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Financial implications of the Pierce/Garnett deal

John - Red's Army (@RedsArmy_John) June 29, 2013 Celtics News 48 Comments

It’s been a long couple of days.  We’re emotionally spent.  Paul Pierce and Kevin Garnett are no longer going to be Celtics and there’s definitely a lot of sadness attached to that.

But I’m going to save the retrospectives for later.  Right now, I’m going to attempt to break this trade down to show you what it means for the Celtics financially.

Outgoing salaries:

2013-14 2014-15 2015-16
Paul Pierce $15,333,334
Kevin Garnett $12,433,735 $12,000,000
Jason Terry $5,225,000 $5,450,000

Notes:  $6 million of Kevin Garnett’s salary in 2014-15 is guaranteed

Incoming Salaries 

2013-14 2014-15 2015-16
Gerald Wallace $10,105,855 $10,105,855 $10,105,855
Kris Humphries $12,000,000
Marshon Brooks $1,210,080 $2,179,354 $3,201,471
Kris Joseph $788,872
Keith Bogans $5,058,138 (estimated) $5,058,138 (estimated) $5,058,138 (estimated)

Notes:

Marshon Brooks 2014-15 salary is a team option.
Marshon Brooks 2015-16 salary is a qualifying offer
Keith Bogans 2014-15 and 2015-16 salaries are likely to be unguaranteed
Kris Joseph’s 2013-14 salary is unguaranteed

The Celtics exact outgoing salary is $32,992,069.  But because Jason Terry has a 7.5% trade kicker, the money being calculated in this deal is $33,392,382.  The Celtics will have to pay Jason Terry $800,625 but the hit on the Nets is spread out over two years… hence the $400,000 bump in the outgoing calculation.

Because they are trading with a tax paying team, the Nets can only take back 125% plus $100,000 of their outgoing salaries. 

This is where I’ll turn it over to Eric Pincus of Hoopsworld:

Brooklyn is short by $2,529,069.  Their total outgoing salary is $26,633,906 (which, when padded by 125 percent plus $100,000, is $33,392,383).

Bogans can be sent by Brooklyn via sign-and-trade to bridge that gap, which is why the trade has to wait until July.  Because Bogans made just $1.2 million last season, any raise greater than 120 percent triggers the base year compensation rule.  Whatever the Nets pay him, only 50 percent is credited as outgoing salary.

To get to the additional $2,529,069 required to make the deal work, Bogans needs to be compensated at least $5,058,138.  He’ll also get a three-year deal to conform to sign-and-trade rules, but the last two seasons are unlikely to have any guaranteed money.

Since Bogans just finished his second-straight year with the Nets, the team has his Early Bird Rights.  The team can pay him up to the league average salary next season (approximately $5.3 million).

A league executive, unable to comment publicly on the proposed trade, confirmed that Bogans will indeed earn about $5 million to make the blockbuster go through.

That’s a lot of numbers.  Let’s take a look at what this means year-to-year before any subsequent moves are made

In 2014

Let’s keep in mind that the tax line is projected to be $71.6 million.

If the Celtics remain under the tax, they will RECEIVE a payout from the tax paying teams.  The Nets are going to be, perhaps, the biggest of them all.  With this new money coming in their tax bill will be north of $56 million dollars, and that’s BEFORE they add any new players.

That’s correct.  Fifty Six million dollars in taxes alone.

The Celtics, if they remain a non-tax paying team next year, would get a cut of that.  A few other teams will cross the tax threshold (Miami will pay somewhere around $28 mil. in taxes as currently constituted).  So assuming the C’s are one of, say, 26 teams getting a payout, they’ll get about $3.2 million in tax payouts just from the Nets and Heat… and we haven’t even factored in what the Lakers will pay.

There’s also the little matter of the non-guaranteed guys: Kris Joseph, DJ White, Terrence Williams, and Shavlik Randolph.  With all the non-guaranteed money, the Celtics salary is at $72,190,604, which is over the tax line.  With out them, it’s $68,319,459 (numbers via Hoopsworld)

If you care to, we can factor in what the new head coach will make… let’s assume Jay Larranga gets the gig and gets $2 million a year.  That’s probably high, but screw it, it’s a round number and I’d rather skew higher than lower on this.

