Bulls Trade and Financial Outlook for 2008/2009

Premise

OK, this is a little more technical, and at the same time a little more abstract than your average season preview, but I think it touches on the underlying factors that we're likely to see drive the Bulls this year than just talking about how much we hate Larry Hughes.  Basically I just want to take a hard look at the finances, because we know damn good and well they drive everything, and see where the Bulls need to go.

Guaranteed money

The Bulls $69.84M in salary heading into the year, with 12 players under guaranteed contracts and $100,000 of “dead money” paid to the waived JamesOn Curry.  This gives them $2.01M remaining in salary before they hit the luxury tax threshold (of $71.15M)

Final Roster Spots

NBA Rules require that the Bulls keep 14 players on their roster, so they will keep around at least two of the following guys on non-guaranteed contracts:

Michael Ruffin ($798k)

Demetris Nichols ($712k)

Roger Powell ($712k)

Darius Washington ($712k)

Elton Brown ($442k)

At a minimum, they could keep Brown and one of the $712K guys and they would remain $859k below the luxury tax threshold.

At maximum, they can keep 15 players, but if they do so, one of them must be Brown in order to stay under the tax (they could keep and two of Ruffin, Nichols, Powell, and Washington) and then Brown and stay under the tax by a mere $61k (that’s close since it’s quite possible our guesses at other players’ salaries might be off by that much).  So at most they can keep two out of Ruffin, Nichols, Powell, and Washington.  Keeping three of them would put the Bulls over the luxury tax threshold.

Hence, finances affect the decision here, but not by a whole lot.

Trade thoughts for this season

While the Bulls have significant questions regarding personnel going forward (and not just about Michael Ruffin), there’s probably not a lot that can be done about it.  Finance is going to dictate personnel.

No matter how the final roster spots shake out, the Bulls will be pretty close to the LT threshold.  In effect, this will impose a pretty strict limit on the Bulls if they try to make a trade. While the NBA rules will allow a team to take back up to 125% + $100k of the salary they trade away, the requirement (to avoid the LT) on the Bulls will mean they basically have to take back less salary than they give out if they make a trade. Or work hard to make the numbers as close as possible. 

This could make some otherwise appealing trades unfeasible.  For example, suppose the Clippers agreed to a Marcus Camby for Andres Nocioni swap.  While the Bulls could use a defensive big like Camby (under contract for this year and the next) and they would benefit to unload Noc’s long-term deal, Camby makes $10M while Noc makes $8M.  Doing this trade would increase the Bulls’ team salary by $2M and push them over the luxury tax threshold. 

Hence, it probably ain’t gonna happen.  This isn’t to push for that particular trade, but simply to give an example of how close the Bulls are to the tax threshold and how much it could potentially effect them (going over the tax last year cost a team a minimum of $7M, so that would appear to be a good estimate for what going over this year would mean).

These trade restrictions are made more difficult by the fact that there are several reasons the Bulls might want to trade.

Next Summer’s cap position

If the salary cap continues to grow (it traditionally does), the cap for the 2009/2010 season will be approximately $61M and the luxury tax threshold will be nearly $74M.  The Bulls currently have about $58.8M in salary commitments to 9 players.  This could decline if the Bulls don’t exercise team options on Cedric Simmons ($2.67M) and/or Thabo Sefolosha ($2.75M).  They will also have to figure in the value of their first round pick next year (guess around $1.5M) and various minimum salary players to fill out the roster (perhaps another $2M).

At a minimum then, the Bulls will have about $62.3M in salary heading into next year. That’s about $11.7M under the luxury tax threshold  If Thabo is extended, that will become $65.05M ($9M under the LT) and if Thabo and Simmons are both extended it becomes $67.7M ($6.3M under the LT).  The decisions on Thabo and Simmons must be made in the next couple of weeks, and are important because for a couple of reasons.  First they change the nature of the players’ current trade value. 

Second, they change how much leeway we have to make offers to our impending free agents; Gordon, Drew Gooden, and Aaron Gray.  Even under the most favorable circumstances it would appear unlikely that, with our current salary structure, we can afford to keep and Gooden and Gordon.  Simply adding their current salaries without a raise to next year’s team would push the Bulls into the tax threshold. Decisions must be made, or circumstances will make them.

Impending Free Agents: Ben Gordon, Drew Gooden, and Aaron Gray

Gordon’s situation presents the biggest problem for the Bulls.  It’s a problem because he’s a guy they were ready to commit a big, long-term contract to (and hence, a guy the Bulls clearly value) but who is poised to leave as an unrestricted free agent next year after two years of mutual unhappiness.  As with last year, Gordon’s future with the Bulls threatens to prevent them from making other decisions.

