HOOPS HOOPS HOOPS

What Every NBA Fan Needs to Know About Ricky Rubio (Plus #15 on the Community Draft Board)
by Stop-n-Pop on Jun 17, 2010 6:44 AM CDT 21 comments

With the lotto in the rear view mirror and the draft on the horizon, I figured it would be a good time to put out a little primer about the Wolves and Ricky Rubio so that excited Knicks fans have a place to go when the Daily News tells them that Donnie Walsh is really good friends with David Kahn...and you know what that means.



1- The Rubio Road to the NBA 100%, without-a-doubt goes through the Timberwolves. The Wolves own Rubio’s NBA rights and barring him completely stepping away from professional basketball for an entire year (following a 3 year period after the draft), he is Timberwolves property.



2- Rubio’s buyout from Barcalona is reported to be $1.4 million following the 2010-11 season. This is hardly unmanageable and even if it were, it is meaningless, as the NBA’s CBA clearly states that NBA franchises can only contribute $500,000 to the buyout of a foreign player. The cost associated for a buyout of any foreign player (not just Rubio) is $500k. No more, no less. This is not the case for EuroLeague teams like Barcelona, who footed the entire buyout bill for Rubio and his family during his latest transition.



3- Rubio’s buyout from Joventut was originally in the neighborhood of $8 million and was eventually lowered to $5 million. Were Rubio to have come to the Wolves, and were the Wolves able to have achieved the same $5 mil buyout, Rubio himself would have been on the hook for the additional $4.5 mil. This was simply cost prohibitive to Rubio (who was making only a couple hundred thousand Euros at the time) to come to the Wolves with the slotted 5th pick NBA rookie salary. Here is what we wrote at the time about the situation:

At first glance, the NBA’s rookie salary scale for the 5th pick seems somewhat reasonable: roughly $15.2 million over 4 years. However, this does not take into account three key items that turn $15 large into a number that doesn’t hold up well against the reported buyout number of $5.28 million. First, $8.42 million of the $15.2 million rookie scale is tied up in two years of player options. A good friend of mine works as an actuary for Mutual of Omaha and he finds it far-fetched that any loan guarantee would be written while taking into account a non-guaranteed payment option. In other words, Rubio is really only guaranteed about $6.78 million in pre-tax earnings over the course of two seasons. Secondly, at no point in any of the Rubio reporting have we ever learned anything about the payment structure of the buyout. Would it be a lump sum? Would it be over 2 years? Would it be over the length of the full 4-year rookie scale? Again, my actuary friend finds it implausible that this debt would be paid on anything other than a lump sum or a two year scale. Even if Rubio were able to secure an insurance policy that extends beyond his guaranteed years, he would face a high premium that may make it an unattractive option vis-a-vis the Barcelona contract. Third, Rubio would face a 35% federal income tax combined with state taxes in Minnesota and every state he plays in. To the best of my knowledge, his overall tax burden would be 42.85%. In other words, his pre-duty/pre-agent fee take home pay for the first two years of his rookie contract is roughly $3.87 mil. That’s $1.4 million in the hole if you add in the reported buyout. If he were able to secure a four year repayment plan, his post-tax take home pay would be roughly $8.69 million; $3.41 mil over the buyout over 4 years and $825k/year pre-agent/duty pay. The bottom line here is that it’s pretty hard to look at the non-endorsement money on the table in the NBA and have it compare favorably to what Rubio will earn in Europe over the next two years. At the end of the day, the Wolves could only contribute $500k while Barcelona ponied up over $5 million. Rubio likely chose the far safer, and more economically sound, option.

In other words, had Rubio come to the Wolves, he would have been paying to play in the NBA for the better part of his rookie contract. Paying to play for any team in the lotto, not just the 15-win Wolves, was not an attractive immediate option in 2009.



4- David Kahn and the Wolves made Ricky Rubio a ton of money. This is the point that most often gets overlooked in the Rubio discussion. By becoming a 3rd party in the Rubio sweepstakes, the Wolves effectively provided the Rubios the leverage that lowered the insanely high Joventut buyout, allowed a European League team to pick up the tab (which, as we previously mentioned, was done in whole by Barcelona), allowed Rubio to get a raise, and, most importantly, lowered his future buyout amount to a number that is completely manageable under NBA rookie salary guidelines (after the $500k Wolves buyout, Rubio is only on the hook for $900,000). He also won a championship. The kicker here is that if Rubio comes to the NBA after 3 years (and not the 2 that some fans expect, and is the first year of a possible buyout), the Wolves do not have to pay him according to the NBA rookie salary scale. They can give him an even bigger deal…at the age of 22. This angle may really come into play if there is a lockout. If Rubio had gone in the first 3 picks, he may have been able to afford the jump to the NBA. When he slid, the Wolves provided him and his family with the best possible landing spot: on a team that had an additional pick to use on a point guard to bridge the gap and who could afford to wait until a lowered buyout and, possibly, a situation where Rubio could make more than what he could under the NBA’s rookie salary scale. Imagine if the Knicks got him with the 7th pick. What would the New York media do if Rubio couldn’t afford to come over to a slotted 7th pick rookie salary? How much more leverage would the Rubio’s have lost with the buyout with Joventut if it wasn’t a closer decision to head to the NBA like the Wolves provided with the 5th pick? I cannot say it enough: The Wolves (and David Kahn) allowed the Rubios to make a lot more money and they significantly improved his financial outlook.



Ricky Rubio unexpectedly landed in the Wolves’ lap and they’re not going to give him up for anything less than a serious haul. The Wolves have allowed Rubio to improve his financial (and professional playing) situation beyond what any other team in the league could have done short of going #1 to the Clippers. At the end of the day, by going #5 to the Wolves, Rubio was able to have his buyout taken care of in full by a superior team, get a raise, continue to develop on the best team in Europe, and eventually come to the NBA at or around the age of 22 without having to worry about going in the hole for his buyout. If his agent throws a hissy fit about his client not wanting to play in Minny in 1, 2, or 3 years, all Kahn has to do is smile and say "thank you very much, we can't wait until he wants to." By showing patience now, the Wolves have significantly increased their chances of appearing credible if they need to call a bluff down the line.



Plus, for those of you who haven't been paying a lot of attention to the Wolves and how they appear to be being put together, David Kahn is all-in on the kid. They are looking to build a running team with long athletes who can get out in transition and catch all of those ally-oops. They are looking for players who can hit open 3s from the corner. They are looking for guys who can be dominant pick-and-roll players. Does it surprise you that recent rumors would leave the team with a 2011 lineup of something like Rubio, Rudy Fernandez, Rudy Gay, Anthony Randloph, and Derrick Favors? They are all in on Rubio, they have helped him and his family out, and they are not letting him go for anything other than a MAJOR haul.