David Stern did the right thing

Jared Wade writes the Indiana Pacers blog Eight Points, Nine Seconds.

Why David Stern Wouldn’t Send Chris Paul to the Lakers

When David Stern refused to sign off on a deal that would send the best player in Hornets history to the Lakers, the world went bonkers. Popular opinion agreed: this was the act of a commissioner overstepping his authority. This was an old, out-of-touch, meddlesome man interfering with a transaction that the steward he assigned to govern the league-owned Hornets, Jac Sperling, had presumably approved. We don’t know the precise time line on all the events that transpired last Thursday, but Stern’s veto proved that Hornets management did not have autonomy over player personnel decisions.

Lost in the outrage, however, is the fact that the proposed deal, as reported, could be considered terrible for the New Orleans Hornets. On the court, a roster built around Kevin Martin, Lamar Odom, Luis Scola, Emeka Okafor and Goran Dragic cannot be considered terrible. Because it isn’t. That’s a solid squad. But when we presume that the current mission of the team is less about winning games and more about ensuring the team is attractive to potential franchise buyers in or near New Orleans, a roster including those players may be detrimental.

In fact, it’s arguably worse than the current team.

It is a rare to find a rich business person who wants to buy a barely profitable, mediocre company with dwindling brand cachet and long-term liabilities. And those qualities are what most of the players who were rumored to be heading to New Orleans would represent. They aren’t young (Odom is 32, Scola is 31, Martin is 28), they won’t drive ticket sales, and only Lamar — thanks to his wife — has a Q rating that makes him remotely marketable to casual fans. Worst of all, they bring with them serious financial commitments for any potential owner.

Right now (not including the rumored re-do deal the Hornets are trying to make with the Clippers), New Orleans’ payroll has some issues but no more than you would expect from an NBA team. Presuming Chris Paul would opt out in May (a date by which when the league likely wants to have a new buyer lined up), the team has $93 million in salary committed over the next three seasons. After then, it has nothing. And that figure is relatively low compared to the rest of the league.

It breaks down as follows.

2011-12: $44.6 million
2012-13: $26.2 million
2013-14: $22.2 million

There are two misleading issues here, however. The key problem is that virtually all the dollars committed after this season go to two flawed, overpaid players: Emeka Okafor and Trevor Ariza. Neither are worthless and both could be key, but not foundational, cogs on a contender. But their salaries (Okafor will make $12.5 million this year, Ariza $6.8 million) mean that there will be a very limited market for their services in a salary-capped league that will soon have an increasingly punitive luxury tax for free-spending GMs. (The harsher tax starts in 2013-14 — the final year of both players’ contracts, which will peak at $14.5 million and $7.7 million, respectively.)

The other issue is a short-term concern: the team only has six players currently under contract. The minimum roster must have 13 players and every team’s payroll must be at least 85% of the salary cap. This year’s cap is the same as last year ($58.5 million), meaning that the Hornets will need to shell out at least $49.7 million.

The players Hornets GM Dell Demps reportedly arranged to acquire would certainly help reach that number. For the 2011-12 season, adding Scola, Odom, Martin and Dragic brings the team’s payroll to $75.7 million. This would put them into luxury tax territory — and they would still need to pay at least three more players. Even presuming minimum salaries for the final three, we’re talking about a league-owned team paying out more than $82 million in salary-related costs alone.

Longer term, the deal adds even more salary commitments. Overall, Scola adds up to $38 million through 2015, Martin adds $24 million through 2013, Lamar adds up to $17 million through 2013 and Dragic adds $2 million through May. That’s not nothing. Together that means that any potential buyer is purchasing $81 million worth of decisions he or she had no role in making.

What Is Stern’s Duty?

The key distinction in how you view Stern’s decision not to allow the Paul-to-Los Angeles trade comes down to one question: Was he was acting as the fiduciary of a league-owned franchise or an overly meddlesome commissioner?

Coming to that second conclusion means presuming that Stern had unsavory motives and perhaps has an insidious grip over the league he governs. It may presume that Stern believed green-lighting a deal that allowed the Lakers — a big-market franchise that has won 25% of the championship trophies awarded  — to employ two of the league’s best 10 players was not in the best interest of league. It may presume he felt pressure from the hawk owners who wanted a hard cap to help curtail the revenue advantages of big market teams. It may presume Stern actually does want Kobe Bryant and Chris Paul in the same backcourt but is scared about the public relations backlash — especially since the Lakers last two titles came after a much-maligned trade gave them Pau Gasol for what appeared to be table scraps. In short, it presumes that David Stern is the NBA’s Wizard of Oz: an all-powerful man behind the curtain pulling strings to design a reality he desires.

