Grizzlies Find a Way Around Minimum Salary Requirement

We all know about the NBA's salary cap -- a limit teams are allowed to spend on players. The cap is soft, and the vast majority of teams exceed the salary cap on an annual basis. Rarely will a team spend a whole season, let alone multiple seasons, under the cap.

But there's also something called a minimum team salary, the level of player spending teams must exceed each year. The collective bargaining agreement signed in 2005 sets the minimum team salary at 75% of the salary cap level. For the upcoming 2009-10 season, that minimum salary would be $43.2 million.

Would you believe that the masters of the cheap, the Memphis Grizzlies, have found a way around the minimum salary? And would you believe it explains the Zach Randolph trade?

It should be no surprise. Heck, on Friday the Grizzlies agreed to take Steven Hunter off Denver's hands. Hunter, an oft-injured center, is owed $3.6 million next season. Conveniently, the Nuggets gave $3 million -- the maximum amount one team can give another -- to take over the deal. Again: this is no surprise, this is how Memphis operates. (In July, the team made a profit on the Shawn Marion deal by taking at least $3 million -- possibly $6 million -- to cover Jerry Stackhouse's $2 million buy-out, even though the team also lost Greg Buckner's $1 million guaranteed contract in the process. At the very least, the Marion deal, in which Memphis was a lubricant, covered the rest of Hunter's salary this season. At best, it covered for Hunter and, say, Rudy Gay.)

But the minimum team salary, that's sacred. How in the world does a team bargain around that? Two words: Zach Randolph ... OK, two more: deferred salary.

The contract Randolph signed with the Blazers in 2004 including an interesting twist: 30% of the salary was deferred until 2012. Salary deferrment isn't entirely unique, but the size of the portion of Z-Bo's contract delayed is important, and rare (if not altogether unheard-of in today's NBA).

For salary cap counting purposes, Randolph's contract is structured like any ol' six-year contract: the totality of his contract ($84 million) is covered within the six years it employs him. That includes a cap figure of $16 million this year and $17.3 million next season.

But in actuality, the Grizzlies need only pay Randolph $11.2 million this season. The rest of the money owed will be a part of $25 million Randolph will earn over six years beginning in 2012.

So what's the problem? Before Memphis traded for Z-Bo in July, it sat below the minimum salary level -- at roughly $36 million. On paper, the trade took the Memphis salary to $43.3 million -- conveniently above the minimum salary threshold. But really, because of Randolph's deferred salary, the Grizz were only on the hook for $38.5 million, or about $5 million less than the minimum amount the team is supposed to spend on talent.

The Hunter move, as well as eventual second-round pick signings, will push the salary cap level higher, though in a real-world sense the Grizzlies are paying very few players this season. This isn't meant to elucidate some loophole, or to tattle on the Grizzlies. But so long as local Memphis media continues to repurpose the company line which says, "No no no, we're doing GREAT!, never mind that we have more losses than any other team over the last three years and our gym is empty, we're still making money and that's all the matters!" ... so long as Michael Heisley's defense gets an uncritical parroting from certain parts of the news media in Tennessee, fans need to know just how much team management is angling to make a profit with no interest in fielding a competitive basketball team.

(By the way: yes, Memphis would be on the hook for Randolph's deferred payment schedule beginning in 2012 ... if the team doesn't trade him first. There's a substantial chance that by 2012 Heisley will have sold the team. That's roughly the year in which the team's relocation penalty becomes feasible to pay. If Heisley does sell before 2012, that means he has personally escaped minimum salary requirements for this season, providing the team doesn't go out and sign Allen Iverson or something.)

Reader Comments (Page 1 of 1)

8-08-2009 @ 1:39PM

mggiigrp said...

Did anybody really keep up with that story?

8-08-2009 @ 4:32PM

KieranM37 said...

that last part got me confused. The stuff about Randolphs contract and the deferred salary wasnt hard to follow along with.

8-08-2009 @ 6:14PM

Giles said...

I`m still waiting to see where Marc Gasol goes. I think he could turn out to be a player to be named later, to pair with Richardson, whom the Clippers promptly dumped. But now the Nuggets have given up a 1st pick to dump Hunter`s salary and pick up a 2nd pick, the Grizz would have two 7 footers to back up Thabeet even without Gasol. Phoenix needs a starting center, so do the Knicks, unless Curry gets healthy and suddenly becomes quick instead of muscular, so do others.

8-08-2009 @ 7:08PM

Jmo said...

Thank you for writing this about the Grizz. It's nice to see someone out of Memphis actually see what's going on here... hell half the people here have no idea, so they blindly support Heisley. It's ridiculous. But I'm glad you wrote this.

8-09-2009 @ 5:41PM

jerry said...

This has to be the stupidest article I have read bashing the grizzlies yet! Does it even matter that Randolph was the best power forward out there for the grizzlies. If the way his contract is set up benefits the grizzlies who cares. It is better for more of his contract to be on this years cap space then next when Rudy Gay is about to get a new contract. The grizzlies salary is low because several players are still on the rookie contracts. The salary cap is so complicated that I bet every team has guys who salary cap number does not match up to actual money paid out. It even says in the article that once Hunter's and the 2nd rd picks are signed it will push the cap number well over the limit so it is not like Zachs salary was added and then no more money was spent! Also why do you not mention that they got a 1st round pick in the deal. This is the whole key to the deal has the grizzlies have said that the goal is to build through the draft and this gives them 3 firsts next year. I dont really like the job Heisley has done but this is the first year that things are looking up in awhile. These writers need to get all the facts in the stories and if you still do not like what is going on thats fine. I am tired of reading articles,espically on fanhouse, bashing the grizzlies while only presenting half the story.

