Friday Insider

[Weez]

I 'apologize' for the inconsistency in Insider posts of late. I'm goign to try and be more like the old reliable me ~ med school things just got me quite weighed down the past couple of weeks.

*If I miss one, I often go back and post them later (see mass postings ~ I have to post them from my home computer (in order to cut and paste)

** If I miss one and don't repost it, feel free to request it, preferably with a link to it on (even if you don't have insider, you can see the link off of ESPN ~ Insider takes them 'down' every couple of days, thus if I'm far behind, they won't be on the main screen.

*** Requests will be taken with more vigor by regular posters on the board; if by a non-regular, read above and provide a link to expidite handling.

NBA owners, players brace for a lockout

By Chad Ford

NBA Insider

In February, NBA commissioner David Stern and union chief Billy Hunter sat together at the All-Star Game in Los Angeles and smoked a peace pipe.

Hand in hand, the two bitter enemies claimed they already were talking about the terms of a new collective bargaining agreement (CBA) with an eye toward coming to a compromise in the summer.

"Recognizing that it seems to be part of labor lore that you have to be under some kind of deadline to get the final deal done, we'll give it our shot," Stern said.

"I've indicated to David and to the owners that we are going to make every effort to try to reach an agreement between now and the end of the summer," Hunter said, "knowing that if we don't, it's pretty difficult to negotiate during the season because the players generally are unavailable."

Their hope was to avoid another nasty lockout, one similar to what the league went through in 1998 and resembling the one the NHL is embroiled in now.

However, eight months later, the two sides are no closer to agreement. The players are clinging to the hope the owners will keep the status quo. The owners are looking for huge concessions that limit the financial losses that occur because of the frequent, ridiculous contracts they sign players to each summer.

And everyone, from players to agents to GMs and owners, are talking about the unthinkable – another lockout.

"I expect that they'll lock us out," a player close to the negotiating process told Insider on the condition of anonymity. "From what I've seen so far, they are really trying to roll back every concession they made to us in the last round. I'm telling my teammates to start saving their money."

That view is held widely throughout the league right now, despite recent rosy public pronouncements by Stern and Hunter.

Will the players really be locked out once the current collective bargaining agreement expires July 1?

Insider made calls to a number of people on both sides of the issue who are directly involved in the negotiating process. Here's what the two sides are bickering over and how they can avoid a labor war this summer.

THE ISSUES

CONTRACT LENGTH

Currently, players can sign a fully-guaranteed contract for a maximum of seven years if they re-sign with their current team. Players signing with a new team in free agency can sign six-year deals.

This is a sticking point for owners, who often get stuck with the bill when players become injured or don't live up to the contract they signed. Teams have very few options right now if they want to get rid of a player with a bad contract. They can hope he retires, try to trade him (usually taking back another bad contract in return) or try to buy out the contract.

Anderson (49) negotiated a reported $20 million buyout of his Knicks' contract.

This fall several players – including Howard Eisley, Shandon Anderson and Eddie Robinson – were bought out for more than $10 million each. In these cases, owners wind up paying players a lot of cash to play for another team. Once a team buys out a player, the buyout amount remains on the books until the original deal expires. That means the team is saddled with cap and luxury-tax implications while the player is free to move on.

This has grown into a major problem. This year the Bulls and Nets will be paying more than $15 million each in salaries to players who aren't on their current roster. Three other teams, the Bucks, the Celtics and the Grizzlies, owe more than $10 million each in salaries to players not with the team. A number of other teams – including the Knicks, Sixers, Wizards, Rockets, Mavericks and Suns – also owe significant dollars to players who are plying their wares elsewhere.

The owners have discussed a number of proposals that eventually were deemed unworkable. The original thought was to no longer make contracts fully guaranteed. That would have caused a major uproar with the union.

The owners' current proposal asks for contracts to be shortened to three or four years. They believe the shorter length will limit their losses from any bad deals they might sign. So far, the union has agreed to compromise a little, shortening the maximum number of contract years to five or six, but the owners feel that isn't enough.

