Monday, July 16, 2018

Can We at Least Keep It Real, Bucks Fans?

Complain that Ersan Ilyasova is getting old.  Complain that he's not clutch.  Complain that he doesn't match up with Philly.  Or complain that the Bucks are engaging in a vast conspiracy to avoid signing black free agents this offseason.

For, no matter how stupid those complaints may be (and the last one would be a doozy, were anyone to sincerely think it), none are dumber than the ideas that Ersan is hard-capping the Bucks, or that he is eating into the Bucks' 2019 cap space.

Some background:

The NBA has a soft salary cap, meaning that there are exceptions that allow teams to exceed the nominal cap limit.  An exception to the cap's soft-ness, however, is that teams have a strict salary limit ("hard-capped") at a number slightly above the League's luxury tax threshold if the non-taxpayer mid-level exception ("non-tax mid") is used by a team with salaries already exceeding the salary cap ("capped-out" team) to sign a free agent.

The Bucks are capped-out.  Ersan was signed for the non-tax mid.  Therefore, the Bucks are now hard-capped.

And Ersan's contract has two guaranteed years.

Back to the lecture at hand:

There is just one teeny, tiny, itsy-bitsy problem with Bucks media/fans' complaints about hard-capping and 2019 cap space: in real life, those things have zero effect on the Bucks' roster. Here's why.

Complaint #1: The Bucks are hard-capped for 2018-19

Teams that pay the NBA's Luxury Tax are never hard-capped.  However, if the Bucks owners have no intention of paying the Luxury Tax, then being hard-capped has no effect on the Bucks' roster.

To Bucks Forest's knowledge, Bucks owners Marc Lasry, Wes Edens, and Jamie Dinan have not commented publicly on whether they are willing to pay the Tax.  That said, consider the evidence:

-Edens & Lasry are known for buying distressed assets, wringing out profitability, then flipping them.
-The Bucks either lost money, or made about $20 million in profits in 2016-17.
-Luxury Tax teams are not allowed to receive money from revenue sharing.
-The Bucks receive money from revenue sharing, according to ESPN.
-Forbes values the Bucks franchise at $1.075 billion.
-Google (just picking a random "growth" stock) has a price-to-earnings (P/E) ratio of 32.
-The Bucks have a P/E ratio of 54 (if Forbes' estimate of $20 million in profits is correct).

What does all of this mean?

It means that the Bucks are "valued" 69% (nice) higher than Google, relative to profitability.  For profit-wringing investors, that means that the Bucks need to start making higher profits, otherwise the franchise value may fall back below $1 billion.

It also means that going into the Tax would seriously jeopardize profitability.  Bucks Forest was unable to find any published reports detailing exactly how much money the Bucks receive from revenue sharing, but ESPN reported that NBA teams have been receiving as much as $32 million in one season.

So ask yourself: Do you think that the Bucks' value-seeking owners have any intention whatsoever of giving up their revenue sharing checks (and, potentially, sabotaging the Franchise's market value) by going into the Luxury Tax?  In this blog's opinion, that's an obvious "No", which means that the complainers aren't keeping it real.

Complaint #2: The Bucks now have $7 million less in 2019 Cap space

At the risk of creating a straw man, here is the argument some Bucks media/fans are making:

"The Bucks could've had at least $16 million; maybe more, if they wouldn't have signed Ersan.  Now they'll only have $9 million.  That's important because $16 million would've allowed the Bucks to out-bid teams that will only be able to offer the mid-level exception to 2019 free agents."

The flaw in this line of thinking is that the above scenario is exceedingly unlikely to occur, in real life.

Consider the scenarios:

If the 2018-19 Bucks have a Lottery season; or perhaps even an inconsistent season that ends in a First Round exit, the Bucks may well be looking to break up the team.  Once Bledsoe or Middleton (or both) have their rights renounced as free agents, they're off the Bucks' Cap sheet, thus giving the Bucks the ability to offer a Max salary to a superstar who wants to play alongside Giannis.  And Ersan's presence would have no effect on the Bucks' ability to sign a mid-level player alongside that Max player, because the difference between the Salary Cap and the Luxury Tax threshold is more than Ersan's salary of $7 million.

On the other hand, if the 2018-19 Bucks win the Championship, win the East, or even come close to winning the East, then who cares!  The Ersan signing worked!  And even if Ersan wasn't a part of the Bucks' success, the team's ability to sign free agents still wouldn't be affected, when accounting for the huge salary increases Bledsoe and Middleton would likely get by being free agents coming off a Championship season.  If those salary increases happen, the Bucks will push up against the Luxury Tax line next summer.

The only way the Ersan signing affects the summer of 2019 in the real world is if the Bucks are planning to retain Bledsoe, Middleton, and Brogdon while being a Tax team in 2019-20.  Otherwise, the team will be able to sign its top free agent target, assuming that player reciprocates interest.

This blog is optimistic about next season.  Some Bucks media/fans aren't.  That's fine.  But let's keep things real.