Fast Break

News broke over the weekend of the Warriors’ efforts to buy out Foyle’s contract. Foyle’s deal gives him far more than he could land on today’s open market, making any realistic buyout an expensive proposition. In response to my post, reader Richard raised an excellent question: what exactly are a buyout’s cap ramifications?

Digging through the NBA collective bargaining agreement gave me nasty flashbacks to law school exams. Fortunately, Larry Coon has pulled together a fantastic CBA FAQ. Based on my reading, here’s how the Foyle boyout works:

1. Foyle and the team negotiate a lump sum payment in exchange for the early termination of the contract. Essentially, Cohan pays him x% of the deal now to make the deal go away.
2. Under the CBA, the buyout amount is distributed proportionally over the remaining years of Foyle’s contract. Rounding the numbers slightly, Foyle is due $8 million this year, $9 million the next, $10 million the third, and $1 million (guaranteed) in the final year. Everyone take a moment to recover from just how shocking this contract still is. Now, if Foyle accepted a 50% buyout, we’d carry $4 million on the cap this year, $4.5 million next year, $5 million the year after, and $500,000 in the 2009-10 season.
3. Although I couldn’t find it in the CBA, I presume Foyle’s cap load for the present year can be reduced up until the date that all contracts become guaranteed (December 15). This is crucial for luxury tax purposes. If Foyle’s drag on Cohan’s wallet isn’t reduced this year, the Warriors will either need to swing a trade or cut Barnes or Roberson to duck under the luxury tax. For those unfamiliar with the tax, the big motivator for just-over teams like the Warriors is not the 1 for 1 tax on salaries over the limit, but the dividend share of all the money collected from the taxed teams (also known as “the Isiah Thomas rebate”).

Big picture? The Warriors’ long-term and short-term interests are going to clash. Their long-term interest is to clear as much cap space as possible to sign the young guys. This means waiting out Foyle to drive down the buyout percentage. Their short-term interest, however, is to shed around $1 million in salary this year to get under the luxury tax cap. They could do that by paying Foyle nearly 88% of his salary to walk away a free man. That initially looks like a no-brainer for Foyle and nightmare for Cohan. But when you factor in the luxury tax dividend from the other teams, paying Foyle a few million more to get under the threshold may actually make Cohan money, depending on the size of the rebate.

My prediction? Cohan morgages any future cap savings to get under the luxury tax now. He pays Foyle a bit more, collects his payout from the other teams, and puts off the tough cap choice until the summer (or at least the trading deadline).

One final CBA nugget: Want to be really depressed about the Warriors’ contract situation? Check out the details of the one-time August 2005 amnesty offer. Imagine if Foyle had been cut a year ago instead of dropped into Monty’s starting line-up…