The NBA introduced the Gilbert Arenas provision in the 2005 Collective Bargaining Agreement as a way to help teams to keep their young restricted free agents who aren't coming off rookie scale contracts. It was named after Gilbert Arenas, an Early Bird free agent for the Warriors in 2003, who signed an offer sheet with the Wizards starting at about $8.5MM. Because Golden State could only offer Arenas a first-year salary of about $4.9MM using the Early Bird exception, the Warriors were unable to match the offer sheet and lost Arenas to Washington.
The Arenas provision limits the first-year salary that teams can offer restricted free agents who have only been in the league for one or two years. The starting salary for an offer sheet can't exceed the amount of the non-taxpayer mid-level exception, which allows the player's original team to use its MLE to match it. Otherwise, a team without the necessary cap space or exceptions would be powerless to keep its player, like the Warriors were with Arenas.
A rival offer sheet can still have an average annual salary that exceeds the non-taxpayer mid-level exception, however. The annual raises are limited to 4.5% between years one and two, and 4.1% between years three and four, but a significant raise can be included between the second and third years of the offer. A team's cap space dictates the average annual salary limit for the entire contract, since the average salary still has to fit under the cap. The Rockets had enough cap space last summer to make a pair of sizable offers, to Jeremy Lin and Omer Asik, that fell under the Arenas provision.
Both Lin and Asik were restricted free agents coming off their second seasons in the league, with the Knicks and Bulls, respectively. Their previous clubs owned their Non-Bird rights, but the Non-Bird exception certainly wouldn't have been enough to match the twin three-year, $25,123,938 offers they received from the Rockets. The cap hit for the Rockets is $8,374,646 in each season of their deals. But, thanks to the Arenas provision, the cap hit for the Knicks and Bulls would only have been $5MM in the first season, and $5.225MM in the second. The third season was what scared New York and Chicago off, since it would have entailed a nearly $15MM cap hit, as detailed here:
Because the first-year salary of the offer sheet doesn't exceed the non-taxpayer mid-level exception, the Knicks and Bulls could have used their mid-level exceptions to match, even though that big a third-year raise wouldn't typically be permitted when using the mid-level. The uneven amount in the third season reflects the amount of cap space the Rockets had to make the offers. The Rockets could have included a fourth season on both deals if they had additional cap room.
For 2013/14, the mid-level exception will be slightly larger, with a starting salary of $5.15MM instead of $5MM, so clubs will have a little more flexibility to keep their free agents using the Arenas provision. Still, just because a team is given the opportunity to use the Arenas provision to keep its restricted free agent doesn't mean it will necessarily have the means. Here are a few situations in which the Arenas provision wouldn't help a team keep its restricted free agent:
- If the team only had the taxpayer mid-level exception ($3.183MM) available, it would be unable to match an offer sheet for a Non-Bird free agent if the starting salary exceeded the taxpayer MLE amount.
- If the team used its mid-level exception on another player, it would be unable to match an offer sheet for a Non-Bird free agent.
- If the player has three years of NBA experience, the Arenas provision would not apply — only players with one or two years in the league are eligible. This is why many teams, as a matter of practice, sign second-round picks and undrafted rookies to three-year contracts with team options in the second and third seasons. This way, the team has the player's full Bird rights if it wishes to re-sign him.
Luke Adams contributed to this post, which was initially published on May 9th, 2012.
Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.
