CHRIS GRANTLAND: 1-2-3, REPEATER YIELDS DENG

Luol Deng was acquired by the Cavaliers for basically nothing, but his presence changed everything.  Like we were different people in a different time with different thoughts and different expectations, with young hearts and fresh eyes.  Players slipped instead of squeezed into roles, the basketball moved freely, and inches of space to shoot became feet.   The Cavaliers suddenly find themselves galvanized, a team rather than a collection of parts.  

LUOL DENG, CLEVELAND CAVALIER

(Melissa Majchrzak NBAE/Getty Images)

Someday the kids who’s first Cleveland Cavaliers memories are watching the JJ Hickson Era Team lose 26 games in a row will share a beer with friends while they lay claim to those horrible memories.  Someday the tweens who watched the 2007 NBA Finals Cavaliers will recall to each other over futuristic pizzas about how the Cavs rebuilt.  Someday the wild teenagers who once drove down to Richfield to watch Austin Carr and the Miracle team will explain how the years after the summer of 2010 until the Cavaliers made the playoffs were a blip. 

One thing that no one will ever want to explain, ever, is the role that terrible NBA lockout had in rebuilding the Cavaliers.  It’s too dry, too boring, too academic and it lacks the simplicity of the one line narrative that formed the basis for every explanation of what happened to Cleveland’s basketball team after that one night in July 2010, when whats-his-face from you-know-where followed up a historic failure in the playoffs with a turd on the doorstep and a ring of the doorbell.

THE NEW CBA IS FINALLY CHANGING THE NBA

There’s the salary cap and the luxury tax level.  The salary cap sets the amount that each team can spend on players, but has exceptions that almost every team uses, so almost every team is over the salary cap.  The luxury tax is an amount which is also set and which is over the salary cap, which establishes an amount of salary where, if a team goes over, they have to pay.  The money they pay goes is distributed to the non-paying teams and to the league for “league purposes”.

The Deng trade is tangible evidence that the NBA lockout of 2011 and the Collective Bargining Agreement which ended it worked to benefit small market teams that maintained salary flexibility.  The way that the luxury tax was eventually negotiated didn’t do much in terms of changing the salary cap, but it made the penalties for exceeding the luxury tax amount so severe that it, in effect, would be a hard cap on how much a team could spend on players.

The luxury tax’s harshest and most effective provision is a “repeater tax”, which becomes effective in 2014-15, but which is based on what happens right now.

For 2011-12 and 2012-13, the luxury tax is the same as it ever was, with every team over the tax paying dollar for dollar in tax the amount that they are over the tax amount.  Next season, however, teams that have been over the luxury tax in each of the three seasons since the CBA ended the lockout have to pay at a “repeater rate”.  Then, in 2015-16, teams that were over the luxury tax in ANY 3 of the 4 seasons since the CBA have to pay at the repeater rate.

The “repeater rate” is astronomical and is based on scale, but ranges from a tax rate of $2.50 for every dollar over the luxury tax maximum all the way up to $4.75 per dollar over certain thresholds, with a provision adding $.50 for every additional $5 million over luxury tax beyond $20,000,000.  It’s notable also that the “non-repeater” rates were also increased, though not as severely.

Teams that were over the luxury tax already in the first two seasons of the CBA are mostly teams that you’d expect:  The Lakers (twice), the Heat (twice), the Celtics (twice), the Spurs, Mavericks, Knicks, Nets, Bulls and, the Hawks.  With the luxury tax it doesn’t matter if you pay $29.3 million like the Lakers did last season, or $0.7 million like the Hawks did after the 2011-12 season.  If you’re over for any 3 years, you pay at the repeater rate.

