30 Million Reasons the Chicago Bulls Should Amnesty Carlos Boozer
Carlos Boozer may be playing his last season in Chicago, and there are 30 million reasons the Bulls would be smart to consider letting him go.
If a recent report from Mitch Lawrence and the New York Daily News is to be believed, Boozer, one of the NBA's 25 highest-paid players, could be a victim of the league's amnesty clause next summer. This is a sentiment that has been echoed by Disney's ESPN and Grantland in the past.
What 'amnesty' means
Unless you spent your holidays brushing up on the latest collective-bargaining agreement, you might be confused how a player can be amnestied.
Think of it as a "Get Out of Jail Free" card for bad contracts. Every team gets one, but the amnesty clause always comes with two stipulations: (1) It must be used before the 2016-17 season, and (2) it only applies to players who were signed before 2011. Once a player is amnestied, the team willing to pay the highest percentage of his salary can sign him. The amnestying team is on the hook for the remaining portion of the deal, but most importantly, they can wipe 100% of it off their taxable salary base. This makes it easier to avoid expensive luxury taxes.
Why the Bulls would let Boozer go
Two years into the new CBA, 20 of the 30 NBA teams have used the clause. Some of these decisions were the result of rebuilding efforts, like the Orlando Magic's amnesty of Gilbert Arenas' bloated contract, but others came from contenders simply trying to clear cap space. In the case of the Bulls, it could be a little bit of both.
At the moment, Chicago has an estimated payroll of $80.9 million, making it one of only six teams over the luxury tax threshold of $71.7 million. According to the CBA, the Bulls should owe nearly $15 million in luxury taxes at the end of this season. If a similar gap remains next year, the team would be subject to an additional 'repeater' tax of around $10 million in 2016.
By using their amnesty on Boozer next summer, the Bulls could shave nearly $17 million off of their total salary. This move would bring about $25 million (the luxury tax plus the repeater tax) in savings for the next two seasons, assuming it pushed the team below the luxury tax threshold. It would also allow Chicago to receive $2 million to $3 million in shared luxury revenue, which are distributed equally among non-taxpaying teams.
All in all, an amnesty of Boozer is worth about $45 million over the next two years. This is presuming the Bulls can find a team to pay 100% of his remaining contract. If the team can get at least one-fourth to be covered, which would be in line with historical averages, the total value of an amnesty drops to a bit over $30 million.
That's a large chunk of change
$30 million is a lot of money. It's about equal to:
One year's worth of the Chicago Bulls' operating income, according to Forbes.
Two years of Derrick Rose's salary.
Twice the amount of money owner Jerry Reinsdorf paid for the franchise in 1985.
One-fifth of the entire cost it took to build the United Center.
Sixteen years' worth of naming rights fees from the arena's sponsor, United Continental subsidiary United Airlines.
Image via Nicole Yeary, Flickr.
The comparisons could go on, but my point is simple: The Bulls would save a significant amount of money by using the amnesty clause on Carlos Boozer.
For a 32-year-old player who's having the worst statistical season of his career by a long shot, it's really a no-brainer. From an efficiency standpoint, Boozer is now a below-average forward, and there's nothing that suggests he'll recapture any of his skills that warranted such a large contract in the first place.
Of course, all of this is theoretical. As of now, the Bulls still have Boozer on their roster, and the team is intact. With Derrick Rose out for the season, the rumors are getting louder that Chicago will shift into rebuilding mode, so this situation remains fluid.
If the front office does decide it wants to go younger, Boozer probably won't be the only casualty. Luol Deng, another aging forward, will be a free agent this summer, and will likely ask for a contract in the range of at least $13 million a year. Chicago cannot afford this, assuming the team wants to avoid the tax issues I discussed above. Thus, it's foreseeable that both Boozer and Deng will be playing somewhere else next season.
If this is the case, Taj Gibson slots in as a natural, cheaper replacement, and he's under contract through 2017. Don't forget that if the Bulls let Boozer and Deng go, they'd have more than enough money to bring Nikola Mirotić over from Spain, who reminds many experts of Dirk Nowitzki. As Josh Hill at Fansided has also pointed out, Chicago could also use the Boozer amnesty savings and sign a superstar like Carmelo Anthony, luxury taxes be damned.
No matter what route the team chooses, I know one thing: Next summer should be very, very eventful.
The next step
Want to figure out how to profit on business analysis like this? The key is to learn how to turn business insights into portfolio gold by taking your first steps as an investor. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you what you need to get started, and even gives you access to some stocks to buy first. Click here to get your copy today -- it's absolutely free.
The article 30 Million Reasons the Chicago Bulls Should Amnesty Carlos Boozer originally appeared on Fool.com.
Fool contributor Jake Mann has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.