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On Saturday the Los Angeles Lakers’ Kobe Bryant tore his Achilles tendon in the fourth quarter of a game against the Golden State Warriors.
Following surgery, the early prognosis is that Bryant may not be cleared to play for six to nine months.
Bryant will be 35 years old when he returns and 36 by season’s end. It will be a long road back for the veteran, who has been in the league since he was 18.
In all likelihood he will not be the same player when he returns, as we saw firsthand this season with the LA Clippers’ Chauncey Billups, who returned from a similar injury at around the same age.
Billups has struggled in the 20 games since his return, looking a step slower than before the injury and a mere shadow of his former self.
The Lakers will pay Bryant an estimated $30.5 million for the 2013/2014 season, making him the league’s highest paid player.
It is a remarkable amount for someone who may miss most of the season and in all likelihood will not return to his best, assuming he can, until the following season.
The Lakers have around $80 million in contracts signed for next season for only eight players, which puts them around $20 million over the NBA salary cap.
Note that this does not include centre Dwight Howard who, if re-signed by the Lakers, will push their payroll to around $100 million.
In the NBA, teams that spend over the salary cap are subject to what they call a luxury tax, which kicks in when a team’s payroll exceeds around $70 million.
For every dollar spent over the luxury tax threshold, a team will pay tax that increases the cost of its payroll. Effectively it is a method to limit the ability of wealthy teams to buy championships.
The new collective bargaining agreement, ratified in December 2011, increased the luxury tax that applies to teams exceeding the salary cap.
Previously the tax had been applied on a dollar-for-dollar basis: that is, if you spent $1 million above the threshold you paid a luxury tax of $1 million.
However, under the new agreement a progressive tax system is used which makes it increasingly costly to spend above the cap.
What does this mean for the Lakers? If the Lakers re-sign Howard they will already be facing a team salary of around $100 million for just nine players.
The Lakers will have to sign at least 12 players, so for simplicity we will assume this pushes the Lakers’ payroll to $105 million.
Based on a payroll of $105 million the Lakers would be around $35 million over the luxury tax threshold.
Consequently, they would pay a luxury tax of almost $110 million in 2013/2014, which brings their total player payments to $215 million.
The LA Lakers are an extremely wealthy organisation but these figures cannot be ignored.
The Lakers will explore options to reduce their payroll but one option, which has become relevant following Bryant’s injury, must be considered: should the Lakers amnesty Bryant’s contract?
The amnesty provision is a one-time opportunity for teams, following the new collective bargaining agreement, to release one player and remove him from the team’s salary payments and luxury tax considerations.
Normally this provision is used to remove bad contracts for underperforming or injury-riddled players and has made it easier for poor teams to rebuild.
Under the amnesty clause, the team stills pays out the guaranteed portion of the players contract but it does not count against the team’s payroll and the player can seek other opportunities.
For the Lakers, an amnesty agreement means that they would pay Bryant $30 million but that salary would be immediately removed from the team’s payroll and they would also save money by reducing their luxury tax payments.
This would reduce the Lakers’ payroll to $75 million, which would require them to pay a luxury tax of $7.5 million.
The Lakers’ total payroll after releasing Bryant would be $113 (including Bryant’s contract), which indicates savings of around $100 million.
Actual savings would likely be much greater since insurance would pay much of Bryant’s 2013/2014 contract.
Under the amnesty clause, Bryant would not be able to play for the Lakers in the 2013/2014 season but could be signed by another team. Bryant would be eligible to return to the Lakers the following season under a new contract.
Obviously there are additional considerations beyond the financial consequences that should be considered.
Bryant has played 1,459 games for the Lakers (in the regular season and playoffs) since debuting as a teenager in 1996 and is widely viewed as one of the Lakers’ greatest players. He is the undisputed leader at the club and one of the fans’ favourite players.
Given his contribution to the Lakers (on the court and financially) it seems reasonable to suggest the Lakers should provide some loyalty in return. But what value should be placed on loyalty?
While such a decision might make financial sense it could be a PR nightmare, which angers and confuses the Lakers fan-base.
There is also the possibility Bryant would sign with another team and never return to the Lakers, particularly if he feels betrayed by management.
Furthermore, there may be other, less controversial options to reduce the team’s payroll, such as not re-signing Howard or dumping the expiring Pau Gasol contract on another team; both moves would go some way to reducing the luxury tax that the team will pay in 2013/2014.
Regardless of the Lakers’ final decision, the financial argument for releasing Bryant is compelling.
The Lakers salary cap situation cannot be sustained and decisions will be made on a number of players, including Bryant.
The decision will ultimately depend on how quickly Bryant can recover from surgery and return to the court.
Bryant has a reputation for recovering from injuries faster than expected and it would surprise few if he managed to will himself back before the end of this year.
Nevertheless, it poses an intriguing conundrum for Lakers’ management and will test whether any loyalty remains in the NBA.
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