Here are the real financial savings for the year 2014 as of right now:

Salary:   $7.7 million without non-guaranteed contracts.  $3.8 million with non-guaranteed contracts
Tax: $4.4 million (what they would have paid had they kept Pierce and if they’re under tax line).  $3.5 million (with the taxes paid if non-guaranteed deals are included)
Coach salary: $5 million (approximate guess)
Taxes received: $3.2 million (at LEAST… if they remain under the tax line)

If the Celtics get under the tax line, their actual savings (consider it money that Wyc and the fellas pocket) is somewhere north of $20 million dollars. If they guaranteed contracts and paid a tax, it would be $12.3 million or so.

I find it hard to believe the Celtics will be a taxpayer.  They have no reason to pay taxes for this team.  Expect non-guaranteed guys to get moved.  I wouldn’t be shocked to see them make subsequent moves to further shed salary.

As Eric Pincus explains in that link above, the C’s could technically turn this into 3 separate trades and create a $7.3 million trade exception that is good for a year.  That could prove useful down the line.  I highly recommend reading that Pincus article.

2015-and-beyond

This is where we get into some dicey territory as far as money savings goes.  If the Celtics decided to waive Kevin Garnett and pay him $6 million, then they’d be on the hook for about $11 million or so with that and Terry’s deal on the books.  Next summer, the Celtics could choose to waive Bogans (assuming he’s fully non-guaranteed) and decline the team option on Marshon Brooks, thus saving themselves about a million dollars versus the non-trade scenario.

Obviously you could pretend that they’d guarantee KG and say they’d save $7 million, or you could pretend KG retired, filed papers, left that entire salary on the table.  In that scenario, the C’s would be about $5 million in the hole after the trade.

The 2016 numbers are so far off that it’s not really worth calculating.  Obviously, you can see the Celtics would have neither KG or Terry on the books at that point, but they now would, potentially, have at least $13.3 million (or $18.3 million if Bogans survives that long).  But a lot is going to happen between now and then.

In the end, the Celtics could save themselves some BIG money… and that’s even with making Keith Bogans the luckiest man of the Summer of ’13.   Their final non-player haul is:

  • A potential net gain of at least $20 million
  • First round draft picks in 2014, 2016, and 2018.
  • A potential $7.3 million trade exception

A few final notes:

  • That trade exception has to be used within a year or it expires.
  • Atlanta has the right to swap picks in 2014 due to a stipulation in the Joe Johnson trade.  If Atlanta’s pick is worse than Brooklyn’s, they can switch places.
  • The Celtics have a similar provision in 2017.  If the Nets have a better pick than Boston in 2017, the Celtics can switch places with them.
  • The 2016 and 2018 picks are unprotected.  If the Nets implode and get the number 1 pick in each of those drafts, they’ll belong to the Celtics.
  • No, sorry everyone who asked, but you cannot use the Amnesty Provision on Gerald Wallace.  Only guys under their current contracts with their current teams during the lockout are eligible.  That leaves Rondo and Bradley as the only possibilities in Boston, so don’t expect the Celtics to use it… ever.
  • No, the savings do not allow the Celtics to pursue a free agent.  They’re still well over the cap.  They could turn the trade exception into something via sign-and-trade, but they don’t have any free money to pursue Al Jefferson or Josh Smith.

Like this Article? Share it!

  • 76th

    Wish I was Bogans

  • Buddy_Hinton

    Say that again

  • Brick James

    What are the chances the deal doesn’t go through?
    It can’t be made official until 7/10.
    That’s a lot of time for something to happen.

    • forever_green

      I would like to know this also.

    • ShawnCVD

      That would be awful.

  • Lee in Oregon

    Keith Bogans is the happiest man in America! So much for hard work & perseverance, luck & timing goes a long way.

  • pierce Hart

    DANNY AINGE HASN’T GOT A HEART! Which isn’t a bad thing but I’m still in tears about Paul.

