It is frustrating to see the other teams in the Western Conference add player after player while the Denver Nuggets appear to be doing nothing, but I think we can expect Denver to jump into the fray at some point and reel in their own big fish.
Let’s start off with some more NBA accounting. Henry Abbott at TrueHoop has reported that each team will receive a payment from the league escrow account.
What is the escrow account you ask?
A percentage of each player’s salary (for 2008-09 it was nine percent according to Larry Coon’s Salary Cap FAQ page) is deposited into an escrow account. At the end of the season that money is either returned to the players or disbursed to the teams. The determining factor of who gets the money is the ratio of player salaries and benefits to Basketball Related Income. Typically the escrow money is returned to the players, but this season the ratio dictated that the money will go to the owners.
As a result every team will receive a cash payment of $6,467,847 out of the escrow account. That is a significant chunk of change.
Keep in mind the luxury tax money that is collected from the big salary teams gets redistributed amongst the non tax paying teams. The result is another $2,911,756 payout. That means that a non tax paying team like Denver will receive a grand total of $9,379,603 in cash by the end of July. Now add in the Nuggets’ nine home playoff games as opposed to the regular two and the bottom line for 2008-09 gets much better for Stan Kroenke.
The question then becomes what is Kroenke willing to spend?
Let us allow history to be our guide.
In 2007-08 Denver paid out $81,437,079 million in team salary and at that time the luxury tax limit was $68,865,000. The result was that between their payroll and $13,572,079 in tax payments the Nuggets shelled out a grand total of $95,009,158 on players.
Can we assume that Kroenke is willing to spend $95 million again? What we as fans have going in our favor is the 2007-08 team was completely unproven where this team was able to knock on the door to the NBA Finals. I believe Kroenke will open up his pocketbook again to improve this team.
Using the $95 million expenditure in salary and tax payments from 2007-08 as an example we can surmise that the Nuggets payroll could be allowed to get as high as $82.46 million (at that salary level the tax payment would equal $12.54 million and thus a total outlay of $95 million). Right now the Nuggets are sitting at a team salary of $76.7 million (including Linas Kleiza’s $2.7 million qualifying offer. That leaves room for almost another $6 million in salary to be added in our $95 million scenario.
Now add in that extra $9.4 million the league is handing out as discussed above and perhaps it is possible Kroenke will green light a team payroll even higher than the $82.46 million from our example.
With only $2.1 million of the mid level exception left over after signing Chris Andersen and the biannual exception starting at $1.99 million remaining to be spent on free agents it would appear that if Denver wants to make a splash, they will probably have to use their trade exception(s).
It is certainly possible that the Nuggets sign a couple of minimum salary guys and call it good, but from what I know about Stan Kroenke, we should expect Denver to bring in at least one more solid player in order to hang with the Lakers, Spurs and Mavericks.