REVAMP FINANCES

[WigNosy]

Warning: long post ahead. If you want the juicy stuff, just look for the "PROPOSAL" paragraphs - they are the real "what" and everything else is kind of the "why" - but I felt it was important to include the "why" so discussion could take that into account.

So I did some research in FBB and on the real NBA CBA and have some proposals. Most of these are intertwined together - more on that at the end.

PART I: THE MID-LEVEL EXCEPTION

FACT: The current MLE in the NBA is a specifically negotiated amount - $8.406 million - and will rise and fall at the same amount the cap does.

FACT: FBB ties the MLE to inflation (i.e., if the cap goes up 4%, the MLE goes up 4%).

FACT: When the draft is completed, FBB checks to see if a team has more cap space than the total value of the MLE. If the team has less cap space than the value of the MLE (includes no remaining cap space), the team is given access to the MLE and gets a "cap hold" assessed for the value of the MLE so it can't use both its remaining cap space AND the MLE. This is all done by FBB, there is no action needed on our part. If the team has MORE remaining cap space than the value of the MLE, the team does not get access to the MLE (and gets no cap hold).

FACT: The MLE may be "split" among multiple players. For example, if the MLE is worth $9 million you can sign two players to contracts of $4.5 million each or 3 players to contracts of $3 million each... or one player to a $9 million contract. Just like normal cap space, FBB checks after each signing and deletes offers that no longer fit under the remaining MLE space.

PROPOSAL: Introduce the Mid-Level exception beginning next season. The MLE will be set at 8.5% of whatever the league salary cap is for that year. Teams with unpaid luxury tax bills may not make use of the MLE.

PART II: YEAR OVER YEAR RAISES

FACT: When we originally set up year-over-year raise percentages for contracts the league, they were set at 10% (12.5% for Bird Rights). They remain at that level to this day.

FACT: In the first 10 seasons of the league, the salary cap went up from 11.9 million to 34.8 million. That is an average of $2.55 million per season, which was an average increase of 11.23%. The biggest jump in any single season was 14.35% and the smallest jump was 5.78%.

FACT: In the next 10 seasons of the league, the salary cap went up to 67.7 million - an average of $3.28 million per season. This was an average annual increase of 6.40% (even though the raises were higher in absolute dollars, they were smaller as a percentage of the cap). The biggest year-to-year jump was 8.03% and the smallest was 1.73%.

FACT: In the last 9 seasons following, the salary cap has gone to 90.1 million. This is an average of $2.91 million per season and is an average increase of just 4.84% per season. The biggest jump was 8.22% and the smallest jump was just 0.21%.

FACT: FBB allows us to set the maximum percentages for year-over-year raises for both "non-Bird" and "Bird Right" free agents. (It does not allow us to set maximum contract values; those are hard-coded in).

FACT: The real NBA has seen maximum year-over-year raises change through the years as each new CBA is ratified. The 1999 CBA set raises at 10% for non-Bird players and 12.5% for Bird players (see http://www.cbafaq.com/salarycap99.htm#17 - scroll down to the table). The 2005 CBA set raises at 8% for non-Bird and 10.5% for Bird players (see http://www.cbafaq.com/salarycap05.htm#Q19). In 2011 the CBA set raises at 4.5% and 7.5% respectively (see http://www.cbafaq.com/salarycap11.htm#Q25) And the current (2017) CBA sets the raises at 5% and 8%.

PROPOSAL: I propose 5% for non-Bird contracts and 7.5% for Bird Contracts (both "Larry Bird" and "Early Bird"). This keeps the current 2.5% raise spread. This makes (non-Bird) contracts go up at about the same rate the cap has gone up on average over the past 10 seasons, similar to the way the 10% figure was close to the rate the cap went up over the first 10 seasons of the league. It's probably well past time to look at changing the maximum raises we allow.

PART III: THE LUXURY TAX

FACT: The NBA luxury tax formula has varied (it's a function of Basketball-Related Income, a number that is derived from league revenue) but in the 2005 CBA it was 61% of BRI and the cap was 51% (so the luxury tax started at 119.6% of the cap) - in the 2011 CBA it was 53.51% of BRI and the cap was 44.74% of BRI (again, tax started at 119.6% of the cap). This year it is $119,266,000 and the cap is $99.093 million which makes it 120.4% of the cap. So within half a percentage point, it's accurate to say the NBA luxury tax is 120% of the cap.

FACT: The NBA currently pays up to 50% of luxury tax money to non-taxpaying teams (see http://www.cbafaq.com/salarycap.htm#Q19) though it is permitted to pay less than this.

FACT: The NBA also imposes a salary floor of 90% of the salary cap. In the real NBA, teams under the floor must pay the difference between their total salaries and the floor into a fund that is disbursed to all players.

