Downbeat#1269: Devalued Value of Expiring Contracts

Trade Deadline. The NBA trade deadline is now just two short weeks away on Thursday, February 20th. This inevitably means that the rumor mill is about to crank up in full force, with some prognosticators predicting that this could be one of the busiest trade deadlines of all time. Chad Ford stated it thusly in his ESPN chat on Wednesday:

.

Paul (SLC)

Do you really think this year's trade deadline will be "epic" (as suggested by Henry Abbott)? I just can't see teams in a position to draft well wanting to give up those picks and I'm not sure what potential contenders could give back in exchange.

Chad Ford

(1:33 PM)

I do. I think you have the perfect storm of a handful of teams trying to make a run at the title and a handful of bad teams that might be willing to give up a valuable veteran or two because they don't fit their long term strategy and help in the race for the No. 1 pick. That doesn't happen very often where both teams at the top and the bottom are incentivized to make deals.

Of the two groups that Ford alluded to, the Jazz no doubt fall into the "bad teams" group, of organizations who might be willing to give up a valuable veteran or two that are not in that teams long term plans. Clearly, the Jazz are not alone there as Boston and Philadelphia have already made trades to make themselves worse this season, and are both rumored to be looking to make more. Additionally, the Lakers (Pau Gasol), Magic (Arron Afflalo) and Milwaukee (everybody?) also are rumored to be interested in dumping decent players for future assets.

While the Jazz's current rotation consists of a few "valuable" veterans, they are each tied to extremely bloated contracts. These bloated contracts do make many reasonable trades hard to pull off due to the NBA's salary matching rules in its Collective Bargaining Agreement (the "CBA"). Thus, where a team like Memphis may have had some interest in a guy like Richard Jefferson, they instead acquired a similar player in Courtney Lee who is playing on a far cheaper contract.

Jazz Expiring Contracts. The Jazz have had a bit of a fetish for expiring contracts ever since the NBA lockout in 2011. Last season the Jazz sat on valuable, expensive veterans like Paul Millsap, Al Jefferson and Mo Williams and allowed their contracts to expire in the summer of 2013. Each of those players chose to sign elsewhere and the Jazz were left with nothing in return except salary cap space.

As we all know, the Jazz then replaced the salary being paid to last years veterans, with the money being paid to Richard Jefferson, Andris Biedrins and Brandon Rush. Add in Marvin Williams, and 56% of the Jazz's salary expenditures this year are being paid to the following four players:

While Jefferson and Williams have been adequate as starters, their production as listed above is far below what a team would expect from a similarly salaried player. Biedrins and Rush have been so terrible that they may not be able to secure an NBA contract beyond this season.

As was stated at the time of the GSW trade, and as has been mentioned by many Jazz employees since, Utah now has "flexibility" to make many types of trades by utilizing the expiring contracts listed above for salary matching purposes. WIth that said, what types of trades are out there? Why is it that teams seemingly are less willing to do salary dump trades as they were prior to the adoption of the 2011 CBA?

New CBA Provisions that have decreased Salary Dumps. The NBA owners have long been fighting to eliminate the need for the salary dump trades in the NBA. While there has been talk of transforming contracts into a form more similar to the NFL, the NBPA has fought hard to keep as much guaranteed salary as possible in the contracts of the players.

What the players have been willing to move on over time is the length of contracts. It is crazy to think that in the Summer of 1988, Karl Malone signed a 10 year contract with the Jazz. Even crazier, in 1993 Chris Webber signed a rookie contract for 15 years in length (which he of course voided after his rookie season). In the 2011 CBA most players will end up with no more than 4 or 5 years. This change over time has eased potential franchise crippling contracts off of teams books and makes a mistake or two much easier to handle.

Another major factor of the 2011 CBA was the Amnesty Provision, which allowed teams to waive a player and not have it count on their salary cap. There are very few players still eligible to be amnestied, by league-wide 20 teams have already used this provision and utilized it to cut a player, where they may have otherwise decided to trade that player to another team for an expiring contract. At this point the only player who is likely to be amnestied going forward is Carlos Boozer.

Lastly, an under-reported provision of the 2011 CBA, the "Stretch Provision" is available for teams to use on any player it wishes to waive going forward. Among other things, this provision allows the team to waive a player between July 1 and August 31 of each summer and pay his remaining salary over twice the number of years remaining on his contract plus one. A good example of where this might be used this summer is in Boston, where Gerald Wallace is owed $10.1MM for each of the next two seasons. If Boston enters free agency in July and convinces a free agent to sign, but needs to clear some salary cap space to do so, then they can choose to waive Wallace and the $20.2MM owed to him will be charged to their cap over the next 5 seasons at $4MM per season. That would give the Celtics an additional $6MM ($10.1MM-$4MM=$6MM freed) in cap space this summer to sign whatever former Butler Bulldog that they have in mind.

2014-15 Projected Team Salary Cap. Through the use of many of the provisions listed above and due to an estimated 6% raise to the 2014-15 Salary Cap to $62.1MM, there are not many teams that remain in financial difficulties. Below is a table showing the estimated 2014-15 guaranteed salary for each of NBA

As you can see by the table, only 1 team is currently scheduled to be a luxury tax payer and only 9 teams are even above the salary cap limit. This will obviously change as teams make draft picks, extend qualifying offers to free agents, re-sign their own free agents (like Miami) or add other team's free agents. While this table isn't a perfect representation of the economic climate it does show how few teams are in dire need to unload bad contracts and thus may willing to pay another team like the Jazz a valuable asset to take that contract.

Of course there may be an increase of teams willing to do something similar to what GSW did last summer and unload enough salary for the specific purpose of adding a key free agent. However, any of those types of scenarios will play out in the summer, once teams can start negotiating with free agents and know what salary cap room they may need.

Potential Salary Dumps. In addition to looking at the teams above to see which may be looking to clear cap room now in anticipation of financial difficulties next summer, I also reviewed each team to see which player contracts may be the most likely to be on the move based on their size past this season:

Obviously, my determination of the value of each of these contracts isn't likely to match with every team's GM, but I'd expect the above as the deals that teams would want to move the most. Based on current performance, Deron Williams by far tops the list of unwieldy contracts. I highly doubt BKN has any interest in moving him now though until it sees what this team can do in the playoffs.

The more likely guys to be dealt in my opinion are Eric Gordon, Carl Landry, Jeff Green, and OJ Mayo. Unfortunately, I do not see it as very likely that those teams are willing (or able) to give the Jazz a 2014 first round draft pick to trade each player.

While I ultimately do not see the Jazz being able to pull off a salary dump that nets them a valuable asset in return, I am however, very curious to see if you guys think I am missing something. Please use the comments section to suggest possible trades involving these players that might net the Jazz something of value.