The Utah Jazz Offseason CBA Primer Edition - The Downbeat #1061

Since the advent of the internet, online newspapers, sports websites, message boards, blogs, twitter and various other social media tools, being an NBA fan has expanded into a 365 day a year endeavor. No longer is fandom simply confined to a team’s 82 game schedule (plus playoffs), but rather fans are now able to enjoy the everlasting NBA soap opera fueled by a stream of constant information and rumors into the offseason happenings of their favorite franchise.

Perhaps no group of fan has benefited more from this information overload than the Monday Morning Quarterback (“MMQB”). The MMQB, more than any other type of fan, loves to decipher, criticize, offer up suggestions and complain about the mistakes of his/her team’s management and coaching staff. I am a MMQB. If you find yourself reading SLCDunk often, I’d guess that you are a MMQB too.

As we here at SLCDunk continue our coverage into one of the most significant offseasons in the history of the Utah Jazz franchise, let’s take a brief pause and refamiliarize ourselves with the important aspects of the NBA’s Collective Bargaining Agreement (the “CBA”), as it creates the legal framework and rules which will govern the Jazz’ decisions over the next 5 months.

The next 4 beats cover what I feel are the more important provisions of the CBA relating to the Jazz this offseason but if I did not cover something you have a question about, please feel free to add your question to the comment section. Also, if you are a masochist, the cited versions to the CBA contained herein can be found here: http://www.ipmall.info/hosted_resources/SportsEntLaw_Institute/2011NBA_NBPA_CBA(final%20version).pdf

Financial Considerations.

Salary Cap and Luxury Tax. An NBA team’s salary may not exceed the Salary Cap at any time unless the team uses a valid exception. (See CBA Article VII, Section 5(a)). Accordingly, before making any moves this offseason, the Jazz will need to determine how much money they will have available to spend in the player acquisition process.

It was recently reported by Marc Stein of ESPN that the anticipated Salary Cap for 2013-14 will be $58.5mm, with the luxury tax line to come in at $71.6mm. This represents a modest increase over the 2012-13 figures, and in both instances, is about $1.5mm below projections.

It is also important to note that the reported Salary Cap figure for 2014-15 is estimated to be $62.1mm with the luxury tax line at $75.7mm. While the 2014-15 Salary Cap does not necessarily affect how the Jazz acquire players this year, it does play an important role in the Jazz’s long-term Salary Cap management, especially in regards to Rookie Scale Contract extensions (see beat 5 below) and the contract structure of any player the Jazz sign or acquire that owns a contract that is greater in one season in length.

Anticipated Jazz Salaries. At this time the Jazz have guaranteed 2013-14 salary for 6 players (Marvin Williams, Derrick Favors, Enes Kanter, Gordon Hayward, Alec Burks, and Jeremy Evans) in the total amount of $25.3mm. While Marvin Williams holds an Early Termination Option that would allow him to void the final year of his contract, the likelihood that he does so considering his current injury status is now virtually zero, however he does have until June 30th to make that decision.

The Jazz at this time are approximately $33.2mm below the anticipated 2013-14 Salary Cap. HOWEVER, due to anticipated Cap Holds for the Jazz’s draft picks, and minimum roster requirements, the Jazz’s available Cap Room (assuming they renounce the rights to all free agents and waive players with unguaranteed contracts) will be closer to $26.8mm.

Draft Day Trades.

Trading Draft Picks. One rule that is commonly misconstrued at this time of year is an NBA team’s ability to trade away 1st round draft picks. Stated in its most simplistic form the NBA has a rule that prohibits a team from not having future 1st round draft picks in consecutive future drafts. Thus, the Jazz could not enter into a trade today to deal picks #14 and #21 and their 2014 draft pick for a player from another team’s roster. However, the Jazz would be able to package #14, #21 and their 2014 1st round pick for a 1st round pick in the 2013 draft, as the result of the trade is that they only lack a pick in the 2014 draft. Additionally, once a pick is used on daft night, the team goes from owning a future 1st round draft pick, to owning the draft rights to that particular player. The rules do not prevent a team from using a draft pick and then trading that player after the selection is made, even if they do not have a 1st round pick in the following seasons draft (this is exactly what the Mavericks are allegedly interested in doing with the 13th pick in this years draft, while they have already traded away their 2014 selection).

Trading Marvin Williams. As mentioned above Williams holds an Early Termination Option which allows him to void the final year of his contract. However, since his deadline to void the final year does not come until after draft night, the Jazz cannot trade Williams without first having him agree to amend his contract to eliminate his early termination option. This in effect works as a trade veto for Williams before July 1st as it is solely within his control whether or not he will accept a trade to another team.

Trading Jazz Veterans. I will discuss sign and trade transactions in more detail below, but needless to say the Jazz cannot trade a player on draft night that they no longer hold the contractual rights to. (See CBA Article VII, Section 8(c) and Section 8(e)(2)). Furthermore, teams and players are not allowed to negotiate new contracts after the end of the season and prior to the start of the Moratorium Period. Any attempts by the Jazz to negotiate a sign and trade with a player during the draft to another team would violate the CBA and be subject to sanctions for tampering.

Trading “Cap Space.” One trade option for the Jazz on draft night is to acquire players from other teams in a “salary dump” transaction. As a result of 2012-13 Salary Cap figures being used for the purpose of trade matching on draft night the Jazz would seemingly be unable to consummate such transactions. However, as discussed below, beginning on July 10th, the Jazz will be able to accept players in trades without following the typical salary matching requirements for teams over the Salary Cap. Accordingly, the Jazz will be in position to verbally agree to trades on draft night that are contingent on the Jazz consummating the transactions on July 10th, after they have renounced the necessary Cap Holds to enable them to get far enough below the Salary Cap to accept another team’s player without sending the requisite matching salary in return.