PROPOSAL: I propose we change the current luxury tax to kick in 120% of the salary cap (instead of 101.5% as we do now) but leave our current luxury tax calculations otherwise intact. Teams that are under the tax and also over the floor receive an equal share of 50% of the points collected in taxes, rounded down (i.e., divide total tax payments by 2, then divide by number of teams and then round down). So this imposes a floor only in the sense that a team must meet the floor in order to collect luxury tax payments. Because of the severe restrictions on teams that are delinquent in luxury tax payments which keep them from adding salary outside of trades, teams that are delinquent in luxury tax payments do NOT need to meet the salary floor requirement to receive payments.

EXAMPLE:

This year's luxury tax table would look like the below:

Amount over Cap	Pct	Tax	2 Yr	3 Yr	4+ Yr
$1 - $18,027,447	0.20	0	0	0	0
$18,027,448 - $18,928,819	0.21	19	27	41	55
$18,928,820 - $21,632,936	0.24	23	32	48	64
$21,632,937 - $24,337,053	0.27	27	37	55	73
$24,337,054 - $27,041,170	0.3	31	42	62	82
$27,041,171 - $29,745,287	0.33	36	48	70	92
$29,745,288 - $32,449,404	0.36	41	54	78	102
$32,449,405 - $35,153,521	0.39	46	60	86	112
$35,153,522 - $37,857,638	0.42	51	66	94	122
$37,857,639 - $40,561,755	0.45	57	73	103	133
$40,561,756 - $43,265,872	0.48	63	80	112	144
$43,265,873 - $45,969,989	0.51	69	87	121	155
$45,969,990 - $47,772,734	0.53	76	95	131	167
$47,772,735 - $49,575,479	0.55	83	103	141	179
$49,575,480 - $51,378,223	0.57	90	111	151	191
$51,378,224 - $53,180,968	0.59	97	119	161	203
$53,180,969 - $54,983,713	0.61	104	127	171	215
$54,983,714 - $56,786,458	0.63	112	136	182	228
$56,786,459 - $58,589,202	0.65	120	145	193	241
$58,589,203 - $60,391,947	0.67	128	154	204	254
$60,391,948 - $62,194,692	0.69	136	163	215	267
$62,194,693 - $63,997,436	0.71	144	172	226	280
$63,997,437 - $65,800,181	0.73	153	182	238	294
$65,800,182 - $67,602,926	0.75	162	192	250	308
$67,602,927 - $69,405,670	0.77	171	202	262	322
$69,405,671 - $71,208,415	0.79	180	212	274	336

Note that under this proposal, only seven teams would have paid the tax this sesaon (Rockets, Trailblazers, Cavaliers, Hawks, Warriors, Magic, Grizzlies) instead of 14. 50% of their total payments of 487 points would have been disbursed to the other 23 teams (so every other team would receive 10 points because 487 divided by 2 is 243.5 divided by 23 is 10.59, rounds down to 10 points).

RUMINATIONS ON POSSIBLE CONSEQUENCES:

1. Reducing the year-over-year raises will put a small amount of downward pressure on league salaries.

2. Adding the MLE will put a significant amount of upward pressure on league salaries. This will be due both to teams over the cap being able to offer more than minimum salaries and because teams that have less cap space than a max deal will probably be willing to take on a contract if it will put them close enough to the cap to get access to the MLE.

3. Allowing teams that finish under the luxury tax to share in receiving payouts from luxury tax payments (and get points) will put some downward pressure on salaries.

4. Mandating that teams that want to share in luxury tax payouts meet the league salary floor will put upward pressure on salaries for marginal players.

5. Raising the luxury tax level (from 101.5% to 120%) will put some upward pressure on salaries as teams will be more willing to spend over the cap.

6. Because teams will be encouraged to keep their salary in a band of 90% to 120% of the cap, there is likely to be a little more incentive for teams to make trades. Talking trades increases activity and keeps the league more interesting for everyone.

7. Redistributing points from luxury tax payments to teams under the tax keeps more points in the "sim economy" for use in other areas like training.

8. We could probably vote on year-over-year increases as its own item, but I feel strongly that adding the MLE and readjusting the luxury tax line need to be considered as a "package deal." Implementing just the MLE puts too much upward pressure on salaries. Readjusting the tax line without implementing the MLE makes it too easy to reset and avoid the repeater tax.

9. We should probably be taking a look at the financial aspect of the league (max raises, MLE, luxury tax, etc.) - i.e., "renegotiating the CBA" every 10 seasons or so anyway.

10. If we implement the MLE, the odds are the Hawks are no longer going to be able to get good players on vet mins. :p

[IamQuailman]

Part 1: Yes
Part 2: HELL YES
Part 3: Hmmm I guess yes (120% is a big jump)

[RPF]

some very interesting stuff here Wigs, i will continue to look it over but it really sounds good.

