Yesterday was a big day in the Knicks blogosphere. Following Wednesday night’s elimination it was time for Knicks fans to look forward to the all too familiar next year. Translation: recaps and offseason predictions galore. The most interesting and surprising was from Sam Amick at Sports Illustrated. Amick, who consulted with none other than Knicks Bricks Hero Larry Coon on the piece, concluded that the Knicks would likely lose Landry Fields this year. A perplexed Mike emailed me saying that the article “steams his hams” and wondered about its accuracy. Both of us had been operating under the presumption that the Knicks would be able to retain Jeremy Lin in restricted free agency using the mid level exemption under the Gilbert Arenas rule. Followed by using Early Bird Rights to retain Landry who is also a restricted free agent.
My first reaction was concern that Mike’s computer had been hacked by an 80 year old man who gets upset when his hams are not baked or fried. After realizing that most octogenarians can barely turn on a computer, let alone hack into an email, I got onto Mr. Coon’s NBA FAQ for some research. Meanwhile, Mike had tweeted the man himself and got an official answer. Straight from the horse’s mouth: “If [the Knicks] use Non-Tax Midlevel on Lin, then apron (about $74M) becomes a hard cap. They can use Early-Bird on Fields, but wouldn’t have much left over under hard cap. Is using 5/8 of room hard cap on Fields worth it?” This is consistent with Coon’s answer to Question 25 on his website. The upshot is that Fields is probably gone (I’d say 95%) unless he takes something close to the minimum.
While quasi-frantically checking the NBA FAQ, I did a lot of reading on the Gilbert Arenas provision (Question 44) that allows the Knicks to use their Non-Taxpayer Midlevel to match any Jeremy Lin offer. As Amick put it, “The Knicks are positioned to keep the restricted free agent because they can use their mid-level exception of about $5 million to match any offer for him and because the so-called Gilbert Arenas rule limits rival teams from offering more than that amount in first-year salary for players with fewer than three years of experience like Lin.” If you are like me and read Coon’s summary of the Gilbert Arenas rule 30 times, then you know that Amick’s explanation is a little loaded. Teams are limited to offering Lin the Non-Taxpayer Midlevel in the first year of an offer sheet, but they can offer way more than the $21 million or so over four years that the midlevel and 4.5% annual raises would allow.
A team with cap room greater than the Non-Taxpayer Midlevel (a projected $5 million) can offer Lin more per year for the length of the contract. They are still restricted to paying him the Non-Taxpayer Midlevel during the first year, and are limited to a 4.5% raise during the second year. That way the Knicks can match any deal because they only need cap room to match the upcoming season’s salary. However, a team with cap room is not limited in the raise it can offer in the third year and a fourth year (although the fourth year can only be 4.1% more than the third year salary). On Coon’s site he uses a team with $9 million in cap room this year as an example. The hypothetical team could offer Lin a four year contract worth $36 million. If the Knicks don’t match he would be paid $9 million per year. If the Knicks do match, he would be paid $5 mil in year one (again consistent with the Non-Taxpayer Midlevel), $5.225 mil in year two (4.5% raise), $12.628 mil in year three, and $13.146 mil in year four (the salary in any year cannot be more than 25% of the cap).
It obviously gets worse as a team with $10 mil in cap room could offer $40 mil over four with a third year salary of $14.588 mil, and fourth year at $15.187 for the Knicks.
A team with $11 mil could offer $44 mil over four with a third year salary of $16.548 mil and a fourth year of $17.227 mil [Editor’s Note: These salaries would likely be lower due to Question 16 on the CBA FAQ. It would also make an $44 million offer prohibitive for all intents and purposes. Thanks to DanL@Knicksblog and @tarmosino]. Those salaries sound insane for a guy who has had one 26 game stretch of productivity. But, if the couple of months of Linsanity taught us anything, the Harvard graduate is no ordinary basketball player. The New York Observer reported that, in less than two weeks of consistent playing time, Lin increased MSG’s stock by over 11% to slightly over $32 per share. An increase that earned James Dolan $3 million and his father nearly $20 million. Linsanity also meant that Time Warner, whose subscribers didn’t have the MSG channel during the first half of the season, desperately needed to negotiate a deal with the Dolans and MSG, which in turn meant more money for their Cablevision rivals. Currently the MSG stock is trading at over $38, meaning Jimmy Boy has earned close to $10 million and his pops has earned over $60 million since Lin started getting signicant minutes.
You don’t need a subscription to Bloomberg to realize Lin’s financial impact in NBA circles. Thanks to Jeremy Lin promotions during road games, the Knicks finished third in road attendance behind only the Heat and Lakers after being ranked outside the top ten before Linsanity. Lin also had the second highest selling jersey in the NBA behind only reigning MVP Derrick Rose. It wouldn’t be unreasonable to presume that Lin would have had the highest selling jersey if he started playing regularly earlier in the season, and he has to be the odds on favorite to have the highest selling jersey next season. Those odds likely increase if he goes to another team and rabid Lin fans need to buy his current team’s jersey. Suffice it to say, Jeremy Lin would easily justify the financial investment of
$44 $40 million over four years.
