sometimes I wonder why I take the time to post this stuff at all with comments like yours!

What is your problem? I wasn't criticizing you. I'm sure I'm not the only one on this board who will recognize that article. Maybe Ford accidentally submitted one of his earlier columns and no one at ESPN.com has caught the error yet.

If you feel that I'm not showing the right gratitude for your Insider posts, I will stop reading them. I do know that the board appreciates them, so, for everyone else's sake, please continue your work.
 

thegrahamcrackr

Registered User
Joined
Nov 19, 2002
Posts
6,168
Reaction score
0
Location
Scottsdale, Az
sunsfn said:
On ESPN Insider this article is there and it is dated today, which usually means it is a new article, or there is an update to it..........?

Sometimes I wonder why I take the time to post this stuff at all with comments like yours! :mad:


Wow, rough day at work today? :p


The article seems to be an outline for his CBA deals. There are usually little changes that take place throughout the article for each update.

The big changes I noticed in this one was the discussion about raises and cutting the escrow tax in half
 

elindholm

edited for content
Joined
Sep 14, 2002
Posts
26,657
Reaction score
7,703
Location
L.A. area
The big changes I noticed in this one was the discussion about raises and cutting the escrow tax in half

The discussion about raises was definitely posted before, except for possibly the last sentence ("According to sources, the owners have softened their stance on this issue during the past few weeks to the point that it's unlikely the raise structure will be changed significantly").

The part about the escrow tax might be new, since that particular issue bores me and I don't remember whether I've read anything about it before or not. :p
 

coloradosun

Hall of Famer
Joined
Jun 3, 2004
Posts
1,393
Reaction score
0
Several new topics are discussed in this article versus the prior

-Super Luxury Tax would probably only affect 2-3 teams, that obviously would affect the NY Yankees, I mean Knicks.
-Cap raised to 50M - this seems paltry when he puts it in perspective, the cap is only raised 3% a year when salaries are increased by 10%.
-Cap is only related to Basketball Related Income, where does all the money go that is generated from Non Baskeball Related Income, merchandising.
-The Bulls and Nets are having 15M of their cap going to pay salaries on other teams, Bucks, Celts and Grizzlies 10M, that's painful.
 
OP
OP
S

sunsfn

Registered User
Joined
Oct 3, 2002
Posts
4,522
Reaction score
0
thegrahamcrackr said:
Wow, rough day at work today? :p

Just a bad day all around............!

Sorry guys, I should not have responded like I did!

:lame:
 

Staff online

Forum statistics

Threads
526,261
Posts
5,165,081
Members
6,246
Latest member
Dipstick45
Top