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The Cap and the Holds

So what’s the Nets’ salary situation for next season? Are they going to be below the cap in the off season? Will they be able to sign any of the big stars?

The answer is complicated, but the bottom line is that even with the trades of Jason Kidd and Jason Collins, the Nets are unlikely to have much cap flexibility…certainly not as much as many fans expect. Still, the front office won’t have to worry about the luxury tax, as they have since the summer of 2004, and they will have a lot more flexibility than if they hadn’t made the trades.

As of today, the team will $49 million to nine players next season, assuming that Stromile Swift doesn't exercise his player's option of $6.2 million and become a free agent. That will be about $8 million under next year’s projected cap.

But that’s just the beginning of cap calculations. Here’s where things get complicated.

That $49 million figure doesn't include "cap holds" necessary to hang on to the rights of the Nets’ three free agents along and their two first round draft picks. Under the collective bargaining agreement, the Nets have to set aside a reserve—a "cap hold"—on each of their free agents: Nenad Krstic, who is restricted, as well as Boki Nachbar and Desagana Diop, both of whom are unrestricted.

In the case of Krstic, who is still on his rookie contract, the CBA requires a hold equal to three times his 2007-08 salary, or $5.67 millon. For the other two, the hold is equal to twice their 2007-08 salary. That’s $5 million in the case of Nachbar and $4.3 million in the case Diop.

Assume the Nets’ two first round picks are #15 (their own) and #22 (Dallas’). The "cap holds" for first round picks are equal to what the teams will pay them under the rookie contract scale. So the player chosen at #15 will have a $1.4 million hold and the #22, a $1 million hold. (There are no "cap holds" required on second round picks.)

That’s a grand total of nearly $17.4 million in "cap holds" on top of the $49 million for a grand total of $66.4 million for 14 players.

The "cap hold", of course, is often far in excess of what a team will eventually pay the player. For example, the Nets are highly unlikely to pay Nachbar $5 million next year. Krstic may or may not get to $5.7 million, depending on his health. He and the Nets could also agree to a qualifying offer. That way, the Nets would only have to pay him $2.76 million next season, but he would an unrestricted free agent in 2009. Of the three, Diop is the most likely to command a salary close to his "cap hold" of $4.3 million. Big men get paid in the NBA.

Artificial or not, the holds will affect the Nets’ personnel decisions until the players agree on deals. Once the two sides agree to a salary, then the "cap hold" goes away, replaced by the player’s actual salary. A team can also relinquish rights to a player, like Orlando did last summer with Darko Milicic. And of course if a player signs with another team, the "cap hold" disappears with a stroke of his pen.

Still, the Nets would have been in a lot tighter place without the trades that sent Kidd to Dallas and Jason Collins to Memphis. The team would have been looking at $59.96 million owed seven cap holds for Malik Allen, Antoine Wright and their own first-round pick.

With Kidd's $21.3 million contract now Mark Cuban's problem, the Nets' biggest contracts will be, barring trades, Vince Carter's $15.2 million, Richard Jefferson's $13.2 million and Devin Harris's $7.8 million. Swift, if he does not exercise his player option, will be next at $6.2 million.

The Nets will also have some extra cash to play with. The franchise received $3 million from the Mavs in "cash considerations" in the Kidd deal, the max allowed. It had already agreed to send an unknown amount to Memphis in the Collins deal...probably $300,000, the difference in salaries.

The Nets had also sent an unknown amount to the Hornets in October to balance the David Wesley -for- Bernard Robinson and Mile Ilic trade. That was a salary dump since Wesley was owed a guaranteed $250,000 on a $1.75 million contract and Robinson and Ilic were owed $1.95 million. So assume the cash in that deal was equal to the difference, or $1.7 million. So the net for the Nets in those cash exchanges is probably about a million dollars.

They may have also saved some money in the Jamaal Magloire buyout, assuming it amounted to what he had already been paid, around $3 million of his $4 million salary.

And by staying under the luxury tax threshold as a result of all those machinations, the Nets will also be eligible for a payout from the league. Once the luxury taxes are collected, they are dispersed to the teams that were frugal enough to stay under the tax threshold. In the Nets' case, that should amount to another $2.5 million this summer.

Should the team want to sign anyone in the last few weeks of the season--as both Thorn and Lawrence Frank have hinted they might, they have a significant cushion. They're currently about $7.7 million under the luxury tax threshhold of $67.865 million, meaning no dollar-for-dollar taxes.

On February 1, they were treading water and right at the threshold, probably within a couple of hundred thousand dollars, at most of paying a luxury tax. They were close enough the injuries forced them to pay D-League call-ups Eddie Gill and Billy Thomas nearly $260,000. Trading Collins for Swift gave them a little more of a cushion. There was a small disparity--$300,000--between the two players' salaries. Then, the Nets saved $6.413 million in the Kidd trade even with the $4.3 million demanded by Keith Van Horn. (The Nets took in $15.765 million in salary and sent out $22.178 million.)

Will the Nets use whatever flexibility they have to make big trades that restructure the Nets' salary picture ... as the 2004 KMart and Carter trades did, as the 2008 Collins and Kidd trades did? It will be dependent on a number of things, and not all of them on the court. It could also be dependent on the economy. Owners, particularly those in a credit sensitive business like real estate, may not be willing to take a risk the GM would.