Offseason thoughts

[Alexander Wang <awang@xxxxxxx>]

I haven't contributed to the list in quite a while due to attempting to 
finally complete my thesis but I've followed the Celtics games (more so 
during the postseason) and the discussions of the offseason moves. Assorted 
thoughts:

1. I was pleasantly surprised by the success of the Celtics. Now, I didn't 
really believe the vehement arguments that the Celtics would suck, which 
were usually based on the argument "Who will the Celtics leapfrog over to 
make the playoffs? Didn't everyone else improve?" That argument tends to 
ignore internal improvement through maturation and improved chemistry. It 
was the same the year before (2000-2001) when it was argued that 
Philadelphia did nothing to improve while various other teams added 
important pieces - Miami for instance. For this year, the Celtics improved 
through individual player development; more experience under the same 
simple team concept that O'Brien espouses; the return of injured players 
such as Battie and Anderson; and yes, some good fortune through a 
beneficial defensive rule change that allowed us to mitigate our interior 
weaknesses as well as injuries to Eastern Conference rivals.

2. An analysis of the financial picture begins with some clarification 
about the official "soft cap" and the luxury tax threshold. The soft cap is 
at around $40M; being significantly below it allows you to sign big ticket 
free agents. If you are above it, you can still sign players using 
exceptions: the $4.5M which can be used every year for multi-year and the 
Bird exception to re-sign your own players. The luxury tax threshold is at 
a higher number which is projected to kick in next year at $50M. Nobody 
seems to have a complete picture of what happens when you exceed the luxury 
tax threshold but here's my general picture based on what I read in a New 
York Times article as well as various other quotes.

At the very least, you pay an extra dollar into a pool for each dollar you 
are over. This pool is returned to all the owners that are not "much" over 
the tax threshold. So if you stay below, you reap the benefits of the huge 
tax payments of New York, Portland, and Dallas. Furthermore, there is an 
escrow provision where 10% of players' salaries are withheld; if total 
salaries exceed some other threshold, this money is returned to owners 
also. But if you are above the tax threshold, you don't get this money 
either; this has been the subject of acrimonious debate between the league 
and the players' union because it evidently isn't officially in the CBA, 
which (unfortunately for the players) evidently just says that the league 
can do whatever it wants with the escrow money. And the league is doing its 
best to keep overall salaries down by financially punishing free spending 
teams as much as allowed.

The main result is that if you are beyond a certain threshold, you not only 
pay the tax, but you lose the money from the tax pool and you lose the 
money from the escrow pool. So say the tax threshold is $50M and the "pool 
threshold" is $52M. You, as the Celtics, are at $50M right now and a free 
agent is demanding $5M. If you sign him, you pay him the $5M in salary. You 
pay $5M in luxury tax. You lose your share of the luxury tax pool, which 
might be around $3M more. You lose the escrow pool, which is probably 
around $5M. So that $5M free agent costs the owner $18M. This is the reason 
that many owners are treating the "pool threshold" essentially as a hard cap.

3. How does this apply to Rodney Rogers? I think many of us want Gaston to 
bite the bullet and pay that $18M. You can reason that amortizing that cost 
over a six year contract is only $3M per year, since next year we'd 
probably be back below the pool threshold. Now the return argument could be 
this though. Now that the luxury tax is starting to kick in, it's becoming 
obvious that free agents are being squeezed, which makes it easier for 
teams to steal quality players from each other using the mid-level 
exception - basically what has happened with Billups and what seems likely 
to happen with Rogers. This situation may continue next year: there will be 
more buyers as several teams get under the cap but there will be more 
sellers too, especially with several classes of restricted and unrestricted 
free agents coming off their rookie contracts. It's possible that a Rogers 
level talent or better will be available for the mid-level exception. If we 
signed Rogers to a multi-year deal we would probably not be able to use 
this exception due to being near the pool threshold again. So from Gaston's 
point of view, he's probably thinking, screw paying the extra $13M, I'll 
see what I can get next year instead and save that money. (Of course the 
ideal situation is that he goes ahead and pays the $13M and uses the 
exception every single year to get even further over the threshold - this 
"almost hard cap" separates the haves - Portland, NY, Dallas, and maybe 
Sacramento? - from the have-nots even more.)

4. Natural question: was trading for Rogers dumb knowing all this? Let's 
evaluate it from a 2002-2003 salary perspective. Ignore Milt Palacio 
because his contract was a team option for 2002-2003. We have (taking from 
Patricia Bender and guessing a bit assuming that contracts are back-loaded 
as is the norm):
	Randy Brown: 	$2.8M
	Joe Johnson:	$1.8M
	22nd pick:	$1.0M
	----------------------
	Tony Delk:	$2.5M
	Rodney Rogers:	??????

Now assuming that Rogers is not re-signed, what the Celtics essentially did 
financially was dump around $3M in 2002-2003 salary. It seems that we can't 
even make a $3M offer to Rogers without triggering the threshold. We know 
that Gaston has not wanted to cross the tax threshold from the beginning. 
My guess is the following: knowing this, Wallace knew that he would have 
either had to dump salary during the seaon when he did with the Rogers 
trade, or he would have had to dump it now. If he hadn't made the trade, 
we'd be above the threshold right now, and we would have been doing 
anything possible to dump salary. The only teams that could facilitate this 
would be the ones under the cap (are there any? Clippers, Bulls?) and they 
would extract an extreme price, because they know how desperate the owner 
would be to avoid the tax. Remember that when Orlando was trying to shed 
rather small salaries to sign McGrady and Hill, they gave away several good 
players and lottery picks to the Clippers. Everyone would love to get rid 
of bad contracts, even those not near the luxury tax, because then they can 
snag players using the exceptions instead.

I think what Wallace did was make the trade hoping that first, it would 
lead to a better playoff run (which it did), and second, hoping that the 
free agent market or some adjustment to the luxury tax threshold would 
allow him to retain Rogers. But my guess is that knowing the projected 
2002-2003 payroll before the trade, he knew that he had to shed salary 
somehow, either then or now.

5. Conclusion: Does it suck that we have an owner that won't pay the luxury 
tax? Yeah, although with the exception of the three teams or four teams 
I've mentioned, nobody's doing it. What sucks more is that somehow we got 
into this crappy near-luxury tax situation in the first place. For 
instance, if we hadn't signed Randy Brown, all of this could probably have 
been avoided. So who to blame? Pitino is the obvious target; how much 
impact did Wallace have on the decision making there?

The key point is that you can't evaluate the trade purely based on talent, 
i.e. is Tony Delk worth two first round picks? Obviously he isn't but along 
with that trade was a $3M salary dump that conceivable saved the owner 
$15M. Now does it suck that we're trading talent for money like that? Of 
course it does. I think that we have to accept that the Celtics and most 
teams are working under an effective hard cap because that is the reality 
of this ownership; it's possible to succeed under it but past financial 
mismanagement is catching up to us, and as a result we may take a step back 
this year. Over the next two years, we get rid of the contracts of 
Anderson, Williams, and Potapenko. I would guess that those contracts will 
be replaced by mid-level exception players rather than any big free agent 
acquisition. Under this pseudo-hard cap and the expiration of various 
rookie contracts, I think salary expectations are going to come down and 
we'll see higher quality players available at the exception - then it'll be 
extremely important that the GMs choose carefully.

Alex