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Understanding Harden’s Restructured Contract

Eric Pincus explains restructuring contracts, which has implications for players like Russell Westbrook & Derrick Favors.

Eric Pincus

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On July 9, the Houston Rockets took advantage of one of the many quirks of the Collective Bargaining Agreement, renegotiating and extending the contract of All-Star guard James Harden.

As detailed in May, Harden was one of almost 30 players who have qualified (or will qualify this summer) to have his contract restructured — available only to players with four or five years contracts, at least three years following their original signing date.

Additionally, renegotiation cannot lower salary; and teams must have enough cap-salary space to take advantage of the rule.

Others who may still restructure include Derrick Favors (Utah Jazz), Russell Westbrook (Oklahoma City Thunder) and Paul George (Indiana Pacers).  Naturally, both sides need to consent to a deal.

Restructuring isn’t common, but the Denver Nuggets used their cap room last summer to re-work the contracts of Danilo Gallinari and Wilson Chandler.  But Harden is unique in that he had two seasons left on his deal – paying $16.8 million for 2016-17 and $17.8 million for 2017-18.

Under his new contract, Harden will receive the following:

2016-17 — $26,540,100
2017-18 — $28,299,399
2018-19 — $30,421,854 (estimated)
2019-20 — $32,703,493 (estimated; player option)
Total — $117,964,846 (estimated)

The odd raise structure, year-to-year jumping by $1,759,299, $2,122,455 and $2,281,639 looks like a mistake, but it’s the proper application of a myriad of rules.  Harden’s actual salary over the last two years of his deal won’t be set until the 2017-18 salary cap is officially announced.

Why wouldn’t Harden receive raises of $1,990,508 each year — 7.5 percent of his 2016-17 salary?

2016-17 — $26,540,100
2017-18 — $28,530,608
2018-19 — $30,521,115
2019-20 — $32,511,623 (player option)
Total — $118,103,445

The key is that Harden’s original contract covers the 2016-17 and 2017-18 seasons.  His extension doesn’t actually start until 2018-19.

By the rules of extensions, Harden is eligible for a raise of 7.5 percent in 2018-19 over the final year of his original contract (2017-18, after it is renegotiated).  Once the extension starts, the 2018-19 season is the basis for any subsequent raises, limited again to 7.5 percent, which determines his salary for 2019-20.

Technically, Harden and the Rockets could have agreed to an extension with a sizable pay-cut in 2018-19 — down by 40 percent from his 2017-18 salary — but Harden’s actual agreement is listed as a “maximum contract.”

(UPDATE: This next two paragraphs are flawed in regards to Harden’s 2017-18 salary, in that raises are not subject to the next season’s maximum salary.  It does apply to his potential salary in 2018-19.  Further explanation to follow.)

If that’s not already complex enough, there’s yet another wrinkle to the equation.  In a memo distributed to teams earlier in the month, the NBA updated its salary cap projection for 2017-18 to $102 million, down from $107 million.  With that, the maximum salary Harden is eligible to receive next year shrunk from roughly $29.7 million to the league’s current middle-tier max, or $28,299,399.

This matters because Harden is only eligible for a 7.5 percent raise over his 2016-17 salary if the resulting amount is no higher than the maximum salary.  Harden may still earn that $28,530,608, but to get it he’ll need the salary cap to climb higher than $102 million.  In fact, his actual salary could further shrink if the cap comes in lower than the current projection.

(UPDATE: The basis for Harden’s raise is actually 7.5 percent of the additional amount of $9,756,068 he received in renegotiated salary for 2016-17, which is $731,705.  Harden’s original salary of $17,811,626 for 2017-18 is increased by both the same raise he received in 2016-17 ($9,756,068) and $731,705 to reach $28,299,399.  Hat tip to cap expert Albert Nahmad of HeatHoops.com for his breakdown of Harden’s 2017-18 figure.)

Westbrook, in the final year of his deal, would be eligible for a three-year extension, after renegotiating his salary up to the same number Harden will receive for 2016-17.

