| Gone With The Wind Authored by Herman de Vries - July 6, 2005 - 3:39 am
This summer, the Orlando Magic have three players with relatively large contracts that expire after the 2005-2006 season: Tony Battie, Kelvin Cato and Doug Christie. Those contracts can be very interesting for teams looking to slim down their payroll or rebuild using cap space, meaning the Magic could likely be very popular in the free agent market. However, by trading expiring contracts for multi-year deals the team would make it’s future payroll grow fast as well. Is it really a must to spend so much cash in order to win in the NBA?
Rebuild while winning
The answer is a loud and screaming ‘no’. The last couple of years, there have been champions who still had money left to spend on their salary cap, and teams in that have been in the gutter for years with an overblown payroll. Two of the best examples of teams that were able to rebuild their team using it’s cap flexibility while continuing to win are the San Antonio Spurs and Detroit Pistons.
The Spurs haven’t stopped competing for a championship since they drafted Tim Duncan in 1997 and even managed to win their third NBA championship this year with one of the most modest payrolls in the entire league ($46.9 million, 24th highest in the league). In the summer of 2003, after winning their second NBA title, they were even far enough under the salary cap to offer a maximum contract to free agents like Jermaine O’Neal, Elton Brand and Jason Kidd, but chose not to in order to keep their finances flexible so that they could re-sign guards Tony Parker and Emanuel Ginobili later on. Parker has played a large role on the Spurs’ past championship runs and Ginobili was named an All-Star this past season and played extremely well during their 2005 title run.
The Spurs’ opponents in the 2005 NBA Finals were the Detroit Pistons, who have had a similar road to success when it comes to finances. After having to let Grant Hill go in a sign-and-trade to the Orlando Magic in the summer of 2000, the Pistons were forced to rebuild. Joe Dumars, the team’s General Manager, chose to do this by acquiring scrappy, hard working veterans that played defense rather than by blowing the team apart and trading all it’s pieces for contractual reasons rather than to keep competing. After winning the Central Divison Championship in 01-02 and 02-03, the Pistons acquired soon-to-be free agent Rasheed Wallace in a three team deal involving the Hawks and Bucks. Wallace would turn out to be the missing piece in the puzzle and lead them to the 2003-2004 NBA championship. That summer, the Pistons were $10 million under the NBA’s salary cap and were able to re-sign Wallace and add former All-Star and Olympian Antonio McDyess to make another title run in 2005. The Pistons currently have the 19th highest payroll in the league at $52.4 million.
Other examples of teams using cap flexibility to rebuild are the Utah Jazz, Denver Nuggets, Phoenix Suns and Cleveland Caveliers. The Jazz kept competing while maintaining cap flexibility after seeing John Stockton retire and Karl Malone sign with the Lakers. The Jazz were able to sign some top free agents in Carlos Boozer and Mehmet Okur last summer. The Nuggets blew their team and were able to sign former 1st overall pick Kenyon Martin with their capspace. The Suns traded Marbury for expiring contracts, prospects and draftpicks and were able to land MVP Steve Nash and Quentin Richardson with their free agent money, good enough to make the Western Conference Finals this year. The Cleveland Caveliers, who were well on their way for a playoff berth in the East but collapsed late this season, will have around $10 million to spend this summer on top free agents such as Ray Allen or Michael Redd, and appear to be destined to compete for championships in the future with LeBron James.
We’ve often seen lottery teams trade their best players for expiring contracts, cheap young prospects and future draft picks, so that they would have a clean slate again and have all their options open, something that has proven effective for teams like the Denver Nuggets and Phoenix Suns. However, the capspace and financial flexibility by itself isn’t what made those teams better: it’s how they dealt with it. For every Nuggets or Suns team that has ‘resurrected’ this way there’s an Atlanta Hawks team that ends up with empty hands every single year. As a team you don’t need caps pace and financial flexibility to win, you need it to make sure you keep winning. Tim Duncan isn’t the (only) reason why the Spurs have been successful ever since they drafted him in 1997; it’s how they’ve kept and dealt with their cap space and financial flexibility that allowed them to take a different direction when they felt they needed to.
Current payroll situation
Right now the Magic, holders of the 6th highest payroll in the NBA, have just over $65.6 million in guaranteed contracts for the upcoming season. By the end of the season, after the contracts of Doug Christie, Tony Battie and Kelvin Cato would expire, the Magic will have $47.3 million in guaranteed contracts. The contracts of this years draft picks or possible free agent signings will likely make that number grow a little bit. The Magic could have a payroll up to $72 million by the end of the summer.
