NBA Roundtable

2010 Tax Concerns: Toronto

In Free Agency, General NBA, Trade Talk on June 24, 2010 at 1:14 pm

Toronto Raptors Salaries

Contracts Above $5 Million

  • Hedo Turkoglu – $9.8 million
  • Jose Calderon – $9 million
  • Andrea Bargnani – $8.5 million
  • Reggie Evans – $5.08 million

Andrea Bargnani is beginning a five year contract extension. Hedo Turkoglu will be in the second year of his five year deal while Calderon has three seasons left on his contract. Reggie Evans is an expiring contract.

Those four players give us a sub-total of $32.38 million.

Rest Of Team’s Salaries

  • Marcus Banks – $4.85 million
  • Jarrett Jack – $4.6 million
  • DeMar DeRozan – $2.45 million
  • Marco Belinelli – $2.38 million

Marcus Banks and Marco Belinelli are expiring contracts. Jarrett Jack had three years left on his contract while DeRozan is entering the second year of his rookie scale contract.

These four players create a sub-total of $14.28 million.

Other Costs

  • Draft Pick — Toronto owns the #13 pick which holds a cap hold of $1.6 million.
  • That gives Toronto a roster size of 9 players.
    • Open Roster Slots — For a minimum cap estimate, the Raptors would have a cap hold for three open roster spots worth $1.425

That is a sub-total of $3.03 million which gives us an overall total of $49.69 million.

Salary Cap

David Stern recently announced

NBA commissioner David Stern said on Friday that the league is projecting the cap to come in at about $56.1 million. The actual number won’t be determined until early July, before teams can begin officially signing players.

Though that figure would still be lower than this season’s $57.7 million cap, it’s far better than estimates from last summer, when the league sent a memo to teams warning them of a potential sharp drop to between $50.4 million to $53.6 million.

Raptors Cap Space

Toronto would have a maximum of $6 million in cap space if they rescinded their rights to Chris Bosh, Amir Johnson and their other free agents.

That would only be equivalent of an MLE contract so there is no added value to this.

Summer Options

Consequently, the Raptors will try to

  • Sign and Trade — Chris Bosh will likely leave with the Raptors agreeing to a sign and trade. That sign and trade could bring back anywhere between $6 to $16 million in salaries.
    • It is also possible that Toronto includes another player (say Calderon or Turkgolu) in the sign and trade but an equivalent salary will be coming back so no need to go into further detail here
  • Re-sign Amir Johnson to a deal in the $3-4 million range

That would leave the Raptors with anywhere from $59 million to $70 million in salaries.

The latter figure would put them over the luxury tax thresholds ($68 million).

Free Agency Signings

Depending on the sign and trade, the Raptors ability to do the following will be seriously effected

  • MLE — Toronto cannot spend the MLE if they take back comparable salaries in a Chris Bosh deal. If however they only take back, say half of Bosh’s salary, then it is quite likely that the Raptors are aggressive in spending their MLE that summer.
    • What type of player they try to sign with the MLE will be effected by who comes back in the Bosh sign and trade + what player they select with their lottery pick.
    • It may be a (1) replacement big man, or, (2) that combo forward or backup wing they need to provide depth, or, (3) a new backup point guard if they trade one of their point guards
  • How much Toronto spends on filling out their roster. Do they sign rookie minimum contract players ($475k contracts) or veteran minimum contract players ($825k)? If so, how many of each? And how many roster spots do they fill? Do they go with the league minimum or 13 roster spots or the maximum of 15 roster spots?
    • The difference between those figures could be as much as three million ($1.9 million versus $4.95 million). A significant difference.

So, until we know how the Chris Bosh sign and trade plays out … it is impossible to tell Toronto’s intentions in free agency.

Other Trade Possibilities

  • Toronto will in all likelihood trade one of their two point guards — Jose Calderon + Jarrett Jack — the most likely to leave is Jack due to Jose’s dubious trade value.
    • Jack’s trade value is similar to his value as a player. A borderline starter, a very good role player, someone who can be anywhere from the fifth starter to eighth man. Same wage bracket.
  • Toronto will also try to move Hedo Turkoglu but I doubt that they’ll receive any worthwhile offers so I am expecting him to be on the roster next season.
    • If Toronto does move Turkoglu, they will likely receive a very poor trade package … and likely put themselves in an even worse position than they are in now.
  • And the word is that Andrea Bargnani is off the table and unavailable for any trades.
  • Toronto has three expiring contracts — Reggie Evans + Marcus Banks + Marco Belinelli — totaling $12.31 million. That would allow them to take back as much as $15.49 million in salaries.

Toronto’s draft pick + DeMar DeRozan are potential sweeteners to potential trades if the other team is offering someone of substantial value.

So, in summary, we will in all likelihood see:

  • A Bosh sign and trade
  • A point guard trade likely involving Jarrett Jack
  • Amir Johnson re-signing

And possibly see

  • Toronto taking on long term salary by moving their expiring contracts in return for an established player who is leaving in a salary dump

And unlikely to see

  • Bargnani be moved
  • Turkoglu be moved

Quick Financial Summary

Toronto is likely looking at one of two scenarios

  • A lot of salary comes back in a Bosh sign and trade and Toronto is left hanging around the luxury tax threshold. Maybe over, maybe under, but in the ball park.
  • Only a portion (around a half) of Bosh’s salary comes back in a sign trade and consequently Toronto spends their MLE and puts themselves in the luxury tax bracket. Maybe over, maybe under.

Either way, Toronto will almost certainly be putting themselves somewhere near the luxury tax line next season.

And, in doing so, they will likely dig themselves a deeper hole.

Raptors fans should be terrified by Bryan Colangelo’s intentions this summer. This could be the worst yet.

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