Timberwolves and Team Options
by shrink on Nov 8, 2009 10:40 AM CST
15 comments
Money Talks with shrink
Last week, the biggest financial news from the Timberwolves was their decisions to exercise Kevin Love and Corey Brewer's contract options, and to decline to exercise Oleksiy Pecherov's. All three were first round picks and thus the terms of their contracts follow the specified rookie scale. Before we discuss these decisions, let's take a quick look at the rules that govern first round picks.
In 1995, the NBA changed its Collective Bargaining Agreement to put players drafted in the first round on a strict salary scale based on their position in the draft. Unlike other sports, this prevented rookies for holding out for exorbitant salaries beyond that of most veterans. Teams can offer between 80%-to-120% of that salary scale, no more, no less. For example, 2009 #1 pick Blake Griffin got nearly $5 million in his first year, and 27th pick Wayne Ellington, received a little over $1 million. With guaranteed raises built into these contracts, the first four years of a 1st rounder's paychecks are pretty well established.
The important part for today's discussion is that while the first two years are guaranteed for the player and team, years three and four are team options. On October 31st each year (or the next working day this year, November 2nd), teams need to decide whether they want to continue with the contract, or let the player become an unrestricted free agent at the end of the season. You'll note that the decisions are for the next season, so a decision on October 31, 2009 is for the salary for the player from July 1, 2010 through June 30, 2011.
This creates a dilemma for the Timberwolves. Every contract that they retain for 2010-11 means less money under the salary cap next summer. Despite declining Oleksiy Pecherov's option for $2,380,270, Kevin Love ($3,638,280) and Corey Brewer's options ($3,703,472) cut deeply into their cap space. Raw cap space is a valuable commodity for either signing free agents for more than other team's Mid Level Exceptions (around $5 mil in 2010), or more likely, trading with other teams eager to sign free agents or get their payroll under the declining luxury threshold.
Here's what David Kahn had to say about the decisions:
"We are happy to extend Kevin and Corey for next season. All of us have been impressed with the determination displayed by both players this summer to make themselves better players through conditioning, hard work and skill development. I believe both have the drive and desire to be special players in this league. "As for Oleksiy [Pecherov], I spoke to him this morning that he should not interpret this decision as if Coach Rambis and I believe he has no future with our organization. Far from it. Because of our cap flexibility next season, we could re-sign Oleksiy next summer if it is in our mutual interests. He is a young player with potential, who is just seeing significant playing time for the first time in his career."
The three decisions were expected by many fans. Kevin Love has clearly shown he is a part of the Wolves' future, and Corey Brewer showed enough flashes in the pre-season to earn another year of examination. While Brewer's play can be erratic, he fits David Kahn's criteria of size, athleticism, and room to develop. Pecherov has shown some offensive ability but it would be difficult at this point to guarantee his salary when it would cost the team cap space.
Dollars under the salary cap are more valuable than ordinary dollars, because they can do additional functions. For example, with enough of them, a team seeking free agents can outbid teams that are over the salary cap which can only offer the Mid-Level Exception (about $5 mil in 2010). These dollars can also allow a team to make a trade that isn't within the 125% + $100,000 matching requirement, allowing them to trade greater amounts of salary relief. Even if the Wolves believed Pecherov was worth a $2.4 million salary in 2010-11, the may not have wanted to lock up the more useful dollars under the cap. However, the break even point for this decision isn't production-vs-salary, but whether the team was confident they could trade the player and his two guaranteed years to another team for an expiring.
Examining the overall financial effects of these decisions require taking on some uncertainty. If we predict that the NBA will set its 2010 salary cap at around $52 million, and further estimate we'll spend about $4.5 mil on our protected picks plus filler to reach roster minimums, letting all three walk at the end of the season would have left $16.9 mil in 2010 cap space. Keeping all three would put the Wolves' cap space at $7.2 mil, and the current decision puts them at around $9.5 million.
