NBA salary explosion plays into a second look at Bucks arena

Those of you who follow sports have likely seen a lot about the explosion of NBA salaries and player movement in the last week, headed up by former NBA MVP Kevin Durant going to the Golden State Warriors and former Marquette great Dwyane Wade leaving the Miami Heat to return home to Chicago and play for the Bulls. The numbers are dizzying, particularly among mid-level players, including former Badger and Buck Jon Leuer getting over $10 million a year for the next 4 years from the Detroit Pistons.

Speaking of the Bucks, I want to go back to the hearing that took place 1 year ago this week at the Legislature’s Joint Finance Committee where the fiscal impact of the Bucks was a main topic of the discussion of whether or not state and local taxpayers should chip in for the new Bucks arena project.

John Koskinen, chief economist for the state Department of Revenue, told the committee that the Bucks contribute about $130 million to Wisconsin's gross domestic product annually. He also said income taxes on Bucks personnel generate $6.5 million per year. By 2019 those taxes should grow to $10.4 million annually.

That high revenue from players and other Bucks personnel was among the main reasons given for the state to have an interest in contributing money toward the arena. In the final bill, the state ended up paying $4 million a year starting in 2016-17, and also will shell out $10 million for repairs around the Bradley Center for the last 2 years it's hosting events (odd, but they are hosting March Madness this coming year, along with the typical BC fare). I expressed more than a little skepticism at the claim that Bucks-related income taxes would all be lost if the team left (I felt that other areas of the economy could pick up as people chose other entertainment options if the Bucks left, and similar revenues would follow), but the “cheaper to keep em” argument has become more plausible given what’s happened in the last few weeks in the NBA.

A big reason for the free-agent splurge is a huge jump in the league’s salary cap, largely due to a new TV deal that was signed in 2014 and starts next season. That cap number was just finalized last week, and the amount that’s available to pay players has gone way up compared to last season.

The league announced Saturday that the 2016-17 salary cap will rise to $94.1 million. The luxury tax line will increase to $113.3 million and the salary cap floor will be set at $84.7 million. The new salary cap figure is $24.1 million more than the 2015-16 salary cap, representing a record for a single-season increase.

Remarkably, the NBA’s salary cap has never previously risen by more than $8 million in the modern era.

For comparison’s sake, the salary cap was set at $70 million last season, the luxury tax line was $84.74 million and the salary cap floor was at $63 million.

Given that an NBA roster is around 15 people, that’s a cap increase of $1.6 million per player.

The Bucks took part in the free-agent bonanza last weekend, signing former Cavs guard Matthew Dellavedova for $38 million over 4 years, and also getting Mirza Teletovic away from the Suns for 3 years and $30 million. So the state budget will appreciate what these guys chip in over the next few years, although what effect the new arena had on these signings vs the all teams having to pay more for players isn’t clear. I haven’t heard the arena come up as a reason either of these players signed, but they also couldn’t officially sign with the team before today, and they have yet to have their introductory press conferences.

And this off-season isn't just a one-time bump for NBA players, as the TV deal is set for 9 years, which will keep the cap at these high levels next year and for future years. In fact, it was noteworthy that it was considered a disappointment when projections came out today saying that the salary cap is only supposed to rise by another $8 million for 2017-18 instead of $13 million.

I’d still argue many other needs in this state should have been funded over a new sports arena (bumpy highways and defunding the UW while paying for this seems very "Idiocracy"-like), but I’ll admit the north end of downtown Milwaukee is sprouting new development by the day, and the plans for the multi-use plaza around the new arena seem very cool. So maybe the Walker folks and others from both parties who voted for the Bucks arena may have gotten the fiscal part of the Bucks deal correct, because there is a whole lot of added money floating around the NBA right now, and Bucks players will definitely get some of that. I’m more than willing to check out the new arena when it opens in 2018, and with the salary cap continuing to grow in the NBA, giving the team more flexibility to sign guys from other teams (or allowing them to pay enough to keep young guys like Giannis and Jabari) it’ll be interesting to see who might be part of that Bucks team when it opens up.