The NBA's ballyhooed free-agent summer of 2010 might have quietly taken another hit late Tuesday night.
In a memo announcing next season's salary cap and luxury-tax threshold, sent out shortly before the league's annual July moratorium on signings and trades was lifted at 12:01 a.m. Wednesday, NBA teams also received tentative projections from the league warning that the cap is estimated to drop to somewhere between $50.4 million and $53.6 million for the 2010-11 season.
The official league memorandum, obtained by ESPN.com, forecasts a dip in basketball-related income in the 2009-10 season of 2.5 percent to 5 percent, which threatens to take the 2010-11 cap down some $5 million to $8 million from last season's $58.7 million salary cap.
A significant drop for the luxury-tax threshold is also projected going into the summer of 2010. If basketball-related income drops by 2.5 percent in 2009-10, league officials are projecting a 2010-11 salary cap of $53.6 million and a luxury-tax line of $65 million. If BRI, as it is referred to in the NBA, decreases by five percent, teams would be looking at a $50.4 million salary cap and a luxury-tax line of $61.2 million in 2010-11.
"Teams should be aware of this projected BRI decrease," reads the memo, "and plan accordingly."
The new figures for 2009-10 just announced by the league have set the salary cap at $57.7 million per team -- down $1 million from $58.7 from 2008-09 -- and the luxury-tax threshold at $69.9 million.
Commissioner David Stern actually warned during the NBA Finals of a BRI shortfall of "maybe as much as 10 percent" from last season to next season, but Tuesday's projections were sufficiently dire for teams such as the New York Knicks that have been planning for months to make a significant free-agent splash next summer.
When Knicks president Donnie Walsh took the job in April 2008 -- before the global economic downturn that, as with most businesses, has hit the NBA so hard -- some teams around the league were projecting a 2010-11 cap ceiling in the $63 million range per team. So in the best-case scenario outlined by the league office Tuesday night, New York would have roughly $10 million less in spending money next summer than it originally planned for, although the memo did include a disclaimer stressing that these were "early" projections that could "change based on economic conditions and as more information on leaguewide business performance becomes available."
In June, when asked by Stern to give a group of reporters some perspective on what a 10-percent drop (or thereabouts) in leaguewide revenues might do to free-agent spending in the 2010 offseason, NBA president Joel Litvin said he'd anticipate a "significant impact" in terms of slicing into the amount of spending money many teams once expected to have.
The Knicks, for example, increasingly look as though they will be restricted to signing one maximum-salaried player that summer if the latest projections hold, which theoretically would only enhance the Cleveland Cavaliers' chances of retaining LeBron James, given the other holes in the Knicks' roster. New York's original plan to lure James was founded upon trying to sign James and a second marquee free agent in 2010.
Teams have been bracing for reductions in the cap and luxury tax, but seeing such numbers circulate was still jarring for many team officials.
"Real scary," said one Western Conference executive.
Said another from the West: "The figures for [2009-10] are better than I expected. It is [the summer of 2010] that will be scary."
So it also remains to be seen whether James, Miami's Dwyane Wade and Toronto's Chris Bosh -- all of whom are widely expected to pass on signing the contract extension each is eligible for this summer to ensure they'll have the opportunity to test free agency in 2010 -- will reconsider that stance on extensions because of the potential declines in cap space for external bidders, more teams straying into luxury-tax territory and the possibility that maximum salaries would be lower entering the 2010-11 season then than they are now.
Tuesday's memo also listed the seven teams that must make luxury-tax payments to the league office by July 22 based on last season's payrolls. The dollar-for-dollax tax, assessed to any team with a payroll above the $71.15 million threshold that was in place in 2008-09, will result in the following invoices to be delivered to the respective teams before Friday's deadline: New York ($23,736,207), Dallas ($23,611,661), Cleveland ($13,707,010), Boston ($8,294,664), Los Angeles Lakers ($7,185,631), Portland ($5,899,356) and Phoenix ($4,918,136).
The 23 teams that stayed below last season's tax threshold, meanwhile, will each receive just over $2.9 million, which is taken from the combined tax pool paid by the seven aforementioned teams. The memo notes that the remaining $20.4 million of undistributed cap funds is headed for the NBA's Revenue Assistance Plan, which distributes money to low-revenue teams.
The $1 million drop in the cap from 2008-09 to next season marks just the second time since the NBA instituted a salary cap starting with the 1983-84 season that the figure has fallen. The fact that the luxury-tax line also appears to be moving steadily downward could prove to be no less damaging to free-agent spending in this and subsequent summers, thanks to the dollar-for-dollar penalty which so many teams are determined to avoid.
