NBA Free Agency 2012: How New Collective Barganing Agreement Will Impact FA's

While the 2011 NBA lockout certainly wasn't much fun for fans and players alike, it did establish important guidelines for how the NBA is run.

The new collective bargaining agreement, or CBA, established some new procedures for many of the league's major facets, including free agency.

While some policies remain the same, here are some important issues to keep in mind while following this summers free agent frenzy.

More information and dates and statistics used for this article can be found here.

Important Dates

Here are some important dates to keep in mind concerning the league year, free agency and trading newly-signed players:

-June 30th: Last day to extend qualifying offer to players coming off rookie contracts.

-July 1st: New salary cap year begins, teams may negotiate with free agents.

-July 11th: Teams may officially sign free agents.  Teams have three days to match offer sheets to their own restricted free agents.

-July 16th: First-round draft picks become free agents if not offered contract.

-September 6th: Second-round draft picks become free agents if not offered contract.

-December 15th: Players who signed on or before September 15th can be traded for the first time.

-Mid-April: Last day free agents can sign contract is day of last regular season game.  Teams are responsible for entire salary in contract, salary cannot be pro-rated.

So during this time while we hear of players "agreeing" to contracts, nothing can be official until July 11th.

Salary Cap

The NBA salary cap changes from year to year and is based off of how much money the league brings in, or basketball related income (BRI for short).

This is to ensure that the league's teams can't have a spending spree if the league itself is tanking.  If the money coming into the league drops, the money teams can use to spend on players drops and vice versa.

For example, under the old CBA of 2005 the cap was set at 51 percent of the league's BRI which totaled a salary cap of $49.5 million in 2005-06.

The NBA fought to lower this percentage in the new CBA, meaning they could make more money without teams being able to spend more.  Under the CBA of 2011 the salary cap is based on 44.74 percent of BRI which equaled out to $58.044 million in 2011-12.

The soft cap for 2012-2013 is believed to be in the $58-$60 million range, meaning free agent contracts should remain similar to previous years.

Salary Cap Minimum

While teams are limited in what they can spend, it's also worth noting that there is a minimum amount that teams have to spend in order to keep the league competitive.

Under the 2005 CBA this number was 75 percent of the salary cap.  With the new CBA this number has increased, up to 80 percent of the cap in 2011-12, 85 percent in 2012-13 and 90% thereafter.

This means teams must spend more to meet the minimum requirement, a move that serves as a big advantage to free agents looking to cash in.

Maximum Contracts

Players set to sign maximum contracts such as Eric Gordon and Roy Hibbert are actually going to see a cut in pay from the old CBA rules.

With the 2005 version, maximum salaries were based off 48.04 percent of the BRI the league brought in.  The 2011 CBA saw this number drop to 42.14 percent.

While this isn't a huge difference in percentages, it does mean a few extra million dollars that the max contract player is missing out on.

Still, I don't think anyone will feel bad for Gordan when he only makes $58 million over the next four years.

Length of Contracts

While restrictions have been put on how much money a player can make, there have also been changes to the length of the contract as well.

In order to help save teams from long, bad contracts the new CBA states that the maximum length of a deal a player eligible for Bird rights (spending three consecutive years with the same team) can sign is five-year deals.  Those without Bird rights can only sign four-year deals.

This is a change from the previous six-year contracts players with Bird rights could sign and seven years from the CBA before 2005.

Sorry Kobe, no more seven-year, $136 million deals.

Sign-and-Trades

As is the case with Steve Nash to the Los Angeles Lakers, free agents can agree to be traded as part of a sign-and-trade deal.

This can only happen if the player, his former team and his future team all agree to the deal.  With Nash, he could have only joined the Lakers for a fraction of the $27 million deal he will sign with them upon agreeing to the trade due to LA being over the salary cap.

Previously, players were allowed to sign six-year deals under a sign-and-trade like LeBron James and Chris Bosh did when joining the Miami Heat.  Had they signed with the Heat directly, they could have only received five-year deals.

Under the new CBA, the six-year deal has been reduced to four years, the same number a free agent could sign on his own while joining a new team.

With Nash this wasn't an issue because no team was offering more than a three-year deal anyways to the 38-year-old.

Mid-Level Exception

For players looking to make their way onto a contender as a mid-level exception, expect a drop in salary from previous years.

The 2005 CBA had a mid-level exception set at $5.765 million with an eight percent increase each year, up to five years.

The 2011 version has seen both a reduction in salary and total amount of years, down to $5 million (base salary grows by three percent annually beginning in 2013-14), with 4.5 percent raises for up to four years for teams below the luxury tax threshold. 

Taxpaying teams like the Los Angeles Lakers and Miami Heat are limited to three years, with a  $3 million base salary.

This rewards teams who don't run up the payroll while also allowing them to rid themselves of mid-level players who aren't living up to the contracts they originally signed (cough, Metta World Peace, cough) a year earlier.

Gilbert Arenas Provision

The Gilbert Arenas provision was originally created so that teams wouldn't be out-bid for their own restricted free agents due to limited cap space.

When offering a contract to a player with one or two years in the league, like Jeremy Lin, the first-year salary in the offer sheet cannot be greater than the Non-Taxpayer Mid-Level exception which is currently set at $5 million.

This allows the Knicks to match any first-year offer that Lin gets because they can afford the mid-level amount despite already being over the salary cap.

The trick that the Houston Rockets are currently trying to lure Lin away is the ability to back-load such a contract.

The Rockets can only offer a contract starting at $5 million but want to pay Lin $30 million over four years.  Under this provision, they can do this by back-loading.

Here's how it's set up.  The second-year salary in such an offer sheet is limited to the standard 4.5 percent raise. The third-year salary can jump considerably—it is allowed to be as high as it would have been had the first-year salary not been limited by this rule to the Non-Taxpayer Mid-Level exception, so Lin's third and fourth year on the deal would be roughly $10 million each to makeup for the low starting salary.

A four-year, $30 million contract would have to be structured like this:

Year	Money
12-13	$5,000,000
13-14	$5,200,000
14-15	$10,000,000
15-16	$10,380,000

The cap hit against the Rockets would be $7.5 million each year, the average amount per year of the length of the contract.

Recap

Here's a brief recap of what's changed in free agency:

-Players and teams can negotiate contracts starting July 1st, but can't officially sign until July 11th.

-The salary cap is likely to stay around the $58 million it was set at this year.

-Team's payroll must now be at least 80 percent of the soft cap.

-Free agents with Bird rights may only sign five-year deals, those without may only sign for four years.

-Sign-and-trade contracts may only last four years.

-The mid-level exception is set at $5 million and can only last four years.

-Players like Jeremy Lin who have only been in the league for one or two years can still get rich, they just have to wait a few years to do so.

-Financial and collective bargaining agreement talk aside, it's just nice to have free agency back in July again.

Let's hope the next lockout is a long, long ways away.