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Enormous Contracts Are the NBA’s New Reality

Nate Duncan looks at the money available for free agents this offseason to explain why the market is so hot.

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It has been a relatively quiet first day of free agency as the market waits for big fish like Carmelo Anthony and LeBron James to bite.  But the few deals that have been signed have shocked many observers in both salary and length.  Notably, 30-year-old Marcin Gortat agreed to return to the Washington Wizards for a reported five-year, $60 million pact, Jodie Meeks agreed to three years and nearly $19 million with the Detroit Pistons, and the Golden State Warriors reportedly agreed with Shaun Livingston on a three-year deal for their full mid-level exception, although the last year is only partially guaranteed.  This morning it was reported that restricted free agent Avery Bradley agreed to a four-year, $32 million deal to return to the Boston Celtics, and C.J. Miles agreed to four years, $18 million with the Indiana Pacers.

While these contracts are far above the market rate for last year, the rising cap this year, the number of teams hording cap space and the increased number of teams looking to compete this year has significantly inflated the market compared to the last few post-lockout years when the cap remained relatively flat.

Bear with me if you will for a short gaming of what this offseason will look like.  Please note that this is not a prediction of where these players will land necessarily, but more of an exercise to get an idea of how much money will be left once the main players have found their destinations.  To do so, I went through the salary situations of all 30 teams starting with the updated salary situations from our Eric Pincus.*  The goal was to determine how much room they would have, either via exceptions or outright cap space.  Obviously such an exercise involved myriad assumptions such as which players’ cap holds will be renounced, which non-guaranteed players will be retained, ad infinitum.  Clearly, not all of these can be correct.  They will not be delineated here, as that is not really the purpose of the exercise.  The point is more to get an idea of the total amount of free agent money available.

*Eric’s numbers include cap holds that have yet to be renounced as well as a lot of non-guaranteed money that will likely be cut.

As we will see, not only are the Meeks, Livingston and Bradley deals in line with this year’s market, but the teams signing them might have even been smart to move on them so quickly.

The Big Fish

The first part in modeling the summer is accounting for where the major free agents will land.  Aside from where we have reporting to the contrary, the assumption will be that most if not all of the major free agents will return to their prior teams.  Because the market is so inflated, the incumbent team will often have to use the advantage of offering a fifth year, as only the prior team may do. Since many of those teams are over the cap with no way to replace those players, that seems the most likely scenario in these cases. This is especially so since most of the teams in this situation are trying to get better this year.

If so many players end up returning to their prior teams, that will cause more overall money to be spent due to many of those teams using Bird rights to re-sign those players by going over the cap.  If those players leave, then those teams likely will not have the spending power to replace those assets, while teams with cap room still must spend to at least 90 percent of the projected $63.2 million cap this year.*

*If a team does not spend that much, it must distribute the difference between its actual payments to players and the salary floor to the players on its roster via whatever formula the NBPA finds appropriate. This would most likely be pro rata based on how much the players on the team are already making.

On to the main players.

The Heatles

Reports have generally indicated that LeBron James will demand a maximum deal. Chris Bosh and Dwyane Wade may sign for the max as well, but it’s possible that they’ll re-sign for less. Udonis Haslem will also re-sign for less than his original salary, but probably for more years to make up the lost income.  Most estimates have floated the idea that the Miami HEAT could have around $10 million in space to sign free agents, plus the $2.7 million Room Exception for teams under the cap.

Carmelo Anthony

Anthony seems the most likely star to leave his prior team. This analysis will assume he goes to the Chicago Bulls, but the overall league market would be much the same if he goes to another new team. If he remains with New York, that leaves another team with cap space that must be filled and inflates the market even further.

Dirk Nowitzki

All reports have indicated he is going back to the Dallas Mavericks, likely for about $10 million per year.

Lance Stephenson

Because the Pacers have no way to replace him, the assumption will be he ultimately returns there despite reports of an impasse after Indiana offered him a five-year, $44 million deal.

Kyle Lowry

Reports have Toronto mulling whether to offer him a fifth year on a contract starting at $12 million per year. If that is indeed the offer, it is hard to imagine him leaving because there is no way he would get that kind of money as a 32-year-old free agent coming off a four-year deal.

Isaiah Thomas

We will assume he returns to the Sacramento Kings on something like an $8 million per year contract as a restricted free agent.  They too have talked about trying to get better this year, and if they lose him they would still be capped out with no other decent point guard on the roster and only the MLE to offer.  Given the amount of money available around the league, I am surprised Thomas isn’t being talked about for offers over $10 million per year.  Apparently teams are scared off by his size.

