Originally Posted by joyner
This needs to be emblazoned across the first message in this thread.
Giving this contract to Manu means we can sign another player. A smaller contract means that we could not. Does it make any sense? No, not at all, but that's the way it works under the NBA's bizarre cap rules.
Next person to say "We should've given Manu less and then signed AK/Ellis/Korver/Smith/whoever!" gets a
It is pretty difficult to understand. Here is Larry Coon's try at an explanation. NBA Salary Cap FAQ
26. How do exceptions count against the cap? Does being under the cap always mean that a team has room to sign free agents? Do teams ever lose their exceptions? |
If a team is below the cap, then its Disabled Player, Bi-Annual, Mid-Level (either the Taxpayer or Non-Taxpayer Mid-Level, whichever applies to the team) and/or trade exceptions are added to their team salary, and the league treats the team as though they are over the cap1. This is to prevent a loophole, in a manner similar to free agent amounts (see question number 38). A team can't act like it's under the cap and sign free agents using cap room, and then use their Disabled Player, Bi-Annual, Mid-Level and/or trade exceptions. Consequently, the exceptions are added to their team salary (putting the team over the cap) if the team is under the cap and adding the exceptions puts them over the cap. If a team is already over the cap, then the exceptions are not added to their team salary. There would be no point in doing so, since there is no cap room for signing free agents.
So being under the cap does not necessarily mean a team has room to sign free agents. For example, assume the cap is $58 million, and a team has $51.5 million committed to salaries. They also have a Non-Taxpayer Mid-Level exception for $5 million and a trade exception for $5.5 million. Even though their salaries put them $6.5 million under the cap, their exceptions also count toward their team salary, increasing their total to $62 million, or $4 million over the cap. So the team actually has no cap room to sign free agents, and instead must use its exceptions to sign players.
Teams have the option to renounce their exceptions in order to reclaim their cap room. So in the example above, if the team renounced their Traded Player and Mid-Level exceptions, then the $10.5 million is taken off their team salary, which then totals $51.5 million, leaving them with $6.5 million of cap room which then can be used to sign free agent(s).
Starting January 10 (February 10 in 2011-12) of each season, the Mid-Level (Non-Taxpayer, Taxpayer and Room), Bird (Larry Bird, Early Bird and Non-Bird) and Bi-Annual exceptions begin to pro-rate2 (reduce in value). For example, if there are 170 days in the season, then these exceptions reduce in value each day by 1/170 of the amount remaining on January 10. So if a team had a $5 million Non-Taxpayer Mid-Level exception and spent $1 million before the start of the season, then on January 10, and each day thereafter, it would reduce in value by 1/170 of $4 million, or $23,529. If the team signs another player on February 1 for $1 million, the daily pro-ration would still be 1/170 of $4 million.
A team's exceptions may be lost entirely, or the team may never receive them to begin with. This happens when their team salary is so low that when the exceptions are added to the team salary, the sum is still below the salary cap. If this happens when the exceptions arise, then the team doesn't get their exceptions at all. If the team salary ever drops below this level during the year, then any unused portions of their exceptions are lost (and do not return if the team salary increases).
For example, assume there is a $58 million salary cap, and during the offseason a team has $50 million committed to salaries, along with a Non-Taxpayer Mid-Level exception for $5 million, a trade exception for $2.5 million, and an unrenounced free agent whose free agent amount is $2 million. Their salaries and exceptions total $59.5 million, or $1.5 million over the cap. What if their free agent signs with another team? The $2 million free agent amount comes off their cap, so their team salary (including their remaining exceptions) drops to $57.5 million. This total is below the cap so the team loses its Non-Taxpayer Mid-Level and trade exceptions.
There is logic behind this. The whole idea behind an "exception" is that it is an exception to the rule which says a team cannot go over the salary cap. In other words, an exception is a mechanism which allows a team to function above the cap. If a team isn't over the cap, then the concept of an exception is moot. Therefore, if a team's team salary ever drops this far, its exceptions go away. A rule of thumb is that a team may have either exceptions or cap room, but it can't have both at the same time. However, a team in this situation does qualify to use the Room Mid-Level exception (see question number 25).