With an earlier than expected playoffs exit by the Detroit Pistons, fans' thoughts have turned towards how the team will look in the future. Armed with only a second round draft pick in the 2006 draft (first round pick traded with Elden Campbell for Carlos Arroyo in the 04/05 season) Joe Dumars will have to turn to his own roster, free agency and explore trade scenarios if the Detroit Pistons expect to return with an elite roster next season.
With that in mind, I've decided to set down the financial constraints and conditions the Pistons will operate under this offseason.

Lets first address significant dates. Free agents become "free" on July 1st. However, there is a league moratorium on trades and signings from July 1st until July 11th. Effective Wednesday July 12th, player movement can commence. The only exceptions are signing of current draft picks, the signing of minimum contract players, and restricted free agents accepting maximum contracts or qualifying offers.


Current 2006/07 Roster (under contract)

Rasheed Wallace - signed thru 2008/09
~ next season salary estimated @ $11.4 million

Tayshaun Prince - signed thru 2010/11
~ next season salary estimated @ $7.93 million

Rip Hamilton - signed thru 2009/10
~ next season salary estimated @ $8.86 million

Chauncey Billups - Player option in 2007/08
~ next season salary estimated @ $6.4 million

Antonio McDyess - Player option in 2007/08
~ next season salary estimated @ $5.9 million

Maurice Evans - signed thru 2007/08
~ next season salary estimated @ $1.6 million

Carlos Delfino - Team Option for 2007/08
~ next season salary estimated @ $1.04 million

Dale Davis - signed thru 2006/07
~ next season salary estimated @ $3.6 million

Jason Maxiell - Team option for 2007/08, Team option for 2008/09
~ next season salary estimated @ $973,440

Free Agents

Ben Wallace - Unrestricted Free Agent (Bird Rights)
~ 2005/6 salary estimated between $6 and $7.5 million. My math says it is closer to $6 milllion.

Lindsey Hunter - Unrestricted Free Agent (Bird Rights)
~ 2005/6 salary estimated @ $1.76 million

Kelvin Cato - Unrestricted Free Agent (Bird Rights)
~ 2005/6 salary estimated @ $8.64 million

Alex Acker - Unrestricted Free Agent or Restricted Free Agent if tendered a qualifying offer.
~ 2005/6 salary estimated @ $398,762

Amir Johnson - Team Option or Unrestricted Free Agent
~ 2005/6 salary estimated @ $398,762

Tony Delk - Player Option or Unrestricted Free Agent
~ 2005/6 salary estimated @ $1,035,000


Terminology (simple version)

Unrestricted Free Agent (UFA)
Able to pursue contract negotiations with any team. No extra advantage is afforded to the team that last had the UFA under contract.

Restricted Free Agent (RFA)
RFA players are able to pursue contract negotiations with any team. To become restricted a player is typically tendered a qualifying offer from the team last holding his rights. Once tendering a Qualifying Offer, the team that held the RFA under contract has the right to match offers made by other teams.

Teams bidding on the RFA may submit offer sheets (with the approval of the player). Those offer sheets count against the salary cap until they are accepted, matched or expire.

Offer sheets must be matched within 7 days or they are automatically accepted. The 7 day match period can only be shortened (or terminated) if all 3 parties (player and both teams) agree to do so. The team that submitted a qualifying offer may match the offer sheet and retain the services of the player or decline and allow the offer sheet to become a contract for the player with a new team.

Typical strategy for a team looking to retain it's own RFA would be to tender the qualifying offer and then pursue negotiating a new (and larger) long term contract with the RFA player rather than have him pursue the open market (where his price could be driven up).

Qualifying Offers
Qualifying offers are one year in length. Players accepting the qualifying offer become an UFA the following season. The size of qualifying offers vary from case-to-case. Teams have until June 30th to tender a qualifying offer to their restricted free agents. Failure to do so, makes that player an UFA.

Team Option
The team holds the right to "kick-in" an additional year on the existing contract. Failure to accept the option will allow the player to become an UFA. Must be exercised by July 1st before the option season is to occur or the contract is automatically terminated.

Player Option
The player holds the right to "kick-in" an additional year on the existing contract. Failure to accept the option will allow the player to become an UFA. Must be exercised by July 1st before the option season is to occur or the contract is automatically extended.

Bird Rights
The Larry Bird exception allows a team over the salary cap to re-sign their free agent provided the player has not been waived or changed teams as a free agent in 3 years. Bird Rights allow for 6 year contracts. Other teams competing for a player in free agency may only offer a maximum 5 year length contract. Bird Rights allow for maximum salary contracts with 10.5% raises each year. Bird Rights can be traded with a player, as was the case with Rasheed Wallace. Consequently Bird Rights were not available for Mehmet Okur as he was originally signed only to a 2 year contract as a second round draft pick.

Raises
All raises are calculated as a % of the first year of a contract. For instance, a 4 year contract starting at $10 million dollars with 8% raises would be $10 million in year 1, $10.8 million in year 2, $11.6 million in year 3 and $12.4 million in year 4. $800,000 per year.


