B is for Base Year Compensation

The basic rule of the NBA’s salary cap is that if a team is over the cap after making a  player transaction (trade or player signing), then the team must use one of the ten exceptions available to teams over the cap.  One of the most widely-used of these exceptions is the Traded Player Exception, which says that a team over the cap can make a trade but that it is limited in how much salary it can take back.  The general rule is that – today – a team can take back 125%+$100,000 of the amount of player salary that it sends out or that it can take up to a year in taking back up to 100% of the amount of player salary that it sends out.

Because teams over the cap are limited by these salary-matching restrictions, there might be a temptation to overpay a player in order to get his salary high enough to be able to facilitate a trade.  For example, if the Spurs decided that they wanted to trade for Rip Hamilton (whose salary is $12.5 million this year) but didn’t want to send out any of their current high-priced players in return, why not just re-sign Jacque Vaughn for a one year contract of $11 million and send him to Detroit?  The Pistons get out from under Hamilton’s long-term deal and the Spurs get the player that they desire.  The problem is that this type of sign-and-trade deal essentially defeats the purpose of the salary matching rules.  So to prevent this kind of situation, the CBA institutes a rule known as Base Year Compensation.

Base Year Compensation (BYC) rules state that if a player was signed using either Early Bird Rights or Bird Rights, and if the player received at least a 20% raise in the first year of his new contract, then the player is considered to have Base Year Compensation status.  This status is also given to players who receive at least a 20% raise when they are given an extension after the 4th year of their 1st round Rookie Scale contract is over.  The other rules regarding BYC players are as follows:

  1. Players who were signed using Early Bird Rights or Bird Rights start their BYC status on the day that their contract was signed.  Players who were extended off of their Rookie Scale contracts start their BYC status on the first day following the July Moratorium in the year that their extension starts.
  2. A player’s BYC status lasts for 6 months or until the next July 1st, whichever date comes later
  3. A player’s BYC status ends after he has been traded.  It also ends if his current team drops below the salary cap.

BYC status only comes into play if the player’s current team tries to trade him while his BYC status is still active.  In that case, his BYC status makes the player more difficult to match salaries with.

To understand this, let’s review trade rules briefly for teams over the cap (as the majority of NBA teams are).  Teams must match salary within that 125%+$100,000 limit for a simultaneous trade of players.  In calculating that type of salary matching, most players count the same amount as outgoing salary for their current team and incoming salary for their new team.  For example, if Monta Ellis were traded, he would count as $11 million outgoing salary for Golden State and as $11 million incoming salary for the team he was traded to.  But in the case of BYC players, the rules complicate the salary matching and make it more difficult to move the BYC player in a trade.

The rules state that a BYC player’s incoming salary is his current salary (plus any trade bonus).  However, his outgoing salary is either 50% of his current salary or the amount of his salary last season, whichever figure is higher.  This disparity between the two figures can complicate trades between teams that are both over the cap.

Before getting to a practical example of this complication, though, let me illustrate how a player’s BYC figure for outgoing salary is set.  Brandon Roy signed an extension with the Blazers in 2009 that commenced in July of 2010 that pays him $13.6 million in 2010-11.  Since his extension off of his Rookie Scale contract gave him more than a 20% raise, he is a BYC player.  His outgoing salary in a trade is the larger of 50% of his current salary ($6.8 million) or his salary in 2009-10 ($3.9 million), which in his case is $6.8 million.  Roy’s teammate, LaMarcus Aldridge also signed an extension with the Blazers in 2009 that commenced in July of 2010, and is also a BYC player.  Aldridge’s outgoing salary is the larger of 50% of his current salary ($5.6 million) or his salary in 2009-10 ($5.8 million), which in his case is the latter figure of $5.8 million.

Now onto how BYC status can make it more difficult to make trades.  For an example, let’s assume that Boston wanted to trade Rajon Rondo for Steve Nash.  Both the Celtics and the Suns are over the cap.  Rondo makes $9.09 million this year and Nash makes $10.3 million, which would appear to fit within the 125%+$100,000 window for both teams.  However, Rondo has BYC status, so the trade actually looks like this:

  • Phoenix sends out $10.3 million (Nash) and takes back $9.09 million (Rondo), which is allowable.
  • Boston sends out $4.5 million (Rondo’s BYC status number) and takes back $10.3 million (Nash), which does not fit within the 125%+$100,000 window, so is not allowable.

Trading BYC players, then, becomes quite tricky unless the player is being traded to a team under the cap, is being traded to a team with a large Trade Exception, or is being dealt in combination with other players (which increases the size of the 125%+$100,000 window for both teams).

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