The Sixers Have Passed the Cap Floor and Saved Millions

The Sixers angered people again, because businesses that expose loopholes and use them to their own advantages have that effect. This time, as was noted last night, the Sixers claimed longtime future Sixer Thomas Robinson off waivers from the Denver Nuggets before he could sign a free agent contract with the Brooklyn Nets. And as Woj first noted, the reason for the claim is mostly about money.

In claiming Robinson, the Sixers put themselves above the NBA's salary floor, the minimum required amount of spending on players each NBA team must do as part of the collective-bargaining agreement signed in 2011. That "minimum required amount of spending," like most things involved with contracts, is riddled with easily exploitable holes. The Sixers found two which helped them reach the floor cheaply, both at the expense of the Denver Nuggets.

First, the entire salaries of traded players are included in the cap floor calculations as of season's end. So, when the Sixers acquired JaVale McGee and Oklahoma City's increasingly more appetizing first round pick, the Sixers acquired an $11.25M salary for their cap calculation. But the Sixers will only need to pay McGee the amount he is owed for the rest of the season.

Depending on the payment structure agreed upon by McGee and the Nuggets, the Sixers would only need to pay out between $6.5-$8M to McGee for the rest of this season, and then $12M related to next year. Per Larry Coon's CBA FAQ, NBA players are paid bi-weekly over a 6-month, 12-month, or 18-month period (which is not publicly known - and rightfully so). The difference between the $11.25M and the actual remaining payments are cost savings for the Sixers.

And second, players claimed off waivers are the financial responsibility of claiming teams AND are included as a season-long contract for the claiming team. When the Sixers claimed Robinson, his contract amount is included in full for the rest of the season, provided the Sixers keep him in town or, if he's subsequently waived, another team does not claim him then. Depending on the report, that should provide the Sixers with at least $1M in cost savings.

If these moves hadn't been made, the Sixers would have needed to pay out the dollar amounts in full to the players on the roster. This turn of events is a bit unfortunate for the other players, considering that they were in for a nice additional bonus they'll no longer get.

Meanwhile, Denver shed these contracts to start rebuilding themselves. The Nuggets as a result mistakenly fell below the salary floor and either must rise above it or make an additional payout to the remaining Nuggets players. Tim Connelly got outclassed, which is not surprising given the lukewarm reviews of his GM tenure in Denver, highlighted in this organizational profile by Kevin Arnovitz earlier this season.

Ultimately, the Sixers took on $15M in contracts from the Nuggets, saved $5M, and gained a first round pick from the team.

I've now put together a list of all the players getting paid, with major help from the CBA FAQ and the Basketball Insiders page for Sixers salaries. Check those out, then fact-check my figures. As it stands, with the admittedly incomplete file given the assumptions that need to be made, the Sixers may have saved more than $7M in actual payments for differences between the cap and actual payment amounts with a conservative estimate. Click here to see the estimated payment amounts. The partial salaries are calculated based off bi-weekly payments made over a twelve month period. Feel free to tell me if you think any are wrong. All salaries are sourced from Basketball Insiders.

Given all that, should we even care about this? I think so. What happens with the Sixers financially ultimately can impact Sam Hinkie's job security. Ownership may have been convinced to tank by being told they can be profitable while doing so. If Hinkie, who doubles as team President and is responsible for both on- and off-court performance, can't execute the strategy and turn a profit, then maybe he doesn't make moves to further the franchise. There's a fairly long history of NBA executives playing to save their jobs rather than making changes in the best interests of the franchise. Hinkie's attempting to do both, in a way, and has thus aligned his goals with that of the organization.

Saving $7M in actual dollars just on player salaries is a major, major part of increasing margins. The team also took in $1.4M in trades during the year, which for other teams was the price of doing business.

At the same time, the strategy is so business-like, so ruthless, and so cold and calculated. It doesn't seem right that an organization can lose most of its games by design and come out with a profit. This is a major flaw the NBA has no choice but to address in the next CBA. Until then, the Sixers will hack the system until they get a superstar, and they'll make money doing it.