The way things look right now, the Magic will not be under the salary cap until after the 2006-2007 season, when Grant Hill’s contract expires and comes off the cap. The Magic will have $23.2 million dollars (+ draft picks and/or possible free agent signings) in guaranteed contracts then, meaning they could easily have enough money to spend in free agency to offer someone a contract up to the maximum allowed by the NBA. Besides Steve Francis ($15 million) the Magic would only have Hedo Turkoglu ($6.8 million), Dwight Howard ($6.1 million) and Jameer Nelson ($2 million) under contract out of the current group of players if they would pick up Howard’s and Nelson’s 4th year options.
In 2007 the better players of the 2003 NBA Draft class that had their 4th year options picked up by their teams will become restricted free agents if they haven’t signed extensions with their teams before then. The 2007 free agent class could have players available such as Cleveland’s LeBron James, Denver’s Carmelo Anthony, Miami’s Dwyane Wade, Toronto’s Chris Bosh, Chicago’s Kirk Hinrich and many others.
Mr. DeVos spends the big bucks
In the past, Magic owner Rich DeVos has been described as a penny-counting owner who will not spend any more money than he has to at times. It was no big secret that he did not want the Magic to go over the luxury tax a few years back while John Gabriel was the team’s General Manager. In the present, the Magic have the 6th largest payroll in the entire NBA and look to continue that trend as they currently have over $65 million in guaranteed contracts on their payroll for next season, a number that could rise up to about $72 million depending on what they do in the draft and free agency.
Is this a new trend that will continue with the Magic’s ownership? With the expiring contracts they currently have they will have a choice on what to do with their payroll. They can either wait for the contracts to expire and cut payroll or try to get under the salary cap so that they can pursue free agents, or they can try and use them in a trade with a team that wants to cut payroll? Is Rich DeVos and his family really dedicated enough to keep forking over these huge amounts of cash for years to come if they trade their expiring contracts for guaranteed contracts?
Will the Magic waive Christie?
A June 26th article in the Orlando Sentinel (“New CBA could help Magic cut luxury tax” by Brian Schmitz) stated that Doug Christie could share the same fate as players such as the Knicks’ Alan Houston or the Mavericks’ Michael Finley; they might be waived by their teams this summer.
The Knicks (1st), Mavericks (2nd) and Magic (6th) currently have three of the top-6 payrolls in the NBA, all three are over the luxury tax threshold. They will have to pay the ‘dollar-for-dollar’ tax, meaning they will have to pay each dollar they are over the threshold to the NBA as a penalty, causing their annual outgoings on salary to double after the threshold.
The new Collective Bargaining Agreement that has taken effect this summer has a new rule that states NBA teams can waive one player to duck paying the luxury tax on that player’s salary. The player would not come off the team’s salary cap and the team can not re-sign the player after waiving him.
If the Magic do in fact waive Doug Christie it could be an indication that the team might not be willing to trade (all) their players with expiring contracts for perhaps more talented players with guaranteed contracts.
The value of expiring contracts
After seeing All-Stars like Baron Davis and Vince Carter get traded for expiring contracts over the past few years, it has become apparent to the common fan that when you have expiring contracts to offer during the trade season, you can probably get a nice piece of the pie. However, an owner would have to be very committed to allow a GM to take on such huge amounts of guaranteed money over a span of multiple years. After all, there’s a reason why the teams that were on the receiving end of those deals for expiring contracts made those deals; they must have had a plan them¬selves.
Why do you think in the latest labour-talks owners have pressed so hard for shorter contracts? Because they expire sooner! Owners do not want to have to pay large sums of cash on players, because one big injury to that player can put a headlock on a franchise financially. It is also possible a player just does not turn out to be as good as the team expected him to be when they signed him. When you give a large, multiyear deal to a prospect that is still growing as a player a GM better make sure he is worth it.
When a team is looking to trade a certain player for expiring contracts, it usually means they just want to get rid of his salary in order to get their flexibility back. Does that mean this player (or the risks that he brings with him) just is not worth the money? Are the Magic really better off trading players like Tony Battie, Kelvin Cato and Doug Christie for players with large multiyear deals in order to make their payroll rise un-equivalent to the talent level?
Unfortunately, for us, not even Miss Cleo can tell us the answers to those questions. One thing does stand out though: the teams that give away their financial flexibility take the longest to adjust and to recover. No matter at what angle you look at it, it has to be something the Magic’s current assistant General Managers Dave Twardzik and Otis Smith or a possible other future front office chief will have to take into account when they go into this summer looking for trades.
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