Wednesday, June 30, 2010

That Just Happened

Reigning Black

Yes, Ricky Bobby. ... That, just happened.

After asking aloud to myself if the Spurs were going to be any kind of a player in free-agency earlier today, it would only seem fitting that Richard Jefferson would decide to opt out of a 15.2 million-dollar contract. Suffice it to say, I saw this coming a mile away -- and if you believe that I'd love to sell you your next... anything, really.

Whether this turns out to be a great move on Jefferson's behalf or as poor of a decision as it would seem -- opting out of a final year that would've paid him around two-times his current worth -- is neither here nor there as it pertains to a Spurs fan. So rather than get bogged down in the inconsequential, I think it'd be wise to address what this means. What exactly are the implications and ramifications for the Spurs?

How much money does this save the Spurs?

Had Jefferson exercised his option, the Spurs were looking to be in the neighborhood of $10 million over the luxury tax. Meaning they'd be paying two dollars for every one dollar over the threshold. So with him opting out, the Spurs are likely to now spend up to the threshold without exceeding it. With Jefferson's decision to opt out, Peter Holt's bottom line just improved by $25 million, should the Spurs stay under the tax -- the Spurs were $10 million over the tax, which translates to $20 million (double on every dollar over), and the Spurs would now be in line to collect $5 million in luxury-tax distribution in July, 2011 by simply being under the threshold.

Could Jefferson be re-signed? If so, is it possible that $32-40 million is a better bargain than $15.2 million?

The simple answer to the first? Yes, Jefferson could be re-signed. How $32-40 million is a better bargain than $15.2 million? Well, as outlined above, it's all about the tax. If the Spurs were to simply give Jefferson more years at a reduced rate -- spreading out the salary so that it's more conducive to the cap on a yearly basis -- the Spurs could still receive the $25 million garnered from Jefferson's opt-out by simply paying him, say, $8 million over the next four-to-five years for a total of $32-40 million. The Spurs would then get under the tax in the first year and owe him $28-32 million for the duration of his contract -- a much more manageable scenario.

Could Jefferson still be traded?

Absolutely. Let's say a team like New Jersey was interested in bringing back Jefferson, only this time at a much more reasonable rate. Say, 4-years and $32 million. The Spurs could then do a sign-and-trade with New Jersey for a conditional second-round pick and an $8 million dollar trade exception. That trade exception could then be used to acquire a player from a team looking to shed payroll or simply unload a player. If New Jersey needed some prodding and maybe a bit of a sweetener, the Spurs could take back Kris Humphries -- 1-year and $3 million -- and receive a trade exception for $5 million dollars.

How does this affect Splitter's situation?

The good news for Peter Holt and the boys is that the cost of Splitter has now been cut in half. No longer paying tax, the Spurs needn't worry about paying double on the dollar. The not-so-good news is, Splitter's likely to receive the whole mid-level exception now -- you try telling an agent and his client you can't afford to pay an extra $1-2 million after just coming across an approximately $25 million dollar windfall.

What do the Spurs have left as it pertains to free-agents (including their own)?

Assuming Splitter receives the full Mid-Level Exception, the Spurs will be armed with both the Bi-Annual and Veteran-Minimum exceptions. They can sign their own free-agents using Full-Bird Rights on Bonner, Early-Bird Rights on Mason and a Non-Bird Exception on Bogans; and Ian Mahinmi can be signed to a contract of up to $1.8 million without using any exception.

Final thoughts.

Of course, fittingly, as I started this post with the irony of learning about Jefferson's decision to opt out after asking myself aloud if the Spurs would be a free-agent player at all, Richard Jefferson may come back to the Spurs. And, it's at the reduced rate we just got done alluding to. So, nothing to see here. Go ahead... move along. But before you do, let me leave you with this:

- If Jefferson resigns with the Spurs for 4 years $32 million, the Spurs will still benefit from the tax by structuring a more palatable contract -- which helps the bottom line and roster flexibility. Jefferson got more guaranteed money, yet, still managed to relieve Peter Holt's heartburn.

- The Spurs' ability to get under the cap could allow them to pay Bonner or Mahinmi fair market-value without being subjected to the double-on-the-dollar luxury tax penalty -- the Spurs would have been over the luxury tax without a Jefferson opt-out, which would have made all off-season transactions cost double.

- Splitter still has the Spurs by the cojones and you can probably still expect him to receive the full Mid-Level Exception -- but, again, Holt's heartburn should be much more tolerable for now.

That just happened, Ricky Bobby. ... That, just happened.


  1. Nick, this is good stuff. I feel like I really understand all the plays now, both for RJ and the Spurs.

    I've enjoyed reading your stuff over at PtR and look forward to seeing more from you both here and there.


  2. Always good to hear some positive feedback and glad you've found the work helpful and enjoyable, J.R. -- although, that probably suggests I've got nowhere to go but down from here . . .

    Regardless, don't be a stranger.