Sunday, July 8, 2012

Chicago Bulls And The Perfect Storm

Seeing Derrick Rose go down with a minute left in Game 1 against the 76ers, not only did my heart sink with sadness but I started to think of the Bulls window of opportunity. Having your franchise player, native son clinch his knee in pain is not a good sight and I started to question the Bulls ability to win a championship within the next three years.

The Bulls seem to be heading into a perfect storm: Injured franchise player (Rose), bad contract (Boozer), stagnant offense, and financial concerns.

The Art of War, NBA Style
Houston made a $24m/3yr offer to Omer Asik. That offer, as Robert Mays of Grantland points out, handcuffs the Bulls financially:
For Houston, Asik’s cap hit each year would be the total money evenly split over three seasons. For the Bulls, it would mean having to pay that $14 million in the final year, a figure that would put them way over the luxury tax threshold right when the tax penalties are slated to become even more severe for repeat payers. That difference in $6 million makes matching the Rockets’ offer go from irresponsible to nearly impossible.
The $14m the Bulls would have to pay in year three is quite a lot of money -- especially for a backup center. This strategic move the Rockets made would make Sun Tzu proud.

Financial Handcuffs
Here's a quick look at how much the Bulls owe going into next season:
  • Rose | $15m
  • Boozer | $15m
  • Noah | $11.3m
  • Deng | $13.3m
  • Hamilton | $5m
  • Gibson | $2m
  • Butler | $1m
  • Total: $62.6m
That's seven players under contract next season. Let's assume that the salary cap is set at an even $62.6m next season. This means that the Bulls still need to fill 5 spots and they're already breaking even with the salary cap.

The luxury tax states that a team over the salary cap will have to pay a dollar surcharge (tax) for each dollar over said cap. So the Bulls, as of now, would owe $0 dollars in a luxury tax.

If the Bulls sign Asik, add $5m over the cap (now $5m in luxury tax). Oh, and don't forget, you'll need to resign Taj Gibson at some point as well as 4 other roster spots. Without some type of trade of a big money contract, paying a luxury tax seems inevitable.

As passporthoops points out there were some teams who were waaaaaaaay over the salary cap last season: Lakers ($30m over), Heat ($20m over), and Knicks ($8m over) but going over the cap and paying a penalty depends on how loss averse an owner is.

A Lesson In Losing Money
“The first rule of investing is don't lose money; the second rule is don't forget Rule No. 1.” - Warren Buffet
I can imagine Jerry Reinsdorf sitting in his plush, leather chair deciding where to throw money away: paying the luxury tax or amnesty Carlos Boozer. If the Bulls retain Asik, the Bulls will have to pay a luxury tax of $5m next season and somewhere in that area for 2013 because of a Gibson deal. But wait -- we still need to fill four more spots on the roster!!! If the Bulls do sign Asik, I expect the luxury tax to increase to a good $8m next season. Whether it's the luxury tax or amnesty Boozer, Jerry Reinsdorf is losing money. And Jerry doesn't like to lose money... he's in the business of getting a return. And although the Bulls have been in the top 5 in the league for profits, I highly doubt Jerry is just going to sit there and lose money.

The way I see it, there's two ways out of this:
  1. Amnesty Boozer in 2013: although Boozer's salary doesn't count against the Bulls salary cap, it does HOWEVER count against Reinsdorf's pocket. Reinsdorf will still have to pay that salary -- the problem of him losing money isn't solved. Boozer had a win share of 7.6 last season and played in all 66 games. We'll need every bit of those 7.6 wins next season while Rose and Deng are on the mend.
  2. Trade one of the core players: Deng, Noah or Boozer. This is why there was trade talks of Deng, he's versatile but only offered a 5.8 win share last season (he played 54 games). The Bulls brass were approaching the Deng situation correctly: trade him now while he still has some value. Noah and Deng are the only tradeable assets the Bulls have -- any investigations of trading either should happen.

Leaning On The Future
The help the Bulls receive can be in the development of their younger players like Jimmy Butler and Marquis Teague.

The draft pick of Marquis Teague was a gift in the Bulls lap. He's a player that can break down defenses off the dribble. Whether he starts or not in Rose's absence, I'm less concerned with, as we'll need this ability from someone next season. If Teague picks up the offense, I like having that insurance policy behind Rose and occasionally having Teague run the point and Rose the two-spot. Yes, it will be a small backcourt, but I like having two guards that can break you down with speed, athleticism and making the play on the floor at the same time.

We'll also be leaning on Jimmy Butler who the Bulls are high on and who comes cheaper than Ronnie Brewer. I think Jimmy can contribute more, offensively, than Brewer.

But make no mistake about it, Bulls fans -- the next three or four years are predicated on the progression of Teague and Butler. If they struggle to find a rhythm offensively, it could set the organization back a season or two. This is not a good thing if Miami keeps retooling.

Reversing The Window
The Bulls can reverse the window by thinking strategically on how much Reisndorf is willing to lose, losing $15m on Boozer's contract seems out of the question. But paying $7-10m in luxury tax the next couple of seasons doesn't seem reasonable either. Keep in mind, the Bulls also need a potent two-guard to even compete for a title... and those don't come cheap.

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