Both sides expect a compromise to be reached. For example, a player could sign for a maximum of five years if he re-signs with his current team and four years if he signs with a new team in free agency.

RAISES

In the current CBA, players are allowed maximum raises of 12.5 percent per year if they re-sign with their current team and 10 percent if they sign with a new team in free agency.

Over time, the effect of those raises can be devastating to a franchise. For example, the Lakers, who signed Kobe Bryant to a seven-year contract with 12.5 percent raises last summer, are on the hook for $14.175 million this year for Kobe. In 2010-11, his salary escalates to a whopping $24.8 million.

Owners contend the raises are out of whack with the current financial realities in the league. Last year, the salary cap stayed flat. In years past, it has gone up small, incremental amounts. If salaries are rising at 10 percent a year and the cap is rising at three percent, teams that currently are avoiding the luxury tax won't be so lucky in three or four years.

Some teams have tried to counter this trend by offering players flat contracts. However, very few agents or players are will to accept that option.

To curb the growth of salaries, owners want to roll back the maximum raises to 3 percent for players who re-sign with their current team and 2 percent for players who sign with a new team in free agency.

This is a major sticking point for veteran players, who count on those nest egg balloon payments at the end of their careers. Owners counter that in the current system, players become a huge financial burden at a time when they are the least productive. Jason Kidd will be making $21.4 million when he's 36 years old. If he is unhealthy, or just a shell of his former self, the team will struggle to stay competitive.

So far, the players are holding firm to the current numbers of 10 and 12.5 percent. The owners are standing fast at the other end of the spectrum.

As with most things that are bargained, expect compromise. Raises of 5 and 6 percent, respectively, cut the current numbers in half but allows salaries to increase at a rate that exceeds inflation.

THE MID-LEVEL EXCEPTION

Some GMs feel the mid-level exception, more than any other "soft cap" device in the CBA, is responsible for the out-of-control salaries in the league.

Fisher's (2) miracle basket in a Lakers' playoff victory last spring helped him land a lucrative deal with the Warriors last summer.

The mid-level exception is available, every year, to every team whose payroll is above the league's salary cap. It's based on the average salary in the league – currently $4.9 million. Teams can use the exception to sign players for a maximum of six years with 10 percent raises.

Derek Fisher signed a six-year, mid-level deal with the Warriors this summer that totaled $37 million. While his salary this year is $4.9 million, it escalates to $7.4 million in 2009-10.

Owners argue the exception has blown a huge hole in the cap. Because teams sign someone new to the exception every year, the numbers really start to add up. Owners believe combining a lowering of the mid-level exception with shorter contracts will bring it under control.

No one is asking for the mid-level exception to go away. The owners still want the loophole, but they don't want owners like Mark Cuban and James Dolan to be able to drive a semi through it. Currently, the owners are looking to lower the amount of the exception to $3 million and limit the maximum number of contract years to three. If the rule had been in place this year, Fisher would've been eligible only for a three-year, $10 million contract – something the Warriors could have swallowed more easily, both in the short term and the long term.

Players want to keep the mid-level exception where it is – the average salary of players in the league.

Expect this issue to be one the owners concede. If they can reduce the maximum number of years and tighten up the raises, the mid-level exception won't be nearly as big a problem, even at current numbers.

MAX CONTRACT LIMITS

The current CBA puts limits on the maximum salary a player can receive, based on his number of years of service.

For the 2003-04 season, the maximum first-year salary for a player with six years of experience or fewer was $9 million or 25 percent of the team's cap (roughly $10.9 million last season), whichever was greater. For players with 7-9 years, it was $11 million or 30 percent of the cap (roughly $13.2 million), and for players with 10 or more years, it was $14 million or 35 percent of the cap (roughly $15.3 million).

Owners want those numbers lowered significantly (to 15, 20 and 25 percent) in an attempt to get spending under control. The players, obviously, are opposed. So far, there has been little movement, though both sides acknowledge that a 20-25-30 compromise likely will be where the numbers end up.

