The Deng Incident: Analysis Of The Bulls-Cavs Trade

07
Jan

SF – Luol Deng traded from the Chicago Bulls to the Cleveland Cavaliers in exchange for C – Andrew Bynum, the Sacramento Kings’ 2014 first round pick (top 12 protected), the Portland Trail Blazers second round picks in 2015 and 2016, and the right to trade draft spots with the Cleveland Cavaliers in 2015 (if Cleveland’s selection is between 15-30).

This isn’t exactly the most straight forward of trades. This isn’t talent for talent or even, strictly speaking, talent for picks. This is talent for picks and flexibility. Specifically, cap space and spending flexibility. There are a few levels to the type of flexibility that the trade of Luol Deng to the Cavaliers gives the Bulls and the first part is the loss of Deng’s salary. I won’t go into too much detail about why the Cavaliers did this trade as it is straight forward from their point of view. They are in a win now mode and looking to make a push for the playoffs while the small forward position was the weakest by far on their team. Let’s take a look at a few ways that this one traded contract affects the Bulls salary cap and future plans.

Repeater Tax

The Chicago Bulls payed the luxury tax in the 2012-13 season for the first time. They were slightly more than $3 million over the cap with total salary commitments of $74,245,794 and a luxury tax threshold of $70,307,000 for the season. Under the latest NBA CBA, any team, starting next season, that has payed into the luxury tax for three straight seasons will be subject to the repeater tax. The tax is MUCH harsher than the normal luxury tax, as you can see here. You could end up paying anywhere from $2.50 to $4.25+ PER DOLLAR SPENT in taxes to the league.

No team wants to be a part of the repeater tax because it turns a simple $5,000,000 contract into at least a $12,500,000 total cost. Not to mention the team building holds that this puts on your team, specifics can be viewed here, including but not limited to not being able to use the many types of salary cap exceptions available to those teams between the salary cap and luxury tax threshold.

The Bulls were on pace to pay the tax this season for the second time in a row with a total salary commitment of roughly $79 million prior to the Deng trade and a luxury tax threshold of $71.748 million. The trade of Deng for Bynum (plus picks) lowers the Bulls cap by about $2 million to exactly $77,449,202. Still just under $6 million over the tax threshold.

What makes this deal go is the unique structure of Andrew Bynum’s contract. Because of his injury and commitment history, the Cavaliers signed Bynum to a two-year deal with a total value of about $24 million. However, if he was cut by 1/7/2014, the team was only liable for $6 million of his $12 million owed on the season and on their cap. As expected, the Bulls did just that, lowering their salary commitments to about $71.449 million, putting them under the tax threshold and resetting the repeater tax counter to zero.

Salary Cap Space

This move, along with a move expected after the season concludes, will net the Bulls a large amount of salary cap space to work with in the off-season. The expected move is the amnesty of PF – Carlos Boozer, making $16,800,000 next season in the final year of his contract. This will also be matched up with the expiring (whether traded in the near future or not) contract of PG – Kirk Hinrich and the excision of Bynum’s future salary commitments. In the end, the Bulls will be looking at a salary commitment of about $48,140,994 going into the off-season.

Based on current projections (very much NOT final), the cap for 2014-15 is looking to be somewhere in the $62.1 million range. This will give the Bulls a preliminary cap room of just under $14 million. I’m going to use $14 million for the sake of my brain and the math. Don’t worry, it gets more complicated, the Bulls will NOT have $14 million to play with off the bat.

With only nine players under contract if all those plans go through, there could be less if other players are traded, the team is subject to cap holds in the amount of the slot value for their available first round draft picks (only first round because second round pick contracts are non-guaranteed, first round contracts are guaranteed) and a minimum salary cap hold for the remaining unfilled slots. The Bulls have the potential for THREE first round draft picks in the 2014 draft, but only require one. There are too many scenarios to go over in more detail than I plan to, but here is a fantastic visual of the draft picks that the Chicago Bulls now possess.

If the Bulls only keep their own first round pick, there is a great chance that this will fall in the latter picks of the lottery. The ping pong balls will fall where they may (remember drafting Rose anyone?), but let’s assume that the Bulls end up with the 12th pick of the first round. The slotted first year salary is $1,683,500, the amount of the cap hold. This would put the Bulls at 10 players “under contract” and would require that two more cap holds at league minimum salary ($507,336) be placed on the Bulls. Under this scenario, the Bulls are looking at salary commitments of $50,839,166 and available cap space of $11.26 million.

Two first round picks? Probably numbers 12 and 17ish? $10.47 million in available cap space.

All three first round picks? Probably numbers 12, 17 and 15ish? $9.53 million in available cap space.

This is enough space to sign a nice piece, but not enough to sign a top flight free agent. In all likelihood, several million will be used to try to bring over Spanish PF sensation Nikola Mirotic. The Bulls could trade away some contracts; Teague, Gibson or Dunleavy, in an attempt to clear more space to make a run at a “top flight” guy like Carmelo or one of the big three if they opt out. This will undoubtedly be the most cap space the Bulls have had since signing Carlos Boozer.

Draft Picks

As stated above, the Bulls now have a chance to have three picks in the most loaded draft (supposedly) in recent memory. Two major problems. One, they will almost certainly not be receiving both, if either, of their additional first round picks this season as the Kings pick (from the Deng trade) is top 12 protected and the Charlotte pick (from the Tyrus Thomas trade) is top 10 protected. Two, if we receive either of those picks, they will not be traditional impact picks, though almost certainly useful. The Bulls own pick has the most potential as it could dip into the lottery where anything can happen. The Deng trade makes the Bulls significantly worse in the short term. A necessary step for getting a good pick in this upcoming draft because of how abjectly terrible the Eastern Conference currently is.

The Bulls also receive two additional second round picks, one in 2015 and one in 2016, from the Portland Trailblazers. The picks, based on current trends, will likely be near the back end of the second round, but the second round is a complete crap shoot anyway. However, despite the unpredictability of the second round, those picks have become increasingly valuable in recent years. Marc Gasol, Omer Asik, Chandler Parsons and Monta Ellis (among others) were all second round picks. If you find talent like those players in the second round then you have that talent on a contract that is completely un-guaranteed, can be cut without issue at any time and are usually sub-$1 million contracts. IF you strike gold, it is invaluable. Ask the Rockets and how they feel about Chandler Parsons’ contract.

Not to mention the ability to trade draft slots with the Cavaliers if their pick falls after #15. This doesn’t seem like much, and it isn’t. But the Bulls expect to make a quick turnaround and expect to be picking around #30 next year. If that is so and the Cavs end up at 16 or so, Chicago can greatly increase their draft pick value in a season where they may be extremely successful. It is a worthwhile sweetener to the deal.

Conclusion

The Bulls have a plan. Once Luol Deng declined a 3-year $30 million contract offer from Bulls management, it was clear that he wasn’t part of that plan. I don’t blame Deng for declining that contract at all, it was surely a low-ball offer for a player of his caliber, but it was also the number the Bulls were willing to pay and they weren’t budging, there was no middle ground here to be reached and Chicago did the right thing in moving on while they could still receive something for Deng’s value.

Colby Rogers (@FrontOfficeGuy)

About the author: Colby Rogers

Colby is the Editor-in-Chief, Founder and Lead Contributor to Other League. Also a law student focusing on Labor & Employment law and intersections with law and sports. You can find him on Twitter via @Colby_OL.