Last week, the NBA and NBA Players Association (NBAPA) came to terms on a new Collective Bargaining Agreement (CBA). This effectively ends the possibility for a lockout, as the two sides will not engage in contentious negotiation like in 2011. The changes were not as significant as previous CBAs, but still carry enough weight to have a major impact on player movement and team spending over the next several years. The NBA has not released the official terms of the CBA — everything I write below is based on reported information.
In this article, I will list the reported changes/additions to the CBA, while explaining how it differs from from the 2011 CBA rules, why these changes were made, and how each clause will impact the Celtics. Along the way, I will try to explain some of the advanced terminology, but for readability sake, I will not explain the nuances of everything.
For all who I haven’t lost, here is a summary of the 2016 CBA changes:
1.) Designated Veteran Exception (DVE)
•What is it?
A new type of contract intended to help teams keep their star players. It’s essentially a 5 year contract which starts at 35 percent of the salary cap. Under the 2011 CBA, only players with 10 years experience could make 35 percent of the cap, but the DVE allows teams to offer this level of money to players who meet the following qualifications:
•For an DVE extension, the player must be entering their 8th or 9th season
•For a DVE re-sign (i.e. – player is an unrestricted free agent), the player must be entering their 9th or 10th season.
•The player must be on the team that drafted them, but a player will still qualify if they were traded during their rookie contract (i.e. – first 4 years in the league)
•The player must have been either an MVP within the past three seasons, defensive player of the year the previous season or two of the last three seasons, or All-NBA either the previous season or two of the last three seasons.
•The contract must be signed in the off-season, a player has a no-trade clause for one year into the contract, and teams can have two of these contracts on the roster.
Why does it matter?
The previous rules incentivized players to wait until they hit free agency before signing a new contract. The exception was the “renegotiate-and-extend” rule, which we saw this offseason with Russell Westbrook and James Harden. The Thunder and Rockets used their cap space to give Westbrook and Harden substantial raises for the 2016-2017 season, and added additional years to their contract. It essentially allowed teams to dip into their cap space to give their player long-term salary increases.
WIth the DVE, teams can go over the cap, and re-sign these players at 35 percent of the cap with annual raises of 8 percent.
The NBA owners have continually tried to empower teams to re-sign their star talent and provide financial incentives for star players to re-sign with their drafted teams. It’s somewhat of a response to Kevin Durant leaving the Thunder. If Oklahoma City had the DVE, they could have re-signed Durant up to two years before hitting free agency. Durant instead signed a two-year deal with a one-year opt-out so he could get to the 10 year, 35 percent max salary. Every team could offer him the same $26.5 million salary for the 2016-2017 season. This rule would have permitted the Thunder to offer Durant a contract (and starting salary) no other team could compete with financially.
The 2011 CBA created the rookie extension for top-tier young talent to sign five year extensions at a salary no other team could match. The DVE essentially extends the rule to players with six to nine season of NBA experience. That rookie extension rule was largely a response to LeBron James leaving Cleveland for Miami.
Differences from 2011 CBA?
The 2011 CBA disqualified extensions (not including rookie extensions) as a means for teams to re-sign star players. The NBA wanted to end extension raises largely because of the Carmelo Anthony situation in Denver during the 2010-2011 season. He forced a trade to New York during the last year of his contract, and the Knicks were immediately able to extend him at max money — essentially, he had his cake and ate it too.
Had Carmelo waited until free agency to sign with the Knicks, he would have received a less lucrative contract. It had immediate effects on Dwight Howard’s situation. If the extension raises were active, he likely would have signed a max extension with the Los Angeles Lakers. Instead, he waited until free agency, turned down the Lakers 5 year/$118 million contact, and signed a 4 year/$88 million deal with the Houston Rockets. The Lakers ability to offer the 5th year was not enough to keep Howard.
The extension was a valuable tool for the Celtics in 2006 to re-sign Paul Pierce. Had the 2011 CBA rules been in place, Pierce’s would be incentivized to wait until free agency to sign a new contract, and with how the team looked, he probably would have walked.
How does this impact the Celtics?
