The Cavs and the salary cap

[col63onel]

With the season over, we now turn our attention to making the Cavs better. That involves moving around salaries. MLB has no salary cap, the NFL has a very basic one, and the NBA has a much more complicated cap.

Unfortunately, we can't really count on the mainstream media to give us the straight story. Many of them don't understand it, so they propose or report stuff that is 100% illegal. That's where this thread comes in.

I talked with a few other students of the Salary Cap (most notably @wuck ), and they agreed that this thread would be useful. The goal is to have a thread where you can come to ask questions about the NBA salary cap and how it affects the Cavs. You could pitch us your "dream off-season" and see if it is plausible. You can also read through others questions and see if your question has been answered, or if you don't understand an answer, ask for clarification. We certainly could answer questions about other teams (like, why I think Miami lowballing Wade is not a bad move for them), if need be.

A few general tips

1.) We aren't 100% knowledgeable of every aspect. NBA beat writers don't get it right more than 1/2 the time, so we might not always have every answer right away. If we knew all the answers, we'd be working in the NBA right now.

2.) Try to make your questions as specific as possible. A question like, "Who can the Cavs get" is not really the point of this thread (partly because the most complete answer would be very long, and partly because there are a lot of non salary cap variables affect that question), and won't be answered. A question like, "If we sign player X to this contract and trade for player Y, could we still afford to sign player Z to this contract" should generate a faster response because it should be fairly easy to answer. Obviously, you can't make all of your questions that specific, but just keep in mind that the more specific the question is, the better the response would be.

3.) When we answer a question, we'll likely cite the "Larry Coon Salary Cap FAQ". Coon has worked for ESPN in the past, and one of the few I actually trust. He has a website that takes the current Collective Bargaining Agreement and tries to explain it in layman's terms. His website is here. If you want to learn more about the salary cap, this where to start. It's where I learned about 95% of all my salary cap knowledge.

4.) In the same vein as #3, we'll leave a lot of the details to the Coon FAQ. In just about every possible scenario, there is a tiny technicality that you have to consider for completeness sake. The FAQ covers those, but if they don't really affect the situation at hand, no reason to include them.

I do want to make a few posts that answer some questions that I assume everyone wants to ask (our own free agents, who or what can we trade, etc.). I should get those up in the next few days.

I also want to keep a list of people who feel qualified to answer these questions. If you feel up to the challenge, PM me and I'll add your name to the list.

Posters who think they know a lot about this salary cap stuff
@wuck
@col63onel
@Dr. Gymbo
@caf
@Douglar

 

[LeBro]

Great idea!

First, let's assume that the Cavs retain everyone (all UFA and RFA). I've read our cap will be really high -- like $110M, well into the luxury tax territory.

With that said, in what capacity can the Cavs sign players at that point? Is the only way they can bring in a player using the mini-MLE? (My understanding is that the MLE is not available to them because they're over the luxury tax, but the mini-MLE is?) It's not clear to me how signing a player works once a team is over the luxury tax.

 

[col63onel]

Great idea!

First, let's assume that the Cavs retain everyone (all UFA and RFA). I've read our cap will be really high -- like $110M, well into the luxury tax territory.

With that said, in what capacity can the Cavs sign players at that point? Is the only way they can bring in a player using the mini-MLE? (My understanding is that the MLE is not available to them because they're over the luxury tax, but the mini-MLE is?) It's not clear to me how signing a player works once a team is over the luxury tax.

Great question. Will be answered in one of my "FAQ" posts that I'll get up tonight.

 

[LeBro]

I've read a lot about how Brendan Haywood's contract is valuable because it's non-guaranteed. I don't really understand how that works.

For example, in another thread, there's spitball speculation that the Cavs could trade Haywood the Spurs for something like Tiago Splitter and Patty Mills. That seems like a massive haul for someone like Haywood. What makes his contract so lucrative? (I've also read a lot that, because of the cap going up, his contract as a trade asset isn't as valuable as it once was?)