Trevor Ariza

It has long been predicted that Ariza will return to the Washington Wizards.  With Martell Webster going under the knife for back surgery, Otto Porter nowhere near ready to start (if he ever will be), and Marcin Gortat already paid, the Wizards will likely retain the 29-year-old Ariza as well using Bird rights. This too may be tougher than expected for Washington, given the other potential suitors for Ariza.

Restricted Free Agents

As reports of the Cleveland Cavaliers making a max offer to Gordon Hayward swirl, it appears very likely that Hayward, Eric Bledsoe and Greg Monroe will get maximum offers given the amount of space available around the league.  A maximum offer sheet for these restricted free agents will start at approximately $14.7 million. We will also assume that their incumbent teams will match such an offer sheet.  If, however, they do not, the Utah Jazz, Phoenix Suns and Detroit Pistons will all have an extra $14.7 million in cap room to use on other free agents since they are all below the cap.  Therefore, the ultimate destination of these players does not really affect the total amount of money available in the system.

Meanwhile, it seems very likely that Chandler Parsons has some sort of arrangement to return to the Houston Rockets, or they would not have let him out of his contract a year early when his signing an offer sheet as a restricted free agent could potentially scuttle their free agent plans.  Because he still has a low cap hold of $2.9 million, the Rockets will still be able to sign free agents up to the cap before exceeding the cap to re-sign him with Bird rights.  The assumption will be that he returns on something approaching a $10 million deal, presumably with a bit of a discount priced in since the Rockets did him a favor by not exercising their team option for under $1 million for 2014-15.

Edit: To be clear, under this scenaio Parsons would not actually sign his new deal until after the Rockets sign additional players.  Signing it before the Rockets sign anyone else would use up their Room prematurely.

Teams With Cap Room

Now that those assumptions are in place and most of the major free agents are accounted for, here is my projection of the remaining available cap room around the league.

Philadelphia 76ers–$30.9 million

Orlando Magic–$22 million*

Los Angeles Lakers–$21 million

Phoenix Suns–$20.9 million

Charlotte Hornets–$18 million

Atlanta Hawks–$16.1 million

Dallas Mavericks–$16 million

Cleveland Cavaliers–$15 million

Utah Jazz–$13.8 million

Milwaukee Bucks–$13.1 million

Miami HEAT–$10 million

Houston Rockets–$7 million*

Detroit Pistons–$2.8 million

*The Orlando projection includes the two-year, $9 million contract given to Ben Gordon.  Houston’s includes Jeremy Lin on the roster for now. Although they will likely move him, it would be to another team with cap space so it would not affect the total amount of money in the system.

Look at those figures again.  Even with most of the major free agents gone, there could remain as much as $218 million in cap space around the league.  That number could of course change based on the potential destinations for the big boys, but it represents a reasonable proxy for what is out there.*

*While teams like Philadelphia, Orlando and Utah may not spend all the way up to the cap on their own free agents, the 90 percent salary floor means they are incentivized to take on bloated contracts from other teams in exchange for assets, which would open an equivalent amount of cap space elsewhere in the league.

Available Exceptions

Of course, that is nowhere near the maximum amount of money available around the league.  Based on the math and what we know of teams’ luxury tax tolerance, quite a few teams will have the full mid-level exception to spend.  By my projections, Boston, Denver, Indiana (partial use), Los Angeles Clippers, Memphis (likely Mike Miller), Minnesota, New York (if Carmelo leaves), Oklahoma City (possibly a partial use), Portland, San Antonio and Washington (depending on how high Ariza’s contract goes) could use the MLE.  That is 11 teams. If we conservatively assume that six of them will use the full MLE and another two use part of it, that is another $35 million or so in the system.

Many teams could also use the $2.1 million Bi-Annual Exception. These include Boston, Los Angeles Clippers, New York, Portland, and San Antonio.* If four of the six use it, that’s another $8.4 million.

*If Chicago can execute a sign-and-trade for Anthony or another target, they will likely use the MLE and BAE as well.  Edit: A previous version of this article stated that Washington could also use the BAE, but it was used on Eric Maynor last year.

Given Brooklyn’s recent spending habits, it will likely use the $3.3 million Tax-Payer MLE (MMLE).

Finally, many teams trying to improve with cap room could use their $2.7 million Room Exception.  These include Atlanta, Chicago, Cleveland, Dallas, Detroit, Houston, Los Angeles Lakers, Miami, Milwaukee, New Orleans (lost other exceptions due to going under the cap for the Omer Asik deal) and Phoenix.  That is another 11 teams. All but Atlanta and Milwaukee of this group seem certain to use theirs, so let’s conservatively say nine teams.  That is another $24.3 million.*

*I assumed that cap teams Orlando, Philadelphia and Utah would not use their Room Exceptions.