    • jrleftfoot

      He traded KG and PP together to a contending team. They have a better shot at a title than they would have in Beantown. I think he does indeed have a heart. He`s cleaning house because Doc leaving broke up the band.

      • Frank Aziza

        Not if Danny kept them and tried getting help the last few years.

        • Gibba1924

          Are you serious??? Danny did the right thing … Thank God the Fans don’t run the Teams in NE … Jezz!! Smart move Danny just a couple of years to late ….

      • frickenWaaaltah

        Buying out Paul and amnestying Garnett was cheaper, it would have created instant cap space, and it would have let Paul and Kevin go wherever they wanted to go.

        Free to choose wherever, do you really think they would have both picked the Nets and bet their remaining years on Deron Williams and Joe Johnson? It was a gift to Brooklyn and to the NBA in general, not Paul and Kevin.

        • jrleftfoot

          They didn`t need instant cap space because this year`s free agent class stinks. PP and Kevin wanted to ply together and now they can , for a better team than the current Celtics, Nine # 1s in 5 years is a lot more valuable than the likes of Josh Smith.

  • zippittyay

    Bogans is *only* 33 years old??

  • kobe_beef2424

    paying Gerald Wallace with that amount of money is beyond stpd

    • jrleftfoot

      They had to match salaries. DA is putting together a package for future moves.

      • Frank Aziza

        Yeah some future, 17 th pick in the draft every year.

        • ShawnCVD

          You don’t know that . 3-5 years from now Nets could be brutal. PPKG is done, DWill could bottom out, Joe Johnson will be 15+years in the league.

      • Gibba1924

        Somebody gets it!!!

        • Frank Aziza

          I get that but u want me to wait 3 to 5 years for a POSSIBLE lottery pick, then hope those drafts produce super stars, then wait 3 to 5 more years for them to devolop. Ok so in ten years well be a contender.

          • ShawnCVD

            I doubt Ainge holds onto every pick.Theseare pieces trade chips.

  • forever_green

    Taking back those bad players and saleries was a killer..it will interesting to see what DA does next.

  • Frank Aziza

    So this trade isn’t about clearing up cap space it’s about putting money in the owners pockets.
    Let’s go Nets!!!
    The Celtics don’t stand for anything anymore. I wish mark Cuban owned the Celtics, that dude is still trying to build with 35 yr old Dirk!!! God bless him, he stands by his man. Danny doesn’t give a crap about anything.

    • forever_green

      I agree with everything you said except the Celtics not standing for anything- your probably just upset like me..I too respect the people that do stand by their players…young players don’t win championships, veteran’s do.

      • Frank Aziza

        Ainge was one of my favorite players, great heart too. He has treated the big three like trash since 2010. Every time they struggle he looks to trade them then they turn it around and he keeps them. If he was running the Spurs he would have broke that team up 3 years ago for draft picks. I understood the KG for Jordan deal then maybe figure a way to get Josh Smith and then you have Rondo Green Jordan and Smith. That’s a good start. If its not working you could always dump all four of those young dudes in two years. I waited 21 years to be a contender and thanks to McHale giving us KG I had a Celtic team worth cheering for. The guy just traded two of the greatest celtics of all time for draft picks and to save the owners money. Red Auerbach died and along with him was that the celtics were a family. Not with Danny as GM.

    • Gibba1924

      You guys are thinking with your Heart, not with your head …. The C’s needed this … This is the way you rebuild, this is how you sustain a viable Franchise …. Last time I checked … Franchises aren’t stocked with stars picked in the 20′s because they aren’t there …. great move Danny now use the assets you’ve amassed to build this team!!!

  • Frank Aziza

    If we had the nets owner could u imagine the help he would have gotten KG and Pp the last few years. We would have gotten David West last season, that would have helped beat Miami in the ECF.

    • ShawnCVD

      Um … How exactly?

    • Gibba1924

      The team we had wasn’t going to win .. unless they could have turned Paul and KG into part time guys … The guys are in the very Twilight of their respective Careers!! Danny made the right move … if Red would have done this with Bird, McHale and Parrish, Maybe we C’s fans wouldn’t have had to live through the Crap that was 90′s C’s Basketball!!