If the Bulls operate under the assumption he can be re-signed, they’ll still need to move other players if they want to keep Gooden or simply play it safe.  There are several potential problems in the estimate I gave above.  It’s a best guess, but there’s no certainty. For example, suppose the cap doesn’t increase by the expected amount, Gordon players better than expected, or the Bulls get a surprisingly high draft pick that makes more than $1.5M.  Any of those circumstances could cause a couple million dollar swing in the salary cap that would wipe out the ability to keep him.

On top of this problem is the fact that Gordon agreeing to come back to the Bulls after two acrimonious negotiations seems improbable.  Should the Bulls risk declining the option on Thabo, or trading Nocioni for a non-productive player on a shorter contract, for example, in order to free up as much room as possible, only to have Gordon leave anyway?

The prospects for trading Gordon are likewise bleak.  He must agree to any trade, and by doing so, he loses his Bird rights.  This means that the team he’s traded cannot exceed the salary cap to sign him the way most returning players can be resigned.  He would either have to agree to a MLE contract, leave for another team, or be traded to a team that’s significantly under the salary cap (thus allowing them to avoid the Bird Rule in the first place). Thus, I expect the potential trade candidates for Gordon are very limited.  I would suspect:

1. Miami and OKC, which both project to be under the salary cap by enough to resign him to a significant contract,

2. Portland, which is in a similar situation, but which has several younger, similar players (Jerryd Bayless, Rudy Fernandez)

3. Perhaps a championship contending team that cannot hope to re-sign Gordon, but would like a quality player for this season (Boston, Houston, New Orleans, San Antonio?).

In all of these cases, the return the Bulls could expect is… not good.  Unlike this summer, when teams like Miami and New York reportedly offered to take a bad contract off the Bulls hands, teams could not offer this, since doing so would compromise their ability to re-sign Gordon.  Realistically, a player on a rookie contract or a draft pick seems like the best sort of return we might realistically expect.

A final possibility might be to arrange a trade that both gives Gordon to another team and clears significant cap room for that team as well.  For example, pairing Gooden, Gordon and Cedric Simmons in a trade with the Clippers for Marcus Camby, Tim Thomas, and Eric Gordon would probably give the Clippers enough room to resign Gooden and Ben Gordon if they wished to do so, while giving us a more traditional center and a replacement SG prospect (however, this trade still runs into the luxury tax problem talked about above).

In short, there are some possibilities for trading him, but they are all very complicated and it’s likely we won’t get much return.  On the other hand, there’s some possibility for keeping him in the long run, but they’re similarly complicated and hold the potential we lose him for nothing.

In either case, we seem to run a risk even by sitting on our hands.  If we do nothing this season, then Gordon is likely to leave at the end of the year for nothing.  It’s pretty questionable whether we could afford to re-sign him even if he allows the Bulls the opportunity to match an offer he receives from another team.

Drew Gooden’s situation is somewhat tied to Gordons, as well as the performance of Tyrus Thomas and Joakim Noah.  Even if both of those young players fare well, Gooden is our only well-experienced and somewhat offensive-minded frontcourt player.  Even if they do well, it’d be a shame to see him walk for no return at the end of the year.  Some team out there, I’d think, would give up a draft pick or two if we don’t have him in our future.

Although it’s certainly possible Aaron Gray is a non-factor, with the reports he’s lost significant weight, he might become a worthwhile player. As the only true center on the roster, he’ll probably command some playing time. And even if he’s not great, big strong seven footers command money.  So looks consistent, productive, and improving this season, it’s certainly possible some other team could make him a significant offer (in my mind I think up the MLE).  Whether it’s important to keep him in that case is something else that should be considered.  Especially in the context if limited funds available before we hit the luxury tax threshold next season.

The Old Regime: Andres Nocioni and Kirk Hinrich

Probably the quickest way to free up finances would be to trade one or both of these players for expiring contracts (or a team under the cap).  In the case of Nocioni, I frankly can’t understand why this hasn’t been done.  While I value his manic style, there are over a hundred million reasons he shouldn’t be here (Luol Deng’s got $71M of them, Noc holds another $29M of them).  It just doen’t make sense to be paying Noc that kind of money when we’ve got our best player playing his primary position and several better and/or cheaper options at power forward. 

Further, he’s likely to lose whatever value he might have if he’s forced to rot on the bench.  If he’s played significant minutes… well, it means a better player, or one more important to our future is sitting on the bench.  He should have been traded already.