That now leaves us with approximately $289 million in available money—an absolutely enormous sum.

Who Gets the Money?

Now remember again that this $289 million is available to be spent with almost all of the best free agents off the market.

In the scenario I’ve modeled, here are some of the remaining notable free agents:

Pau Gasol

Spencer Hawes

Luol Deng

Channing Frye

Ed Davis

Boris Diaw

Josh McRoberts

Shawn Marion

Paul Pierce

Patty Mills*

Patrick Patterson (RFA)

P.J. Tucker (RFA)

Mo Williams

Vince Carter

Thabo Sefolosha

*Mills has a shoulder injury that will keep him out until at least midseason, and is widely assumed headed back to San Antonio.

Certainly other players could get paid this offseason, but that list is incredibly unexciting.  And yet in this scenario $289 million, plus minimum salaries, is going to be split up among these players and even lesser lights. The choice between massively overpaying older players like these and investing in maximum contracts for players like Hayward, Bledsoe and Monroe is an obvious one.  That is why those players will almost certainly get maxed out.

What is Market Value?

Given the realities of the market, the Livingston, Meeks and Bradley contracts do not look nearly so bad. Then consider that the salary cap is projected to increase a further $4 million next year, and may see even higher increases in the years after that as new national and local television deals kick in.* Even the Gortat contract seems to be right about what he would have gotten on the open market in terms of annual value.

*Especially with respect to the national deal, the NBA may elect to mute a possible huge one-year jump in the cap by structuring the national TV contract to increase in value over its lifetime rather than doubling the previous contract in year one.

Nevertheless, the mere fact a contract is market price based on what other teams are willing to pay does not necessarily make it a good deal.  This is especially so for players like Gortat, Lowry and Ariza who will likely re-sign with their old teams.  With the market so competitive, the fifth year becomes critical for both player and team, especially when a player is on his third long-term contract.  With the amount of competition on the market, length of contract rather than size will become more important than ever.  We may see smart teams move ever more in the direction of shorter offers for more money to free agents when they are signing players below the upper crust.

For the first three offseasons after it was enacted, many cited a depressed free agent market as the reality of the 2011 CBA.  It is now clear that was an artificial reality imposed by the flat cap required to reduce the players’ percentage of BRI into the agreed-upon 49-51 percent range from the previous CBA’s 57 percent, as well as bloated longer contracts left over from the previous CBA. The shorter contracts under this new CBA will put many more free agents on the market every year. The new breed of general managers are much smarter about maintaining flexibility. The cap is now rising, and should continue to do so beyond what many have imagined. Get used to three years, $19 million as a relative “bargain” for Jodie Meeks for the foreseeable future.  It is the NBA’s new reality.

 

Nate Duncan is an NBA analyst and attorney. He writes regular features for Basketball Insiders and chats weekly at 11 Eastern on Tuesdays.

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Grizzlies trade Jonas Valanciunas to Pelicans for Eric Bledsoe, Steven Adams

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According to ESPN’s Adrian Wojnarowski and Andrew Lopez, the New Orleans Pelicans are shipping guard Eric Bledsoe, center Steven Adams, the Nos. 10 and 40 picks of the 2021 NBA Draft, and two future first-round picks to the Memphis Grizzlies for center Jonas Valanciunas and the Nos. 17 and 51 picks of this week’s upcoming draft. So, the Pelicans are giving up the Lakers’ 2022 first-round pick. Valanciunas, the 29-year-old veteran center, averaged 17.1 points, 12.5 rebounds, and 1.8 assists per game in 62 games played throughout the 2020-21 season. He also shot 59 percent from the field. The seven-foot Lithuanian also ranks fourth overall in true shooting percentage (.616) among active players. On July 11, 2019, Valanciunas signed a three-year, $45 million contract with the Grizzlies. He is set to earn $4 million next season.

Additionally, in 71 games played last season, Bledsoe averaged 12.2 points, 3.4 rebounds, and 3.8 assists. The six-foot-one guard also shot 42.1 percent from the field in the 2020-21 season. On November 23, 2020, as part of a four-team trade, Bledsoe and Adams were traded to the Pelicans from the Oklahoma City Thunder, along with two future first-round picks and the right to swap two additional first-round picks. Last season, in 71 games played, Bledsoe averaged 12.2 points, 3.4 rebounds, and 3.8 assists. His field goal percentage was 42.1 percent as well. The 11-year veteran is set to earn $18,125,000 in the 2021-22 season. Before he was traded to New Orleans, on March 4, 2019, the guard signed a four-year, $70 million extension. He earned his first All-Defensive second-team selection in the 2019-20 season.

