Details of the terms of Jamal Crawford’s buyout with the Atlanta Hawks were finally revealed late Tuesday night. Chris Vivlamore originally reported that Crawford’s 2017-2018 salary would be approximately $11 million and Eric Pincus of BasketballInsiders.com indicates that Jamal gave up $4 million of his remaining $17,246,988 in guaranteed compensation for his release.
Allow me to clarify what a buyout entails and how this affects Atlanta’s cap sheet moving forward.
What Is a Buyout?
In the NBA, players must sign what is termed a Uniform Player Contract that is collectively bargained by the owners and player’s association. There is a lot of legalese within this contract but of relevance here is that every contract must contain an Exhibit 2 - Compensation Protection. This is where a Player and Team enter into an agreement of the level of protection for the contract. NBA contracts are not all guaranteed — which is a bit of a misnomer when people compare the NBA to the NFL. However, general business practice in the NBA makes it so contracts have a higher level of guaranteed compensation than the NFL. For Jamal Crawford, he had a contract for $14,246,988 in the 2017-18 and $14,500,000 in the 2018-19 Season. His 2017-18 Salary was fully guaranteed but only $3,000,000 of his Salary in 2018-19 was guaranteed.
A Player and Team can mutually agree to raise or decrease the protection level of a contract (it is in section 2.3.n). Back in 2015, Mike Muscala and Atlanta actually agreed to increase his level of compensation for his 3rd and 4th years from non-guaranteed to 50% guaranteed. This went largely unnoticed because increase in guaranteed compensation is usually uninteresting to a fan. However, when a Player and Team mutually agree to decrease the level of compensation that is of interest because that situation is what is called a buyout.
A buyout will reduce the guaranteed portion of compensation conditional on the Player clearing waivers. This is effectively a situation where a player is buying their release from a contract in order to pursue a contract with another Team. The Team is gaining money in these situations. In this situation, Atlanta saved $4 million in their buyout with Jamal Crawford.
Now, something of little importance to fans but of interest to the accountants for the Atlanta Hawks is how the remaining compensation ($13,246,988) to Jamal Crawford is paid out. Before the 2011 Collective Bargaining Agreement (CBA), the payment schedule could be individually negotiated a-la how Bobby Bonilla is still being paid about $1.2 million per year by the New York Mets until 2035. This is no longer the case for the NBA and has not been since the 2011 change (see the 2011 CBAFAQ by Larry Coon if you do not believe me).
The CBA is very precise in how the payment of a waived contract is handled and it is detailed in 2.4.k of the CBA. As long as there is more than $250,000 remaining in compensation, every waived contract is paid equally over 2 times the remaining number of years plus an additional year. Every. Dang. Contract. This automatically occurs, hence why it is titled the “Automatic Stretch Provision” within the Uniform Player Contract (it is Exhibit 2). Atlanta has no choice but to pay the remainder of Jamal’s contract in equal installments for the next 5 years.
Jamal Crawford Buyout Amounts
|Season||Previous Guaranteed||Cap Hits||Payment Schedule|
|Season||Previous Guaranteed||Cap Hits||Payment Schedule|
|Agreed Buyout:||$13,246,988||(Gave up $4M)|
There is no election by Atlanta to “stretch” the payments of Jamal’s buyout and there is no real reason for fans to care about this but, at the same time, there is an important distinction with how cap hits are handled and how Atlanta chose to structure the cap hits.
Crawford Cap Hits
Per Eric Pincus, Atlanta will have a cap hit for Jamal Crawford of $10,942,762 in 2017-18 and $2,304,226 in 2018-19. This implies that Atlanta did not stretch his cap hits, which I will cover that situation in a minute. But the reason for these particular amounts for Jamal’s cap hits are due to the portion of guaranteed compensation for Jamal and what the total overall compensation was agreed to per the buyout.
Jamal had $17,246,988 in guaranteed compensation. His 2017-18 Salary represented approximately 83% of this amount and his 2018-19 Salary represented the remaining 17% of this value. This is the basis for how his remaining $13,246,988 in compensation is handled, 83% of this value goes on the 2017-18 Season and the remainder to the 2018-19 Season.
Atlanta now boasts somewhere between $9,945,277 and $10,116,009 in remaining space because they screwed up the timing of the Tyler Dorsey contract. The difference is based on how Atlanta and Dewayne Dedmon structure their contract, which hasn’t been officially signed and announced yet, but can only be signed with cap space.
What if it was stretched?