It really doesn’t. There is no superstar on this team that would demand such a lucrative contract (cue the Isaiah defenders!). If Avery Bradley were to win Defensive Player of the year, he could qualify, but even with his improvement, he would not command a contract that starts at 35 percent of the cap.
2.) Veteran Extensions
What is it?
When a player signs an extension (not including the DVE or rookie extension), the player can receive a 20 percent salary increase in the first year of the extension, with 8 percent raises in successive years. The extension can be a maximum of four years.
Differences from 2011 CBA?
Previously, a player could sign an extension starting at a 7.5 percent increase from the previous salary, with 7.5 percent raises in successive years. The extensions could only be for three years. The main reason for a player to sign this type of deal would be if they were on the decline and sought long-term security (the oft-injured Danilo Gallinari signed this type of extension in 2015).
Why does it matter?
By increasing the starting extension salary from 7.5% to 20% and increasing the maximum years from 3 to 4, this rule tries to incentive non-max players to re-sign with their current teams. For a player on a bargain contact like Isaiah Thomas, this extension is useless, as it gives him a raise from $6.9 million to $8.2 million with 8% annual raises over 4 years. But in free agency, he’d command 30 percent of the cap (let’s say $30 million).
It may work for a player like LaMarcus Aldridge, who can be a free agent after next season. He could get an increase to $25.8 million (from $21.5 million) with the 8 percent annual raises. It would work if he didn’t think he could make $25.8 million on the open market. Basically, if a players is worth more than 120 percent of his current contract, this is irrelevant, but if less, it could be a viable tool.
How does this impact the Celtics?
Unless we’re looking to re-sign Tyler Zeller, it should be inconsequential for the team. It could work for Al Horford when he can be a free agent in three seasons, but with all the cheap contracts the Celtics have, it shouldn’t matter.
3.) Maximum Annual Raises
What is it?
Maximum annual raises will increase from 7.5% to 8% for Bird signings (i.e. – re-signing with incumbent team), and from 4.5% to 5% for other signings.
Why does it matter?
This represents another measure to give more money to top talent. After this summer’s spending spree — where middle-of-the-road players like Evan Turner, Bismack Biyombo, Solomon Hill, and others, benefited from the influx of TV money — now more of that money will go to the top players. With the increased raises, it takes away the pool of available cap space that would otherwise be spend on the NBA’s middle class. This is really just a redistributing tool.
Differences from 2011 CBA?
Self-explanatory, just increased annual raises.
How does this effect the Celtics?
The next contracts for Isaiah Thomas, Avery Bradley, Marcus Smart, Jae Crowder, and Kelly Olynyk will all be more marginally more lucrative. Of course, it depends how much money they’ll command on the open market.
4.) Exception Increases
What is it?
The contractual values for the several exceptions — which were previously fixed until 2021 under the 2011 CBA — have increased. The full year-to-year schedule of these amounts has not been announced, but it is reported the values will increase by 45 percent. Below are the levels for the 2017-2018 season, and in parenthesis what they would have been under the previous CBA:
Mid-level Exception: $8.4 million ($5.62M)
Taxpayer MLE: $5.2 million ($3.47M)
Room Exception: $4.3 million ($2.98M)
Bi-annual Exception: $3.3 million ($2.2M)
Why does it matter?
The money is being redistributed from the middle class to the lower class by increasing these values. This is a direct result of owners feeling anxious about the large contracts handed to the middle class players.
Differences from the 2011 CBA?
Again, self-explanatory.
How does this affect the Celtics?
Boston will have substantial cap space this offseason. They will not use most of these exceptions until they are over the cap. It will really just increase their payroll and dip into the pockets of Wyc Grousbeck.
5.) Rookie Scale Contract Increases
What is it?
Contracts for rookies drafted in the first round are based on a salary scale, and the actual salary is determined by the pick the player was selected. These values, like the exceptions, were previously at fixed amounts until 2021, but they have reportedly been increased by 15 percent.
Differences from the 2011 CBA?
No difference in how rookie contracts are administered, it’s only the amounts that are increasing.
Why does it matter?
