Sarver Will End Up Paying Luxury Tax

[George O'Brien]

Every NBA owner starts out planning to run his team responsibly and avoiding the luxury tax. Unfortunately it does not take long for reality to set in. It is very hard to win without paying the price.

The Spurs tried to stay on top by signing veterans who could not demand big contracts, but in the end was not athletic enough. According to Hoopshype, they have contracts worth $60.9 million BEFORE trying to re-sign Mohammed (currently underpaid at just $5.5 million) and Udrih is eligible for an extension.

The Mavs already are listed with $74 million before trying to re-sign Jason Terry and Josh Howard is elible for an extension.

The Lakers are already listed as starting with a structure of $67 million and that doesn't include Turiaf.

The Rockets are projected at $54 million with only 9 guys under contract.

The Clippers are below the salary cap at $41, but have Cassell and Rad entering unrestricted free agency plus Ross and Livingston are eligible for extensions.

It is possible to get to the playoffs without spending a lot of money. It is getting harder and harder to win a championship without paying luxury tax much less more than one ring.

It's easy enough to say "I just won't pay luxury tax." It is a lot harder to accept that it could easily preclude winning a championship.

 

[SunsTzu]

I think their info on the Clipper's is wrong. It is Kaman up for extention this year(same class as Barbosa and Diaw) and Livingston next year. I'm also fairly certain Ross signed a 3 year contract last off season.

If Sarver wants to be a contender year in year out he'll have to have a payroll over the luxury tax atleast some of the time. I'm not sure what exactly to believe from what Sarver says, but I do believe him when he says if he was worried about money he wouldn't have bought a basketball team and that there are much easier ways for him to make money.

 

[Gaddabout]

If Sarver wants to be a contender year in year out he'll have to have a payroll over the luxury tax atleast some of the time. I'm not sure what exactly to believe from what Sarver says, but I do believe him when he says if he was worried about money he wouldn't have bought a basketball team and that there are much easier ways for him to make money.

The bottom line is the bottom line. The luxury tax is a menace to Sarver's management plan (and his pride), but it is not impossible to overcome if the line is barely crossed and the Suns make long runs in the playoffs. It's a big gamble, though, even without bleeding into the luxury tax. I think next year the Suns will be hoping to break even by going deep into the playoffs with their hads bumped up against the salary dividing line.

The Suns squeezed out a profit this year by playing 20 playoff games and 10 home playoff games. That's not something you build into a business model, though. First, no model of profitability is going to be based on getting to the Western Conference Finals. Second, it is neither conducive to basketball ops nor accounting to assume (and hope for) two 7-game series and a 6-game series.

The Suns did it with a payroll of about $53.5 million. With Amare's new contract -- without adding new players -- the Suns will be at ~ $62 million next year. The only way to project a profit without making the assumptions above is to increase ticket and concession prices, but they'll have to be modest increases. The Suns had low crowd turnout the first few months of the season. They'll probably be counting on better numbers going into next year ... assuming Amare shows he's at least somewhat healthy, but I think the local sports dollar is going to be stretched more than ever with the Cards sold out and the Sun Devils expecting decent returns in the winning margin.

 

[JS22]

The bottom line is the bottom line. The luxury tax is a menace to Sarver's management plan (and his pride), but it is not impossible to overcome if the line is barely crossed and the Suns make long runs in the playoffs. It's a big gamble, though, even without bleeding into the luxury tax. I think next year the Suns will be hoping to break even by going deep into the playoffs with their hads bumped up against the salary dividing line.

The Suns squeezed out a profit this year by playing 20 playoff games and 10 home playoff games. That's not something you build into a business model, though. First, no model of profitability is going to be based on getting to the Western Conference Finals. Second, it is neither conducive to basketball ops nor accounting to assume (and hope for) two 7-game series and a 6-game series.

The Suns did it with a payroll of about $53.5 million. With Amare's new contract -- without adding new players -- the Suns will be at ~ $62 million next year. The only way to project a profit without making the assumptions above is to increase ticket and concession prices, but they'll have to be modest increases. The Suns had low crowd turnout the first few months of the season. They'll probably be counting on better numbers going into next year ... assuming Amare shows he's at least somewhat healthy, but I think the local sports dollar is going to be stretched more than ever with the Cards sold out and the Sun Devils expecting decent returns in the winning margin.

Ticket prices are getting a bit too high, IMO. Personally I wouldnt be so angry if they just upped the price of food, drinks, merchandise, etc, another 20%. I don't really buy food when at the arena, so it wouldnt kill me.

