During a Clippers offseason of unprecedented manuevering, owner Donald Sterling surprised hoopheads and Angelenos alike yesterday when his front office waived Ryan Gomes and the $4-million left on his contract via the amnesty provision. Initially designed in the Collective Bargaining Agreement to save overzealous GMs from themselves, the amnesty clause allows a team to rid their books of one contract executed before the consummation of the current CBA, effectively erasing the existence of that contract regardless of whether any of the money was guaranteed. The kicker is that the amnestied player still is compensated the dollar amount indicated in their contract–the deal merely moves off of the books.
Here’s the initial email reactions from Michael Shagrin and Andrew Han on the ramifications of the Gomes amnesty.
Andrew Han: So lay it on me, Shaggy. What’s so great about amnestying Gomes?
Michael Shagrin: The justification for amnestying Ryan Gomes is to avoid any risk of paying the repeater luxury tax in the 2015-16 season. Yes, that is very far away, but when you consider the Clippers desired roster over the next few seasons, it becomes pretty clear that Donald Sterling will be just about locked in to paying the luxury tax after this season. During the 2013-14 NBA season, Blake Griffin’s $95-million extension kicks in as will Chris Paul’s new $110-million contract (I hope/assume/blackmail).Those two contracts alone will take up significantly more than half of the salary cap in 2013-14, without even accounting for the $23-million in guaranteed money going to DeAndre Jordan, Caron Butler, and Jamal Crawford. So, it’s safe to say that after this year, the Clippers will be luxury tax payers for the foreseeable future.
But strategically avoiding the luxury tax this season holds a unique attraction because it would prevent the Clippers from paying the increasingly punitive “repeater” luxury tax rate in the future. If the Clippers hit the tax line this season, and then do the same in the subsequent two seasons, they would start to be assessed the luxury tax as repeaters ($1 more tax on every dollar spent above the line than if they were merely an ordinary tax payer). Thus, the decision to amnesty Gomes can be characterized as a $4-million sacrifice today to avoid future penalties that could be far costlier.
(Ed. note: Here’s the specific passage from CBAFaq in regards to the “repeater tax” that starts in 2014-15)
AH: It’s a reasonable argument. The first year the repeater tax goes into effect (2014-15), the Clippers will avoid it because they just finished last season under the tax line. And if the Clippers did not amnesty Gomes, their currently salary would be at $69.9m, precariously close to the $70.3m luxury tax line. But the Clippers would already be at 12 roster spots; 13 is an official NBA roster. So the Clippers only needed to fill 1 more spot and had no large salary slots to go deep into the tax.
With only small trade exceptions and minimum deals the Clippers could offer, couldn’t they have held onto Gomes as an expiring contract chip until the trade deadline? They could always dump his prorated salary to a cap room team and add $3m for the trouble. Doing that would cost about the same as amnestying Gomes now and it would give the Clippers’ 3-headed GM more time to find something productive with the contract.
MS: There are positives and negatives to keeping Gomes and hoping to use him in a deal at the deadline. But before we even look at those, the Clippers have to fill that 13th roster spot, and without amnestying Gomes, they would only be able to add $400,000 in payroll before hitting the tax line. Given the particulars of the CBA, there are very few options for signing a player at such a basement price (most vet minimum’s start above $400k)–especially an effective back-up center, the last remaining need of this offseason. But even if the triumvirate found a way to plug in a bargain-bin player at that low dollar amount, they would have a hard time making any mid-season moves to plug the 14th and 15th roster spots if they want to avoid paying the luxury tax.
In terms of trading Gomes as an expiring contract, I think the issue is a pragmatic one. The triumvirate is flatly not adept at making creative deals that take advantage of the built-in incentives of the CBA. Even if the front office made quality moves this offseason, nothing they did required all that much nuanced thought – the additions were simple free agency pickups. Assuming the Clippers will want to make some midseason alterations, amnestying Gomes now puts much less pressure on the front office to orchestrate multiple deals at once and will allow them to harness their focus exclusively on roster improvements.
AH: But how are you trusting the Clippers front office to make midseason roster improvements if you can’t rely on them to simply jettison an expiring contract? Dumping a contract and throwing money at it doesn’t seem like a particularly complicated process in comparison to finding bargain addition to a roster during the season.
And on the topic of finding roster additions, how exactly is the front office supposed to do that now? They can only sign people to the minimum or trade for a player making less than $2.8m. Players making under $3m are generally rookie scale players or complete specialists on contending teams. There typically isn’t a bounty of those type of players available in a straight salary dump. And it would have to be a salary dump at this point because it looks like every player on the Clippers’ roster has a use. There’ll be no Brian Cook for useful piece trade on the horizon this year.
But let’s go back to skirting under the tax line. Yes, it would have been hard to stay under the tax if Gomes was still on the roster at the end of the season. But the Clippers were hard capped at $74.3m (due to using the full MLE) and could not have gone deep into the tax even if they wanted to. And to instantly assume the Clippers would be a tax paying team year after year seems a bit presumptuous.