2016-17 — $26,540,100 (2016-17 middle-tier maximum)
2017-18 — $28,530,608 (7.5 percent raise, first year of extension)
2018-19 — $30,670,403 (7.5 percent raise, $2.1 million raise based on first year of extension)
2019-20 — $32,810,199 (same $2.1 million raise)
Total — $118,551,310

As a free agent next summer, Westbrook won’t be able to earn more than the maximum, once set next July.  If his future is in Oklahoma City, then restructuring gives the team a clear path forward.  If not, the Thunder are probably better off looking for a trade.

Westbrook would be able to restructure and extend on a new team, provided they have the necessary cap room after a trade.  Without that commitment from the All-Star guard, teams will be hesitant to give up as much to the Thunder for Westbrook.

The Boston Celtics are well-positioned to give the Oklahoma City a rich offer, with the cap space to renegotiate and extend Westbrook’s salary.  The Los Angeles Lakers have held off signing players like second-overall pick Brandon Ingram, Tarik Black and Marcelo Huertas, protecting their remaining cap space, in case a trade opportunity should arise.

A number of teams would line up with offers, but that list shortens considerably without Westbrook agreeing to sign to a long-term deal immediately — and that may simply be a non-starter.  Westbrook may want a Hamptons-like moment, similar to the one recently experienced by former teammate Kevin Durant.

Meanwhile, Favors has six years of NBA experience, and is eligible for the bottom tier max of $22,116,750.  Currently he is set to earn $11,050,000 for 2016-17, but the Jazz could earmark their $11 million of cap space (available upon waiving the non-guaranteed Christapher Johnson) to give Favors a restructured and extended four-year deal starting at the maximum salary.

(UPDATE: Minor tweaks made to Derrick Favors’ figures, based on the logic applied from James’ Harden’s renegotiation.)

The following is the maximum restructured contract potentially available to Favors:

2016-17 — $22,116,750 (2016-17 bottom-tier maximum)
2017-18 — $23,896,756 ($11.1 million raise, plus 7.5 percent, in final year of original contract)
2018-19 — $25,689,013 (7.5 percent raise in first year of extension)
2019-20 — $27,615,689 (7.5 percent raise, based on first year of extension)
Total — $99,318,207

Extensions can also start at the maximum salary, but with a descending salary in subsequent seasons.  The following is the minimum the Jazz can offer Favors, provided they start at the current season’s maximum:

2016-17 — $22,116,750 (2016-17 bottom-tier maximum)
2017-18 — $22,236,744 (7.5 percent decrease in final year of original contract)
2018-19 — $13,342,046 (40 percent maximum decrease in first year of extension)
2019-20 — $12,341,393 (7.5 percent decrease, based on first year of extension)
Total — $70,036,933

Should Favors finish out his contract, signing a new deal in 2018-19 at a projected max of $30.5 million (based on a projected cap of $108 million), he would earn a maximum of approximately $86.3 million from 2016-17 to 2019-20.

Why would Favors accept a renegotiation?  At a maximum salary over four years, the easy answer is a lot more money, immediately.  Even with lower raises, Favors stands to make more over the next three seasons than he would by finishing his contract, and then signing a maximum contract after the 2017-18 season.

The Jazz would benefit in locking in a young, core piece for two additional years.

A player option in the final year would allow Favors to hit free agency sooner, but then the Jazz are paying a lot for the next couple of seasons to lock in one more year with Favors.

Finding the exact sweet spot between $70.0 million and $99.3 million would be a negotiation between the team and Favors’ agent, provided both sides are open to lengthening their partnership.

Since Favors would be eligible for a similar renegotiation next summer, the Jazz might want to wait to lock him in for the maximum of four seasons, through 2020-21, but there’s no guarantee the same rules will be in place beyond the current Collective Bargaining Agreement, which is likely to be renegotiated after the 2016-17 season.

Qualifying Offer Deadline

Saturday is the deadline for teams to unilaterally withdraw outstanding qualifying offers to restricted free agent.