However, its still a long way until 2010, and its important to note that these "guaranteed contracts" don't lock the Timberwolves into the $9.5 million cap space estimate. This is a team that can change. There will be a lot of examination of the players and their fit on this team for the future, and David Kahn has certainly demonstrated that he is not afraid to make a trade or signing. For example, like Rodney Carney last year, the Wolves could still offer Pecherov a contract up to his $2.4 mil -- though other teams could offer more. Things could happen that could cause Brewer to be dealt. If Kahn believes the Wolves have a chance at one of the elite free agents for next year, he may trade players like Ryan Gomes or even Ramon Sessions, to increase the Wolves' cap space. The possibilities are endless, because at long last, the Wolves have only expirings contracts and no over-priced deals.
With several trade assets, financial flexibility, and many other owners facing serious financial challenges, Kahn has positioned the franchise to take advantage of any number of opportunities that may present themselves.
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shrink does Canis Hoopus posts now?
Cool!
by John Doe on Nov 8, 2009 11:28 AM CST reply actions 0 recs
Corey's option means Gomes is basically gone
They can’t really keep Gomes on at this point and have the cap space they want. The decision on Brewer forces the Wolves’ hands in that respect.
"It has come to the editor’s attention that the Herald-Leader neglected to cover the civil rights movement. We regret the omission."
by feral on Nov 8, 2009 11:54 AM CST reply actions 0 recs
I agree...
…I don’t think there is any way Gomes is back next year. Either by way of trade or having his contract not picked up, I think he is too high priced for what Kahn wants to do….especially with all the picks on the table.
Forever splitting the Cheechakos from the Sourdoughs
www.canishoopus.com
by Stop-n-Pop on Nov 8, 2009 1:01 PM CST up reply actions 0 recs
I agree, but here's a wrinkle
Moving Gomes seems to be the simplest way for David Kahn to clear additional cap space for 2010. Fortunately for the Wolves, it would probably be easy to trade him. Gomes is on a well-priced contract in today’s NBA economy, his partial guarantees give teams a way out of salary, and his flexibile game and team-oriented attitude would help him play a supporting role for a contender (BOS?). He could also make a good component in a trade for a star with a bigger contract.
However, while it may be the most likely, keep in mind that the Wolves entire roster is filled with movable assets. If we got a good offer for Sessions, but only bad offers for Gomes, would it be Ryan that was still out the door? A blockbuster with Al Jefferson may, or may not, mean that Gomes could stay. If Brewer was to fall apart, Gomes might have more value to us at SF.
I agree with you that the Wolves should be keeping a careful eye on Ryan Gomes, and evaluating his potential role in the Wolves future Gomes isn’t a bad player and has some value, but is he worth the additional cap space to us? This isn’t the last move we’ll see out of David Kahn before summer of 2010.
by shrink on Nov 8, 2009 1:27 PM CST up reply actions 0 recs
What does it look like
when Corey Brewer falls apart? Do his limbs actually fall off while he’s dribbling across half-court on a break?
"It has come to the editor’s attention that the Herald-Leader neglected to cover the civil rights movement. We regret the omission."
by feral on Nov 9, 2009 11:06 AM CST up reply actions 0 recs
One correction?
My reading of Larry Coon’s FAQ indicates that we can go above $2.4 million on Pecherov. If we were over the cap we’d be limited in using Early Bird rights or other exceptions to sign him above that amount, but since we’ll have free cap space we can exceed that amount.
It’s part of the reason why I didn’t want to pick up Brewer’s deal either.
by Blond Ricky on Nov 8, 2009 12:11 PM CST reply actions 0 recs
I could be wrong...
But I interpret section 19 under Larry Bird Exception starting with “There is one more limit…” (http://members.cox.net/lmcoon/salarycap.htm#Q19) to mean that the Wolves are limited by the 4th year team option they decline.
The early bird rights only apply to 1st round picks who had their 3rd year option declined (Joe Alexander, Yaroslav Korolev) and I can’t find a place that says a team can go above the team option they declined with free cap space.
Do you have a link to the part your referencing?
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by wyn on Nov 8, 2009 12:40 PM CST up reply actions 0 recs
Is OPech's Declined Option Rare?