On the court, Lin also justifies a salary of more than the Non-Taxpayer midlevel. In 35 games his Hollinger player efficiency rating of 19.97 would rank 38th in the NBA. If we discount the eight or nine games that he was getting scrub minutes, then we are looking at a top 20 player as far as PER is concerned. PER doesn’t account for defense, which is considered a weakness for Lin. This might be overstated because the Knicks were winning it with defense when Lin stepped into the lineup (when you play Jared Jeffries over 20 minutes per game, and Tyson Chandler 35+ minutes then you really have no choice). Lin is likely not a top 20 player, but he appears to be a top 50 player and probably a top 40 player. You don’t have to be a capologist to know that, with 30 NBA teams, lesser players are making more than
$11 $10 million in annual salary.
So how worried should we be as Knicks fans? Unfortunately, I don’t have a complete answer because a lot depends on what Lin wants and he might not have even thought about all his options yet. No team, except for maybe the Lakers, can offer Lin the same off the court earning opportunities. It’s possible that Lin doesn’t talk with other teams and just signs with the Knicks for the Non-Taxpayer Midlevel or a portion of the midlevel. Or he could sign an offer sheet that he knows the Knicks will match, because of his off the court and on the court value to the franchise. Or worse, he signs the best offer sheet and really hurts the Knicks cap. Under the new CBA teams have three days to match an offer sheet as opposed to the former seven. This should increase offer sheets as teams don’t have to tie up their cap room for a week while a rival waits to the last minute to officially decide.
Other teams also have a competitive incentive to not let the Knicks get a top 40 player on the cheap. Let’s say a team (we will get into the teams who could in a little) offers Lin a poison pill deal of
$44 $40 million over four years (assuming the year four salary is not more than 25% of the cap). This wouldn’t be outlandish as Portland twice tried to bully the Jazz with their frontloaded offer sheets to Paul Milsap and Welsey Matthews. No team can flex financial muscle like the Knicks, but matching a $44 $40 million over four offer sheet would mean that the Knicks would owe almost $75 $73 million to Lin, Carmelo Anthony, Amar’e Stoudemire, and Tyson Chandler in 2014-2015. There would be no practical way to avoid going back into luxury tax territory. Fortunately, all but Lin could be off the books in 2015 under that scenario, so it would only be one really bad cap year. I’m 99% sure the Knicks match any offer sheet, but some teams could make things dicey this offseason.
The majority of teams only have the cap space to offer the Non-Taxpayer midlevel (so it’s a no brainer for the Knicks to match), don’t need a point guard, or both. We can also leave out the Bobcats, Raptors, and Kings, because they are the Bobcats, Raptors, and Kings. That leaves the Suns, Blazers, Pacers, Hornets, Nets, Mavs, Sixers (if they amnesty Brand) and Rockets as teams who can offer $10 million per year in salary and have potential point guard needs. For basketball reasons, the Pacers make the most sense because they had the fifth best record in the NBA this season, and by weighted minutes were the ninth youngest team in the NBA. The Blazers would also greatly benefit from a point guard of Lin’s ability (and not overweight Raymond Felton) to add to a young nucleus of Aldridge (if healthy), Batum, and two potential lottery picks.
For off the court reasons, the Hornets and Nets would probably offer the highest salaries after years of scraping the bottom in attendance. The Suns and Rockets seem like wild cards because the Suns would be saying good bye to Nash and the Rockets have Lowry and matching rights with Dragic. Still, stranger things have happened. Considering the Sixers might be surprising, but they make sense for several reasons. They are a young team, fourth youngest in weighted minutes, in the second round of the playoffs, need attendance help, and shouldn’t be too committed to Jrue Holiday who they could package with Iggy/Turner (to Utah?) for a big man. Philadelphia is less than three hours from New York and Washington D.C., so Lin would be close to two of the most powerful cities in the world.
Finally, there are the Mavs and Mark Cuban. The Mavs passed on resigning Tyson Chandler this year and if the Nets keep Deron and trade for Howard (pretty likely), then that cap room will be burning a hole in his pocket. What better way to improve on the court and reinvigorate the fan base, than signing an international superstar? That scenario scares me the most. Conversely if the Mavs do manage to get Howard and/or Williams then the Brooklyn Nyets will have something like $40 million in cap room. Lin wouldn’t even have to change his favorite pizza delivery. So whether you like your hams baked, fried, or steamed, don’t assume that the Knicks are going to get Jeremy Lin for cheap. Yesterday, we learned that we are probably parting with Fields, today things are a lot more interesting.