NBA source details new mid-level exception

By using the full mid-level exception, the Celtics would likely lose free agents Glen Davis (above) and Jeff Green. (Greg M. Cooper/US PRESSWIRE)

It was perhaps the thorniest “system” issue of all, the one the players were willing to go to war over: Should teams that pay the luxury tax have access to the full mid-level exception, worth $5 million per year over four seasons?

The owners had proposed banning any tax team from using the full mid-level and instead allowing it to use a “mini” mid-level worth $3 million per year over three seasons. The players, knowing how many of them get their career-making contract via the mid-level and how many benefit from the leverage that comes when every team can offer it, wanted something better.

Here’s what they got, according to a source familiar with the deal:

• Every team can use the full mid-level exception, provided doing so does not take the team more than $4 million over the tax line.

• Sounds great for the players, right? Here’s the rub: If you use the full mid-level to get to or approach that barrier looming $4 million over the tax line, you cannot cross it by re-signing your own free agents via Larry Bird Rights. You can cross it to sign rookies or players on veteran minimum contracts. (Update: 8:29 p.m.: The NBA informs me via Twitter that teams in fact cannot cross that barrier $4 million over the tax line via veteran’s minimum deals if you first use the full mid-level).

Let’s use a real-world example: The Celtics have about $66 million in salary committed to seven players next season, putting them about $4 million under last year’s tax line of $70.3 million, which we’ll use as a projected tax level for the upcoming season. Using the full mid-level on, say, Jason Richardson, would take the Celtics’ payroll to $71 million — over the tax line. Under the owners’ old proposal, Boston would have thus been prohibited from using the full mid-level.

Under the current proposal — the one to which the two sides have tentatively agreed — Boston could offer the full mid-level to Richardson. But it would leave itself only about $3 million of room with which to sign its own free agents — Glen Davis and Jeff Green being the headliners — using Bird Rights. In other words: Using the full mid-level would likely mean losing both Green and Davis.

The Celtics could continue spending beyond that $4 million barrier provided they do so via non-Bird deals — veteran minimum contracts, for instance. It is unlikely the Celtics could sign either Davis or Green — young players seeking a payday — with minimum contracts. They might be able to persuade a ring-chasing veteran for that amount, though.

In effect, the compromise here is that teams just under the tax level must choose between using the full mid-level or re-signing their free agents to fair-market deals. It will be interesting to see how this plays out. It is unclear how many teams this would affect each season. In order to be impacted, teams would have to be: 1) near the tax line; 2) interested in using the mid-level; 3) interested in re-signing a key free agent or two.

As an important aside, the same threshold — $4 million over the tax — applies to sign-and-trade transactions, those much-loathed combination deals in which teams re-sign their free agents to Bird-level deals and then trade them. The owners initially wanted to prohibit such deals, but have decided to allow them, provided they don’t take either team involved more than $4 million over the tax line. (Teams already spending more than that amount would be prohibited from using sign-and-trades that beef up their payroll, it appears.)

We’ll be learning more and more about all of this over the next few days.