The rookie scale generally makes rookie deals cheaper than their production, and most have their team options picked up. However, this season there were five who had their options declined:
Ian Mahinmi .. 2005 Draft 28th Pick
Oleksiy Pecherov .. 2006 Draft 18th Pick
Alando Tucker .. 2007 Draft 29th Pick
Sean Williams .. 2007 Draft 17th Pick
Joe Alexander .. 2008 Draft 8th Pick
There were roughly sixty choices (60 1st round draft picks from 2007 and 2008, +/- players that were in Europe), so the five that didn’t get picked up are clearly in the minority. However, for a player like OPech and Mahinmi, their time in Europe gave front offices a longer look at the players.
Joe Alexander is an anomoly. Its rare that a team doesn’t pick up a player’s third year. Teams have only seen the player for a little over a year, so generally they will sign him, and hope for the best that he improves in his second year. Fans are emotionally invested in their young players, particularly lottery picks, and GM’s don’t like to publicly admit their mistakes. When the Bucks declined his team option, it demonstrated how little optimism they have for the future of the player.
by shrink on Nov 8, 2009 1:13 PM CST reply actions 0 recs
A couple others I've seen declined this year
Javaris Crittenton
JR Giddens
Acie Law
I think it’s getting more and more common in the last few years. Salaries are going up, the cap is going down, revenue’s hurting AND the change to only 2 guaranteed years (rather than 3) is still relatively new.
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by wyn on Nov 8, 2009 7:21 PM CST up reply actions 0 recs
Thanks, and I think you're right about the external forces.
For several teams, 2010 is such an important year for many teams seeking free agents. For many others, if the luxury threshold drops $7 million, they’ll have a difficult time cutting payroll and avoiding both luxury penalties ($1 for each $1 over the lux) and the loss of their luxury share (1/30th of the lux pool, or about $3 mil).
With most NBA players having guaranteed contracts with raises, many owners are getting squeezed next year. I think that especially for owners that refuse to go over the lux (like Herb Kohl in Milwaukee), young first-rounders have less time to show they can develop into players worth tieing up more cap space.
by shrink on Nov 9, 2009 8:50 AM CST up reply actions 0 recs
It also begs the question...
…of who is going to take the time to develop some of these projects? This is where I hope the D-League can step up.
Forever splitting the Cheechakos from the Sourdoughs
www.canishoopus.com
by Stop-n-Pop on Nov 9, 2009 9:13 AM CST up reply actions 0 recs
I wonder..
…if anyone will pick Alexander up in the off season. He’s been injured so it’s been tough to get a hold on how much potential he may have. From what has been written about him it sounds like he’s a solid worker.
Forever splitting the Cheechakos from the Sourdoughs
www.canishoopus.com
by Stop-n-Pop on Nov 9, 2009 7:55 AM CST up reply actions 0 recs
Ya, the cap going down is probably the biggest reason
It’s just hard to justify keeping guys like Crittenton, Alexander or Law, who haven’t proven anything in the league. In the years past, those guys probably would have their options picked up based on their sheer potential, like we did with Brewer, but with the cap projected to be $10mil less than what it was even just a year ago, teams just aren’t going to cross the luxury tax line for a player that isn’t producing.
If the Bucks had picked up Alexander, they’d be paying not just his contract, but also paying what his contract is worth into the luxury tax. So that’d be essentially $6mil for a player who averages just 5 points and 2 assists, and has questionable health.
If we had been up against the luxury tax line, I’m sure Brewer would not have gotten his option picked up. We just fortunately happen to be in a position to be able to take the risk of bringing him back next year.
by Oceanary on Nov 8, 2009 7:35 PM CST reply actions 0 recs
Brewer and Gomes together could be very valuable
assets at the trade deadline. The Wolves can package them and perhaps another player to get back a well paid impact player. The other team can talk up Brewer and Gomes to make the trade look better, knowing that this summer they can let Gomes go to save money. Brewer would also probably be easily traded to a team under the cap that misses out on the free agent bonanza.
by Rumblebee on Nov 8, 2009 8:02 PM CST reply actions 0 recs
wait…
shrink wrote a whole page and did not confuse al jefferson with al harrington or richard jefferson? I do not believe this is shrink.
by revprodeji on Nov 9, 2009 7:51 AM CST via mobile reply actions 0 recs
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