Free Agency.

Moratorium Period. No player and Team may enter into any oral or written agreement concerning terms and conditions of the player’s employment between July 1st and July 9th. (See CBA Article II, Section (14)). While teams and players negotiate and word of new deals often gets leaked during this timeframe, no actual agreements can be consummated until July 10th.

Re-signing Veteran Players. While the CBA has dulled some of the financial benefits, the Jazz still have the financial and contractual advantage to re-sign their own veteran free agents. Specifically, the Jazz could offer 5 year contracts with 7.5% annual raises to each of Paul Millsap, Al Jefferson and Mo Williams. Alternatively, other teams could only offer each player 4 year contracts with 4.5% annual raises.

Sign and Trades. I've written about this in great length in the past, so I will only briefly summarize this here. The 2011 CBA changed the duration of contracts and the size of raises that a traded player can get under in a sign and trade transaction. In the past, a player had incentive to work with his former team to consummate a sign and trade as said player would be able to sign a contract that was 1 year in length longer and carried larger annual raises than he would otherwise be able to get on the free agent market. The 2011 CBA has been revised so that the maximum number of years a player can get is 4 (versus 5 if he stays with original team) with maximum raises at 4.5% (versus 7.5% if he stays with original team). (See CBA Article VII, Section 5(c)). Additionally, teams that would be in excess of $4mm over the luxury tax amount after the consummation of a sign and trade transaction are now prohibited from acquiring players in sign and trade transactions. (See CBA Article VII, Section 8(e)(1)).

The combination of these changes will limit the teams that will be able to or interested in working with the Jazz on a sign and trade with any of our veterans free agents.

Renouncing Player’s Rights. Until a team’s Veteran Free Agent re-signs with his team, signs with another NBA team, or is renounced, he will be included in his prior team’s Salary Cap. (See CBA Article VII, Section 4(d)). If the Jazz want to use their Salary Cap room to make an offer to a free agent (or acquire a player in an unbalanced trade), the Jazz will need to renounce the rights to its veterans to create Salary Cap room necessary to accommodate the transaction. Please note that provided a team has the Salary Cap room, or an exception thereto, they can still re-sign any player they renounce. Any Bird Rights that veteran had would be lost when his rights were renounced.

Signing Other Free Agents. As we all know by now, the Jazz will have a large amount of Salary Cap space to acquire players on the free agent market. Free agents signing with the Jazz will be limited to 4 year contracts with a maximum of 4.5% salary increases (or decreases) each year. (See CBA Article VII, Section 5(c)).

Amnesty Waivers. The 2011 CBA gave every team the 1 time right to waive a player and not have said player count against their Salary Cap. When a team waives a player in accordance with this provision, any other team below the Salary Cap may place a waiver claim in order to acquire the player before he hits the free agent market. Teams are allowed to make a full or partial waiver claim on the player's remaining years under contract. If the Jazz are the high bidder they would acquire that player under the terms they've bid. At this time it appears there will be very few amnestied players this July, with perhaps Andrea Bargnani and Charlie Villanueva being the most likely.

Trades. A team that is under the Salary Cap may make trades without regard to matching player salaries, as long as the result of the trade does not push the team more than $100,000 above the Salary Cap following any trade. (See CBA Article VII, Section 6(j)(2)). Therefore, the Jazz may be seen as a prime destination of other teams to send players to, in order to use some of the Jazz’s Salary Cap flexibility to absorb contracts they no longer desire. If the Jazz choose to use Cap Holds to stay over the Salary Cap then the standard trade matching rules apply.

Rookie Scale Contract Extensions.

The under discussed portion of the Jazz’s offseason is that 2010 draftees Hayward and Favors are both eligible for extensions to their Rookie Scale Contracts. Starting on July 1st and continuing through October 31st the Jazz can negotiate with either player to sign a contract extension. (See CBA Article VII, Section 7(b)).

Standard Rookie Scale Contract Extensions. The starting salary for an extension to a Rookie Scale Contract may be any amount up to 25% of the Salary Cap (See CBA Article II, Section 7). Annual increases and decreases in a player’s salary are limited to 7.5% per season. (See CBA Article VII, Section 5(c)(4)). An extension to a Rookie Scale Contract is limited to 4 years beyond the last year of the players current contract. (See CBA Article II, Section 7).

What this means is that both Hayward and Favors are eligible for extensions starting at approximately $15mm per year, and totaling about $66.75mm (please note the $15mm approximate starting salary is not exactly 25% of the reported 2014-15 Salary Cap, as the “salary cap” figure used to calculate maximum salary considers different items than the “salary cap” figure used to calculate maximum team salaries). These extensions would kick in for the 2014-15 season and last through 2017-18 season.

Designated Player Extensions. The 2011 CBA added a twist to Rookie Scale Contract Extensions. Each NBA team now has the option of designating one player to receive a 5 year Rookie Scale Contract extension, which includes a starting salary of up to 30% of the 2014-15 Salary Cap. In order to qualify as a Designated Player, the player must meet the “5th Year 30% Max Criteria” which includes: (1) the player is named twice to an All-NBA 1st, 2nd, or 3rd team, (2) the player is voted in twice as an All-Star starter, or (iii) the player is designated once as the NBA MVP. (See CBA Article II, Section 7(a)(i)).

Unfortunately, for both Hayward and Favors, barring either being named the NBA MVP for the 2013-14 season, they will not meet the requirements for the larger contract.