Some people seem to write off the contract as if it's not valuable at all, some suggest we could get a package of something like Splitter/Mills. That's a pretty big divide -- can you comment on that at all? Additionally, does trading Haywood and bringing someone in allow for us to circumvent limitations of the luxury tax? (i.e. still pay luxury tax penalties, but take on salary that we couldn't have taken on via a free agent signing)

 

[gourimoko]

I've read a lot about how Brendan Haywood's contract is valuable because it's non-guaranteed. I don't really understand how that works.

For example, in another thread, there's spitball speculation that the Cavs could trade Haywood the Spurs for something like Tiago Splitter and Patty Mills. That seems like a massive haul for someone like Haywood. What makes his contract so lucrative? (I've also read a lot that, because of the cap going up, his contract as a trade asset isn't as valuable as it once was?)

Some people seem to write off the contract as if it's not valuable at all, some suggest we could get a package of something like Splitter/Mills. That's a pretty big divide -- can you comment on that at all? Additionally, does trading Haywood and bringing someone in allow for us to circumvent limitations of the luxury tax? (i.e. still pay luxury tax penalties, but take on salary that we couldn't have taken on via a free agent signing)

Haywood's contract is not guaranteed, so teams looking to clear cap space and sign a free agent can trade for Haywood and effectively clear space. This gives him value.

The flip side is that the NBPA has stated they will not tolerate any cap smoothing, which means we will almost assuredly see massive cap increases over the next several years with the 2016-17 cap likely to exceed $85M.

Every team in the league is preparing for the new cap structure, so this negates some of Haywood's perceived value.

 

[LeBro]

Haywood's contract is not guaranteed, so teams looking to clear cap space and sign a free agent can trade for Haywood and effectively clear space. This gives him value.

And what does it mean on Cleveland's end? What flexibility/advantages does it give them in terms of taking on additional salary? If Haywood is making ~$10M, does that mean we can take on a contract of ~$10M/yr, plus or a minus a certain percent of that?

 

[gourimoko]

And what does it mean on Cleveland's end? What flexibility/advantages does it give them in terms of taking on additional salary? If Haywood is making ~$10M, does that mean we can take on a contract of ~$10M/yr, plus or a minus a certain percent of that?

I don't consider myself a cap expert, but, yes, in our present situation we can make legal trades with Haywood's $10M contract.

We can always make a trade that reduces salary, so we could always trade Haywood out for $10M and take back $9.9M (assuming the other team isn't under some other restriction).

AFAIK, and correct me if I'm wrong, but even being over the apron we can trade Haywood for 125% of his contract value, or $12.5M, thereby increasing our salary.

 

[col63onel]

Keeping our own free agents
One common aspect of the NBA salary cap: regardless of how much salary your team has, who was on your team, how long they have been in the league, or how good they are, the NBA allows teams extra leeway to sign their own free agents. The most commonly used term is "Larry Bird Exception". You can read more about the specifics of "Bird Rights" in questions 25-44 of the Coon FAQ. There are obviously a lot of nuances and a lot of other similar exceptions that get lumped in with "Bird Rights", but the general principle is: You can generally go as far over the salary cap as you want to sign your own free agents.

This post will look at the options of the players who played for the Cavs this past season, but whose contracts are up. I sorted them into 3 categories. I am not counting LeBron as a free agent, even though he technically will likely opt out and sign a new deal. That's for a different post.

Vet Min Free Agents
Kendrick Perkins
James Jones
Shawn Marion

Marion has stated he will retire. We can bring back either Perk or Jones if we want to, but could only offer them a 20% over last years salary (see "Non Bird Exception" in Q25 of Coon FAQ). That ends up being little more than the veteran minimum, but I don't think many, if any teams, would offer more than the vet min anyways. We could keep both if we wanted to, or both could retire. These will be guys at the end of the bench even if they come back, so I don't feel a lot like discussing them any more.

