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Significant progress on luxury tax marks Wednesday's talks

Posted Oct 27 2011 1:27AM - Updated Oct 27 2011 11:13AM's Labor Central

NEW YORK -- A week ago, the deputy commissioner of the National Basketball Association Video said that the players' union issued an ultimatum as a precondition for continuing negotiations on a new collective bargaining agreement. Minutes later, the president of the National Basketball Players Association said that the deputy commissioner and the chair of the league's labor relations committee Video had lied to the assembled media. And the mediator that had been brought in to try and broker labor peace between the two sides walked away, saying he could do no more.

That was a week ago.

Wednesday night, after nearly four months of a lockout that has caused incalculable damage to the reputations of everyone involved, the skies, finally, began to clear.

The NBA and the players' union did not reach agreement on a new collective bargaining agreement Wednesday, but they finally started pulling in the same direction. They made real and significant progress on the most vexing of the "system" issues that threatened to destroy the whole season -- the implementation of a new and more penurious luxury tax system that would severely penalize teams that exceed the luxury tax threshold. This was done, according to a source involved in the negotiations, when the union made concessions on how much money teams would be penalized for exceeding the threshold.

You don't want to read too much into tone, especially when both you and the subjects you're observing are bone weary. But league officials and player reps looked in a much more relaxed mood early Thursday morning than they'd been at any point in the negotiations. One source in the room said progress was "very slow" Wednesday. But slow is better than none.

And after 15 hours of talks that began at noon on Wednesday afternoon and lasted until about 3:20 a.m. Thursday morning, both sides indicated that if enough progress were made between Thursday's scheduled negotiating session and the weekend or early next week, a full, complete 82-game schedule -- thought an impossibility when NBA Commissioner David Stern announced on Oct. 10 that the league had canceled the first two weeks of the regular season -- was still, while a longshot, indeed possible.

"I didn't quantify how much progress we made," Stern said at an early Thursday morning news conference. "I was not surprised. It was what we could bang out in a mere -- what was it? -- 15 hours. But I can't describe it other than to say it's much better than not making any progress at all. We spent a lot of good time and we're going to spend more good time" Thursday.

Said Deputy Commissioner Adam Silver: "I would say there's no question that today was a better day than last Thursday. I think it's too early, not just in the morning, but in the negotiations to express confidence that we're at a deal. There's no question, though, that we did make progress on some significant issues."

The biggest was the luxury tax.

The league has abandoned its initial proposal for an NFL-style hard cap, and the union wasn't interested in the "flex cap" proposal the NBA made that was similar to the current system used by the National Hockey League, in which teams can exceed a certain cap threshold but cannot exceed a number slightly above the threshold. The NBA then proposed a system which would severely penalize teams that exceed the threshold, with the goal of reducing the gap in spending between the league's higher-revenue producing teams and its lower-revenue producing teams. The league believes reducing the gap will lead to more competitive balance between teams, in part, because good players would be spread out more throughout the league instead of clustered on just a few teams.

The union, though, had previously balked at the league's proposal, saying it amounted to a hard cap that would discourage the NBA's highest spenders from paying for veteran free agents.

Currently, teams pay $1 in penalty for every dollar they exceed the salary cap threshold, which was a little more than $70 million this past season. The league proposed a system in which teams would pay $1.75 per dollar for the first $5 million they are over the threshold. The penalty would increase by 50 cents for each subsequent $5 million they were over, so a team that was $10 million over the tax threshold would pay a penalty of $20 million -- $8.75 million on the first $5 million over the threshold, $11.25 million for the second $5 million over the threshold.

Under the new system, a team like the Lakers that was $20 million over the tax threshold last season -- and paid $20 million in luxury tax payments for last season -- would pay a whopping $50 million in penalties: $20 million on the first $10 million over the threshold as detailed above, and $30 million on the second $10 million over the threshold -- $13.75 million on the band between $10 and $15 million over, and $16.25 million on the band between $15 and $20 million over. And a "repeat offender" who exceeded the threshold more than twice during the next CBA would pay triple damages -- or $5.25 -- for every dollar it exceeded the threshold.

