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The Miami Heat has traded shooting guard Zoran Dragic to the Boston Celtics, along with $1.6 million in cash and the Heat’s second-round draft pick in 2020(1). In return, the Heat will receive a top-55 protected second-round pick from the Celtics in the 2019 NBA draft.
The agreement comes a day after the Heat reached an agreement to trade point guard Shabazz Napier to the Orlando Magic. The Heat traded Napier to the Magic along with $1.1 million in cash in exchange for a top-55 protected second-round pick in 2016.
The second-round picks being returned to the Heat essentially have no value. The Magic and Celtics would need to have one of the five best records in the entire NBA in 2015-16 and 2018-19, respectively, for the Heat to get them. Otherwise, the obligations are extinguished.
The Heat also receives trade exceptions equal to the salary of each player: $1.7 million for Dragic(2), and $1.3 million for Napier. Miami has up to one year to utilize each exception, which can be used to acquire player(s) making up to value of the exception plus $100K in trade or on waivers without sending back salaries in return. The exceptions cannot be combined. Read more…
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The Miami Heat has agreed to trade point guard Shabazz Napier and $1.08 million in cash to the Orlando Magic in exchange for a top-55 protected second-round pick in the 2016 NBA draft. The deal will be formally announced on Monday.
The second-round pick being returned to the Heat in exchange for Napier essentially has no value. The Magic would need to have one of the five best records in the entire NBA in 2015-16 for the Heat to get it. Otherwise, the obligation is extinguished.
The Heat will also receive a $1.29 million trade exception as part of the trade, equal to the amount of Napier’s salary. The Heat will have up to one year to utilize the exception, which would allow the team to acquire one or more players with total salaries of $1.39 million in trade (or on the waiver wire) without sending back any salaries in return.
That, by all accounts, is a terrible return on investment for the No. 24 pick from the 2014 NBA draft. It means the Heat essentially traded its 2014 first round pick (No. 26), its 2014 second-round pick (No. 55), its 2019 second-round pick and $1 million in cash in exchange for one season of Napier.
Worse still: Napier showed flashes of promise during his rookie season; he was a low-cost player set to make just $1.3 million this season; and the Heat had him under team control for at least the next three years, after which he was to become a restricted free agent.
Why, then, have the Heat agreed to pull the trigger on the trade? Read more…
The Miami Heat has very much liked what it has seen thus far from Josh Richardson during summer league.
The Heat selected Richardson with the 40th overall pick in 2015 NBA draft, but the versatility and defensive promise he has displayed in many ways validates that general manager Pat Riley gave him a first-round grade. Richardson was 24th overall on the team’s draft board.
So why has Riley yet to approach Richardson about a contract?
Well… The roster is still in flux. Richardson is still being evaluated. And as long as those two things hold true, there is no pressing need for Riley to do so… yet.
When a player is selected in the second round of the draft, he remains the exclusive property of the team that selected him until at least the September 5th immediately following the draft.
At that point, the team needs to make a decision.
In order for the team to retain draft rights to the player, it must submit to him a “Required Tender” by September 5th. The tender is an offer of a contract that affords the player until at least the immediately following October 15 to accept, has a term of one season, calls for at least the minimum salary applicable to the player, and can be fully non-guaranteed.
If the team does not issue a tender by September 5, the drafting team loses its exclusive rights to the player, and the player becomes an unrestricted free agent the following day.
The Heat really likes Richardson, and will not let that happen.
Once (or before) the tender is issued, the player has three primary options: (i) forgo the tender and instead negotiate with the team for a different contract, (ii) forgo the tender and instead seek employment outside the NBA, or (iii) accept the tender and play under its terms for the season to come. Read more…
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The NBA announced on Wednesday that the salary cap for the 2015-16 season has increased by 11.0 percent to an all-time high of $70 million. The tax level for the 2015-16 season has increased by 10.3 percent to an all-time high $84.74 million.
These are substantial increases from the league’s previous projections issued just last April – $67.1 million for the salary cap, $81.6 million for the tax level – predicated on the basis of exploding revenues.
What does this mean for the Miami Heat? In terms of flexibility, not a whole lot.
But it does mean huge savings for owner Micky Arison.
The Heat will likely be a taxpayer next season. And that will carry with it severe consequences.
If the Heat exceeds the tax threshold, it would become the NBA’s first team to ever pay the “repeater tax,” which adds an extra $1 for every dollar a team is over the luxury tax threshold, over and above the incremental tax rates that would apply. The repeater tax is triggered when a team has paid the tax in four of the previous five seasons. The Heat has paid the tax in three of the last four years.
For every dollar by which the Heat exceeds the tax level next season, it will need to pay at least $2.50 in taxes. That rate increases to $2.75 per dollar for any incremental amount by which the Heat exceeds the tax by $5 million, increasing further to $3.50 per dollar for any incremental amount by which the Heat exceeds the tax by $10 million, increasing further to $4.25 per dollar for any incremental by which the Heat exceeds the tax by $15 million, and increasing an additional $0.50 for each $5 million increment thereafter.
