Can a New CBA Help the Denver Nuggets be Contenders?

Your loyal and friendly Denver Nuggets bloggers here at Roundball Mining Company have not published anything of consequence regarding the current labor conflagration which now has the NBA on the brink of missing regular season games.  The fact of the matter is that the range of possibilities was so far reaching that any kind of analysis would have been complete speculation – not that there is anything wrong with that, this is a blog after all.  We have chosen to stay on the sidelines and patiently await some signs of movement in the negotiations.

The chances of both parties reaching an agreement in time to avoid losing any regular season games is remote; however, there has been significant movement over the previous few days that has displayed a glimmer of hope that any delay in the start of the regular season could be kept to a minimum.

According to various reports the owners have relented on their desire for a hard cap, the death of fully guaranteed contracts, rolling back existing salaries and today came off of their insistence that players not receive any more than 46% of all Basketball Related Income.

In other words, any dreams of fans from small market teams waking up one morning and finding an NFL style structure in place have gone unanswered.  For the most part the framework for the next CBA preserves most of the key features of the old CBA.  Still, there is hope that a more equitable system will be in place when the 2011-12 season gets underway.

The secondary issues that will determine the underlying dynamics of the new agreement are the luxury tax penalty, how exceptions – especially the Mid-Level Exception – are handled and expanded revenue sharing.  If the owners get their way with these issues, it could – and I stress could – make things a little easier for small market teams to compete on a more consistent basis.

First of all, the owners are seeking to make the luxury tax a greater deterrent by increasing the penalty.  There are several teams whose owners will avoid the luxury tax at all costs, even if it is only a dollar for dollar penalty.  If that penalty is increased the number of teams willing to dip their toe into the tax waters will certainly decrease.  Over the previous two seasons exactly half of the teams in the NBA have submitted a luxury tax payment at the end of the season.  A more stringent penalty could greatly reduce that number from 15 down to five or six.  No tax will slow down the Lakers or Knickerbockers, but if the tax is more punitive, it will limit which teams are willing to overspend.  Of course the players know this so any chances of seeing a drastic increase in the luxury tax are low.  Even so, any increase in tax severity will help level the playing field.

Next we turn our gaze to the various exceptions that are currently in place that allow teams over the cap to still bid for free agents.  The owners are seeking to limit the number of “Bird” free agents to one per year.  I can see why this makes sense to them on paper as it would help keep salaries down.  However, the Bird Rights are typically a big tool to be used to keep your current free agents in town.  Owners have fought in the past to enact rules to help them retain their players, such as allowing teams to resign their own free agents to an extra season with higher annual raises.  I doubt we see this change implemented.

The exception that does by far the most damage to the league is the MLE or Mid-Level Exception.  A great many atrocities against fiscal responsibility have been delivered via the MLE.  Look no further than Denver’s signing of Al Harrington last summer.  When a team is over the cap the only way they can make a serious bid for a player other than a minimum salary roster filler is the MLE – and there is the Bi-Annual Exception, but that is not financially significant.  As a result every contending team, or team who wants to make their fans think they are trying to contend, throws their full MLE at players who are anywhere from poor to decent or even solid contributors, but not good enough for their previous team to hang onto.  Players argue that teams should just be smarter and not sign undeserving players to those big contracts.  The argument does make sense.  Of course, in practice it is not so easy.  Teams only have so many options available to themselves every summer to improve their team.  To let one of those options go simply is difficult to do.  When other teams are adding players and apparently improving themselves it is painful to see free agency crap shoot close with a big round of ammunition still in the chamber.  Of course, if teams did stop handing out these obviously horrific deals players would cry collusion, but that is beside the point.

The bottom line is the MLE has to go and I believe it will.  With the number of concessions, real or imaginary, the owners are giving I see them having the leverage to dig in their heels on the MLE.  With a reduced MLE well run teams can more cheaply add decent players without hamstringing themselves down the road.  The option to use the cheaper MLE in successive seasons without causing irreparable damage to their payroll will be available as well.

For the Nuggets recent MLE booby trap the real travesty of the Al Harrington signing is not that he was paid $5.765 million in 2010-11, it is that he is scheduled to make $6.69 million two years from now when he is in his 15th season in the league.  That is simply untenable for a team like Denver.  Paying a player that kind of money when he will likely not even be one of their top eight or nine players is very damaging to their ability to compete.  However, at the time that is the price they had to agree to in order to sign him when they were trying to make a splash to keep Carmelo Anthony in Denver.

The final major piece of the puzzle is revenue sharing.  There are significant problems with revenue sharing.  Look at baseball where small market teams are content to rake in their payments from the big boys and just stash it in the bank as opposed to spending it on putting a better team on the field.  Some of those teams will turn a profit whether even one fan walks through the gates or not.  Revenue sharing can be a nice boost for teams who do not have the massive revenue streams of teams like the Lakers, Knicks or the Bulls; however, if the owner is not willing to use that money to increase the competitiveness of his squad, it really has done nothing but make the franchise a better investment.

One other proposal that the owners have supposedly put on the table is a second round of get out of one terrible contract free cards, otherwise known as amnesty.  The players will certainly go for it as it actually puts more money in their pockets due to the fact the waived player gets his money anyway, and can cash in on a second contract with a new team.  Plus this instance of amnesty will reportedly include canceling the players’ salaries from the luxury tax and the salary cap as well.  That opens up room for more spending on players who are theoretically worth the investment.  By the way, there is one player on the Nuggets who is has a roughly 100% chance of experiencing amnesty and that is the only player on the roster with a full MLE contract, none other than the aforementioned Al Harrington.

Some fans, and owners for that matter, may be disappointed to see a hard cap slide off the table as the ship that is the NBA labor negotiations lists from side to side.  The truth is with such small rosters and microscopic number of championship caliber franchise players teams are still going to be held hostage by players who long for greener pastures and the big market teams will always have a huge advantage.

The chances of small market teams will depend greatly on possessing superior management and a great deal of luck – you can read my treatise from last summer on that issue here.  I will always believe luck is the primary determining factor in which teams succeed and which teams flounder in the NBA and no CBA will change that.

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  • Chris

    Luck used to be a determining factor in which teams succeed and which teams don’t, however long term I don’t see that playing out that way.

    Teams such as New York, Miami and the LA Lakers will always be able to clear cap space and have the current generation of NBA players team up and fill out their roster once those players reach the prime of their career 7 years in like (Melo, Amare, DWade, LeBron, Bosh).

    Denver’s best hope in this star driven league is going to be to develop talent in house and take the same approach they did with Melo. Luck out end up at the top of the draft land a stud and hope you can build something with him in the 7 years that you have him. Limit mistakes (like 80 million for KMart), leverage the draft, get quality vets to fill out the roster.

    All the Lakers have to do is clear cap space in a strong free agent class and build from there. That approach won’t work the same way for the Nuggets. They will be able to sign players, but not the marquee types that will win you a title. They will get to overpay for the KMarts of the world.

    You can look at a team like Dallas and say the Nuggets could do that with a stud player like Dirk who won’t be swayed by the bright lights of NY or LA. I don’t think that Dirk is a career Maverick without an owner like Mark Cuban. You don’t see players showing Silent Stan the loyalty many around the NBA have shown Cuban.