The union had countered with a plan whose increases were much less -- starting at $1.50 for the first $5 million over the tax threshold, then $1.75 for the second $5 million, $2 for the third $5 million, and so on. But the union moved toward the league's numbers, according to the source.

Talk of a possible full 82-game schedule was welcome news for fans who had despaired losing part of the regular season, especially one-time appearances by Western Conference teams in Eastern Conference cities, and vice versa. And players who thought they would lose at least one, and possibly two, game checks certainly were buoyed by the possibility that they could be paid in full. (The league has not announced the cancellation of the rest of November's regular season games, as the New York Daily News said it would do on Tuesday.)

NBPA Executive Director Billy Hunter said any hope of resuscitating the 82-game season would require back-to-back negotiations through the weekend. And with basketball-related income tripping the sides last week, Hunter said, the sides agreed to table BRI discussions to see if they could make some progress on the system issues.

"I assume if a deal can be achieved between now or Sunday or Monday, I think it's possible," he said. "It's going to be stressful."

Stern said many factors, from arena availability to how many games players could reasonably be asked to play in a compressed schedule, to how many games fans could be asked to attend in a given time frame, all conspired against a full schedule being played. But he did not dismiss the possibility if a deal could be reached soon.

"We're not putting a specific date on it," he said. "We just think we've got to do it soon, and if we could make a deal obviously we've partnered with the union in an effort to have as many games as we can."

The two sides didn't discuss BRI at all on Wednesday, the other major sticking point. The league proposed a 50-50 split of BRI to the players last week; the union, which got 57 percent of BRI in the previous CBA, countered with a proposal that averaged out to 52.5 percent of BRI for the players -- an annual return of $180 million to the owners from the previous agreement. Both sides discussed "bands," or ranges of revenue that the players could receive depending on whether and how fast revenues grow during the next CBA. The league's proposed band ran from 49 to 51 percent of BRI; the players' band ran from 50 to 53 percent of BRI.

The sides got nowhere on BRI last week. The union indicated then it might be willing to discuss coming down from its offer if the league made concessions on the system side. It was not clear if the NBA made any major system concessions Wednesday, but union president Derek Fisher seemed to indicate there was still work to be done on the league's part before the union would consider moving off of its BRI proposal.

"We can't say that major progress was made in any way, but there was some progress made on our system issues," Fisher said. "We're continue to work through as long as we possibly can and as hard as we possibly can to see if we can get a deal done. We're not going to get ahead of ourselves at this point. We'll continue to remain focused on some key principle items in our system that have to remain there for our players to agree to what is already a reduced percentage of BRI."

The two sides have already made progress on a shorter and cheaper mid-level exception that preserves the players' demand to have a vehicle for good-if-not-great players to have a decent payday during their careers, while giving teams some relief that those deals won't become a choke point on their salary cap if the players don't pan out. They're close on the "amnesty" proposal that was part of the last CBA, allowing teams to essentially waive a player and remove him from the team's tax threshold. And the team could spread a player's remaining guaranteed money evenly over several seasons, instead of it accelerating into one or two years.

The sides have also made progress on a "pool" that would reward players on their first contract who outperform the deal, yet frequently aren't able to cash in until they become unrestricted free agents after their fifth season. Young players would get additional revenue out of the pool for reaching certain obvious incentives like making the All-Star Team, or, in the case of Bulls guard Derrick Rose, in just his third season, becoming the NBA Most Valuable Player. (The union has also proposed that rookie contracts expire after four seasons instead of the current five.)

There are many miles to go before each side sleeps. But for the first time in 16 awful weeks, players and owners could dream -- maybe -- that a deal was in sight, and that the NBA would be back in business sooner rather than later.

Longtime NBA reporter and columnist David Aldridge is an analyst for TNT. You can e-mail him here and follow him on twitter.

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