Celtics financial strategy tests limits in NBA

The Boston Celtics are close to closing the series against the Dallas Mavericks this Monday (June 17, 2024) and winning their 18th NBA title. The franchise exceeded the luxury tax limit (charged on the amount exceeding the cap), allocating US$184.2 million in salaries, above the cap of US$165.3 million.

That resulted in a luxury tax bill of about $41.4 million, one of the highest amounts in the league, which will be redistributed among franchises that stayed under the cap.

The strategy adopted by the Celtics included strategic moves, such as the acquisitions of players such as Derrick White, Kristaps Porzingis and Jrue Holiday, reinforcing the squad without giving up key players Jayson Tatum and Jaylen Brown. These maneuvers reflect planning to assemble a competitive team, capable of attracting complementary talents.

However, the team faces future financial challenges. Jaylen Brown’s supermax extension, which will take effect in the 2024-2025 season at a salary of $49.4 million, will bring the Celtics’ payroll to more than $192 million .

This implies new incidences of the luxury tax, with more severe penalties for repeat offenders, affecting negotiations and hiring.

The contract extension of Jrue Holiday, who opted for a longer and more economical deal with a $37.3 million player option, exemplifies how the Celtics seek to balance their finances without compromising the quality of the team. Holiday declined his player option to begin an extension that starts at about $30 million per year. This choice not only guarantees the player financial security, but also gives him the player’s option after the next TV contract, which could lead to an increase in salaries due to economic changes in the NBA market.

Future decisions regarding Tatum’s supermax extension and Derrick White’s contract situation will be crucial to the team’s finances.

The Boston Celtics are not the only franchise with high investment strategies. The Golden State Warriors, with a luxury tax bill of $170.3 million in the 2021-2022 season, show that significant investments are key to maintaining an NBA dynasty.

Changes to the 2023 Collective Bargaining Agreement (CBA) complicate maintaining stellar rosters without facing severe financial consequences.