First trip to Piscataway: Ohio State’s hype trailer for primetime matchup at Rutgers
October 23, 2015Kevin Love’s evolution with the Cavaliers, in photos
October 23, 2015The long, offseason nightmare is over: Tristan Thompson officially agreed to terms with the Cleveland Cavaliers on Wednesday. It was a huge relief for fans after his holdout inched closer to the start of the regular season next week. The final five-year, $82 million contract resembles what many expected from the beginning of negotiations this summer, so nothing ended up too surprising after all.
With Thompson, Iman Shumpert, Kevin Love, and Kyrie Irving all locked up to long-term deals, it would seem that the team is mostly committed to its current roster for the foreseeable future. That’s certainly mostly true, as between just those four alone, the Cavs are potentially1 tied up with over $72.5 million for the 2018-19 season — that’s three more years from now! That’s more than this year’s salary cap, for four players!
Yet, decisions still do loom for the team’s long-term future, even after this busy offseason for owner Dan Gilbert, general manager David Griffin, and company. In fact, based on some preliminary calculations based on future salary cap projections, the Cavs actually are likely to have a larger total salary and tax bill next year than this season. That’s somewhat counter-intuitive, as many expected it to peak this year with the highest tax bill before the upcoming salary cap hikes.
Let’s review the three main reasons why the Cavs aren’t done breaking spending records just yet:
1) Timofey Mozgov’s free agency. Yes, it’s perhaps too early to start worrying about this already. The Cavs literally just ended a long free agency negotiation with one of their other vital frontcourt rotation players. Why stress out about Mozgov just yet? Because it’s going to perhaps be as tricky as Thompson’s situation, minus restricted free agency and the threat of the qualifying offer, but with the wild, wild west of the new cap environment.
Note: Mozgov is a 29-year-old center entering only his sixth NBA season. Yet he’s only played two full seasons in the league. His age and his relative inexperience are both risks. Do we know for certain if Mozgov is durable enough to withstand full regular seasons and two-month playoff battles? Do we know if he’ll start to regress as he enters his early 30s? Do we know if maybe he hasn’t even hit his peak yet since he’s got fewer NBA minutes than most under-25-year-olds in the league? There are a lot of uncertainties at play that weren’t at play with the 24-year-old, never-missed-a-game Thompson.
Let’s consider some contract comparables. Marcin Gortat’s five-year, $60 million deal last offseason as a 29-year-old center is a decent starting point. Kenneth Faried signed a four-year, $60 million contract last year. Oklahoma City matched Portland’s four-year, $71 million maximum qualifying offer to Enes Kanter this offseason. Jonas Valanciunas, the young Toronto big man, signed a four-year, $64 million deal back in August. You’d certainly have to expect a possible deal for Mozgov to start no lower than $12-14 million per season, as per these recent deals.
Then, there’s that huge cap hike happening next summer. The salary cap is expected to rise from $70 million per team all the way to $89 million in one gigantic gallop. The huge swing could lead to NBA teams having over $1 billion in total available cap space. Nearly every single team — besides the Cavs, Warriors, Clippers, Spurs, and maybe the Rockets — is going to be way under the cap line, let alone even the salary floor. Unlike with Tristan Thompson, there are likely to be many potential and logical suitors for Mozgov next summer.
Mozgov’s maximum contract offer next offseason is five years and $120.5 million, equal to the extension that Damian Lillard agreed to this summer with the Portland Trail Blazers. That’s a boatload of money — far more than any deal signed by a Cavs player this offseason. I’m not expecting Mozgov to receive anything that close to the max, although Jason Lloyd did infer that possibility already. But with increased competition, there’s a pretty decent chance his deal could land closer to $18-20 million annually as opposed to just $12-14 million.
2) LeBron James’ opt out. Yes, we’re going to have to deal with this again next offseason. The math equation remains the same: LeBron can earn far more in 2016-17 by signing a new max deal, based on the new salary cap, than if he just opted into the second year of his contract. Players can only earn a maximum of a 7.5 percent raise year-over-year. The cap is increasing by over 25 percent next season, so it’s an easy call again for LeBron.
How much of a difference will this make? By one calculation, about $5 million more. His player option for 2016-17 is just over $24 million. Scratching that deal and getting a new one based on 35 percent of the new salary cap2, and he’d earn about $29.3 million as a 2016-17 starting point. And with the NBA’s progressive tax structure, that extra $5 million can easily double or triple itself in tax payments.
3) Any other moves that could happen. The Cavaliers have two trade exceptions, one for Brendan Haywood’s $10.5 million contract and one for Mike Miller’s $2.8 million, with July 2016 expiration dates. They’ll have a few back-end-of-the-roster decisions to make with regards to Matthew Dellavedova’s restricted free agency, Richard Jefferson, James Jones, Joe Harris, etc. And they’ll again have the taxpayer mid-level exception at their disposal with an estimated value of about $3.48 million.
