Commentary

Cap news enlivens free-agent chase

Originally Published: April 16, 2010
By Larry Coon | Special to ESPN.com

LeBron James and Dwyane WadeJason Miller/US PresswireSeveral teams just improved their financial position to pursue LeBron James and Dwyane Wade.
David Stern changed the landscape of the free-agent market Friday. In a media chat after a board of governors session in New York, he revealed that the league's projection for the 2010-11 salary cap is now $56.1 million -- a robust increase from its earlier projections.

The salary-cap amount is determined by the league's revenues from the previous season. If the league had a good year, the cap goes up a lot the next season. But the league didn't expect this to be a good year. Its projections this past July, when the 2009-10 cap was announced, were more of the gloom-and-doom variety. In its annual memo to the teams, the league announced that it expected revenues to fall within a range of 2.5 percent to 5 percent -- signaling a drop in the salary cap from its current $57.7 million to a range between $50.4 million and $53.6 million.

The NBA's advice to teams at the time was both simple and ominous: Be aware of this projected decrease and plan accordingly.

The league periodically revises its projections as the season progresses based on economic conditions and revenues. Around the All-Star break, it revealed that the cap likely would fall on the high side of the earlier projections -- somewhere in the $53-54 million range.

A cap as high as $56.1 million comes as a complete surprise. It still represents a drop of about $1.6 million from the current cap, which translates to a 0.5 percent drop in revenues from last season. But it makes a huge difference for teams that were hoping to use the huge 2010 free-agent market to reverse their franchise fortunes.

Teams that were a little short of being able to offer the full maximum salary to premier free agents will now find themselves with sufficient cap room to do so. Teams that were resigned to letting go of their own free agents to create cap room now have the ability to hang on to a player or two -- signing a free agent and preserving some of their depth at the same time.

Even the capped-out teams benefit from today's announcement. With a higher-than-expected salary cap comes a higher-than-expected luxury-tax threshold. Teams firmly entrenched in luxury-tax territory, such as the Los Angeles Lakers, just saved about $3 million. These teams might now be more willing to spend their midlevel exceptions this summer.

But there's also a little bit of a gray cloud to go along with this silver lining. Some of the downsides include:

• The Chicago Bulls worked frantically at the trade deadline to create enough cap room to make a run at a player such as Dwyane Wade, sacrificing Tyrus Thomas and John Salmons. The New York Knicks, desperate to unload Jared Jeffries, were forced to relinquish Jordan Hill to persuade the Houston Rockets to assume Jeffries' contract. A substantially higher cap means their sacrifices might have been for naught. The Knicks, for example, might have decided to hang on to Jeffries and Hill had they known the salary cap might be higher than they thought.

• Teams near the tax line also are affected by Friday's revelation. With a payroll of $70.4 million in January, the New Orleans Hornets held the equivalent of a fire sale, unloading Bobby Brown and Devin Brown to get below the projected tax threshold. Those moves might have been unnecessary, given today's revised projections.

• The players' union might have a bone to pick here. The gloom-and-doom projections surely led to teams being more conservative, and the union might claim that this affected player salaries in an unfair way.

The teams that will be helped by this sudden windfall include:

The Knicks previously were looking at about $31 million in cap room, and they are pining to sign not one but two maximum free agents. After signing a player such as LeBron James for $16.6 million, they would have been left with just $14.4 million -- not enough for another max player such as Chris Bosh.

The revised salary-cap projections give the Knicks a lot more breathing room -- and a lot more flexibility. Signing both James and Bosh is now within the budget. Or they can elect to sign just one player like James while bringing back some of their own free agents, such as David Lee and Sergio Rodriguez. In other words, Donnie Walsh's job just got easier.

The New Jersey Nets had been looking at about $22 million in cap room but now find themselves with about $25 million. This won't be enough to land two maximum free agents, but when you're coming off a season with the worst record in the league, you don't need to swing for the fences. You just need as much help as you can get. With $25 million, they can sign one high-dollar free agent and still have about $8.5 million left to spend on a complementary player. They also might be less likely to move Devin Harris for financial reasons should they miss out on Wall in the lottery.

The Miami Heat enter the summer with the clear goal of re-signing Wade and bringing in some help in the form of a big man such as Amare Stoudemire, Bosh or Carlos Boozer. But like any team looking to clear cap room, they would have had to let go of their own free agents -- robbing them of their depth. Now, they will be able to re-sign Wade, lure a free agent like Stoudemire and still have $10-12 million left over to fill out their roster.

The Bulls made a number of tweaks to their roster before the trade deadline to ensure they would have enough cap space to go after a player such as Wade or Bosh. They got the job done -- but just barely. The higher salary cap enables them to sign a premier free agent to add to their core of Derrick Rose, Luol Deng, Joakim Noah and Kirk Hinrich yet still have the ability to add a complementary player or hang on to a free agent such as Acie Law.

The Los Angeles Clippers are another team that was clearing as much cap room as possible to land a premier free agent. Before Friday's announcement, they would have been a little short of that goal, with only about $14.5-15 million of cap room. The revised cap projection propels them into contention for the maximum-salary free agents. With a $56.1 million cap, the Clippers will be able to sign any of the premier free agents to the full maximum salary. Should their Plan A fail, they also have the ability to go after one of the second-tier free agents while hanging on to one or more of their own players such as Steve Blake, Rasual Butler, Travis Outlaw or Craig Smith.

The pie-in-the-sky scenario for the Clippers would be to win the lottery and the right to draft Wall, then dangle about $16.4 million (just under a max offer) at LeBron, hoping he won't be able to resist the opportunity to lead such an impressive nucleus of players. Not likely, but hey, they're the Clippers -- let 'em dream.

In one way or another, every team in the league is affected by Friday's announcement. One of the biggest free-agent markets in league history just got a lot more interesting.

Larry Coon is the author of the NBA Salary Cap FAQ. Follow Larry at Twitter.

Larry Coon is the author of the NBA Salary Cap FAQ.