SBD/Issue 201/Leagues & Governing Bodies

NBA Warns Salary Cap Could See Significant Drop For '10-11 Season

The NBA yesterday in a memo to teams warned that the salary cap is "estimated to drop" from $57.7M next season to between $50.4-53.6M for the '10-11 season, according to Marc Stein of ESPN.com. The league's cap next season of $57.7M is down $1M from the '08-09 campaign, while the luxury-tax threshold also has decreased from $71.15M to $69.9M next year. The memo "forecasts a dip" in basketball-related income (BRI) next season of 2.5-5%, "which threatens to take" the '10-11 cap down $5-8M from this past season's $58.7M cap. The NBA also projects a "significant drop for the luxury-tax threshold" for the '10-11 season. If BRI drops by 2.5% next year, NBA officials are projecting a salary cap of $53.6M and a luxury-tax mark of $65M for the following season. If BRI decreases by 5% next season, the NBA believes the cap could fall to $50.4M with a luxury-tax line of $61.2M for the '10-11 season. The league's projections for the '10-11 season were "sufficiently dire" for some teams that have been "planning for months to make a significant free-agent splash next summer." Teams have been "bracing for reductions in the cap and luxury tax, but seeing such numbers circulate was still jarring for many team officials." One team exec said, "Real scary." Stein reported the memo also listed the seven teams that need to "make luxury-tax payments to the league office by July 22" based on last season's payrolls: the Knicks, Mavericks, Cavaliers, Celtics, Lakers, Trail Blazers and Suns. As a result, the other 23 teams that "stayed below last season's tax threshold" each will receive just over $2.9M, "taken from the combined tax pool paid by the seven aforementioned teams" (ESPN.com, 7/7).

POTENTIAL IMPACT ON FREE AGENCY: ESPN's Chris Broussard said the new salary cap and luxury tax could have "huge repercussions, and the summer of 2010 may not have nearly as much movement as we all have thought." Broussard: "For the past two years, all we've heard about is the summer of 2010, not only different players moving around but teams actually setting their agendas for that summer to sign one superstar free agent or maybe even two. But when teams did that, they were thinking the salary cap would be around $62-63(M). Now you're talking about it being between $50-53(M). ... That's a top-flight player that teams will now not be able to add." He notes the news is "good news" for teams like the Heat and Raptors, who have impending free agents in Dwyane Wade and Chris Bosh, respectively. Broussard: "Maybe the chances Chris Bosh staying (in Toronto) improve because Cleveland felt like they might have enough cap room to sign a Chris Bosh. Now that's unlikely" ("SportsCenter," ESPN, 7/8).

RARE DROP FOR SALARY CAP: In N.Y., Howard Beck notes the salary cap will decrease next season "for only the second time in its 26-year history -- a reflection of the economic recession." The last drop was between the '01-02 and '02-03 seasons, when it fell from $42.5M to $40.27M. The cap then increased for six consecutive seasons, reaching an all-time high last year (N.Y. TIMES, 7/8).

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