Explaining Carmelo

There have been some Bull’s fans drinking the Carmelo Kool-Aid that he was always going back to New York. One person’s theory (my dad) was that he was trying to drive up the price, but that’s not how salaries in the NBA work. And when it all comes down to it, this was driven primarily by money, but only because Melo couldn’t get the money elsewhere.

Unlike baseball, salaries in the NBA have a limit. Not just in a salary cap sense (more on that soon), but in a sense that depending on a particular player’s experience level there is a maximum yearly salary they can receive. For example, if every single team had an infinite salary cap, no one team could offer a player a higher yearly salary than another player. But a team re-signing it’s own player can offer that player a 5-year contract instead of a 4-year contract. So even though the yearly salary can’t be higher, the total value of the contract can be higher if the player re-signs with their current team.

That is not the only advantage a team has when re-signing their own players. Because there is not an infinite salary cap, teams can only offer a salary equal to the amount of money they are under the salary cap. In the case of the Bulls this number was somewhere around $16-18 million if they amnestied Carlos Boozer1. So barring any sort of maneuvering, Carmelo could not only get an extra year on his contract with New York, but also a higher yearly salary.

There is a workaround to the salary cap restriction. Re-signing a player allows a team to go over the salary cap. This is why New York could offer Carmelo a “max” contract no matter what. The other workaround is to trade for players. Even if a team is over the salary cap, as long as they trade salaries away to make sure that their payroll doesn’t go up by more than 25% these trades are legal. When it comes to free agents like Carmelo, the answer is what is called a “sign and trade”. Essentially Carmelo signs a contract with the Knicks who have already agreed to trade him to another team. It’s hard to fathom a situation where this was not Carmelo’s #1 option. He would have received all the money he wanted plus end up on a very strong contender. Most likely Phil Jackson either refused, or asked the Bulls for more than they were willing to part with (likely some combination of Taj Gibson and/or Jimmy Butler).

Some would say that he should want to win bad enough to take less, but it’s easy to say that when $30M dollars is not hanging in the balance. The pressure in Chicago to win would have been pretty high. Most pundits were already saying Carmelo would easily make the Bulls the best team in the East. Staying in New York still leaves much lower expectations, and one would assume most of the pressure there now falls on Phil Jackson. Plus if Carmelo were to win a title in New York, he would be the hero of the franchise and that is worth way more than being second to Michael Jordan in championships in Chicago.

Carmelo is going to make some serious cash over the next few years, and the ceiling for winning in New York is well beyond anything that would come with winning elsewhere. As much as it breaks Bulls fans hearts, it makes a lot of sense for him.

  1. It’s not worth digging to deep into this concept, and it happened yesterday anyway []