Money On The Mind

Darius Soriano —  June 5, 2012

Yesterday, the Lakers did what they’ve been saying they would for months and exercised their team option on Andrew Bynum’s contract for next season. As a result, big ‘Drew will rake in $16.1 million dollars next year (while also setting up other questions still to be answered, but that’s another topic).

This commitment to Bynum got me to thinking about the Lakers finances both short and long term. As we know the new collective bargaining agreement is designed to level the playing field through punitive penalties to high spending teams. The Lakers, of course, are one such team. So, in building for today and tomorrow, the Lakers must take into account their payroll into every move made. This may not be what fans want to hear, but it’s an inescapable truth and must be part of the calculus of how this team moves forward.

Consider the following facts:

  • With Bynum in the fold, the Lakers’ payroll for next season will be around $79.3 million. However, this is before Ramon Sessions makes a decision on his player option. If Sessions picks up his option and plays out the final year of his contract the Lakers payroll jumps to about $83.8 million. If he opts out and the Lakers re-sign him, their payroll will be even higher.
  • The above total will also be affected by the other free agent decisions that the team must make. Devin Ebanks and Matt Barnes are both free agents and losing both creates a major hole on the wing behind Kobe and Ron. The likelihood that one of them returns is high and my bet would be on Ebanks returning, though at what cost remains to be seen. Jordan Hill is also a free agent and while the CBA dictates what his maximum salary can be next year ($3.6 million) the team will need to decide if he’s a part of their future as well and at what cost.┬áDarius Morris is also a free agent and the Lakers will need to decide if they’d like to keep him.
  • The CBA dictates that next season the luxury tax line will be at least as high as it was this season – $70 million.
  • The CBA also dictates that next year’s tax payments will equal $1 for every $1 a team is over the tax line.
  • After next season (2013-14; year 3 of the new CBA), the escalated tax penalties kick in and the year following that (2014-15; year 4 of the new CBA) teams are eligible to be hit by the repeater tax (defined as a team that pays the luxury tax for 4 years in a 5 year span).

From here it’s pretty clear that the Lakers have to think both short and long term, not only from a “how do we contend” standpoint but also a “how do we keep our payroll reasonable” standpoint. Every team will have to navigate these waters but a team like the Lakers – with heavy financial commitments to several key players – are already working with their backs against the wall. They need to balance a desire to win (now and later) with the desire (need?) to get below the tax line by the summer of 2014.

Fortunately, there’s a ready made plan of attack already built into the contracts the Lakers currently have on their books. In the summer 2014, the Lakers don’t have a single player under contract. That is the summer Kobe, Pau, Ron, and Steve Blake’s contracts all expire. At that point, the Lakers can (and likely will) work under the framework of the CBA to rebuild their team into one that can contend as quickly as possible while not going into luxury tax territory. The decisions that will need to be made at that point (especially in regards to Kobe) will be hard ones no doubt, but they’re properly set up to make them.

(Side note: What happens with Andrew Bynum long term will affect the Lakers’ payroll for 2014 and beyond. If he signs an extension or tests free agency but returns to the Lakers, he will be on the books beyond 2014 and his salary must be accounted for here. The same can be said if he’s traded for an equal talent that the Lakers feel is a cornerstone player for their future. Whatever the case, it’s fair to assume the Lakers will have a max (or close to max) level contract on their roster that summer. However, that doesn’t change the fact that the aforementioned players’ contracts are expiring and the team will be positioned to get under the tax line that summer.)

Of course, that’s not the only year with financial concerns. The 2013-14 season will hit the Lakers hard in terms of tax payments. Eric Pincus did some math on the matter and estimates a $92 million dollar payroll in player contracts (an amount he calculates based off filling out the roster) will equate to $144.5 million dollars in payroll + luxury tax payments. Are the Lakers willing to spend that much that season? The answer to that question will dictate every roster decision we see in between now and then.

As we’ve been saying all off-season, the Lakers will have many decisions to make in terms of how they want to build a team and what model will be most successful for them. However, we mustn’t forget that financial concerns will always loom large. These concerns will be part of every roster move made (or not made) and will shape the details of any deal significantly. So, while Andrew Bynum’s option being picked up was a no-brainer and great news for Lakers fans, there will be harder decisions to be made in the future in how the Lakers spend to compete.

*Payroll and salary information via Shamsports


Darius Soriano

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