Moreover, in 58 games played last season, Adams averaged 7.6 points, 8.9 rebounds, and 1.9 assists per game. The six-foot-eleven center ranks fifth among active players for effective field goal shooting percentage (.591). The eight-year veteran also ranks third in offensive rebounding percentage, with an active statistic of 14 percent. On November 23, 2020, the same day Adams was traded to the Pelicans, he signed a two-year, $35 million extension. For next season, he is projected to earn $17,073,171. To add to this trade news, the Grizzlies and Pelicans are swapping second-round picks in this year’s draft, too. Referencing NBA.com’s “Consensus Mock Draft” article, with the No. 10 pick of the draft, the Pelicans were originally expected to draft either Josh Giddey or Davion Mitchell at this number. However, plans have now changed.

From ESPN’s Bobby Marks, the trade will not be finalized until August 6th, and this is because of the annual salaries of these said players. Free agency will begin on August 2, 6:00 p.m. (EST). Furthermore, per Spotrac’s 2021-22 NBA salary cap table, next season’s luxury tax threshold is $136,606,000. The team’s current available luxury tax space is $22,555,195. The Pelicans and Grizzlies have a salary cap maximum of $112,414,000. Brandon Ingram, Bledsoe, and Adams had a combined cap percentage of 39.2 percent. Considering that Bledsoe and Adams are traded away, this will clear up $35,198,171 of dead cap space.

Yesterday, CBS Sports reported the news pertaining to Lonzo Ball’s desire to remain in New Orleans. With extra cap space, the team is expected to re-sign the 23-year-old guard. Likewise, for the Grizzlies, the teams has a luxury tax space of $37,019,952. Their current cap space is $8,321,229. As stated before, the transactions have not yet been finalized. The Grizzlies’ outgoing cap is now $14 million, but from the contracts of Adams and Bledsoe, they are bringing in $35,198,171.

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NBA Trade Rumors: Jazz considering trade offers for Bojan Bogdanovic, Joe Ingles, Royce O’Neale, and No. 30 pick of the 2021 NBA Draft

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Per one interesting announcement from Bleacher Report’s Jake Fischer, the Utah Jazz are open to trading forward Bojan Bogdanovic, forward-guard Joe Ingles, small forward Royce O’Neale, and the No. 30 pick of the 2021 NBA Draft. Fischer stated, “The Utah Jazz are known to be one of the few teams actually searching to move playoff-tested talent. Retaining Mike Conley is an offseason priority, sources said, and the Jazz have held numerous discussions with teams around the league about offloading salary to create for Conley in free agency.” Point guard Mike Conley is set to become a free agent this offseason. Though, general manager Justin Zanik will aim to re-sign the 33-year-old guard in the coming weeks. Conley earned $34.5 million in the 2020-21 season.

“League personnel most often mention Joe Ingles as the Jazz wing to watch, and Bojan Bogdanovic and Royce O’Neale are also considered available for trade as Utah narrows its focus towards building a contender around Donovan Mitchel. The Jazz are also open to discuss trading their No. 30 pick, sources said.” In the 2020-21 season, in 72 games played, Bogdanovic averaged 17 points, 3.9 rebounds, and 1.9 assists per game. On May 1, 2021, in the team’s 106-102 victory over the Toronto Raptors, the six-foot-seven Croatian scored a season-high 34 points, shooting 12-for-22, and he finished his performance with four rebounds and four assists as well. On July 7, 2019, he signed a four-year, $73 million contract with the Jazz.

In 67 games played last season, Ingles averaged 12.1 points, 3.6 rebounds, and 4.7 assists per game. The six-foot-eight forward is set to earn $14 million in the 2021-22 season. Plus, among the mentioned players, Royce O’Neale has contributed the least. In 71 games played last season, he averaged seven points, 6.8 rebounds, and 2.5 assists. On January 19, 2020, the forward signed a four-year, $36 million extension with the team. He will earn $8.6 million next season. According to The Athletic, in the team’s seventh workout for draft prospects, they viewed Quentin Grimes, David Duke, Matt Mitchell, and a few other players. In the first round, if the team chooses not to draft any of the players they are holding workouts for, the organization will trade the No. 30 pick.