Griffin’s extension goes into effect after this year, tacking on $6-$9m. But Gomes and Odom are expiring contracts totaling $12.2m. Chris Paul will get a new contract but it will still be in the vicinity of his current base salary. But Caron Butler’s $8m salary also becomes an expiring salary. Still worried about 3 years later that the Clippers would be a deep tax team? DeAndre Jordan is an expiring contract in 2014-15 and his $11.4m that year is an expiring contract.
The Clippers MIGHT be flirting with the tax line every year for the next three to four years but by no means is it a certainty. And even if they did crest into the tax, it would never be deep into the tax like the Lakers, Knicks or Nets where the new tax system is most venomous. The repeater tax argument just doesn’t bear much water, in my opinion.
MS: The reason I trust the front office to make midseason roster improvements is that, now, they don’t have to worry about hitting the tax line. The three-headed GM can successfully perform its duties, but only if they’re relatively simple. Take for instance a Caron Butler injury. You move Grant Hill into the starting lineup and you’re left without a backup 3. If you’re only only 5-figures away from the tax line, how do you go out and sign Bobby Simmons to a 10-day contract or two? You can’t. Andy Roeser would then have to ask Vinny to lace up his high tops and play some minutes at his old position.
Though it is true that dumping an expiring contract isn’t all that difficult, what’s the point? If the Clippers need to make a move, as in the hypothetical described above, the situation would necessitate swiftly moving Gomes’ contract and we really can’t be sure that it will have a market. It’s an unnecessary risk for a front office that hasn’t proved it has the capability to triage. When Donald Sterling throws $4-million down the toilet for legitimate basketball reasons, it seems logical not to second guess the paradigm shift.
Back to the virtues of avoiding the tax line–this year the luxury tax is still dollar for dollar, but avoiding it this year locks in the non-repeater rate for 2015-16. Sure the front office could get fancy and try to duck under the threshold in any of the upcoming three seasons, but there are only so many years left of Chris Paul before he’s over the hill. Does Clipper Nation really want to the front office spending CP’s prime years looking for ways to stay under the tax line? Or, should they be using their capital with Sterling selling big, difference-making expenditures?
Look at the Atlanta Hawks who’ve had one of the league’s best Big Three for the past few years, but their owner hated going into the luxury tax. They ended up cycling through crappy role players due to their bloated stars’ contracts. We all know that Donald T. has penny-pinching instincts. Though he may understand the potential profit margins of a successful basketball team, I certainly would not want to be the one asking him to pay $2.50 for every dollar spent over the tax line.
Ultimately, the Clippers could receive an asset of minor value this year if they executed a Gomes-centered deal to perfection, but that comes with the risk of a dark luxury tax cloud hanging over the franchise for years to come. Really, the problem with failing to amnesty Gomes is that you never know what will cause this organization to shift back to frugality.
AH: In the hypothetical scenario of needing a replacement in case of injury, 10-day contracts are actually 5-figure sums so it’s mildly hyperbolic to suggest Del Negro would have to lace up his kicks to fill in for depth (and by mildly hyperbolic, I mean incredibly hyperbolic).
And I’m sorry, are we operating under the proposition that the Clippers will ever repeatedly go deep into the luxury tax? As Arnovitz and co. like to say, “I reject the premise.” Suggesting that Gomes had to be amnestied today in order to prevent future repeater tax concerns and then say that the Clippers don’t have years to waste because Chris Paul is in his prime has got to violate some sort of laws of contradiction (if such things exist).
If anything, the smart play would be to exceed the tax this year and next, when the penalties are still mild, to acquire everything the Clippers need. And once the harsher restrictions take effect, transition to a San Antonio model of hunting for bargains to surround the major cost players.
And that’s exactly the problem: How are the Clippers supposed to acquire a viable player without sending out a rotation player at this point? Gomes could have returned a player making up to $6m and it would have left ~$4m to fill out benchwarmer spots before hitting the hard cap. Now the Clippers will likely avoid the tax – in a year when it isn’t punitive – and have hamstrung themselves in being able to procure an impact player.
But (and here’s a big “but” so let me emphasize it)… BUT, like you said earlier, if Sterling is willing to throw away $4m in a legitimate basketball move, I’m reluctant to blast it as a bad thing. I would have never, ever, NEVER thought the Clippers would use the amnesty clause. It sends such a strong signal that the organization is serious about winning and will sacrifice money to do it. I may disagree with the efficiency of the move, but the message it shouts to players, media and the league is deafening.
MS: The crux of our disagreement is whether or not the Clippers will have difficulty staying under the luxury tax threshold in the future. If I was unconcerned with their ability do this, then I really wouldn’t have any issues keeping Gomes on the roster in hopes of pulling off a big trade deadline deal. And we didn’t even cover such an action’s implications for long-term success. This will not be the last time Clipper Nation hears from us on this exact topic.
What we can take from this discussion is that Sterling’s willingness to use his one-time amnesty is shocking. More important than it’s immediate effects though, waiving Gomes via amnesty is the bat signal for a culture change that has already attracted some of the NBA’s most respected veterans.