    • jrleftfoot

      If we had the Nets owner we would have still been over the cap.Do you ever think before you post?

      • frickenWaaaltah

        Eh you’re both wrong, but dude, that was such an over the top jerk thing to say, and take it from me, I have plenty of experience with the whole internet jerk thing.

        Anyways, David West was going to come to Boston via a sign and trade from New Orleans in Summer 2011, but Larry Bird convinced him that Indiana was a better fit for him with a nuts and bolts basketball argument. He took 20 million and 2 years from Indy over 29 and 3 from Boston. The Pacers were also earlier along in their rebuild, coming off a sub .500 season, and the national media thought he was crazy or greedy or not quite right in his mind somehow to pick Indy over playing with the big three in Boston.

        • jrleftfoot

          So we WOULD have been under the cap if we had the Nets owner , mister internet etiquette? Don`t think so.

          • frickenWaaaltah

            Not big on reading, are you? Let’s try this again.

            You are wrong because they didn’t have to be under the cap to get West. They were all set to acquire West via a sign and trade deal. Read that a few times if you have, it’s the key part you didn’t understand last time.

            So you know, the part where you seem to think signing David West was impossible because they were over the cap is just wrong.

            This wasn’t just a rumor. It came really close to happening, then Indy made a relatively ‘last minute’ pitch and got him.

            Frank was wrong in that having owners willing to spend more wouldn’t have made a difference in that situation. West stunned the national media by taking a two year offer from Indy over the three year deal from Boston for basically the same yearly salary.

            It has come out since then that Larry Bird convinced him that Indy was a better fit for him for basketball reasons, i.e. a technical argument based on what sort of player he was and what sort of team mates he’d have in Indy vs in Boston. So not who they were as people, but who they were as basketball players, and how they fit together as a team.

            Here’s Ray Allen back in 2011 whining about David West ‘taking more money’ to play in Indy:
            http://sports.yahoo.com/nba/blog/ball_dont_lie/post/ray-allen-isnt-happy-david-west-took-more-money-in-indiana?urn=nba,wp12133

            And yeah it was catty as well as unfair of Ray to say it was about money when the yearly salary was a little larger in Indy but basically the same (within 1 mil), and he was taking one less guaranteed year to go to Indy.

          • frickenWaaaltah

            Here are two articles from December 2011 when the deal fell through. The C’s were going to get West for Jermaine O’neal yeesh…although Wojo says they were also going to include another unspecified player in the first article to make it worth while for New Orleans, which makes sense.

            http://nesn.com/2011/12/report-celtics-close-to-signing-david-west/

            http://nesn.com/2011/12/report-david-west-sign-and-trade-between-celtics-hornets-dead/

          • jrleftfoot

            I wasn`t responding to the David West part of your buddy`s comment. The Celtics bid was higher than the Pacers, so it wouldn`t have mattered who the owner was unless they wanted to pay some astronomical figure. I was responding to the posters suggesting that we should imagine the help the Nets owner would have gotten Pierce and KG, as if there were no spending limits.. No doubt you are familiar with internet jerks , because you`re a charter member of the club.

          • frickenWaaaltah

            So you’re one of those guys who pretends he meant something else just to avoid appearing he is ever wrong. Noted.

            Seriously, you expect me to believe that you really think a team has to be under the cap to improve? Everybody knows the C’s have been over the cap for years now. Every year, there are teams over the cap that manage to improve and it often involves doing something that is expensive.

          • jrleftfoot

            and your one of those guys who lurks around message boards all day so they can” correct” other people and thinks its reallycool to have ” fricken ” in their screen name. noted.

  • greenbeand .

    factor in doc and that’s 27M savings w/o rookie contracts

    • frickenWaaaltah

      Why factor in Doc? He doesn’t count against cap space, and letting Doc go had nothing to do with this particular move.

      Any time they wanted to save money on Doc, all they had to do was agree to let him talk to other teams and he’d have found a nice spot to land after a bunch of teams fought over him.

  • frickenWaaaltah

    Better option one: buyout Pierce this year, buyout Kevin next year. Total cost is ~23mil.