PLAYER ESCROW ACCOUNT

Currently, players pay 10 percent of their salaries into an escrow account each season. If the amount of total player salaries exceeds 57 percent of the league's total basketball-related income, that escrow money goes to the owners. If total salaries don't exceed 57 percent, the players get their money back.

For the past two seasons, salaries have been hovering above 60 percent, and owners who have kept their payrolls below the league's luxury-tax threshold (and a few that fall within a certain "cliff threshold") have gotten millions back from the players.

The players, as you can imagine, want this to end. In fact, it might be the single most important issue on the table for them. The players already pay an enormous amount in personal income taxes. Factor in the 10 percent that's taken off the top, and a player's take-home pay is far less than what it appears on paper.

Owners are reluctant to do it. The windfall teams got last year from the escrow tax – and from fees paid by owners who were over the luxury-tax threshold – put roughly $8 million in the pockets of owners who were under the tax or in the cliff threshold.

For several teams, that rebate meant the difference between posting a profit or a loss for the season.

Right now, the owners are willing to compromise by phasing down the amount players pay into the escrow account. They are, however, unwilling to get rid of it completely.

This is a major sticking point for both sides. While owners are pushing for a number of items that will get their finances in control over the long term (remember, these proposals won't be retroactive – they'll apply only to contracts going forward), they also are unwilling to take huge financial hits now to preserve the future.

That's why the phase-out is important to the owners. It means they give up less money now but more money once the system begins improving. The owners might have to compromise here and get rid of the escrow accounts. Giving players this small victory might be what it takes to win the war.

THE LUXURY TAX

The infamous luxury tax is something neither owners nor players like. However, it's Stern's biggest stick with which to beat the owners into submission on out-of-control spending.

Last season, teams whose payroll exceeded $54.6 million paid a dollar-for-dollar tax on any amount they were over the threshold. For example, the Knicks' payroll for last season was $94.4 million. That means they paid the league $39.8 million in tax penalties. The total taxes paid by teams last season amounted to more $157 million.

The luxury tax kicks in when total player salaries exceed 61.1 percent of total basketball revenues. That number jumped to 63.3 percent this season – giving the owners their first shot in a long time at a season without a luxury tax.

It's not going away, regardless of what both sides may want. The owners have proposed, somewhat reluctantly, to move the threshold down from 63.3 percent into the mid 50s. Players want it to stay exactly where it's at – 63.3 percent. With a higher threshold, owners can spend more without subjecting themselves to the luxury tax.

This is another area where owners are likely to cave. A lowering of the threshold would put a number of non-tax paying teams firmly in luxury-tax land. There isn't an owner in the league – with the possible exceptions of Dolan and Cuban – who really wants to pay it.

While lowering the threshold would help curb long-term spending, few teams are willing to pay the up-front penalty that would occur if the threshold were lowered. Owners might end up trying to phase back the threshold over time, but so far that isn't on the table.

AGE LIMIT

Stern has been vocal in support of an age limit that would require players to be at least 20 years old to declare themselves eligible for the draft. Hunter has been just as vocal opposing the limit.

It's really much ado about nothing. While Stern honestly would like to see it happen, he's not willing to bargain for it – something the union absolutely will insist on. The owners have been trying to convince the players it's in their best interest to support an age limit (fewer rookies means more jobs for veterans), but Hunter & Co. aren't buying it.

The irony is the union would get on board if the owners would concede on some financial issues. However, as much as the owners philosophically would like to back Stern on this one, numerous league sources insist there's no way they'll give up cash to make it happen.

You'll hear a lot about the issue in the coming months, but at the end of the day, it's going to be a chip that just won't be played.

NBA MINOR LEAGUE

There's been a movement among GMs for some time to see the league turn the NBDL into something that looks more like a real minor league.

Stern told Insider in April that such a league already was in the works, with the possibility of the NBDL expanding to 15 teams.

However, to make something like this happen, the issue must be collectively bargained. The union isn't opposed to the idea in theory but has specific concerns about its implementation. Here's where the concept is right now:

Each NBA team would send young players to a designated NBDL team, along with an assistant coach to monitor the players' development.