The other conclusion is much duller. But unfortunately, it is the one that seems much more logical to me.

It presumes that David Stern looked at the agreed-upon deal and analyzed how it would affect New Orleans’ long-term payroll and attractiveness to potential buyers and said “this won’t do.” It presumes that he does not want to trade Paul to help the Hornets play well on the court, but that he wanted it to help attract buyers. It presumes Stern believes this team needs to reduce long-term fiscal liabilities that could deter bidders. It presumes that instead of getting proven, productive NBA veterans, Stern thinks this team needs to look for more liquid assets – which in the NBA means draft picks and low-salaried players on short contracts. It presumes he wanted to be able to sell something that has value beyond a basketball team: hope.

In all of the other reported trade rumors involving Paul, the Hornets were reportedly discussing the acquisition of young players on very low or very reasonable contracts and/or draft picks. Rajon Rondo, Eric Gordon and Steph Curry are rare, prized commodities who can be the core of a contending team both in 2012 and 2018. Having them on your roster has almost no downside. Draft picks are even better. They are the best asset any team could have in financial terms; a draft pick (a) has no salary today, (b) can theoretically return the second coming of Michael Jordan, (c) may depreciate in value but, unlike a player, can never become worthless, and (d) is easily flipable to any other team in a future trade.

If your roster is low on long-term liabilities and high on coveted assets, you have the ability to not just sell a basketball team. You can sell hope. The league faces the difficult task of manufacturing a local (or nearby) ownership group for the Hornets out of thin air. George Shinn was unable to find anyone who wasn’t looking to move the team from New Orleans. Stern knows his search will be difficult. So he needs to slash the overhead and stack assets.

A franchise flush with such assets is much more alluring to a limited market of uber-rich people who proved uninterested in buying a playoff-ready team from Shinn. It’s a lot easier to get someone to pay $300+ million when they think they have a chance at being the next Oklahoma City Thunder. On the other hand, trying to sell the a post-Paul-to-LA Hornets team is like trying to sell the Hawks. It’s a roster whose on-court potential is nearly maxed out. There is a slim chance it would ever appear in the NBA Finals in the next half decade.

The Final Piece of Stern’s Legacy

I think perhaps too many of the people who have stated that Stern’s decision to not allow this trade to go through is the worst move he has ever made as commissioner (a surprisingly large list) have also made one other incorrect presumption. So many people have questioned why the old man did this when the recently inked CBA was supposed to be his final gift to the league. He has taken the league from an era when Finals games were shown on tape delay to its current heights and, they presume, he wanted to navigate his baby through this labor negotiation. That was his swan song. Then, he would stick around a few more years as the smiling figurehead who shows up at key playoff games before fading away into the night, leaving his now-financially-stable league safely in the hands of Adam Silver.

I think that end game is his plan. But I don’t think finalizing this CBA was his last project; selling the Hornets to a buyer who will ensure professional basketball remains in New Orleans is.

So far in his tenure, there have been six major blemishes on Sterns resume: the 1980s cocaine proliferation, lockout #1, the Malice at the Palace, Tim Donahy, Sonicsgate, and lockout #2. There isn’t much he can do about these. They happened and are now part of both history and his legacy.

But he can make sure there is no Sonicsgate #2.

Through that lens, the Chris Paul situation is much more monumental than anything related to decisions that might upset the likes of Dan Gilbert and Mark Cuban. Why would Stern move mountains to ensure owners who just signed up for a labor deal that lasts until at least 2017 don’t pout? He presumably will be retired by then. Kobe might well be, too. (Or, more likely, he will be a 39-year-old playing on a robotic leg in a futile attempt to break Kareem’s scoring record.) The financial landscape of the league has not been remade into what most owners truly want, but the NBA, as a collective, should not be losing money anymore. Stern righted that ship already in the eyes of the owners. It took a lockout to do it — something Stern certainly wanted to avoid — but he forced a major financial concession from the players. He got the owners something closer to what they want, (a near guarantee of league profitability) even if some wanted him to go further.

Now, in my eyes, he is trying to get what he wants: a near guarantee that professional basketball will continue to be played in New Orleans. If that is his goal, he couldn’t have possibly liked the first deal his proxy managers arranged. And it’s quite possible that that is why he stepped in to veto the deal. If I was the team’s fiduciary, I would have.

Related posts:

  1. HoopSpeak Live: Kobe, Rodman, and Stern
  2. David Stern’s Business Tats
  3. Dismal David Maims His League
  4. Even with a balky knee, can David take down Goliath?
  5. Strange thing: LeBron James being guarded less


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