Money Talks Mailbag

  Money Talks  with shrink

Hey guys, its good to be here!  I wanted to thank the Canis Hoopus guys for the chance to be a part of their website, and you guys for being faithful readers. 

I will be running a regular feature called "Money Talks Mailbag" where I will try to answer your questions about finances and the Collective Bargaining Agreement.  These issues drive NBA front offices, and I hope I can give you a little different perspective on the game.  You can email me at  nba_economist@yahoo.com with your questions, and they may appear in an upcoming article!

Mail Bag #1

 

What's a cap hold? 

In order to understand cap holds, you need to understand the salary cap.  Unlike other sports (..grumble ..baseball), where a rich owner can often buy championships, the NBA has installed a salary cap that limits what teams over a certain payroll can do to add talent.  For example, a team over the salary cap can't add players from other teams without using exceptions, and their trades needs to match salaries within 125% + $100,000.

The next question quickly became "so what's your payroll?" To determine a realistic number, cap holds on player's rights needed to be added in addition to guaranteed salaries.

http://spreadsheets.google.com/pub?key=r0EIACYJtq4Wgjl-ZmYzRug&gid=19

Let's take a look at the Wolves in 2010.  As you can see, we only have eight players with guaranteed contracts, and the NBA minimum is 13.  If we had no other players coming in, the five spots would be assigned a cap hold equal to a player making the minimum, to determine out actual salary.

Cap holds arise from many things.  Obviously, first round picks carry guaranteed salaries, and until the player signs a contract, that would be a cap hold.  Exceptions carry cap holds, until they are renounced.  Players' rights carry cap holds.  All of these numbers are not real dollars, but allow the NBA to determine more precisely what a team's true salary is, and keep teams from using salary cap advantages simply be delaying contracts to expensive players.


How come we have a cap hold on Ricky Rubio if he's over in Europe?


Players who were picked in the first round that are over in Europe have different rules.  Obviously we carry Rubio's rights, so he fits the same definition of a cap hold that I answered in the previous question.  However, while he remains in Europe, there are two major differences.

1.  Rubio's cap hold only lasts during the summer.  This makes sense, because that's when most of the free agent movement would be going on.  His cap hold disappears later, creating a truer reflection of what the Wolves salary.

2.  Rubio's cap hold re-sets.  Every year that we retain Rubio's rights, his cap hold stays at the level of the #5 pick of the current year.  His cap hold last summer was $2,724,300.  Next summer it will be $2,812,200, 100% of the rookie scale for a 2010 #5 pick, and that amount will be subtracted from our available space under the salary cap.

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