Lance Stephenson's decision to turn down a five-year, $44 million contract offer from the Indiana Pacers to accept a three-year, $27.4 million deal with the Charlotte Hornets left plenty of people scratching their heads ... including, it seems, Larry Bird.
The Pacers' team president, a longtime Stephenson booster, picked the Brooklyn-born guard in the second round of the 2010 NBA draft. He took a very hands-on role in helping Stephenson evolve from lightly regarded end-of-the-bench player into linchpin starter on a team that made consecutive Eastern Conference finals appearances, and Stephenson's vocal about his appreciation. He led off his farewell-to-Indy tweet by thanking Bird, said after signing in Charlotte that he's "definitely going to miss Larry Bird," and issued a statement through his agent, Alberto Ebanks, that said he was "especially grateful to his teammates, Frank Vogel, Herb Simon, the Pacers management and, most of all, Larry Bird" for all they'd done to help him.
"Lance will miss the city, the team and the mentor who helped transform him into the dynamic player he has become," the statement read.
Stephenson's "undying love for Larry Bird and for his [Pacers] teammates" made it "a tough decision," but in the end, he chose to leave Indianapolis for Charlotte. For fewer years. And for less guaranteed money. As Bird told Bob Kravitz of the Indianapolis Star in a let's-get-the-team's-side-of-the-story-out-there bit of home cooking, he doesn't get it:
"I really feel bad about losing him," Bird said. "I hope it doesn't interfere with our relationship. But I did what I could possibly do to keep him here. Even if he didn't have any other offers, I was committed to giving him that $44 million because I believe in the kid. If you look at our roster, we have five or six guys in the last year of their deals, plus David (West) and Roy (Hibbert) can opt out, so don't you think I wanted to keep Lance and Paul (George) locked into long-term deals?" [...]
Bird could stomach this if Stephenson had left for much greener pastures, a lot more cash. But the argument can be made that he left for a worse deal.
"It's just disappointing," Bird said. "When I'd go to practices, when he was on, he was by far our best player. And he worked. If you work as hard as he does, you're going to get better. I'm going to miss the kid, no question. And he's growing up. That stuff he pulled in the playoffs, that was out of the blue. But I knew how good Lance was and the value he brought to our team."
I have no doubt that Bird knew how good and how valuable Stephenson was, and that he probably knew it earlier and understood it more completely than just about anyone else. The problem, though, is that it seems the Pacers' other front-office decision-makers — namely Donnie Walsh and Kevin Pritchard — didn't grasp it early enough to set hard lines in previous negotiations that would leave enough financial wiggle room on the books to pay Stephenson what he'd be worth in the early stages of a new contract. (The "$7 million trap" concept floated a couple of summers ago by Tim Donahue of Pacers blog 8 Points, 9 Seconds looks awful prescient right about now.)
Kravitz compares the average annual values of the deals offered by the Pacers (five years, $44 million, about $8.8 million per season) and the Hornets (three years, $27.4 million, just over $9 million per season) and upbraids Stephenson for leaving Indiana "for a couple hundred thousand dollars, a pittance by basketball standards." In telling the Pacers' side of the story, though, he doesn't tell the whole story; the details matter.
As first reported by ESPN's Chris Broussard and subsequently confirmed by Kravitz's colleague at the Star, Candace D. Buckner, the Pacers opened their free-agency negotiations with Stephenson with a five-year, $44 million offer; Stephenson's representatives reportedly balked, with sources telling Broussard that "the versatile shooting guard believes he's worth much more." Broussard followed up on July 7 with some additional detail on the terms (emphasis mine):
Thus far, the Pacers have been unwilling to increase their offer to Stephenson, and some league sources say they will not move from that stance.
Stephenson, for his part, believes he'll be an All-Star next season and is worth well above the $7.6 million the Pacers' offer would pay him.
By taking the reported Year 1 number ($7.6 million) and the reported final number ($44 million), you can do some reverse-engineering to ballpark the construction of the Pacers' initial offer to Stephenson, as Donahue did. Assuming that Stephenson's new deal would include the maximum allowable 7.5 percent raise from the Year 1 salary — per the terms, fittingly enough, of the Larry Bird Exception in the 2011 collective bargaining agreement — here's how you get to five years and $44 million:
• 2014-15: $7,652,174
• 2015-16: $8,226,087 (a 7.5 percent bump from Year 1)
• 2016-17: $8,800,000 (per the CBA, the raises are not compounded, so Lance doesn't get 7.5 percent of each year after Year 1)
• 2017-18: $9,373,913
• 2018-19: $9,947,826
As Donahue wrote, that would have started Stephenson off at "roughly $7.7 million next season, and [paid] a combined $15.9 million in the first two." Charlotte's deal, on the other hand, pays a flat $9 million per year and $18 million total for the first two seasons, meaning it guarantees about $2.1 million more up front ... which is a pretty significant chunk of change when you've made $3,435,000 in salary through your first four pro seasons.
The Hornets' offer covering two fewer years matters, too. I'm with Kravitz (and, I'd suspect, most other folks) in thinking that it's a pretty sizable win for the Hornets that they hold a team option for the final season of Stephenson's deal, and that it's something of a head-scratcher that Lance's reps didn't get that flipped the other way to afford him the option of hitting the market unfettered after two years. Still, though, the Charlotte contract ensures that Stephenson will return to unrestricted free agency no later than the summer of 2017, when he'll be 26 years old and entering his athletic prime.