After July 23, the teams can rescind a qualifying offer — provided the player gives their consent.  If so, the player is also renounced — the team losing Bird rights.

The following eight players remain restricted:

  • Tyler Zeller — Boston Celtics — $3.6 million qualifying offer (QO)
  • Donatas Motiejunas — Houston Rockets — $4.4 million QO
  • Tarik Black — Los Angeles Lakers — $1.2 million QO
  • Marcelo Huertas — Los Angeles Lakers — $1.1 million QO
  • Miles Plumlee — Milwaukee Bucks — $3.1 million QO
  • Mo Harkless — Portland Trail Blazers — $3.5 million QO
  • Nando De Colo — Toronto Raptors — $1.8 million QO
  • Bradley Beal — Washington Wizards — $7.5 million QO

Half of the list (Black, Huertas, Plumlee and Beal) have already agreed to terms to re-sign.  De Colo will spend the season overseas — Toronto holding onto his restricted rights for down the road.

The players to monitor closely include Zeller, Motiejunas and Harkless.

Even if their qualifying offers are rescinded before the deadline, each can still re-sign with their respective teams — but they would immediately become unrestricted free agents.

Unsigned First-Rounders

On Friday, the New Orleans Pelicans announced the signing of Buddy Hield, the team’s sixth overall pick in June.

“We could not be more excited to add a player and person like Buddy Hield to the New Orleans Pelicans,” said General Manager Dell Demps in a statement.  “He embodies all the traits we care about in our organization. His work ethic, energy and confidence have been on full display since he stepped foot in New Orleans. We look forward to helping him grow as a player as he will help us become a better team.”

The following eight 2016 first-round picks have yet to sign contracts:

  • Brandon Ingram (2nd) — Los Angeles Lakers
  • Jaylen Brown (3rd) — Boston Celtics
  • Thon Maker (10th) — Milwaukee Bucks
  • Donatas Sabonis (11th) — Oklahoma City Thunder
  • Juancho Hernangomez (15th) — Denver Nuggets
  • Guerschon Yabusele (17th) — Boston Celtics
  • Ante Zizic (23rd) — Boston Celtics
  • Furkan Korkmaz (26th) — Philadelphia 76ers

Some, like Yabusele, Zizic and Korkmaz will play overseas.  The Lakers, Celtics, Bucks and Thunder are likely waiting to maximize their salary cap space before inking their respective lottery picks.  Hernangomez is also expected to join the NBA this season.

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Cavs Woes Reason For Concern, But Not Dismissal

Spencer Davies takes a look at the Cavs’ issues and why we shouldn’t count them out just yet.

Spencer Davies

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The Cleveland Cavaliers are the classic case of Dr. Jekyll and Mr. Hyde.

When they’re on, they look like the defending three-time Eastern Conference Champions. When they’re off, they look like an old team that’s worn down and, at times, disinterested—and it gets ugly.

Take this past three weeks for example. After going on a tear of 18 wins in 19 games, the Cavs have dropped eight of 11 and are falling fast. Two of those three victories in that stretch were decided by four points or less against bottom-of-the-barrel teams in the East.

So what happened? For one, the schedule got significantly tougher. Beyond just the level of competition, Cleveland has been on the road for a long while. Nine of the games in this recent down period have been away games. The only time they’ve been home was for a quick second in mid-December and a short stay for New Years.

You’ve got to think about how that affects a psyche, not only from an on-court standpoint but also in regard to spending time with loved ones and family. LeBron James brought attention to his own homesickness on Christmas Day while he was in the Bay Area instead of in Northeast Ohio to celebrate the holidays. If it gets to him, you know it’s got to get to the other players as well. These guys are human beings with lives, and the rigors of travel can wear differently on people. Luckily for them, seven of their next nine games will be at Quicken Loans Arena.