Restricted Free Agents
Tristan Thompson
Iman Shumpert
Matthew Dellavedova

Restricted free agency is actually pretty similar to NFL restricted free agency. If a player is coming off their rookie contract, their team basically has the right to match any contract they sign with another team. The details are here.

To skip all the details, these players will be allowed to negotiate a contract with the Cavs or any other NBA team. If they sign with another team, the Cavs have 3 days to "match", meaning they'd keep that player at the same contract he just signed. So if Shumpert signs a 4yr, $36mil deal with the Spurs, the Cavs can match, which means the Cavs would then have him for 4yr, $36mil. He could also sign with the Cavs and not negotiate with any other team if he so chooses.

There is a possibility that a player doesn't sign a long term deal with anyone and plays on a one year contract. I don't see that as likely here, so I won't talk about unless it actually happens.

Unrestricted Free Agents
Kevin Love
JR Smith

Technically, neither are unrestricted free agents yet. They both have a "player option" that is guaranteed for one more season with the Cavs (Love at $16.7m and JR at $6.4m).

If they do both opt out, then they are free to sign with any team. The Cavs would not have the right to match as they would with their restricted free agents.

Love is in line for a maximum deal. He could sign it this offseason for 5 years and about $110m, or sign a one year deal worth about $19m, then sign a 5 year, $127m deal next offseason. So if he only signs for 1 year this offseason, it's to make an extra 17 mil down the road.

JR is an interesting case. By opting out, he either wants a raise over 6.4mil, or he wants to sign a longer deal now, even if it starts at less than 6.4mil. All I can say from the salary cap standpoint is that he would free to sign with anyone.

 

[col63onel]

I don't consider myself a cap expert, but, yes, in our present situation we can make legal trades with Haywood's $10M contract.

We can always make a trade that reduces salary, so we could always trade Haywood out for $10M and take back $9.9M (assuming the other team isn't under some other restriction).

AFAIK, and correct me if I'm wrong, but even being over the apron we can trade Haywood for 125% of his contract value, or $12.5M, thereby increasing our salary.

125% + 100k, so 12.6 for Haywood alone. Coon Q84

 

[Dr. Gymbo]

Gour did a great job answering the questions. When you trade for players, you can trade for players equal up to 125% of the total amount of outgoing contracts. Haywood's final deal is $10.52M, which means we could take back ~$13.15M with just that contract.

Brendan Haywood's contract is very unique, I can't think of another contract like it ever. He signed a 6 year deal with Dallas in July 2010. The final year of that contract is completely unguaranteed and he can be waived with no compensation as long as he is waived by 8/1/15. Dallas used their one time amnesty provision on Haywood granted to each team under the CBA implemented in 2011. He was waived in 2012, but Dallas still has to pay the guaranteed portions of money minus the money a team bid on him; he still gets his full salary, the difference is in who pays it. He ended up in Charlotte because Charlotte "won" a portion of his contract with a bid; only teams with cap space could bid for amnestied players. The Cavs traded for him (his contract) last summer and assumed payment of Charlotte's bid (this is reflective in his salary towards the Cavs cap); Dallas is still paying him the leftover portion of the contract they signed him to.

Basically, Brendan Haywood is acting like cap space that a team with no salary cap space has. Granted, we can only trade him. He is being shopped to teams looking to dump players in order to free up cap space to go after players (like LaMarcus Aldridge and the Spurs).

 

[LeBro]

Gour did a great job answering the questions. When you trade for players, you can trade for players equal up to 125% of the total amount of outgoing contracts. Haywood's final deal is $10.52M, which means we could take back ~$13.15M with just that contract.

How does this apply to multi-year contracts?

Suppose... uhm... just making this up here, suppose Tiago Splitter is on a 3-year contract with a salary breakdown like this:
'15-'16: $5M
'16-'17: $18M
'17-'18: $18M

And now suppose Haywood's salary looked like this:
'15-'16: $10M
'16-'17: $5M

For the 125% thing, can we still make the trade, even though Tiago's salary in the final two years of the contract exceed 125% of Haywood's contract? i.e. does the "125% rule" only apply to the current year's contracts of all of the players involved?

