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NBA PM: Lakers Facing Real Tax Issues
Posted By Eric Pincus On May 24, 2012 @ 5:00 pm In All,Main Page,NBA | No Comments
The Los Angeles Lakers have ended another season in the second round, two straight years with two late-blown leads. After losing to the Dallas Mavericks last May, the Lakers tried to deal Pau Gasol to the Houston Rockets in return for Chris Paul, then with the New Orleans Hornets.
Over the course of the season they considered other Gasol deals but didn’t find the return they had hoped, instead making smaller moves to bring in Ramon Sessions and Jordan Hill.
Now that the Oklahoma City Thunder have dispatched the Lakers, the team has to decide if there’s a way to improve while retaining Gasol . . . or if it’s finally time to move on from the almost 32-year old forward/center who helped LA land two titles.
Economics suggest the Lakers will look to move Gasol sooner than later.
The new Collective Bargaining Agreement (CBA) put into place before this season did not change the dollar-for-dollar luxury tax rate immediately. It remains the same for the year to come.
It’s during the 2013/14 NBA season that the finances get very messy and then, the following year, they go completely off the rails.
In approximate numbers, the Lakers paid $86 million in payroll this past season with $16 million in luxury taxes, for a total of $102 million.
For the sake of argument, bump that number up to about $92 million for the coming year, accounting for raises and the team’s Mini-MLE ($3.1 million). With tax, that’s roughly $114 million. A lot, but a number the Lakers have paid in the past for what they believed was a championship contender.
It’s the following year where the math starts to break down.
If the team is still on the Kobe Bryant/Andrew Bynum/Gasol core by 2013/14 and the threshold remains at $70 million (which may climb and subsequently lower taxes, but then the Lakers can’t know today where that line will be tomorrow), the graduated tax rate would push a $92 million payroll to $144.5 million (with $52.5 million in tax).
That’s BEFORE the repeater tax kicks in.
If the Lakers were somehow to remain at $92 million for 2014/15, with the repeater tax finally a factor, the tax climbs to $74.5 million.
There’s no way the Lakers are going to pay $166.5 million for a roster. Don’t forget the league is taking about $50 million from the Buss’ coffers on top of that via revenue sharing.
It’s easy to look at the Time Warner Cable deal at $150-200 million a year and shrug off any expense, but the Lakers aren’t going to pay anywhere close to that level of payroll.
Also, how is the TV deal structured? Is it spread out over 30 years, paying far less in year one than in year 30?
Additionally the Buss family will one day (hopefully not for many, many years) be looking at a hefty inheritance tax bill from the government. The goal is to keep ownership within the family and the Time Warner deal will help finance what could be a $400-500 million fee.
No, the Lakers need to start finding their way to the low levels of the tax by 2013/14.
The question is how?
For the next two seasons it would seem the Lakers are committed to Bryant, who is set to earn $58.3 million and holds a no-trade clause. Additionally Bynum, rough around the edges as he may be, is expected to get a long-term extension offer from the Lakers, starting at about $16.9 million.
That’s about $44 and $47 million over the next two years invested in just two players.
In the first year of the graduated tax, if the Lakers spend $38 million in salary on the rest of the roster (outside of Bryant/Bynum), the total payroll number with tax would be about $114 million.
Given the $19 million Chris Bosh and $21.7 million Amar’e Stoudemire are set to make in 2013/14, the Lakers are unlikely to put that kind of money into chasing a third player which would leave $16-19 million to round out the other 10-12 roster spots.
As long as Bryant is making $30 million, the new CBA will make it very difficult for the Lakers to pay for three big-money stars.
One rumor, as touched on by HOOPSWORLD’s Alex Kennedy, making the rounds would be Andre Iguodala of the Philadelphia 76ers who is set to make $14.7 million and $15.9 million over the next two years (second is an early termination option). At least his contract moves the Lakers’ toward their necessary goal.
Does Iguodala help to get the Sixers to the Eastern Conference Finals? If so would Philly turn around and deal him? Maybe not.
Equally if Rajon Rondo and the Boston Celtics don’t advance, would a Gasol swap be worth revisiting? Rondo is set to make $36 million over the next three years which is relatively reasonable for one of the top assist-men in the league.
Josh Smith of the Atlanta Hawks is going into his final year at $13.2 million and while he might make sense for the Lakers, would the Hawks be prepared to pay a combined $54 million to Joe Johnson, Al Horford and Gasol in 2013/14? That creates tax problems for Atlanta.
The Chicago Bulls may be looking to shed salary with Derrick Rose’s upcoming year in doubt. Gasol may not fit any more and Carlos Boozer never really made sense for LA.
