clock menu more-arrow no yes

Filed under:

The Financial Workings of a Potential DeAndre Jordan and Tyson Chandler Sign-and-Trade

New, comments

A lesson in Base-Year Compensation.

Jerome Miron-USA TODAY Sports

We've had a lot of rumblings and wishing on a specific topic the last few days: if DeAndre Jordan bolts to Dallas, fans want the Clippers to pursue a sign-and-trade with Dallas.  There was even some support to this just before free agency opened last night:

Following this rumor, there's been tons of questions about how such a deal would work.  Would the Clippers be subject to the hard cap again?  Would they be able to use their full MLE?  Would they have to overpay Chandler to make the salaries match?  Would Dallas ask them to take back Raymond Felton's ugly contract to make the money work?

Well, let's put those questions to rest.  Yes, the Clippes would be subject to the hard cap again.  There are three tools that hard cap a team: acquiring a signed-and-traded player, using the non-taxpayer Mid-Level Exception, and using the Bi-Annual Exception.  The Clippers can't use the BAE, having used it last year, but should Jordan leave, they'll hope to use each of the other two tools, guaranteeing that they will have to operate underneath the apron, which isn't set in stone yet.

Initially, the salary cap was projected at $67.1 million, with a luxury tax line of $81.6 million.  The apron is always $4 million above the tax line, making it $85.6 million.  However, with news today that the cap actually could be as high as $69.1 million, the luxury tax and apron will bump up to.  The luxury tax formula and cap formula are both based off of BRI (Basketball-Related Income), but they don't increase hand-in-hand, dollar-for-dollar.  Larson Ishii, our NBA Legal expert, estimated that this cap increase could reflect a new tax line of approximately $84.3 million, leaving the apron at $88.3 million, and giving the Clippers an extra $2.7 million of breathing room, which is pretty huge.

Between the salaries of Chris Paul, Blake Griffin, Lance Stephenson, J.J. Redick, Jamal Crawford, and C.J. Wilcox (along with the cap hits for the stretched salaries of Jordan Farmar, Carlos Delfino, and Miroslav Raduljica), the Clippers owe $64.7 million for six players.  Assuming that they re-sign Austin Rivers for his $3.1 million cap hold, they will have $67.8 million owed for 7 players, needing 13 for their complete roster.  One of those slots in this scenario is a player signed with the full MLE (assuming the Clippers opt not to split it) and another is Tyson Chandler, leaving the Clippers needing to sign 4 minimum players (including returners and Branden Dawson) with a cap hit of about $950,000 each.  If they opt to keep Lester Hudson or Jordan Hamilton on non-guaranteed deals, those two players have cap hits of about $70,000 more than the minimum.  Add in those four minimum players (assuming Hudson and Hamilton are cut and possibly re-signed for the actual minimum), and the salary number is $71.6 million for 11 players.

With the apron at $88.3 million, the Clippers now, hypothetically, have $16.7 million to work with for their MLE, Tyson Chandler, and any other salary they may wish to add during the course of the year (in trades or by signing a 14th player during buyout season).  The value of the MLE is $5.464 million, meaning that if the Clippers utilized it, they would be at just under $77.1 million in committed salary, with approximately $11.2 left in wiggle room.

Now, we've just hit a wall, right?  DeAndre Jordan, in a sign-and-trade, will make the maximum salary, which, for a player of his experience, is 30% of the cap, totaling $20.73 million in starting salary.  If the Clippers were to pay Chandler in the range of $10-11 million, swapping him and Jordan's nearly $21 million salary would normally be an issue, and the Mavericks would want to add in more money for Chandler or a bad contract, limiting the Clippers' ability to use their MLE and/or re-sign Austin Rivers.  However, there's this little CBA rule called Base-Year Compensation, or BYC.

Base-Year Compensation is an old rule from past CBAs.  The term actually doesn't appear anywhere in the document of the 2011 version.  However, the principle of BYC still applies in one case, and one case only: sign-and-trade deals.  Essentially, it states that when a player is given more than a 20% raise using his bird rights, he can't be traded using his new salary number.  This is to prevent teams from signing players to artificially inflated contracts just to facilitate trades.

When a team re-signs its own early bird right or bird right free agent as part of a sign-and trade deal, and his new contract comes with over a 20% raise with, and signing him puts the original team over the cap, the trade rules are different.  Jordan is the Clippers bird right free agent, in this scenario he is being signed as part of a S&T deal, his new contract comes with almost a 100% raise, not just 20%, and after signing him the Clippers would be over the cap.  Therefore, this applies.  The rule states that when these criteria are met, the player's salary for trade purposes is either his previous salary or 50% of his new salary, whichever is greater.  $11.4 million, DJ's old salary, is greater than half of his new max, meaning that in any sign-and-trade deal, the Clippers have to match incoming salary to DJ's outgoing salary number of $11.4 million, not his actual salary of $20.7 million.  DeAndre's incoming salary reflects his actual max number, meaning the Mavericks would need to have that space available to pay him.  Fortunately, that number fits almost perfectly into Tyson Chandler's cap hold.

This $11.4 million outgoing salary number for Jordan essentially ensures that the Clippers cannot get suck overpaying Tyson Chandler, or taking on Raymond Felton's $4 million salary.  In order to take that back and make the salaries match, Chandler would have to take a significant pay cut.  And even if Chandler wants more than about $10 million a year, the Clippers can only pay him slightly over $14.25 (which I think is higher than he would demand), still leaving them some wiggle room to use a portion of the MLE and re-sign Austin Rivers.

The Clippers are always allowed to take less salary back than they send out, as long as the team that they are dealing with has the cap space to absorb the difference.  Salary-matching rules only apply to teams over the cap.  Should Jordan choose to leave, and the Clippers go this route, they could give Chandler a deal along the lines of 3 years (any sign-and-trade contract must run at least 3 years) and $30 million, and have their full Mid-Level Exception to use on an impact free agent, perhaps a starting small forward.  The lower salary would also give Los Angeles more flexibility next summer when the cap skyrockets.  All in all, it's not a bad consolation prize.  In fact, the argument that this scenario is preferable to keeping DJ on the 5 year maximum isn't all that insane.