Sports 56 WHBlog Q

February 16, 2009

A Financial Grizaster?

Filed under: Uncategorized — Peter Edmiston @ 12:59 pm

This is going to sound a bit apocalyptic, but we’re in strange times right now.  Let’s take a look ahead at a potentially serious problem for every NBA franchise, with the Grizzlies no exception.  The word on the street is that due to a decrease in revenues across the board for the NBA, the salary cap stands a very good chance of dropping (possibly precipitously) next season.  If the cap were to drop, the luxury tax threshold would drop as well, meaning that potentially several teams who are committed to long-term contracts could (through no fault of their own) suddenly find themselves as luxury tax payers next season.  A post by Tom Ziller over at NBA Fanhouse explains the situation well, as does an ominous blurb from John Hollinger (look at the very last note) in his weekend column.

Remember that the penalty for being over the luxury tax threshold is a dollar-for-dollar penalty.  So the $5 million contract becomes $10 million, $10 million becomes $20, and so on.  Remember also that the cap (and the luxury tax threshold) has consistently gone up over the last decade, so many teams have locked into salaries thinking they would always remain under the threshold.  Should this happen, it will make the financially motivated attempt to trade All-Star Amare Stoudemire just the tip of the iceberg.  Small market teams like San Antonio, Sacramento, and Orlando could be forced into some serious decisions about key talent.  It certainly appears that Michael Heisley was on the front end of a growing wave of salary-dumping trades…Amare will be next, followed by several players you probably won’t believe.

For the Grizzlies, it’s a double-edged sword.  At the end of this season, the Grizzlies are projected to have around $20 million in cap space at the cuurent cap level.  If it goes down, their free agent signing capacity goes down as well.  On the other hand, they might become major players for some big-time stars since they are so far under the cap that they would likely not be implicated in any tax problems.  Looking into the long-term implications, it’s going to be a fascinating litmus test for Michael Heisley.  I’ve written before about the fact that Michael Heisley gets a bad rap for being frugal.  He’s spent money consistently when it was needed.  He’s said he would be willing to pay superstar salaries for guys like Rudy Gay and O.J. Mayo when their contracts come up.  But this will be a huge test – if it means he would have to be a luxury tay payer, would he sign Gay and Mayo to big long-term deals?  Does anyone really know what the tax levels will be?

We’ve always talked about the salary cap space available to the Grizzlies as if it were a definite.  It’s not.  Other teams have planned to have massive cap space available in 2010.  They may not have nearly the space they thought.  The LeBron James sweepstakes could well end up being a giant bust.   And the Grizzlies may go from having $20+ million in space to having $10 or less.  No one is immune from this economic crisis.

On a completely unrelated note, this little post from my radio partner is extremely funny and just gross.

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