What are the Milwaukee Bucks planning to do with players like Brandon Jennings and free agent Ersan Ilyasova? Would they invest in Gasol for two years?
Where are the Sacramento Kings on Tyreke Evans? What about teams like the Golden State Warriors? Could the Lakers get into the lottery with Gasol as bait?
Laker fans need to keep in mind that Gasol is over 30 while carrying two hefty years left on his contract. He’s not going to appeal to every team.
If the Phoenix Suns retain Steve Nash, a Marcin Gortat/Gasol frontcourt might make sense. Would the Lakers be interested in Markieff Morris, Channing Frye and/or the 13th pick? Do the Suns take on Gasol’s deal as the kind of incentive Nash needs to stay? Is that what Steve had in mind?
In theory if a trade could be swung in July, LA could also generate a $19 million trade exception (TPE) by utilizing the Lamar Odom exception to take on Morris/Frye.
That’s two young players, the prototypical stretch four in Frye and the means for other deals via the TPE.
The Houston Rockets still have significant interest in Gasol. It remains to be seen what they do with Kyle Lowry and free agent Goran Dragic. Houston also has Kevin Martin on the last year of his deal at $12.4 million.
Luis Scola guaranteed for the next two years at about $9.8 million a year. Scola does have a third year at $11 million but it’s non-guaranteed (unless certain incentives are met). Additionally Houston has an assortment of interesting, younger players like Courtney Lee, Patrick Patterson, Marcus Morris, Chase Budinger and Chandler Parsons.
How far would Houston be willing to go?
The Minnesota Timberwolves, who still like the idea of pairing Gasol with Ricky Rubio (also recovering from injury), may be a suitor and they certainly have assets to offer.
Second-year player Derrick Williams is the kind of athletic-four-on-a-rookie-contract the Lakers could use in place of Gasol. The Lakers tried to deal for Michael Beasley at the deadline. He may be available via sign and trade. Both Brad Miller and Martell Webster have $500k guaranteed apiece, which makes their $5.1+ million contracts easy filler in a deal (Miller has already announced his retirement). Would the Wolves give Nikola Pekovic, Wesley Johnson or J.J. Barea?
Then again Pekovic, at a much cheaper price, proved to be quite a solid starter in his own right.
Sources have told HOOPSWORLD that the New Jersey Nets are not interested in Gasol should Deron Williams decide to leave this summer. The Lakers’ best and only chance at Deron would be if he flat-out demanded a deal to LA and one of the teams interested in Gasol (Houston, Minnesota, etc.) had enough to offer via a multi-team deal.
If there was one player the Lakers might be willing to climb higher into the tax for as they make a transition from stars (Kobe to Deron), it would probably be Williams. Assuming all that comes together easily, however, is a fool’s errand.
There’s always the specter of a Dwight Howard deal but even if Bynum went out in a swap to Orlando, the story remains the same with Pau.
Certainly there are other teams and players that should be mentioned but with just a quick pass through the league, the Lakers may have a number of options when it comes to dealing Gasol.
The hard part is sealing a deal that keeps the Lakers competitive in the here and now – the future – all while managing finances in what is a very suppressive new CBA.
All-NBA Teams Announced
LeBron James was the leading vote-getter to the 2011/12 All-NBA First Team. He’s joined by Kevin Durant, Dwight Howard, Kobe Bryant and Chris Paul.
Second Team honors go to Kevin Love, Blake Griffin, Andrew Bynum, Tony Parker and Russell Westbrook.
Rounding out Third Team is Carmelo Anthony, Dirk Nowitzki, Tyson Chandler, Dwyane Wade and Rajon Rondo.
At center, Howard made First Team over Bynum by just 76 points based on votes from a panel of 120 sportswriters and broadcasters.
Spurs guard Parker was second among point guards, an appropriate showing for one of the league’s stars on arguably the best team – and yet Tony is often overlooked as a “top-five point guard.”
“I gave up on that dream a long time ago,” said Parker recently. “Since I’m in San Antonio, we are under the radar all the time. For me, the most important opinion is Coach Popovich’s. As long as Coach Popovich is happy, I’m good.”
Others receiving votes were LaMarcus Aldridge, Marc Gasol, Derrick Rose, Josh Smith, Paul Piece, Al Jefferson, Pau Gasol, Steven Nash, Kevin Garnett, Tim Duncan and many others.
NBA Draft: Terrence Ross
With the 2012 NBA Draft rapidly approaching, Washington Huskies guard/forward Terrence Ross is hard at work in Los Angeles at Impact Basketball. The 6’7″, 21-year old scorer is projected to be in the 15-20 range but don’t sleep on him breaking into the lottery.
HOOPSWORLD’s Steve Kyler recent spoke to Ross:
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