Similar to LeBron’s expected opt-out: All of these decisions will have massive tax ramifications. Every additional dollar will double or triple or potentially quadruple in size because of the tax system. So while the Cavs might find a large desire to make a big splash with the exception created by Haywood’s contract, such a move would be incredibly costly. That long-ago warning that I wrote about a 300 percent incremental tax still very much applies to the 2016-17 cap bill.
So where does that leave the Cavaliers in terms of possible wiggle room? My current calculations, based on feedback and advice from former NBA executive Bobby Marks on Twitter, have the Cavs at $170.5 million total 2015-16 salary and tax payments. Here’s how that looks:
Revised my spreadsheet based on @BobbyMarks42's advice. I've now got $170.5M total for Cavs. pic.twitter.com/KbpmA23lxD
— Jacob L. Rosen (@JacobLRosen) October 22, 2015
Adding only LeBron’s $24 million player option and Joe Harris’ $1 million team option, and the Cavs are already nearly at the projected $108 million tax bill line for 2016-17. This is before Mozgov, Dellavedova, Jefferson, Jones, or any other roster decisions that could add up to 15 final players before Opening Night. It’s fairly impressive, to be honest.
Using a bit of reverse engineering with my CBA Tax Calculator at the non-repeater level3, I estimated that the team has only about $19.5 million more in player salary wiggle room for 2016-17 to match its current $170.5 million total bill.
That’s just $19.5 million more … for Timofey Mozgov’s new contract, LeBron’s expected $5 million jump, Delly’s restricted free agency, and any other possible roster moves in the next 12 months for the Cavs. It’s a very tight window of financial flexibility based on that $170.5 million expectation. Which is why you can start to see the signs pointing to the team actually exceeding this mark — and possibly coming closer to Brooklyn’s $197 million total spending record from back in 2013-14.
Keep an eye on these figures with respect to any changes to the roster as the short-term future lines up. You might hear of consideration for giving Timofey Mozgov a max deal, using the Brendan Haywood exception, using the Mike Miller exception, and adding another taxpayer mid-level exception player, etc., but you’ll now be smart enough to know that all of those moves would have absolutely massive tax implications. Heck, I could even create another nerdy cap GIF for you, if that’d be easier.
- Iman Shumpert holds a player option worth about $11 million for that season [↩]
- Note: You also have to take a different percentage of BRI for maximum contract calculations, so it doesn’t work out perfectly [↩]
- The Cavs would likely jump into the “repeater” category in 2017-18, but with the upcoming CBA negotiations, there’s no knowing whether such categories will even exist anymore [↩]
8 Comments
Just spend baby.
I know All In is the slogan they like to use, but do we realize that all in also has a good chance of LOSE EVERYTHING! Just sayin
“You can’t lose what you don’t put in the middle…but you can’t win much either.” – Mike McD
Timo is going to get PAID if he has anything remotely resembling a decent season. I honestly don’t think the Cavs will be able to keep him.
Jacob Rosen bringing the heat as usual well done. People need to understand why the Cavaliers took what appears to be such a hard line with Mr. Tristan Thompson. There was a reason. In the end I feel like they gave in probably just to get it over with so another cloud wasn’t hanging over the team. The health cloud is large enough.
Anyways I have to believe and trust David Griffin is well aware of everything Jacob has written. Hopefully he’s accounted for it. For me I still maintain keeping Timofey Mozgov is not only important but it should have outweighed Mr. Tristan Thompson. Still. I believe there are maneuvers the Cavaliers can make to get out from under some of these contracts should the need arise.
The most interesting part out of all of this is something nobody wants to discuss. You finally have a Cleveland team spending on par with the top teams in it’s league. This hasn’t happened in oh ever? But more important then that is the fact that this team better win. It better, at the least, make it back to the finals because if it doesn’t. I mean the best player in the NBA. Two other All-Stars/Olympians. And one of the highest payrolls in it’s league. Oh man say it with me, OIC!
Here’s a question I’ve never seen answered. If the Cavs trade for someone using the exceptions they got in the Blazers deal, and they do this at the trading deadline, what applies to the cap/luxury tax penalty? The total value of the contracts taken back, or the pro-rated, remaining portions being paid? My guess would be that since the spirit of the rule is to deter teams from stockpiling a bunch of talented and highly paid players, it’d be the full amount, but I’ve never seen this confirmed.
Happened to ask and read up on Coon’s over the offseason. The actual luxury tax is not determined/assessed until the end of the regular season. All tax bills are taken by the actual monies spent through the course of the season. Therefore, it would, in fact, be the pro-rated portions of any contracts obtained.