Also, speaking of the 125% thing -- sorry if this is getting pedantic -- but does that mean that teams can continuously flip players around?

e.g. (again, fake salaries here)
Cavs: Haywood - $10M
Spurs: Splitter - $12M
Warriors: Klay - $15M
Lakers: Kobe - $18M

Could the Cavs hypothetically exploit the 125% cushion by continuously flipping players?
Cavs trade Haywood to SAS for Splitter (125% of Haywood's $10M is $12.5M)
Cavs trade Splitter to GSW for Klay (125% of Splitters $12M is $15M)
Cavs trade Klay to LAL for Kobe (125% of Klay's $15M is $18.75M)
...etc...

 

[Birdy89]

Guys are going to start getting eye popping contracts soon. With the cap set to go up almost $40 million by the 17-18' season, teams will be spending a boat load on mediocre guys just to get to the minimum spending level. The league is set to be awash in dollars for 2 years, and then go backwards.

I suspect we will see the true superstar players looking to keep signing 1 year deals until the 17-18 when the cap is projected to jump to $108 million. Getting a max deal for 4-5 years at that point will be like hitting a lottery. It is also going to mess with teams finances as guys who get max deals that year will be getting those big raises every year with a declining salary cap going forward.

Saw this on Draft Express earlier in the year as far as projecting the salary cap out through the end of the decade based on the new TV deal.

15-16 - $67.1 Million (Tax $81.6 Million)
16-17 - $89 Million (Tax $108 Million)
17-18 - $108 Million (Tax $127 Million)
18-19 - $100 million (Tax $121 Million)
19-20 - $102 Million (Tax $124 Million)

Chances are there is a lockout after the 16-17 season that keeps us from ever seeing that next jump, but teams are going to have to do a ton of planning going forward because after those 2 huge jumps it regresses even though guys will be getting yearly raises.

To get to the minimum spending level in those years with the big jumps teams will be throwing just huge money at really pedestrian guys.

Just thought I would put a general overview out of where the cap is going because we will probably be seeing tons of guys taking 1-2 years deals this off-season hoping to cash in on that 17-18 free agency period when the real bonanza occurs.

 

[JFT]

In the article below it states the Cavs will apparently have a record $200M+ payroll due to a $90M+ luxury tax for exceeding the cap (and possibly up to $300M payroll). A staggering amount. Is this correct, and do you really think Gilbert will do that for a 'small market' team valued at around $1B this past year?

How the Cavaliers’ run can lead to a record $200M payroll
http://nypost.com/2015/06/12/how-the-cavaliers-run-can-lead-to-a-record-200m-payroll/

 

[rosebowl89]

If that russian dude can pay like 190 mil for a shitty team like the Nets, Gilbert can dig into his pockets for a year of crazy tax and see what happens when all this stuff changes.

Or at least I hope so

 

[Damage]

"Cleveland Sports Radio has like two weeks to learn the NBA salary cap rules. Because this offseason is gonna get weird"

That was Ben Axelrod's tweet last night and, while I'm not some prognosticator, it's something I've been saying and thinking for a while now. Last off-season was pretty nuts. This off-season could get even nuttier.

I would love to see how many custom reports Griff has right now anticipating every and any move within the Cavs roster. What's more imperative to this process is not the who's or the what's - it's the when's. Time is such nuanced variable in free agency.

For example, we know Tristan is going to get an offer from someone. Hell, this whole conversation about should TT get the max may not matter, as someone could just say, "fuck it, max him out to force the Cavs hand". 5 years, $90M for TT is a very real scenario that people must come to terms with. However, that cap space will grow 25% in 2016/17, meaning a max goes from 5/$90 to 5/$112.5 (around there). In other words, that's akin to tristan making $13.5M for 5 years. Not a bad deal. But when this deal happens matters more than it actually happening.

Buckle up.