8-09-2009 @ 8:42PM

Joel said...

Is it really saying much to be the best anything on the Grizzlies?

8-10-2009 @ 4:36PM

hardaway49 said...

About as much as being the best anything on Sacramento....

8-10-2009 @ 7:00PM

David said...

typical fanhouse Memphis Grizzlies hackjob

what a joke

this guy should do his research before spewing this nonsense...no wonder he writes for this nonsense blog and not for somewhere notable like ESPN or cnnsi

8-11-2009 @ 8:11AM

Latilleon said...

As a Grizz fan who cheered the move to get Zach Randolph, let me put a couple of things out there for you.

The Grizz could defer $10 million of Zach Randolph's $33 million over the next two years, not $25 million. The Grizz will not be obligated to pay any of the money deferred by other teams previously. There is no guarantee it has been deferred up to this point, but the Blazers, the Knicks, and the Clippers would be responsible for their deferred money.

If the money is deferred, it become a debt obligation that will be on the books for the team, and any money owed in all likelihood will be less money Heisley will be take cash when he sells the team. 2014 is the year that the Grizz could be somewhat fisable for relocation is millions in penalties, not 2012, and since the Grizz have access a low interest NBA credit-line, in theory any Grizz salary could be deferred by borrowing money (the same could be said for any team with a credit-line). A comparison would be a deal Heisley did for the FedEx naming rights money. Heisley pocketed the money from a lump-sum deal with a financial company in 2004, taking $52 million for the $90 million contract. Whatever purchaser worth its weight will balance that deal out in the purchase or force Heisley to take that debt obligation with him.

Fans were aware of the Randolph contract before the trade was consummated, so you aren’t bringing any new news to the table. You have succeeded in giving more ammunition to the local columnist (you know, the one who gave half the story about the Grizz 86’ing the scouting department) and his bff, the national CBS sports college basketball writer who loves nothing more than to slaughter Heisley and the Grizz organization.

I know one thing... The Grizz have one truly bad contract: Marko Jaric. Zach Randolph is overpaid, but at least he can produce. The Grizz have Rudy Gay up for an extension, and in a world where Kevin Martin makes eight figures annually, how can Rudy Gay be worth less than a $50 million deal. While Hakim Warrick was allowed to walk, the last significant first round pick the Grizz had up for an extension was Stromile Swift, and he declined a $48 million offer (accepting a $25 million deal from Houston). Before Swift; Jason Williams, Michael Dickerson, Mike Miller, Shane Battier, and Pau Gasol were offered and signed extensions under Heisley. Therefore, as a fan, I expect Rudy Gay to receive an extension or be re-signed as a restricted free agent.

Jaric comes off the books in 2011 and Zach Randolph will re-sign for less or walk, so the Grizz will have payroll room to re-sign Conley, Gasol, and Mayo. The Grizz have a young core that will either develop into something special, or provide ample assets to make deals.

The point I think you missed with your “the Grizz are spending less money than the minimum this year” hacket-job is the Grizz have a significantly better team than last year. Randolph is a gamble, but he’s better than overpaying David Lee, and Zach Randolph is a Memphis regular, and will not be disgruntled being here. The Grizz have a quality starting line-up if Zach Randolph plays like Zach Randolph and stays on the court, and the bench will be an improvement over last year. Whether the Grizz utilize salary cap space to make money to pay salaries, I implore you to tell me, so what? Does it matter that the Grizz doesn't overspend for the 10-13 roster spots and profits off cap-space if the team is improving?

The Grizz have Mike Conley, OJ Mayo, Rudy Gay, Zach Randolph, Marc Gasol, Hasheem Thabeet, Sam Young, Demarre Carroll, and Darrell Arthur. Those nine are better than the top nine of the Sacramento Kings. Throw in Marko Jaric, Marcus Williams, Hamed Haddadi, and whatever crappy 13th man they sign (I wouldn’t be surprised if they bought out Steven Hunter for $3 million so he can sign elsewhere for a net gain in salary), every significant player on the team but Randolph and Jaric will be on a rookie deal or minimum deal, and the team will be better than the 2006-07 team that had former ROYs Pau Gasol, Mike Miller, and Damon Stoudamire.

The Grizz have always needed to be run fiscally responsibly. Memphis is one of the three smallest markets and the team needs to have two or three big salary guys, a couple of moderate salary guys, and the rest with value and rookie contract players. The Grizzlies need to be prudent with payroll unless the team gets to the point it can go for the gusto and overspend because a championship is near.

I expect the Grizz to sign Rudy Gay to a 5 year, $55-60 million deal. $60 million would give Rudy Gay a contract of $9.45 million in 2010-11. Even if the Grizz came out of pocket for only 70% of Randolph’s deal, and paid $12.1 million, the Grizz will be paying $51.2 million in committed salaries, before adding draft picks. If the salary cap figure is $51 million next year, the Grizz will be over the cap deferring Randolph’s $5 million. The official cap figure giving Gay an $60 million deal will be $60 million officially.

So why does Oklahoma City’s low payroll seem like smart money management, but the Grizzlies low payroll seem like being cheapstakes? Outside of Kevin Durant (I think Rudy Gay is maybe 80% the player that Durant is), I look at the Grizz’s roster being better than OKC. The Grizz are set-up to have a payroll around the cap figure, which is what the team should have. Why should fans be short-sighted as you (and our local media haters) beg us to be?