[IamQuailman]

MLE Questions: Can you use MLE during RFA? If yes, since contracts are manually inputted after on the real (non-RFA) file after RFA period is complete, does this register as part of MLE being used? Can part MLE be used during RFA and other part during UFA?

[IamQuailman]

After re-reading, I think it would be good to break option 2 out from 1 and 3, if this does go to vote.

[WigNosy]

MLE Questions: Can you use MLE during RFA? If yes, since contracts are manually inputted after on the real (non-RFA) file after RFA period is complete, does this register as part of MLE being used? Can part MLE be used during RFA and other part during UFA?

As far as I have been able to find there is no way to manually enter the contract and make it use the MLE (or reduce the MLE amount available to the team).

The best solution I can think of would be to put in an MLE offer to that player on Day 1 of UFA and forbid the total of any remaining MLE offers to void that offer) since eventually the player will sign. For example, if the Mle is 8 million and I sign a guy in RFA to a deal worth 5 million, until he signs in UFA I can only offer 3 million in MLE money to one other player. I can’t offer 3 million each to 2 players until after the 5 million MLE guy signs. But that could really mess with sign and trades.

Probably the easiest option would be to limit RFA use of the MLE to disallow use of the MLE by a team in UFA if they get an RFA signing with it (regardless of whether they used the full MLE) just as we disallow use of the MLE to tax delinquents.

[Darth Vegito]

I like all of this and think it's kinda long overdue. I also think they it is imperative for these to be grouped together. Voting down one without the other will have negative effects. These should come as a package where they will counteract each other.
Option 2 is badly needed. League will end eventually without it.
And option 3 is needed as well. The tax is a bit aggressive and forces teams to deconstruct too quickly which causes often tanking. Promoting that teams take more shots and chances keep more teams trying to compete is a win win.

[ballsohard]

Imo redistribution is a very poor move.

The other thing I think I like is putting the luxury tax level at the mle.

[LoCo89]

Said this in Skype but I'll say it here too. One of the things that's been hard to figure out with wanting to post a salary floor suggestion is how to deal with those who don't hit the mark. I like that you're rewarding instead of penalizing for it. However I agree with Scott, I don't really like the idea of redistributing and would rather see something flat and consistent as a reward for hitting the floor

[garbageman]

I think one thing to be wary of is that we've got a lot of propositions stewing that will send the league in gravely different directions depending on how the combinations of votes pan out. Something like this would signify such a huge change in the sim economy that it's passage (or failure to pass) would change the way I'd vote on something like insurance.

For this proposal specifically, I think the tax kicking in at 120% of cap is a pretty sudden change and a bailout for teams deep in the repeater. Maybe we climb up to that level over a few seasons so that teams that made the conscious decision to stock up and go over tax to compete for a few seasons aren't voted into an advantageous situation. If we targeted raising the tax so the capacity was met in 4 seasons or so, everyone has more level ground to structure long-term contracts starting next off-season.

[IamQuailman]

I think one thing to be wary of is that we've got a lot of propositions stewing that will send the league in gravely different directions depending on how the combinations of votes pan out. Something like this would signify such a huge change in the sim economy that it's passage (or failure to pass) would change the way I'd vote on something like insurance.

For this proposal specifically, I think the tax kicking in at 120% of cap is a pretty sudden change and a bailout for teams deep in the repeater. Maybe we climb up to that level over a few seasons so that teams that made the conscious decision to stock up and go over tax to compete for a few seasons aren't voted into an advantageous situation. If we targeted raising the tax so the capacity was met in 4 seasons or so, everyone has more level ground to structure long-term contracts starting next off-season.

100% agree with this. A gradual lux tax would definitely be better than suddenly 20mil of wiggle room. increments of 5%/year (year 1 105% = threshold, year 2 is 110% also introduction of MLE in year 2, 115% in year 3, 120% in year 4).

[ballsohard]

What I think should happen is we have a set number that the cap increases.

We should not be changing the luxury tax much outside of maybe making the apron a little higher.

[ballsohard]

In terms of the tax:

I’ve been thinking about this for a bit and I’ve turned on the luxury tax piece of this. I like our set up now but I think there should be different changes .

1) the biggest thing I read with that fact pattern was that the tax was not an issue, it’s the cap increases. We should set the cap to increase a set amount yearly.

The biggest thing this does is allow people to plan their finances yearly. I think 10 percent is a pretty good since we’re already at.

2.) set the apron at the new mle, this allows a team to use the mle as a strategic weapon and not a “what the hell” weapon

What does this do ? It keeps teams honest with their cap. Honestly think about it. When the cap is 100m you’re going to allow a team to go over 20 million before they’re hit ?