    Better option two: buyout Pierce this year, amnesty Kevin. Total cost is ~29mil. It’s more expensive but it would have been a ‘thank you’ move by setting KG free this year. It also comes with instant cap space.

    So the trade is nothing more than paying way way way too much and taking on way too many undesirable players for the sake of a few bad draft picks. Please stop pretending it was about saving money. They teach opportunity cost in Econ and accounting 101. This deal is expensive. They paid a lot of money for draft picks and they gave Brooklyn a huge gift and they kind of said ‘screw you Miami’ except that team probably isn’t going to beat Miami anyway because Deron Williams and Joe Johnson blow.

    • ShawnCVD

      I don’t think Ainge could amnesty KG who resigned last Summer.

      • frickenWaaaltah

        Yeah you’re right. His partially guaranteed final year was something that I thought could no longer be done in the new CBA, but looking over those rules again I misunderstood them.

        It’s still cheaper to buy out everybody including Terry. Only guaranteed salary counts when you buy out somebody so Kevin would only cost ~12 this year and ~6 next year. Buying out Paul is enough to get under the tax line this year…or it was. Today was the last day they could have done that.

        They would all play somewhere and so whatever they got paid by their new teams would offset the money the C’s owe them and the cap space they take up. Say for example Paul and Kevin signed minimum deals with the Spurs, but Terry signed somewhere else for ~3 million for three years so then the C’s would only owe him ~2 million each year. Or Paul might sign a 2 year deal with Golden State for the midlevel and the C’s wouldn’t even owe him the ~5 mil for 2013-2014.

        • ShawnCVD

          This is about acquiring trade pieces first and financial 2nd. Perhaps Ainge thinks Boston will continue to not be a destination for FA’s so rebuild must be through draft and trades

  • Astarot

    The last notes are the most important here really they can’t go to the market right now (not that I want Smith but it shows “what kind” of savings Ainge made). Ok Ainge saved money but mostly saved money for the owners and he made Nets the better team. Ok the Cs are not a contender and they woudn’t be with KG and PP but they woud use their game and during the season anything can happen. After that season PP goes off the books (can get some min contract) and they coud make decision about KG (he coud even retire so woud be off the books too) – real savings that coud be used on the frre agents. The only player here is Brooks -still young can show something. The winner here – Bogans. So Ainge really took care of taxes here. Maybe he’ll turn this around and make something but I can’t see that happening as of right now. You wantet to trade KG you coud try with Wolves to get Pekovic. Other than that nothing woud be worth trading one of them or both. Picks, well one big gamble cuz you’re not even sure what players will show up in the draft (thoes further drafts I mean).

    • jrleftfoot

      KG had a no trade clause .I doubt verrrry seriously he would have waived it to go back to the Wolves.

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  • frickenWaaaltah

    Also, what’s up with this Pincus guy claiming the C’s can split the trade into three pieces, and in the last piece trade KG for Bogans and generate a trade exception for Boston? I mean dang, that’s just so wrong as to be blatantly stupid.

    The Nets won’t be anywhere near under the cap at any time even if this were executed as three separate deals. You have to be under the cap to do a lopsided trade like sending out ~5 and taking back ~12, otherwise you can only trade +/- 15%. That’s really basic stuff.

    He also seems to think Boston can do it as three deals while the Nets can do it as one deal. Whether or not it’s three deals or one deal is determined by how they file with the league so it has to be the same for both teams.

    Also it has to be one deal because filing it as multiple deals would violate the league’s policy on conditional deals. In this case Pincus is just wrong and there’s no way to game the system by doing one big deal as multiple little deals, but the rule against conditional deals prevents teams from, among other things, doing one big deal as multiple little deals precisely to prevent teams from gaming the system.

  • jrleftfoot

    I guess I just got over mourning faster than you did, but I feel your pain. My nephew lives in Brooklyn .I`m going to try to catch PP and KG there next season.

  • Ulf

    Great write up.

    For those complaining about the players we got in the deal, I really believe it’s too
    early to tell whether or not this was a good move.

    Most likely there will be some form of deal sending part of these player off to different
    teams, perhaps getting something good back or simply just clearing up cap space
    for next year.