Increasing Your Hard Cap

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‘Oh, hello.’ – Mikhail Phrokhorov

Are you a small-market team jealous of the gobs of money that some DKC teams get to throw around like they own half of Russia’s oil fields?

Well, if you’re any good at this fake GM thing, maybe–just maybe–you can get more fake money to spend on fake players in this fake league. Convince your owner that you can take your team on a playoff run, and he’ll open his checkbook. There’s a catch though: Deliver on your promise, and you’re a local hero. Fail, and suffer humiliation, and a reduced budget next year.

Read on for the details on how the Franchise Paths to Contending, Competing, or Developing determine by how much you can raise your hard cap, you Daryl Morey wannabes.

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For the more visual, or for those looking for an abridged quick reference. Click Here

The following lays out the options available to GMs who wish to increase their team’s hard cap (the maximum spending allowed by team owner).

Increases to hard caps may be available to GMs who have demonstrated success, or have a reasonable expectation of success for the upcoming season. However, these increases do not come easy: GMs will be expected to meet certain benchmarks, depending on what level increase they have requested.

Before we begin, here are some important figures and terms to define:

Payroll: Actual salaries spent or paid out. This includes payment for all active players currently under contract, as well as payment to players who are no longer on the roster whose salaries may have been fully or only partially guaranteed. This does not include cap holds for overseas or other unsigned and unrostered players, nor does it include penalties or fines, excepting those levied by the ‘owner’ (more on that later). Payroll numbers for the 2013-14 season will be assessed the day after the last day for roster transactions for the 2013-14 season (which should be during the last week in June).

Hard Cap: This is the maximum amount, or ceiling, that a GM can spend on team payroll in a given season.

Basement Hard Cap: this is the minimum hard cap that all DKC teams will be able to spend up to. For the 2014-15 season, the basement hard cap will be set at the 2013-14 salary cap ($58 million) plus the amount of the full mid-level exception ($6 million), plus an additional $1 million, or $66 million total. All DKC teams will be able to spend up to this amount.

Luxury Tax Threshold: this is an important marker for team spending, as it has historically distinguished (but not defined) teams willing to spend to contend. For the 2014-15 season, the luxury tax will be set at $2 million above the 2013-14 season tax line ($71 million), or $73 million.

Luxury Tax Apron: this is another marker for team spending. In the NBA and in the DKC, the apron is set at $5 million above the luxury tax; thus, for the 2014-15 season, the apron for the DKC will be set at $78 million.

The Idea Behind Budget Increases:

Theory: GMs should have the option of asking their owners for more money to spend, provided that the extra spending will result in more wins. GMs who ask for increased spending must indicate a clear direction of the franchise with a simple goal in mind.

At the outset of the season, preferably before the first team transaction of the new season, each GM in the DKC will announce that his team is following one of three paths:

1. Contending: expectations of a top 4 conference finish, or advancement to the second round of the playoffs. Note: a team needs to have made the playoffs the previous season, or completed a franchise-altering trade to acquire at least one major player. For the purpose of this model, a lottery draft pick does not immediately turn a developing team into a contending team.

2. Competing: expectations of a playoff berth.

3. Developing: no playoff expectations, but a focus on developing players and acquiring assets. Note: no GM can choose a developing path for his franchise for three consecutive seasons.

Each one of these paths will inform potential spending increases available to GMs, depending on payroll spent the previous season (details below). Failure to meet owner expectations despite increased spending will result in penalties in the following season (outlined below).

1. Contending Path:

Contenders must have appeared in the playoffs the previous year, or completed a franchise-altering trade to acquire at least one major player that sets them “in the running” for a deep playoff run (advancement to the second round of the playoffs, at least). The owner expectation is a top 4 finish in the conference, or advancement to the second round of the playoffs.

Contenders may see their hard caps increase according to the following:

  1. Teams above the Luxury Tax Apron may request a 4% increase to their previous season’s hard cap, up to an absolute maximum spending level of $96 million. No team may spend more than $96 million in payroll, beginning in the 2014-15 season.
  2. Teams above the Luxury Tax Line but below the Apron may request a 5% increase to their previous season’s hard cap.
  3. Teams below the Luxury Tax Line may request a 7.5% increase to their previous season’s hard cap.

Failure to meet the expectations of Contending Path status in 2014-15 will result in the following:

  1. Teams above the Luxury Tax Apron will revert to their 2013-14 hard cap, minus a $4 million penalty, and cannot request an increase for the 2015-16 season.
  2. Teams above the Luxury Tax Line but below the Apron will revert to their 2013-14 hard cap, minus a $3 million penalty, and cannot request an increase for the 2015-16 season.
  3. Teams below the Luxury Tax Line will be capped at the Luxury Tax for the 2015-16 season, and cannot request an increase for the 2015-16 season.

Repeated failures to achieve owner expectations will result in longer periods of frozen spending levels (a second failure will result in two years of frozen spending levels, while a third failure may result in even harsher penalties).

2. Competing Path:

GMs need not have achieved any benchmarks in the previous season in order to choose the Competing Path. The owner expectation is a playoff berth.

Competing GMs may see their hard caps increase according to the following:

  1. Teams above the Luxury Tax Apron are not eligible for a spending increase if they choose the Competing Path.
  2. Teams above the Luxury Tax Line up to the Tax Apron may request a 5% increase to their previous season’s hard cap.
  3. Teams with payroll up to Luxury Tax Line may request a 7.5% increase to their previous season’s hard cap.

