The NBA’s big spenders will soon have to reckon with a much more punitive luxury tax structure. From the league’s implementation of the tax in 2003, teams have been required to pay “just” one dollar in luxury tax for every dollar in payroll that exceeds the tax threshold. This relatively soft penalty on an already soft salary cap will soon undergo significant changes. Cap guru Larry Coon describes the new luxury tax conditions under the 2011 Collective Bargaining Agreement, which will kick into effect next year:
Starting in 2012-13, teams pay an incremental tax that increases with every $5 million above the tax threshold ($1.50, $1.75, $2.50, $3.25, etc.). Teams that are repeat offenders (paying tax at least four out of the past five seasons) have a tax that is higher still — $1 more at each increment ($2.50, $2.75, $3.50, $4.25, etc.).
The desired effect is that these heavier penalties will give pause to even the deepest pocketed, biggest spending owners such as the Knicks’ James Dolan, the Lakers’ Jerry Buss, and the Mavericks’ Mark Cuban, when it comes to dishing out big bucks on salaries. (Though many might point to this summer’s free agency period as evidence the dissuasive effect has been minimal so far).
With the Kroenke family at the helm, the Denver Nuggets have been in the upper strata of teams with wealthy owners. According to (more…)
On Saturday the Denver Nuggets chose to waive DeMarre Carroll, according to Benjamin Hochman of the Denver Post. With next Tuesday’s deadline that demands all NBA contracts become guaranteed and Wilson Chandler still not re-signed, waiving Carroll was the simplest way to ensure a roster spot remains open for Chandler upon his return to the NBA sometime in the near future.
Tonight the Denver Nuggets defeated the Golden State Warriors to reach the 50-win plateau for the fourth consecutive season. Along the way nine Nuggets reached double figures in scoring — one short of the team record 10 — and professional pine-rider (or should I say, “former” profesional pine-rider) Kosta Koufos had perhaps the best game of his young career scoring 18 points and nine rebounds in only 19 minutes of action. (more…)
With Carmelo Anthony’s eventual departure looming over the entire season, Nuggets fans have had nothing but time to point their fingers in dismay. Exactly where did we go wrong with Carmelo and whose fault is it? Despite a payroll annually among the most expensive in the league, many are placing the blame on Stan Kroenke’s plan for a new era of far less extravagant spending. While there is some merit to the idea that Stan’s influence could have planted the seeds of doubt in Melo’s mind, to charge Stan’s frugality as the grave injustice that’s ran poor Melo out of town is little more than crying over spilt milk.
The Denver Nuggets have been to the playoffs seven straight seasons and have posted three straight 50 win campaigns for the first time as an NBA franchise. Despite the consistency they have displayed on the court, the front office is once again in a state of flux.
The Nuggets announced today Mark Warkentien and Rex Chapman will not have their contracts renewed and thus will cease to be employed by the club at the end of August (Denver Post article, Tomasson article on FanHouse). This is no surprise as Warkentien has been granted permission to speak with other teams about their front office vacancies. Over the previous four seasons the Nuggets have had quite a few cooks around the fire. Warkentien, Chapman, Bret Bearup and George Karl have all had a say in personnel matters and do not forget Stan Kroenke ultimately determines what he is willing to spend which plays a considerable role in player personnel decisions.
Despite the crowded kitchen Warkentien was the head chef and he made a significant mark on the franchise.
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.
Soak it in Denver Nuggets fans. For the first time in almost a quarter of a century the Nuggets are in the Western Conference Finals.
We will have plenty of time to dig into what went right in Denver’s 124-110 game five victory over the Dallas Mavericks and what they will need to do better in order to advance to the NBA Finals. I promise a proper game recap tomorrow (this time I mean it) and even though there is more work left to do let’s take a brief look at what tonight’s win will do for the franchise.
For all of the abuse he received after the Marcus Camby trade, Stan Kroenke is a very good owner. He loves basketball and wants the Denver Nuggets to win a championship. After paying an exorbitant bill for the 2007-08 Nuggets squad that was demolished by the Los Angeles Lakers 4-0 in the 2008 playoffs he understandably demanded that the front office slash salary this season. As I wrote after last season, he would have been insane if he did not slash salary. That team was simply not worth keeping together.
This group of players is proving that they are capable of earning playoff success. As a result I firmly believe Kroenke is going to foot the bill to bring every player the front office wants to hang on to back next season. That means you can count on the Birdman flying high in Denver next season. Some of you might recall that previously I expressed my opinion that Chris Andersen was as good as gone after the season, because I did not think this team was going anywhere in the playoffs. I am happy to admit I was wrong about the Nuggets’ chances in the playoffs and I will be wrong about Birdman not returning to Denver for the 2009-10 NBA season.
That is the good news. The really good news is I believe Kronke will not just spend money to bring back players like Birdman or Dahntay Jones or Anthony Carter to maintain the roster, but he will spend money to actually improve the roster. That brings us to the next big development for the Nuggets and that is that as a conference finalist Denver is going to be a free agent destination.
The Nuggets have proven that they can play a fun style of basketball, they can play defense, players like Carmelo and J.R. Smith are no longer guys you do not want to share the court with and Denver has a leader capable of guiding the team in the right direction who has won it all before. Players who are looking to win a title that cannot catch on with Cleveland or Los Angeles (the Lakers, not the Clippers) are going to strongly consider the Denver Nuggets.
During the season the Nuggets expressed interest in veteran players who were bought out such as Joe Smith and Mikki Moore and at the time I wrote they should not even waste their time talking about those guys because they are not going to be interested in Denver when teams like Cleveland and Boston are on the phone. Now with their success over the previous month Denver has made itself a team that has to be taken seriously when they call. They can and will be a force to be reckoned with in the free agent market, both in the offseason and for the in season veteran castoffs.
Now combine those two points and then add a third. Denver has an owner willing to spend, a team that will be interesting to free agents plus economically teams are hurting and will be looking to not only hold on to their money, but to dump salary this offseason. Perhaps you have heard the phrase in the land of the blind the one eyed man is king. Well, in the league of the impoverished the team with $5 is king. The Nuggets are not going to have much to spend once they bring back Birdman and whoever else they choose to retain, but they will not need much in order to outbid the few teams who will be looking to spend.
Plus Denver can be a force in the trade market as well as they have some excellent assets to work with. They possess a nearly $10 million trade exception from trading Camby. That exception was included in the Billups trade and “refreshed” thus they can use it until November making it infinitely more useful (originally it was going to expire in mid July). They also have a roughly $3.2 million exception that was acquired in the Chucky Atkins to Oklahoma City deal. Throw in potential sign and trade deals with Linas Kleiza, and the future first round draft pick that Denver is owed by Charlotte and Denver can be a major player this offseason.
I hope you can forgive me for looking into the future with this season being far from over, but I am just excited that the Nuggets have to be considered a member of the NBA elite and have a bright future.
I realize there are surely fans out there who just do not believe in the Nuggets. They still think Melo, Kenyon Martin and J.R. are knuckleheads and they will get swept by the Lakers or trounced by the Rockets. Well, Denver has a great opportunity to win those doubters over by winning the Western Conference Finals, a task they are certainly capable of accomplishing.
Soak it in Nuggets fans. It is a new day in the Mile High City.
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