The Salary Cap and Luxury Tax

The NBA has contractual terms with the Players' Union. This is referred to as a Collective Bargaining Agreement (CBA).

The CBA dictates how teams will handle player movement and salaries. It also dictates how much of the league's revenue will be guaranteed to the players in wages. The salary cap is one of many mechanisms in the CBA to accomplish these goals. The Luxury Tax is another mechanism.

The NBA has a "soft cap". A soft cap allows teams to exceed the salary threshold to re-sign their own players, the benefit of which is that most teams experience roster stability season-to-season. The fans also benefit from having the same players to cheer for in a superstar driven league.

The gross cap amount for each season varies, however for the current CBA it is designated as 51% of Basketball Related Income (BRI). We'll assume an annual salary cap of $51 million dollars for discussion purposes.

The Luxury Tax is a salary threshold that when exceeded, teams are required to match dollar for dollar in penalty payments that are redistributed typically in 1/30th shares to the teams finishing the season under the tax threshold at the league's discretion.

The Luxury Tax threshold is set at 61% of BRI (with some tweaks). We'll assume a tax level starting at $60 million for discussion purposes.


Where the Pistons are

At first glance, the Pistons current contractual obligations appear to put them under the cap. This is deceptive. With a guaranteed payroll of at least $47.7 million, the Pistons are fielding a roster of only 9 players.

The CBA has a minimum roster size provision that "charges" teams with additional minimum salaries until a 12 man roster is achieved. This would take them over or right up against the cap.

Then there is the matter of how the cap is calculated during the offseason. Each team gets two important salary exceptions for being over the cap. The MLE (Mid Level Exception) and the Bi-Annual Exception (previously known as the Million Dollar Exception, this exception cannot be taken in consecutive years).

To close a loophole with teams signing free agents up to the cap, then signing their own players using exceptions like the Larry Bird, Early Bird etc., to gain the Mid-Level and Bi-Annual (like adding another $7 million in wiggle room), all available exceptions are added to the current committed salary to determine the start point of free agent cap levels.

For example, if the cap is $51 million, and a team like the Pistons have a committed salary base for next season at $47 million, the Mid-Level and Bi-Annual Exceptions are both added to existing payroll, taking the Pistons to approx. $54 million, removing their apparent $4 million in cap space.

Thus for all intents and purposes, the Pistons enter the offseason over the cap, leaving only exceptions for their own free agents, minimum contracts, as well as the Mid-Level and Bi-Annual for roster improvement/maintenance.

In the next portion of this 2 part article series, I will go into further depth on the Pistons re-signing their own free agents, and what impact it will have on the financial future of the franchise.

If you have spotted any omissions, errors or inconsistencies, by all means, let me know. If you have questions, feel free to COMMENT on this article.

Thanks for doing the work. It is so hilarious seeing people proposing all kinds of roster moves that are impossible under the cap rules. I also like the bring in Zach Randolph and Bonzi Wells contingent. No defense playing, locker room cancers probably won't bring another trip to the finals.

Thank you so much for this article Microwave. It will take me a few readings I think to even begin to grasp the complexities of the financial picture, but at least now I have a place to start. I have wanted to chime in on the offseason trade subject, but I knew I had no idea what I was talking about. I knew that my ideas were more appropriate to Fantasy picks, not anything that could actually happen.

Thanks for taking the time to enlighten me with this very well written and informative article.

P.S. As I read it, we won't be able to afford both A.I. and K.G. this year, right? Damn.

WOW! Awesome job Micro! Thanks for that. The damn NBA CBA always has me going .

Looking forward to Part 2.

wow, great and necessary informations, micro- good work that answers alot of questions!

Micro...as always, you have out done yourself

I've never been 'up' on all the complexities of NBA contracts and never had the desire to research it all indepth. I find your article comprehensive and informative without being mind-numbing. As a self-proclaimed dyslexic...I'll still have to read it 10 or 20 times. Which brings me to a site suggestion. How about putting your contract article up in the 'Hoops Resources' forum, along with a link to the current rule book, as reference points for those of us less well-informed on the nuances of the NBA?


BTW...the current site link to the NBA referees association ( http://www.thenbra.org/ ) takes you to a search for lingerie & lingerie models...not that I'm complaining

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"What you drive, drives America."

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Kudos Micro...

For those that like to put your GM hat on, we'll be running a contest for "the best plan".... there will be a couple prizes involved... so bone up on the rules and start putting your plan together.

Stay tuned for more details later this week.

. ..uh...blblblblblblbllbbbblblbllblblblblbblblbbbbb b..(i only have a Cass Tech/EMU educamation)....luv ya Bro!

Next installment is delayed for a couple days. I have a new line of inspiration/thinking I want to research.

Should be worth it.

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They are the archetype for dominance. They are the gatekeepers of the conference. They are the Detroit Pistons.

You're such a tease.