It was unclear whether these would change, as the NBAPA has historically had no problem screwing over rookies. The rookie scale amounts were crafted based on salaries from the late 2000s, and with salaries dramatically increasing since then, the NBA and NBAPA decided to increase rookie contracts accordingly.
A player on a rookie deal who is a capable starter is already an amazing value. If these rookie scale contracts stayed at the same values from the 2011 CBA, the value of first round picks would increase even more. By upping these values, it essentially eats into the collective cap space of the league, and again, takes away money from middle class players.
How does this impact the Celtics?
When (slash if) Guerschon Yabusile and Ante Zizic join the Celtics, they will be subject to the new rookie scale when they sign their contracts. The team has four additional first rounders between now and 2021, and while the salaries will be more expensive than projected, this increase likely will not effect the value of first rounders as trade chips.
6.) Cap Hold Increases
What is it?
The cap hold for players coming off the fourth year of their rookie contracts be 250 percent of the player’s previous year salary for players making more than the league average. For players making less than the league average, it will be 300 percent of the players previous year salary.
Differences from the 2011 CBA?
The 2011 CBA designated cap holds as 200 percent for players above league average salary and 250 percent for players below the average salary. These values increase to 250% and 300% respectively.
Why does it matter?
Cap holds are in place so a team cannot load up on outside free agents and then use bird rights to sign their own players. This concept gets tricky for players coming off of cheap rookie deals. Previous CBAs inflated their cap holds, and this CBA inflates it further.
A perfect example for this rule is with Kawhi Leonard. After coming off his rookie contract, his $2.9 million salary translated to a $7.25 million cap hold, but this did not deter the Spurs from signing LaMarcus Aldridge to a 4 year/$84 million contract. While the difference of 250% to 300% would only make a modest $1.45 million difference in Leonard’s cap hold, that gap could have significant bearing on the total contract value for whatever free agent the team tries to sign.
How does this impact the Celtics?
Kelly Olynyk falls into this category, as he will be a restricted free agent coming off his four year rookie deal. His $3.1 million salary equates to a $9.3 million cap hold. It takes away a small bit of cap space the Celtics would have had otherwise, and based on the trend of Celtic transactions over the past year, they covet every last bit of cap space.
7.) Expanded Rosters
What is it?
Rosters will expand from 15 to 17 spots, with the additional spots serving as “2-way” contracts for the D-League (NBA Developmental League). The minimum salaries for D-league players will also increase.
Why it matters?
These “2-way” contracts will allow teams to pay D-league players NBA salaries while still maintaining their rights. NBA players have openly spoke about the stigma associated with the D-League. Salaries are extremely low and players can get better competition and pay playing overseas.
There is no precedent for this. League executives have spoke about this idea for years. And by adding these two spots — effectively adding 60 more players into the NBA — the NBA is increasing the share of money going to the lower class of players.
The NBA and NBAPA hope this measure adds more respectability to the D-League. There are 22 current teams and they hope to expand to 30 so every franchise has its own affiliate.
Differences from the 2011 CBA?
This is the first time the NBA is implementing “2-way” contracts. The minimum number of players a team can carry increases from 13 to 14.
How does this affect the Celtics?
Celtics draftees like Guerschon Yabusile and Abdel Nader can sign with the team if they accept playing more heavily in the D-League. The Celtics have traditionally been effective using the Maine Red Claws as a developmental farm system, and this clause should improve the already strong system.
8.) Other Small Changes (which I won’t go into detail)
•The Salary cap may be at set levels instead of a percentage of BRI (basketball related income) to control for future cap spikes.
•The over-36 rule is now the over-38 rule.
•The luxury tax apron will increase from $4 million to $6 million.
•Teams can extend offer sheets to restricted free agents when the moratorium begins on July 1st. Teams will have two days to match instead of three, but can only match after the moratorium ends on July 6th.
•It’s an outside chance, but they might change the “one-and-done” rule
•Partially guaranteed contracts will only include the guaranteed portion in trade matching.
•Trades that previously required a 150% + $100k match will use a 175% + $100k salary match.
And arguably the most influential change of the entire CBA…
The NBA will ban the use of hoverboards, long live JR Smith!
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