The logic for trading Hinrich isn’t as emphatic as that for trading Nocioni, but at the same time I don’t think anyone should look at Kirk and see him as anything more than a short-term solution at SG and backup PG to Rose while he gets his feet wet.  Sure, having Kirk as a somewhat proven PG and decent all-around guard makes it easier on Rose at some level. There’s simply no logic to him as a long-term member of the Bulls with Rose here.  Not with his abilities or with his salary.

So what to do?

I suppose I’ve given away my answers in discussing Nocioni and Hinrich.  I don’t understand how Gordon’s contract situation prevented the Bulls from trading Nocioni if there were an opportunity to do so.  So that’s trading chip number one.

A lot of folks, John Paxson amongst them, have opined that gee, the Bulls couldn’t possibly risk trading Hinrich and then turning around and losing Gordon for nothing, thus depriving them of their two best guards besides Rose.  That made sense on the surface, but after thinking it out, I’m not seeing the logic of it.

First, if you keep Hinrich until the “situation” with Gordon is settled, it makes it more likely to “settle” it by Gordon simply walking away from a continued logjam that’s uncomfortable for everyone.  If, on the other hand, you trade Hinrich, you make it more likely Gordon stays because you create a workable environment.

Second, Hinrich isn’t that good at SG (or possibly at all any more, to my somewhat surprise).  His best value is as a PG, and it’s fairly obvious Rose is going to play big minutes from the beginning.  So Hinrich’s only real value to us is what he brings as a SG, and his value there really isn’t all that high.

Third, if you’re worried about this problem from a perspective of losing both Hinrich and Gordon, why not use one of those guys (or both, or in some combination with others) to try trading for a better pure SG prospect to pair along with Rose? I think everyone can agree Kirk’s best value is at PG.  We need a SG.  Some team around the league probable needs a PG and has a SG to give.  Making a trade in that direction would kill two birds with one stone.

Finally, consider the “worst case scenario” of trading Hinrich for a pick or a frontcourt player today, playing Gordon big minutes, and then having him want to leave town this summer.  Well, that’d suck because it leaves us without a long-term answer at SG.  Which is exactly where we’d be if Kirk was our primary SG.  All we’d be is a season later in coming to that realization and trying to do something about it.

Planning for the long-run and the 2010 Free Agency season

I see three immediate needs for this team in addition to one long-term priority priority.  The long-term priority is to open up room to sign a maximum salary player in 2010.  That’s two offseasons from now.  The fact that three of our projected starters by then (Noah, Deng, Rose) will be locked in to rookie deals or at a reasonable price makes it feasible to lock down one more starter, a couple role players, and still have legitimate salary to offer a difference-making free agent like Chris Bosh or Dwyane Wade.  Plus, because Tyrus and Thabo will be restricted free agents that summer, they provide some “backup capability” in that they can be resigned in the event we don’t attract a max-worthy player (or Tyrus himself comes close to that).  At worst, keeping that option open unless a clearly spectacular deal comes along should be a priority.

To do this, we can make a basic assumption that if the salary cap continues to grow at historic rates, we can expect the cap to be something like $63M.  If we need to have $18M in cap space to give to a free agent, that gives us a maximum of $45M in salary commitments for the season. Figure in $2M for minimum salary players/cap holds and another $3M for our 2009 and 2010 first rounders.  That gives us about $40M to spend.  Currently we’re slotted to give Deng $11.4M, Rose $5.5M and Noah $3.1M.  That’s five players counting the draft picks, and we’ve got $20M left to spend on some combination of Hinrich ($9M), Nocioni ($7M), Gordon, Gooden, Gray, Tyrus, Thabo and/or someone else who enters the picture between now and then.  That seems like plenty of options to me.  If you figure your average quality NBA starter is going to make $10M/yr, we can probably afford (if we trade away Noc and Hinrich as we should) one very good player (a Michael Redd or Joe Johnson type) or two middle of the road types (a Mike Miller or Ben Gordon at SG and a Tyrus Thomas or Drew Gooden at PF).

In the shorter run, there are two things I’d like to see happen so long as they don’t actively impede that long-run goal.  First, Bulls fans shouldn’t underestimate what good interior gets you.  That was a big part of our collapse last year, and turning some combination of Drew Gooden and his expiring contract (not an intimidating interior defender!) and guys in the backcourt into a guy that actually inspires some fear up front over this year and next would give us a lot of help as Noah and hopefully Thomas gain strength, learn the game and turn their significant defensive potential into reality.  A guy like Marcus Camby (who I made obvious my desire for above) wouldn’t be bad at all).  A completely unheralded guy to take a look at would be the good Collins twin, Jarron, who waists away on the Jazz bench despite being a charge taking machine.

The final thing is simply to resolve the SG mess.  One way or another, resolution of the situation would be good in and of itself.