The Pacers' deals — Kravitz says that Bird "had a couple of five-year options" when he met with Stephenson at the start of free agency — would have tied Stephenson up through the summer of 2019, when he'll be a couple of months shy of his 29th birthday, with (ideally, from Indy's perspective) two more years of heavy-minutes, deep-playoff-push miles on his legs. A younger Lance with more tread left on his tires is likely to receive a more lucrative third-contract offer than one who will hit 30 after the first year of his next deal.
Beyond that, the sooner a player can re-enter free agency, the sooner he can reap the benefits of the league's forthcoming windfall. The NBA's current television deal ends after the the 2015-16 season, and Adam Silver and company are reportedly looking to double the rights fees the NBA receives from its broadcast partners in its next TV contract. Broadcast rights revenues are included in basketball-related income (BRI). As BRI increases, so does the pool of money players receive; so, too, does the annual salary cap (which is calculated based on projected BRI) and the amount of a maximum salary (ditto).
In sum: The more money the league makes, the more money teams can spend on salary and the more money players can make. Those new, richer deals will likely be available in the next couple of years. This is one reason why you're seeing stars like LeBron James opt for two-year mini-max deals rather than a full four- or five-year pact; today's largest long-term possible payday will likely wind up being less lucrative than the largest possible payday available in two summers.
Of course, there's something to be said for taking today's top guaranteed dollar rather than banking on bigger bucks down the line — it's unlikely that, say, Chris Bosh and Carmelo Anthony will regret choosing to make $26.8 million and $27.9 million (respectively) in 2018-19. But whereas this likely represented the last blowout deal go-around for Bosh and Anthony, the 23-year-old Stephenson is just entering his high-earning years and is willing to bet on himself being able to boost his market value with a primary role on a perhaps-ready-for-prime-time Hornets squad on the rise. It's a gamble, to be sure, but it's one that Bird and the Pacers were unable to convince Stephenson not to take.
Kravitz reports that "according to Bird, the Pacers were willing to offer a shorter-term contract that would have given Stephenson the chance to cash in should his game continue to grow." For one thing, this contradicts previous reporting that "the Pacers were unwilling to offer Stephenson a shorter deal, spanning two or three years, [and were] also unwilling to increase [their] offer." For another, as Donahue notes, any shorter deal Indiana tendered would almost certainly have paid Stephenson less than he'll make over the next two or three years in Charlotte. For a third, Stephenson reportedly had an even richer short-term offer on the table — two years and $20 million from the Dallas Mavericks, getting him to an eight-figure-per-year level that Indy didn't and Charlotte doesn't — in the event of the Houston Rockets matching the Mavs' offer sheet on restricted free agent swingman Chandler Parsons. They didn't, so Parsons went to Dallas, and Stephenson went to the Hornets.
Kravitz reports that Indy was "willing, however grudgingly, to give Stephenson a player option midway through a five-year contract so that he could opt-out and test the market once the cap money increased." They can't do that. Option clauses only allow contracts to be extended for one additional year beyond their scheduled end dates, so the earliest that Bird could have let Lance opt out of a long-term deal would have been after Year 4, the summer of 2018. The version of Kravitz's story that appears on on USA TODAY's site reflects that CBA reality (" ... to give Stephenson a player option after four years of a five-year contract"), but while that framework would offer one more season of guaranteed salary, it would also still likely come up shorter than Charlotte's in the first three years and prevent Stephenson from entering free agency for an additional year. It would push Stephenson to give something up on both ends of the deal. Charlotte's doesn't.
Indy could have finagled its way into enough room to match the first-year salary Charlotte offered Stephenson, but Bird and company would have had to shed nearly $6.1 million in salary to avoid topping the $76.829 million luxury-tax line, as owner Herb Simon has made it clear that he doesn't want to pay the tax. As Kravitz frames it, if the Pacers met Stephenson's price, "they would have been left with a thoroughly depleted bench and been forced to deal with the luxury tax." Forced, though, seems a bit much, and unfairly casts Lance as the heavy. It's not Stephenson's fault that the Pacers are paying George Hill $8 million next year, or Luis Scola nearly $4.9 million, or Ian Mahinmi and Chris Copeland a combined $7.135 million. Those decisions came from the Pacers' brain trust, and now they're paying for them.
This isn't a matter of Indy thinking Stephenson isn't worth the money he got; Bird's comments about "the value [Stephenson] brought to our team" make that much clear. It's a matter of previous decisions rendering the Pacers unable to match Stephenson's rate without making other concessions, the Pacers being unwilling to make those concessions, and Stephenson choosing a deal that offered more money up front and more freedom down the line — plus a starring role on a team that now may well be just as competitive in the East as Indiana over the next few years — over taking a "hometown discount" on the first big-money contract of his career. It's a pretty reasonable decision once you get past that first-blush head-scratching. It's understandable that Bird finds the outcome "disappointing," but he and the rest of the Pacers front office really don't have anyone to blame but themselves.
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