Just for a reminder, retrieved from Spotrac, the 2021-22 NBA luxury tax threshold is $136,606,000. Utah’s active roster cap is $133,284,695, the maximum cap is $112,414,000, and the current cap space is $72,990,215. Furthermore, center Rudy Gobert currently has the highest guaranteed contract on the team. On December 20, 2020, Gobert signed a five-year, $205 million extension with the organization. Gobert is set to earn $35.3 million in the coming season, whereas Donovan Mitchell will earn $28.1 million. Gobert and Mitchell combined consume 47.6 percent of the team’s salary cap. For the upcoming 2021-22 season, the Jazz have a guaranteed total of $129,719,453. Based on the team’s future outlook, the Jazz will have to make a trade or two in order to retain their star players. This should go without saying.

NBA Analysis Network reported a few days ago that a potential Jazz-Knicks trade target is Bojan Bogdanovic. Greg Patuto proposed the Knicks receiving Bogdanovic, while the Jazz would receive Kevin Knox II, and the Nos. 19 and No. 32 picks of the 2021 NBA Draft. Now, this could still happen at some point during this draft week, but then again, sports bettors and fans alike understand that these news reports could be just rumors. The most intelligent, unforthcoming general managers know not to leave bread crumb trails for the media, especially leading into the offseason. They will do everything necessary to protect their foolproof plans.

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Raptors, Pacers, Timberwolves, Kings, and Cavaliers among teams showing interest in Ben Simmons

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According to Jake Fischer of Bleacher Report, five teams have shown interest in pursuing Ben Simmons from the Philadelphia 76ers. Fischer reported, “Cleveland, Indiana, Minnesota, Sacramento, and Toronto all showed interest in acquiring the runner-up for Defensive Player of the Year.” Furthermore, the teams are wanting Simmons to change position from point guard to forward. “Multiple executives from those teams, when contacted by Bleacher Report, mentioned their excitement at incorporating Simmons as a play-making forward—not at the point guard position he’s played in Philadelphia.” The six-foot-eleven guard averaged 14.3 points, 7.2 rebounds, and 6.9 assists in the 2020-21 NBA season. This might sound fine for a young rookie, but as a five-year player, these aforementioned statistics were career lows.

However, the 25-year-old also earned his third NBA All-Star selection and second All-Defensive first-team selection last season. After a less than mediocre performance in his third postseason of his NBA career, the majority of 76ers’ fans would agree that it’s now time for Simmons to have a change in scenery. With a regular season record of 49-23 (.681), the No. 1 ranked 76ers in the Eastern Conference entered the conference semifinals as favorites over the Atlanta Hawks. Leading into this series, some NBA analysts were predicting Philadelphia to prevail four games to two. The 2016 first overall pick was expected to limit Trae Young in scoring and rally his team from point deficits, but none of this ever manifested.

Pertaining to postseason averages, Simmons had a playoff series-low of 9.9 points and 6.3 rebounds per game in the conference semifinals against the Hawks. This lackluster showing proved to be a more significant downfall for the superstar, considering Simmons had only five points, eight rebounds, and 13 assists in Game 7 versus the Hawks. In the 2019-20 season, he averaged 2.1 steals per game, leading all other players in the league. Moreover, Simmons currently ranks sixth in the NBA for active player triple-doubles (32). With a total of 32 career triple-doubles, he ranks 13th on the all-time list, tied with Clippers’ guard Rajon Rondo.

On July 16, 2019, Simmons signed a five-year, $169.65 million contract extension with the 76ers. He is set to earn $30.5 million in the 2021-22 season. Among these teams interested in Simmons, Cavs’ Kevin Love has the fourth largest contract guarantee of $91.4 million. Love is due to earn $31.3 million next season, and the 13-year veteran’s contract consumes 26 percent of the team’s salary cap. He could be traded this offseason. Timberwolves’ Karl-Anthony Towns has a contract guarantee of $130.8 million. The 25-year-old Wolves center will earn $31.6 million in the upcoming season.

Plus, Kings’ 2017 first-round pick De’Aaron Fox has a guaranteed contract of $171.1 million. Fox will earn $28.1 million next season. To add to that, Raptors’ Pascal Siakim has a contract guarantee of $131.4 million. Not to mention, reported by Yahoo Sports via trade rumors yesterday, the Golden State Warriors are a potential trade partner for Toronto. The Warriors could make a move on Siakim, clearing up space on the Raptors for Simmons. Per Spotrac, the 2021-22 season cap maximum is $112,414,000. In the coming weeks, one of these said five teams might make a substantial trade offer to the 76ers’ organization that they cannot refuse.

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