PAT RILEY'S MIAMI HEAT ARE OVER THE LUXURY TAX

(Getty Images)

Atlanta Hawks decision to be just barely above the tax level in that first year aside, the Bulls are really the most puzzling.   The reason the Bulls were over the luxury tax limit for last season was because after Derrick Rose went down last season they signed Kirk Heinrich to a deal that put them just around a million dollars over the luxury tax amount.  Contrary to the advice of Brendan Bowers last February, they kept the contract of Carlos Boozer, which meant they would be over the tax level both last season and this current 2013-14 season unless they made some innovative move to reduce salary.   When Derrick Rose went down again this season, the writing was on the wall that the move would be All Star Luol Deng, who was also facing unrestricted free agency at the end of the season, in what quickly became a lost season for the Bulls.

Everything that Cavs GM Chris Grant has done over the last two and a half seasons has been done with the new CBA in mind.  The Cavaliers have been using the CBA to their advantage for those first two years, using open cap space to trade for contracts that netted draft picks from the Lakers and Memphis Grizzlies and while using the “amnesty” provision of the CBA to shed Baron Davis’s $11 million dollar salary from the cap so the Cavs could fit these contracts.  And it’s the reason that the Cavaliers were able to acquire Luol Deng, an institutional Chicago Bull since he was 19 years old, for a pittance of draft picks and an immediately expiring contract of Andrew Bynum, who was waived by the Bulls immediately.

CAVS OWNER DAN GILBERT IN A ROOM WITH LOTS OF COMPUTERS AND CHARTS

(Paul Sancya, Associated Press)

The Bulls were able to clear $12 million off of the cap and get back under the luxury tax because Cavs GM Chris Grant negotiated a team option for the second half of the season in Bynum’s contract.  It’s a wise move for the Bulls, who hope they will be able to reload with a healthy Rose next season, and who still have the option to amnesty Boozer this season or at the end of the season.

The teams that get steamrolled into paying massive luxury taxes will either be committing to losing massive revenue (if the Lakers maintained last season’s salary with a repeater tax, they’d pay more than an entire salary cap worth of taxes) or being handicapped from keeping or adding expensive players. 

Right now Chris Grant has said that he sees Deng as a long term part of the team’s future.  “We’d like to keep him here long-term. At 28 years old, we see him as part of our core and our youth moving forward.” 

But the bottom line is this.  As maligned as Grant and Gilbert have been in the mainstream and national media, the Cavaliers strategic plan to rebuild was clearly tied into its own negotiation strategy in working the CBA.   The same owners that were reportedly annoyed at the hard line positions taken by Gilbert in negotiating the CBA, Jerry Buss of the Lakers and James Dolan of the Knicks, are the ones that are in some of the most severe "repeater tax" trouble, while the Cavaliers just literally walked away from negotiations to trade Bynum for Pau Gasol because the Lakers wanted more than the cap relief Bynum's contract offered for Gasol.

WILL THE LAKERS PAY GASOL $19,285,850 AND FACE MASSIVE LUXURY TAX PENALTIES NEXT TIME THEY GO OVER THE TAX???

(Noah Graham NBAE/Getty Images)

Cavs make the deal to get Baron Davis in 2010-2011, not knowing it will yield Irving as the first overall pick, but knowing that the CBA will likely include another “amnesty clause” that will allow them to remove Davis from their salary ledger.  They add a conditional first round pick from Memphis by absorbing contracts that take them to the salary cap, motivated by Memphis’ own need to cut salary.  Now they trade a suspended Bynum, not on the value or merits of his ability, but on the fact that a team can immediately cut him and remove $12 million dollars of valuable cap space.

It’s worked in their favor to get a player still in his prime who is playing at an all-star level in Luol Deng.  They will not be priced out from keeping him if they want him to be a longer term piece and they’ve maintained the flexibility to go in other directions should they choose to.  We don’t know where this ends, but we can see where it’s headed.

Right now the team has won two games and lost none since the trade.  Deng didn’t even play in the first game after the trade because he was still leaving his long term home in Chicago, but the trade signaled something to the team and to the fans of the organization:  There’s a turning point when assets become a tangible part of winning games.   This is how, and now is when.

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