With that being said, everybody in the NBA goes through it, so it’s no excuse for how flat the Cavs have been. Anybody on the team will tell you that, too. However, when you’re figuring out rotations and re-implementing players who had injuries, it’s not easy. This is exactly why nobody should envy Tyronn Lue.

He’s being asked to make room in his rotations and adjust on the fly as Cleveland gets guys back. When they went on that month-long run, the reason they had success was that the second unit really clicked. Dwyane Wade found his niche as the maestro of the bench bunch along with any mixture of Kyle Korver, Jeff Green, Cedi Osman, Channing Frye, and Jae Crowder. Lue had found the perfect group to spell LeBron James and company.

But then, Tristan Thompson came back and, with all due respect, it messed with their flow. The spacing is no longer there for Wade or Green to penetrate because the paint is clogged. It makes it easier on opposing defenses to just stick to Korver because there aren’t any other threatening shooters on the floor (besides Osman, maybe). Worst of all, the change basically kicked Frye—who has a plus-14 net rating, according to Cleaning The Glass—out of the rotation completely.

Deciding who plays and when is a tough job. Derrick Rose is set to come back soon. Iman Shumpert is coming along as well. Lue likes a 10-man rotation, but there are at least 12 players who deserve to be on that court. We already know Rose is expected to commandeer the second unit in Wade’s absence on back-to-backs. As for if Shumpert remains in Cleveland, who knows? It’ll be interesting to keep an eye on how this situation is managed moving forward.

Isaiah Thomas, on the other hand, is somebody the Cavs have been waiting on to return since the season started. Despite LeBron being LeBron and Kevin Love having as great of an offensive year as he’s ever had on the team, the starting unit lacks an extra punch. Thomas can be that shot in the arm, and he proved that in his debut at home against Portland and on the road in Orlando. There are two snags that both he and the team are going to hit before the 29-year-old returns to his All-Star form: 1) He’s got to get his legs under him to regain the consistency in his game and 2) His teammates are going to have to adjust to playing with him.

These are not easy things to do. Remember, aside from Jae Crowder, there is nobody on Cleveland’s roster that has played with Thomas before. Add in that he’s trying to re-discover his own game and that makes for a pretty bumpy road, at least out of the gate.

Start here—put Thompson in the starting lineup. As poor of a fit he’s been on the bench, he has shown promising signs of a developing chemistry with Thomas. It’s only been four games, but he loves having a partner in the pick-and-roll game. That’s clearly where you’ll get the most production out of him and how he can thrive. He’ll provide hustle, second chance opportunities, and a semi-decent big that can at least bother some of the competition’s drives to the basket. Sliding Love over to the four might change his game a little bit, but you can still get him going in the post before giving him chances as a shooter to work him outside-in.

The resulting effect helps the second unit as well. They’ll get one of either J.R. Smith or Crowder, depending on who would be relegated there. Both of those guys can use a spark to get them going. Because of Crowder’s familiarity with Thomas, let’s say Smith gets kicked out. Maybe that gets him out of the funk he’s in? It also allows for Frye, who hasn’t seen more than 20 minutes in a game since December 4, to get re-acclimated to a group he truly helped on both ends of the floor earlier in the year.

Outside of the need to make a move at the deadline, the Cavs can figure this out. It’s understood that they’re the fourth-worst defensive team in the NBA, but they’ve gone through these kinds of ruts at this time of year, specifically since LeBron came back. There might not be statistical evidence backing up the claim of any improvement, but the track record speaks for itself.

The panic button is being hit, but pump the brakes a bit. This isn’t anything new. The pieces are a little different and things look as bad as they ever have, but in the end, the result will likely be the same.

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NBA Daily: Zach LaVine Has Solid Debut With Bulls

Zach LaVine put together a solid performance for the Bulls in his first game back from injury.

