The Celtics Actual Cap Situation: Dashing Dreams

Over the last week or so, there has been a lot of misinformation, both on blogs and in the mainstream media, about the Celtics cap situation going forward. This is my best attempt to get things right, and I have bounced this off of a few cap experts. There may be a minor error in here someplace—there almost always is when you write about the cap—but I believe this is as close to an accurate accounting of Boston’s cap situation as has been written, and I have heard nothing from anyone that would make me think otherwise.

The general theme is this: Boston does not have cap space (though they can get it, in theory), so it would be best to stop dreaming of the C’s getting into the free agent bonanza.

The nitty-gritty:

Let’s start with two assumptions many folks are making when they argue that, should a few things happen, the Celtics could have significant cap space:

1) Paul Pierce decides NOT to exercise his $21 million option for next season, becoming a free agent instead;

2) Rasheed Wallace retires in a way that costs the Celtics $0 in their 2010 cap figure. (Note: This is unlikely, but let’s just assume it happens for the purposes of this exercise).

Given those two events, the C’s would then have the following money committed to five players, according to the indispensable ShamSports, who is likely mourning England’s disastrous 4-1 loss to Germany:

Kevin Garnett: $18,832,044

Kendrick Perkins: $4,140,208

Glen Davis: $3,000,004

Rajon Rondo: $9,090,909

Avery Bradley: $1,181,800*

*Note for nit-pickers: The league’s collective bargaining agreement sets out salaries for first-round picks linked to their spot in the draft. Teams and draftees can negotiate salaries ranging from 80 to 120 percent of that set amount. For Bradley, I’ve used the set amount rather than a higher or lower amount in that 80 to 120 percent range.

That adds up to: $36,244,965. With a salary cap projected at about $56.1 million, your first instinct is to scream for joy that the Celtics, in this scenario, could have about $20 million in cap room.

But this is not how the NBA’s salary cap works.

First: League rules dictate that you must carry at least 12 active players. If you are on the hook for fewer than 12 players, you must artificially increase your cap figure by slotting in salaries for those leftover players.

In this Boston scenario, with five players signed, the team would have to account for seven imaginary players to reach the required 12. According to question #14 of Larry Coon’s salary cap Bible, the team does that by charging itself the rookie minimum salary for each of those seven spots.

The rookie minimum for 2011 is $473,684. Multiply that by seven and you get: $3,315,788.

Add that to our original figure, and you finish with this:

$39,560,753

Again: It appears the Celtics have enough cap room to offer a player a maximum contract!

But this is fool’s gold. The main reason is that a team’s own free agents don’t just disappear from its cap figure. As serious fans know, a team is allowed to go over the salary cap to sign its own free agents—this is what is commonly known as Larry Bird rights. However, the league does not allow teams to go through this sequence:

1) Get under the cap;

2) Maintain Bird Rights on all of its players;

3) Go over the cap by signing free agents from other teams;

4) Then sign its own free agents via Bird Rights

The way the league prevents this is by charging teams an artificial salary for each of their own free agents. This is called a cap hold, and it is based on each player’s prior salary and experience in the league. You can calculate each Boston free agent’s cap hold using the formulas here.

Ray Allen’s cap hold alone is about $20 million. If Paul Pierce opts out, his cap hold would also be about $20 million. Those figures count in Boston’s salary cap figure, meaning adding in cap holds for Pierce and Allen alone—not to mention cap holds for Tony Allen, Brian Scalabrine and others—takes the Celtics way, way, way, way over the projected cap of $56.1 million. **

In other words: The Celtics have no cap space.

**Adding in cap holds is the same as adding a roster spot, so as long as cap holds exist, you don’t have to fill in so many empty slots with the rookie minimum. That’s just a house-keeping note; it doesn’t change the cap situation in any meaningful way.

Now, you might ask: Can the Celtics get rid of those cap holds so that they can get their cap figure down to that trim-looking $39.5 million mark?

Yes, they can, and the way to do it is simple: The team could renounce its Bird rights on all of its free agents, including Ray Allen and Paul Pierce. Do that, and the team’s salary cap figure really would be $39.5 million, and they really would have about $16.5 million in cap room.

But here’s the thing: If the team renounces Bird rights on Pierce and Allen, it can no longer go OVER the salary cap to re-sign them. They would be prohibited from doing that.

So, sure, they’d have $16.5 million in cap room, but that is (basically) all they would have.

Repeat: That is all the money they would have to fill at least eight roster spots in order to get up to the league-required 13 players (12 active, one inactive).

They would NOT be allowed to go back over the cap.

They would LOSE their mid-level exception, because teams that are under the cap do not get one. You cannot start the official off-season under the cap, go over it and get back the mid-level exception.

They would KEEP the veteran’s minimum exception, since that remains with teams regardless of their cap situation.

Can you sign eight decent players with $16.5 million and only the veteran’s minimum to play with?

Anything is possible in theory, but this would take incredible and unrealistic financial sacrifices from a number of ring-hungry veterans.

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