Failure to meet the expectations of Competing Path status in 2014-15 will result in the following:

  1.  Teams above the Luxury Tax Apron: n/a (merely Competing is not an option).
  2. Teams above the Luxury Tax Line but below the Apron will revert to their 2013-14 hard cap, minus a $3 million penalty, and cannot request an increase for the 2015-16 season.
  3. Teams below the Luxury Tax Line will be capped at the Luxury Tax for the 2015-16 season, and cannot request an increase for the 2015-16 season.

Repeated failures to achieve owner expectations will result in longer periods of frozen spending levels (a second failure will result in two years of frozen spending levels, while a third failure may result in even harsher penalties).

3. Developing Path:

GMs need not have achieved any benchmarks in the previous season in order to choose the Developing Path. There are no owner expectations for Developing Path GMs, but a GM cannot choose this Path for three consecutive seasons. The expectation after two straight years of Developing is that the franchise is ready for the Competing Path.

Competing GMs may see their hard caps increase according to the following:

  1. Teams above the Luxury Tax Apron are not eligible for a spending increase if they choose the Developing Path.
  2. Teams above the Luxury Tax Line but below the Apron are not eligible for a spending increase if they choose the Developing Path.
  3. Teams below the Luxury Tax Line may request an increase equivalent to the value of the MLE, or a 7.5% increase to their previous season’s hard cap, whichever they prefer.

Because there are no owner expectations of Developing Path GMs, there are no penalties to assess for failure.

Note: GMs who voluntarily maintain or even decrease spending levels while on a Path may earn points with their owners. These benefits will be explained in the near future.

Budget Neutrality:

Of course, GMs may not necessarily need to ask for an increase to their hard cap, if they feel confident enough in their chances to meet the expectations of their particular Path choice. GMs who do successfully meet owner expectations at the Contending or Competing level will receive the good graces of the owner, under what is called an “Owner’s Chip” that can be redeemed for various benefits throughout the season.

1. Contending Path:

To repeat, contenders must have appeared in the playoffs the previous year, or completed a franchise-altering trade to acquire at least one major player that sets them “in the running” for a deep playoff run (advancement to the second round of the playoffs, at least). The owner expectation is a top 4 finish in the conference, or advancement to the second round of the playoffs.

GMs who successfully meet the expectations of a Contending franchise without having increased spending earn an Owner’s Chip, which can be used for one of the following benefits:

  1. GMs may request a half-share increase to their hard cap (for teams over the Apron, a 2% increase, for teams over the Tax Line, a 3% increase, and for teams below the Tax Line, a 4% increase) at any point during the season, with the only expectation of a playoff berth. (If the playoffs are not reached, the team hard cap reverts to former level the following season, but an increase may be requested.) Note: team may spend more than $96 million in payroll, beginning in the 2014-15 season.
  2. GMs may elicit the aid of their Owner in attempting to sign a free agent, by executing a “Hard Press” during the FAM process. [I’ll need to flesh this out, but it should substantially boost FAM scorers for the bid team, but not serve as an automatic win button.]
  3. A GM may cash in an Owner Chip to avoid incurring a penalty for failing to meet expectations for the Contending or Competing Path (basically, a “get out of jail/doghouse free” card).

2. Competing Path:

To repeat, GMs need not have achieved any benchmarks in the previous season in order to choose the Competing Path. The owner expectation is a playoff berth.

GMs who successfully meet the expectations of a Competing franchise without having increased spending earn an Owner’s Chip, which can be used for one of the following benefits:

  1. GMs may request a flat increase to their hard cap of $1 million dollars, with no owner expectations to meet. Note: team may spend more than $96 million in payroll, beginning in the 2014-15 season.
  2. A GM may cash in an Owner Chip to avoid incurring a penalty for failing to meet expectations for the Contending or Competing Path (basically, a “get out of jail/doghouse free” card).

3. Developing Path:

To repeat, GMs need not have achieved any benchmarks in the previous season in order to choose the Developing Path. There are no owner expectations for Developing Path GMs, but a GM cannot choose this Path for three consecutive seasons. The expectation after two straight years of Developing is that the franchise is ready for the Competing Path.

GMs who choose a Developing path and do not request an increase of their hard cap may earn an Owner’s Chip, redeemable at a later date to avoid incurring a penalty for failing to meet expectations for the Contending or Competing Path (basically, a “get out of jail/doghouse free” card).

Budget Reduction:

Some GMs, particularly those on the Developing Path, may feel that cutting payroll to achieve benefits from their owner may be a strategy to pursue. GMs who voluntarily lower their hard caps by more than 5% and still successfully meet owner expectations at the Contending or Competing level will receive the good graces of the owner, via what is called an “Owner’s Chip” that can be redeemed for various benefits throughout the season.

Given the difficulty of successfully meeting the benchmarks of a Contending Path franchise while also reducing payroll, GMs will receive double the rewards of their counterparts as explained above; in other words, two Owner Chips to redeem at any point in the future, for rewards that correspond to Contending or Competing teams as outlined above.

Developing Path GMs who reduce payroll by more than 5% will receive a single Owner Chip that can be used at a future date to negate the penalties incurred for failing to meet owner expectations at the Contending or Competing levels.

 

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