Stern would like to expand the league beyond the Southeast to as many as four regional pods, starting with either the Northeast or the Midwest. If the league were to expand to 15 teams, two NBA teams would share each NBDL team.

First-round picks would continue to be paid at the rookie wage scale. This was a key concession to the players, who don't want owners using the league as a way of cutting salaries.

Teams would retain the rights to all of their players and could recall them at any time.

Veterans could not be sent to the D league against their will.

The union would like a limit on the amount of time a team could keep lower picks in the NBDL without calling them up. They would insist a team call up a player after two or three years or lose their rights to him.

From everything we hear, this is something that's going to happen. It would address the issue of young players flooding the league, would create more jobs for players and should improve the quality of basketball in the NBA.

THE BOTTOM LINE

The league is in better shape, financially, than it was before the current 1999 CBA kicked in. Things like the luxury tax and escrow accounts have curbed spending – though not to the degree owners would like.

With the NHL embroiled in a nasty lockout that is threatening its entire season, the last thing either side wants is a repeat of 1998-99.

"We are still recovering from the effects of the last lockout," one league executive told Insider. "Everyone always talks about the short-term effects, but there are devastating long-term ones that can be the most difficult to overcome. I'm not sure that all the fans are back. If we do it again, many of them will give up on us for good."

"We've both been down that road," Hunter said in February. "It's not very comfortable. As a matter of fact, it's extremely uncomfortable. We lost a lot of money, the players did, as well as the league. And it can get ugly on occasion. And then you have got a lot of ground to try to recover once you have come back together.

"So we are going to try to reach an agreement. That does not mean that things may or may not get adversarial, because they often do. Sometimes you have to fall apart before you can get back together.... Having been through a seven-month lockout in the past, that's the last thing I want to experience again."

Despite the obvious differences, the sides are closer than they appear on almost all of the core issues.

The fact the players are essentially calling for the status quo is a major concession. They fought the current deal vigorously in 1998-99 and now are conceding it has been good for the league.

NBA players are still the highest-paid athletes, on average, in the world. More than 60 percent of revenues are still coming their way.

The Armageddon union reps warned players about in 1999 never came about.

The players have a lot to lose if the owners lock them out. Numerous player agents told Insider their clients spend money at such a furious pace they would be unable to withstand a long lockout.

Players have bills, and the first time that million-dollar check doesn't come, and they realize it isn't coming soon, it will be difficult to maintain solidarity.

Times also have changed. The players in the league today don't see the benefits of sacrificing individually now for the good of the collective down the road. The union knows this. They know if they're locked out, the players are unlikely to ultimately get a good deal.

Owners, for the most part, have been their own worst enemy. The changes they want are designed to protect them from themselves. In a perfect world, they'd know better than to sign a player like Fisher to a six-year, $37 million deal. In the real world, it happens with far too much regularity.

The curbs the owners now seek are reasonable. Player salaries are rising at a faster rate than revenues. Owners face too many risks when they sign players to seven-year deals. Teams should be able to build contenders (the Spurs and Pistons have been the rare exceptions) without losing money as a franchise.

The owners have the leverage here and believe if they lock the players out, they'll get most, if not all, of the concessions they're looking for.

Still, if owners lock the players out, and the players show more resolve than the owners expect, they risk destroying interest in the game and the value of their franchises. Over what? Their own inability to practice a modicum of financial restraint.

As devastating as a lockout would be to players, it would be equally detrimental to the league. The owners know this and will be willing to compromise to keep it from happening.

"At the end of the day," one league official said, "I'd be shocked if the two sides can't work out something. There are too many intelligent people on both sides of this issue. A lockout shrinks the pie for everyone – the owners and the players. We've got to get this worked out.

"We owe it to the fans and the game to figure this out."

Chad Ford covers the NBA for ESPN Insider.

[cyman3]

WEEZ, its okay... ur good man.

thanks for the post