Atlanta did have the option to stretch the cap hits over five seasons. This would have immediately freed up $8,293,364 in cap space for 2017-18 but at the cost of adding on an additional $8,293,364 in cap space for the next four seasons at $2,649,398 for each. Looking at the current rebuilding timeline of the team, it would be extremely puzzling if the team stretched the contract as they have already appeared to have given up on using cap space for this off-season.
What about Jamal signing with Minnesota? Does Atlanta get any relief?
Every player contract in the NBA is subject to the Right of Set-Off. This right is a way for a team reduce their payment obligations to a player that they previously waived if the player signs another contract. The exact amount that can be offset is one half the player’s salary above the minimum player salary for a player with one year of service (currently $1,312,611). Jamal has a contract paying him $4,328,000 and one-half this amount above the minimum would be $1,507,695. This would affect cash payments so Atlanta would avoid $5,507,695 in total compensation to Jamal and cap hits — although the cap hit effects are only calculated at the end of a Season.
The effect of an offset is for the cap hits to be reduced by the associated offset in accordance with how the cap hits are structured. For Jamal, this would imply approximately 83% of the offset is applied to the 2017-18 cap sheet for Atlanta and the remaining 17% would be applied to the 2018-19 Season. Or in more direct terms, Jamal’s cap hits would be reduced at the end of the 2017-18 Regular Season and his cap hits would become $9,697,321 in 2017-18 and $2,041,973 for 2018-19. There would be no impact on the 2017-18 cap sheet, but Atlanta would be able to gain $262,254 in cap space.
This same process would also occur if Jamal is still under contract for 2018-19, although this would only affect the cash payments Atlanta makes. It would not impact their cap sheet anymore.
But, as usual, there is a catch. Teams and Players have the explicit ability to waive the Right of Set-Off (Section 2.3.n). Waiving the Right of Set-Off usually occurs whenever a buyout is reached, although not always. In short, we probably will not know if this was waived until after the 2017-18 Regular Season.
But what about a trade with Jamal’s non-guaranteed contract if they didn’t buy him out?
I debated whether or not to include this subsection for a decent amount, but I think it is helpful to reference. The new CBA closes a “loophole” in that, for trade purposes, all new contracts signed only use the guaranteed portion of the contract for salary matching purposes. This only refers to newly signed contracts, and Jamal Crawford’s contract does not fall within this restriction.
In other words, if Atlanta did not agree to a buyout with Jamal and instead had him play out the year with this team, then his $14,500,000 contract in 2018-19 would count for its full value in trade purposes. But at the same time, the team trading for Jamal would only be on the hook for $3 million, thus giving them a potential savings of $11,500,000 in cap space if they traded exactly $14,500,000 for Jamal. A team could actually trade $19,500,000 in salaries to Atlanta for the Jamal contract, which might push the savings up to $16,500,000 for the team in question. But at the same time, is Atlanta going to want to add on that amount of salaries?
The new CBA restricts salary in trades to be only of the amount of guaranteed salaries. But this only applies to contracts signed after the first of July 2017. Jamal’s contract is not under this restriction. So it is possible that Atlanta could have had the ability to flip Jamal’s partially non-guaranteed contract for another asset in the 2018-19 Salary Cap year.
But this calls into question whether or not this is at all feasible. Atlanta recently had Mike Dunleavy’s partially guaranteed contract to make a similar type move. Atlanta did not trade him and presumably that is because they could not find a suitor. This also happened with the Utah Jazz and Boris Diaw and his $7 million non-guaranteed contract. The team was unable to trade him elsewhere and thus waived him.
The ability to trade away a non-guaranteed contract really only applies to situations where the team which is trading away the non-guaranteed contract acquires some asset in addition to dead salary. The teams that want a non-guaranteed contract are attempting to remove bad contracts in order to clear cap space or luxury tax space. And in doing so, the team trying to clear space is attempting to unload a contract and would need to attach an asset.
The current price for a late first round draft pick seems to be in excess of $14 million in cap space. That is what Atlanta paid.
Brooklyn recently paid in excess of $30 million over two years in order to acquire the Toronto Raptors’ first round draft pick in 2018 — although they did keep DeMarre Carroll on their roster.
But these are expected to be late first round picks and the cost of cap space price appears to be in the neighborhood of $15 million.
It is probably unlikely that Atlanta could then recoup another first round pick in 2018 without also costing themselves another $14+ million in cap space. And is that worth it? The jury is out.