Bad Planning Costs The Knicks

Any fan of the New York Knicks has inevitably wrestled internally with inescapable truth that owner James Dolan is controlling the team, for better or for worse. Whether this resigns the Knicks to perpetual mediocrity is debatable, but disapproval of Dolan’s reign atop the franchise has been harsh and frequent.

Of all the criticism Knicks fans have given Dolan, the one thing you can’t say about the owner is that he’s afraid to spend.

Perpetually over the salary cap, Dolan has exhibited a willingness to spend into the luxury cap—wherein he has to pay a penalty for player contracts that exceed the cap—in order to land his next big target. Whether he’s spending his money in the right places is the product of criticism.

After all the years that the Knicks have spent in the luxury tax from the massive contracts of underachieving players, many fans are frustrated that Dolan chose to draw a line in the sand with the Houston Rockets’ backloaded offer to Jeremy Lin, the underdog point guard who set the league on fire for 25 games last season.

However, it’s hard to blame Dolan for being unwilling to match Lin’s offer, which would reportedly cost him $43 million in the third year of the contract due to salary cap penalties, especially when he’s unsure of whether Lin’s run was an aberration or an indication of what’s to come.

What we do know is the contract Carmelo Anthony termed “ridiculous” became all the more absurd when you consider the luxury tax penalties Dolan will be paying in the third year of the contract for being over the league’s tax line.

You could argue that Dolan’s hands are tied in this case, but poor decision-making with regards to the cap has only tightened the rope around his wrists. A slew of bad management decisions ultimately cost the Knicks a chance to keep their budding star and marketing bell cow.

Though it’s still too early to criticize the max contracts of Anthony and Amare Stoudemire, the Knicks’ decision to use the amnesty clause on newly-signed Chauncey Billups is looming large with regards to cap room.

Shortly after the 2010-11 season, the Knicks were faced with the choice of whether to pick up Billups’ one-year, $13 million option for the following season. Not wanting to be left without a point guard after a lockout-shortened offseason, the team picked up his option.

But after the lockout introduced the amnesty clause, which allowed teams to take one big contract off their salary cap to save cap space, the Knicks used their amnesty on Billups in order to make room for a sign and trade for Tyson Chandler, who turned out to be last year’s Defensive Player of the Year.

While it was necessary to do so in order to acquire Chandler, the Knicks sacrificed the right to future cap flexibility by using their amnesty on Billups, whom they had just resigned by picking up his option. Had they declined his option, the team would still have the amnesty in their back pocket, available to use on a massive contract (like Stoudemire’s) to clear cap room for a player like Lin, whose contract would be much more affordable without the luxury tax penalties.

The Knicks also made mistakes by signing veterans Jason Kidd and Marcus Camby to three-year deals, which took up cap space in the much-maligned third year of Lin’s deal. Both Kidd and Camby will be well into their 40’s by the time they are in the third year of their contracts.

Since the third year of Camby’s deal is only partially guaranteed, the contracts of Kidd and Camby will cost the Knicks about $5 million against the cap in that third year. Because the luxury tax hits rise incrementally, the final $5 million dollars of Lin’s third year would be taxed $12 million, as that portion is taxed at a rate of $2.50 for every dollar. Thus, the team could have saved $12 million by giving Camby and Kidd one less year to avoid the tax hit in the third year.

Although they weren’t faced with the final offer sheet when they made their final deals for the veterans, the Knicks knew the Rockets were contemplating backloading Lin’s offer sheet to make it tougher for the Knicks to match. By taking on extra contracts in that crucial third year, the Knicks only made it tougher on themselves.

The Knicks can call the contract as “ridiculous” all they want, but they have themselves to blame for losing out on the man they morphed into a celebrity. Now he will take his star to Houston, where the Rockets will enjoy the fruits of “Linsanity.”

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