The Mid-Level Exception

There was an article in the Daily News today that stated the Knicks might be willing to use their mid-level exception on Jeff Foster, Anthony Parker or Grant Hill this year. News of such a move is confusing, since the mid-level exception has slightly changed under the new CBA. How does this effect the Knicks salary? Does it impact their ability to sign free agents in 2012? Let us first look at what the current mid-level exception is:

"Any team over the cap gets a four-year mid-level ($5 million max for year one) contract signing that is not limited by the cap . It can be used to sign one player for the $5 million or several players for a sum of $5 million."

Non-Tax Payer MLE
Year 1	$5
Year 2	$5
Year 3	$5.15
Year 4	$5.30

The first year of a mid-level exception is not limited by the salary cap, but what about the next 3 years. If the Knicks signed Foster for $5 million for 4 years, does that mean that they will add $5 million to their salary in year 2, 3 and 4 (which would, of course, limit their ability to woo Chris Paul in the offseason)?

The answer to this question is...yes. The salary of the mid-level player (or players) does begin to count/be limited against the cap, beginning in year 2 and for any subsequent years of the contract. Essentially, any team that signs a player for the MLE in year 1 when they are over the cap, and then is not over the cap in year 2, that MLE money ($5 million) goes toward the calculation of salary. Therefore, in 2012, the Knicks would have $5 million less in cap space to sign free agents. This means that such a signing would reduce the likelihood of signing Chris Paul in 2012.

Also, there is another limiting feature to the use of the mid-level exception, that could effect who the Knicks will be able to sign in 2012.

"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."

This means if you use the mid-level exception, and that move moves your salary total to above the luxury tax line, but below the $4 million mark above the luxury tax line, you can no longer use your Bird-Rights exceptions to sign any players that would take you over that magical line. Essentially, you can now only sign minimum contracts to fill up your roster. The Knicks are no where near that salary point yet, but it will be an important point not to cross considering that players, such as Landry Fields and Bill Walker might be signed in 2012 using Birds-Rights exceptions.