 

[sunsfn]

The suns should sell out more games this season if Amare is back and that will help the income over last year.

I was surprised to read the article about the $70,000 that Sarver had to pay out of his pocket because his partners thought that was irresponsible. This tells me that now we have to worry about his partners approving the salaries and not just Sarver. Sarver may not have the final say on a lot of things if that is the case. They were upset with $70,000, how upset will they be if he approves a multi-million dollar contract without them signing off on it!

The Suns are not going over the cap by much if at all this year, count on it!

 

[Gaddabout]

I was surprised to read the article about the $70,000 that Sarver had to pay out of his pocket because his partners thought that was irresponsible. This tells me that now we have to worry about his partners approving the salaries and not just Sarver. Sarver may not have the final say on a lot of things if that is the case. They were upset with $70,000, how upset will they be if he approves a multi-million dollar contract without them signing off on it!

I think Sarver will be a little more like Colangelo in this regard. If one of the investors gets too conservative, he'll probably either buy them out or arrange for someone else to buy them out. He's the managing general partner, so, like Colangleo, he's not obligated to ask before opening the purse strings. This is not a team managed by committee like the Hawks.

We at least know Sarver is competitive and doesn't like to lose. I don't want create the impression that Sarver is the ultimate tight wad, because that's also a distortion of the facts as we have been led to believe.

 

[Covert Rain]

I don't know. Sarver seems to be a business man first and an owner second. I think JC was the opposite. I think what he did with the Diamondbacks shows that he will hedge losses in the short term to bring a championship. I don't see Sarver every doing that with the Suns.

I bet the guy doesn't pay a dime of luxury tax. I can see him trading someone on the team before that ever happens.

 

[sunsfn]

I think Sarver will be a little more like Colangelo in this regard. If one of the investors gets too conservative, he'll probably either buy them out or arrange for someone else to buy them out. He's the managing general partner, so, like Colangleo, he's not obligated to ask before opening the purse strings. This is not a team managed by committee like the Hawks.

We at least know Sarver is competitive and doesn't like to lose. I don't want create the impression that Sarver is the ultimate tight wad, because that's also a distortion of the facts as we have been led to believe.

I have been down on Sarver from the start for a number of reasons.

But I am trying to take a wait and see approach with this off season. Hopefully he will do something that proves me wrong as far as spending to win a championship.

Regarding what you say about him being managing general partner, again I will mention how does the managing general partner have to put up his own $70,000 when the other owners do not like what he did. It appears he may be buying out one or more partners if that is the case in the future. What he did was a very good marketing idea, and he received good press from it, and then the partners said no!

However, like I said I am taking a wait and see approach and being a long time suns fan, I hope he proves me wrong.

 

[Bada0Bing]

I don't know. Sarver seems to be a business man first and an owner second. I think BC was the opposite. I think what he did with the Diamondbacks shows that he will hedge losses in the short term to bring a championship. I don't see Sarver every doing that with the Suns.

I bet the guy doesn't pay a dime of luxury tax. I can see him trading someone on the team before that ever happens.

What did BC have to do with the Dbacks? Do you mean JC?

 

[PhxGametime]

I thought I read an article - wait I know I did that the Suns were the most profitable Team this year at around $40 Million+... it was at Hoopshype, so not sure how legit it is but that's what it said.

 

[jlove]

I thought I read an article - wait I know I did that the Suns were the most profitable Team this year at around $40 Million+... it was at Hoopshype, so not sure how legit it is but that's what it said.

I believe it was posted on NBA.com and either the AZ Republic or East Valley Tribune as well, so I think there is some legitimacy about it.

 

[George O'Brien]

Most teams are not very close to winning a championship. They end up overpaying for the Kenyon Martins of the world without have a serious chance of getting over the hump. Cutting salaries and hoping for a draft steal is about all they can do. The Knicks have shown how hard it is to buy your way to contention.

This is not the Suns situation. They have a serious title contender already on the roster and no need to break the bank to get the supporting cast they need. Still, it is going to be awfully hard to win if they have to retool.

 

[Covert Rain]

What did BC have to do with the Dbacks? Do you mean JC?

Sorry, meant JC.

 

[sunsfn]

I thought I read an article - wait I know I did that the Suns were the most profitable Team this year at around $40 Million+... it was at Hoopshype, so not sure how legit it is but that's what it said.

I read that a while back, but thought it referred to last year. This year it took a few playoff games to start making money.

Anyway, that is how I remember it.