James Blancarte

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The Chicago Bulls are turning a corner this season. Zach LaVine is healthy after completing a year of rehabilitation from an ACL injury. LaVine’s return comes at a critical moment. The team is 13-7 over the last twenty games. Many of the wins in this stretch are over current competitors for a potential spot in the playoffs. This includes wins against the Charlotte Hornets (in overtime), the Philadelphia 76ers and three wins (one in overtime) against the New York Knicks. The stretch of winning ties into the return of forwards Bobby Portis and Nikola Mirotic. Having these key players back and winning this many games recently has changed the dynamics of what had been shaping up to be a losing season.

LaVine played in his first game of the season on Saturday and hit three of four three-point baskets while scoring 14 points in 19 minutes played. LaVine described how he felt physically and about the team’s recent run.

“I thought I did pretty good. I was tired as hell at first. But, we got the win,” LaVine said. “We’re going to keep this thing going.”

The team went into this season having parted ways with their franchise player, Jimmy Butler, in a trade that was derided by many for being lopsided. The trade netted the Bulls LaVine, point guard Kris Dunn and the sixth pick in the 2017 draft in exchange for Butler and the number 16 pick. The trade also allowed Butler to be reunited with coach Tom Thibodeau in Minnesota. For the Bulls, Dunn has greatly improved from the poor play of his rookie season in Minnesota. In addition, the Bulls selected Lauri Markkanen, whom has already displayed some serious talent and potential. Now with LaVine in the lineup, the Bulls can see the total value of the trade on the court.

So, where do the Bulls now stand? According to FiveThirtyEight, as of January 14, the Bulls are projected as having a three percent chance of making the playoffs with a projected record of 32-50. This is a jump from less than one percent (essentially zero percent) back on December 11, 2017. Still, three percent is not the most reassuring projection.

In addition, the recent shift to winning basketball also puts Chicago’s 2018 draft pick in a more precarious position. On December 6, 2017, the Bulls were 3-20 and were on pace to have one of the worst records in the league, if not the worst. Now every win moves the pick further away from a likely top three or even a potential number one pick and moves it closer to a top-10 selection or even middle of the first-round pick.

At the moment, the team is 16-27, good enough for 12th place in the Eastern Conference behind the Hornets, Knicks, 76ers and Milwaukee Bucks for the eighth and final spot in the playoffs. Being 6.5 games back and having seven more losses than the Bucks means the Bulls will need to continue winning at a high rate to make up the difference in the time left in the season.

LaVine didn’t hold back when it came to expressing his optimism regarding the team’s potential.

“I think we can make a push for this thing,” LaVine said. “That’s our job to do. That’s our job to do that,”

LaVine isn’t paying much attention to skeptics who still don’t believe the Bulls have much change to win anything meaningful this season.

“You know, we can’t control outside thoughts or anything,” LaVine said. “We’re ball players, we go out there and try to win every competition. You know, I think we’re good. I think we’re going to be good.”

In LaVine’s absence, Mirotic and Portis (despite their offseason scuffle) have emerged as two of the team’s best players. In addition, center Robin Lopez has done an admirable job keeping up his effort all season long while fulfilling his role as a veteran leader for the team. Lopez described the atmosphere on the team as positive recently in an interview with Joel Brigham of Basketball Insiders.

Despite the reason for optimism, it must be noted that the franchise might make another big trade that would diminish the team’s ability to be competitive this season. Despite his recent on-court success, reports are that Mirotic would like to be traded and that the Bulls asking price is a first-round pick.

Until such a move occurs, the Bulls appear poised to maintain their recent rate of success. Every win could cost the Bulls what could be a top overall pick in 2018. Regardless, the Bulls are surely feeling better about the results of the Butler trade, especially after LaVine’s impressive Chicago debut.

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NBA Daily: Lopez’s Enjoys “Old Guy” Role on Young Team

Robin Lopez is the old man on a very young Chicago Bulls team, but he says the camaraderie is a big reason why he’s happy there, and why the team is overachieving so much this year.

Joel Brigham

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When the Chicago Bulls started the season 3-20, nobody was surprised that they stunk. Everything was fine. They were supposed to stink. That was the entire reason they traded away Jimmy Butler for younger players in the first place. They wanted got their rebuild underway in earnest. (more…)

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