Secondly it’s the same system no one had to relearn.

[Darth Vegito]

2 people who are currently rebuilding would of course have this line of thought to hold off on the increases. And not that you even thought like that but we've always just did things when voting, we don't take into consideration teams that are doing this or teams that are doing that. Many changes along the years have hurt some teams and many things have helped some teams. That's not the way it should be looked at in any way. It's what will benefit the league and if it's voted on then it should go into effect.

[Darth Vegito]

In terms of the tax:

I’ve been thinking about this for a bit and I’ve turned on the luxury tax piece of this. I like our set up now but I think there should be different changes .

1) the biggest thing I read with that fact pattern was that the tax was not an issue, it’s the cap increases. We should set the cap to increase a set amount yearly.

The biggest thing this does is allow people to plan their finances yearly. I think 10 percent is a pretty good since we’re already at.

2.) set the apron at the new mle, this allows a team to use the mle as a strategic weapon and not a “what the hell” weapon

What does this do ? It keeps teams honest with their cap. Honestly think about it. When the cap is 100m you’re going to allow a team to go over 20 million before they’re hit ?

Secondly it’s the same system no one had to relearn.

I unfortunately think this is a decent median. You did mention on Skype eliminating the year 3 and year 4 repeater all together including what you stated above. I think that is a definite, if it would be something I could get behind. I want teams not to be forced to rebuild and sell off talent after Year 3 and 4. The current 3rd and 4th year repeater guarantees that. If it's gone and the apron is placed at the MLE, I think that will have the effect I'm hoping for.

[ballsohard]

In terms of the tax:

I’ve been thinking about this for a bit and I’ve turned on the luxury tax piece of this. I like our set up now but I think there should be different changes .

1) the biggest thing I read with that fact pattern was that the tax was not an issue, it’s the cap increases. We should set the cap to increase a set amount yearly.

The biggest thing this does is allow people to plan their finances yearly. I think 10 percent is a pretty good since we’re already at.

2.) set the apron at the new mle, this allows a team to use the mle as a strategic weapon and not a “what the hell” weapon

What does this do ? It keeps teams honest with their cap. Honestly think about it. When the cap is 100m you’re going to allow a team to go over 20 million before they’re hit ?

Secondly it’s the same system no one had to relearn.

I unfortunately think this is a decent median. You did mention on Skype eliminating the year 3 and year 4 repeater all together including what you stated above. I think that is a definite, if it would be something I could get behind. I want teams not to be forced to rebuild and sell off talent after Year 3 and 4. The current 3rd and 4th year repeater guarantees that. If it's gone and the apron is placed at the MLE, I think that will have the effect I'm hoping for.

I do agree that 3 and 4th year are just ripping teams up and the point of the tax isn't to kill teams for 5 years and pay it off as they rebuild. Its really a tool to require more strategy and really slow down massive dynasties. I definitely think as built it requires a team to build, make a run, then reset then completely deconstruct, which maybe shouldnt be the purpose.

[IamQuailman]

To be fair, I was only suggesting an incremental apron because the jump was so large. If we settled at a 10% increase (just above MLE by 1.5%.... the current apron %), then we could just do that in 1 year. I just didn't think such a huge jump in 1 season was smart.

[garbageman]

I think the two ideas that go hand in hand well are making years 3/4+ less debilitating and cycling tax points back to teams under the apron.

One point I'd like to make is that while the 3-4 year contendership cycle is somewhat limiting, if we lax the rules to allow competing teams to stay stacked longer, the flipside is that teams who do need to rebuild are going to probably have to wait longer to flip into contention and top teams might get more dynastic. In real sports, that's part of the game, but this is a hobby that requires a decent amount of commitment, and if the window to compete extends, the rebuilding window might also extend, which will make rebuilds take longer (could be a full calendar year now) to come to fruition in a league where patience is in short supply.

[WigNosy]

I think one thing to be wary of is that we've got a lot of propositions stewing that will send the league in gravely different directions depending on how the combinations of votes pan out. Something like this would signify such a huge change in the sim economy that it's passage (or failure to pass) would change the way I'd vote on something like insurance.

For this proposal specifically, I think the tax kicking in at 120% of cap is a pretty sudden change and a bailout for teams deep in the repeater. Maybe we climb up to that level over a few seasons so that teams that made the conscious decision to stock up and go over tax to compete for a few seasons aren't voted into an advantageous situation. If we targeted raising the tax so the capacity was met in 4 seasons or so, everyone has more level ground to structure long-term contracts starting next off-season.

This is a fair concern. I should note one of the reasons I suggested 120% (instead of 110%) is it would allow teams to (in theory) make use of multi-year MLEs in 2 out of 4 seasons (since contracts can go 4 years) turning it into a viable "every other year" option instead of a "once in 4 years" option.