The Heat entered the summer with two primary, and in many ways conflicting, objectives: Field a competitive yet cost effective team for the 2015-16 season, and maximize cap space for a 2016-17 season during which the salary cap is expected to explode higher on the strength of a new national TV rights deal.
The measure of success in those objectives was to be predicated on the Heat’s dealings with three men: Luol Deng, Goran Dragic, and Dwyane Wade. Read more…
On Thursday July 9 at 12:01 a.m. ET, the NBA’s 2015-16 season begins. That’s when the league’s salary cap, luxury tax threshold, maximum salaries and other figures all adjust to their new values; when free agents can be can signed; and when players can be traded.
Most NBA business ceases for the first several days of July as the league conducts its annual audit to determine its revenues from the previous season. With that figure in hand, the league huddles with the players association to project revenues for the coming season, and uses it to calculate the new cap, tax and related figures.
Revenues for the now-completed 2014-15 season came in at an all-time record $4.84 billion, up 7.0 percent from the previous year (the highest annual growth rate for the league over a full season in the last eleven years), smashing projections for the season issued last year at this time (off of which the salary cap was based) by a whopping $132 million!
On that basis, the league then projected revenues from sources other than national TV rights to increase by the standard 4.5 percent and added them to the revenues call for in the national TV rights deals (which were set when the deals were signed in 2007), which came to a total of $5.04 billion.
To get the salary cap for the season ahead, the league takes 44.74 percent of that projected revenue amount, subtracts projected benefits, and divides by 30 (the number of teams in the league). The luxury tax uses a similar formula, but is based on 53.51 percent of projected revenues. Adjustments are then made to the cap if players received either too little or too much in salaries and benefits for the just completed season relative to the finalized revenue figure.
The players are contractually guaranteed to receive an exactly 50 percent share of initial revenue forecasts that were determined when the CBA was originally negotiated in 2011, plus or minus 60.5 percent of the amount by which actual revenues exceed or fall short of the forecasts, with a lower limit of 49 percent of actual revenues and an upper limit of 51 percent of actual revenues.
To ensure players do not receive more than their fair share of league-wide revenues, 10 percent of players’ salaries is withheld from their paychecks and deposited into an escrow account. At the end of each season, the players’ guaranteed share of revenues is compared to the amount they were actually paid in salaries and benefits. If the players received more than their fair share of revenues, then the overage is returned to the teams from the escrow account. The players then receive any escrow money that remains. To help ensure such an overage does not happen again, if there is an overage and the system is getting close to exceeding what the league can get back through the escrow system, then the following season’s salary cap (and tax level) may be reduced in order to put on the brakes.
For the 2014-15 season, $218.6 million was deposited into the escrow account.
If the players received less than their fair share of revenues throughout the season in the form of salaries and benefits, the league returns the full amount of the escrow and simply cuts the players a check for the difference. To help ensure such an underpayment does not happen again, the league increases the following season’s salary cap and tax level equal to the amount of the shortfall divided by the 30 teams in the league. The artificially inflated salary cap promotes higher spending on player salaries, and thus decreases the likelihood of a shortfall in the following season.
The system is designed such that the salary cap for each team is set at 44.74 percent of revenues, but the players are actually entitled to receive between 49 and 51 percent of revenues (the exact percentage is tied to the league’s financial performance).
In the past, this has never really been a problem. The NBA has a soft salary cap. Almost every team in the league used to exceed the salary cap by a large enough amount every season – many even exceed the luxury tax – that the players always wound up receiving their fair share of revenues. Typically, in fact, the players wound up getting far more than to which they were entitled, and the league’s escrow system would knock them back down.
Lately, however, it has become a far more significant problem. Punitive new cap rules — hard caps, increasing luxury tax consequences, etc. — coupled with more destructive roster construction models have caused teams to dramatically ratchet down their spending. For the first time ever, two teams failed to reach the league-wide minimum team salary requirement this past season. Eight teams ended the season below the salary cap (excluding cap holds). On the high end, a recording-tying low of five teams were taxpayers this year by a cumulative record-breaking low of just $26 million.
With league-wide revenues of $4.84 billion for the 2014-15 season, $180 million higher than the $4.66 billion originally forecasted when the CBA was negotiated, players were entitled to 50.39 percent of revenues, or $2.44 billion, in salaries and benefits. Throughout the season, they received just $2.38 billion, a $57.3 million shortfall.
The league will therefore return to the players the full $218.6 million from the escrow account, and cut a check for the additional $57.3 million shortfall. It will mark the largest shortfall check sent to players in league history.
The shortfall, in turn, caused an increase to the salary cap for the 2015-16 season of $1.9 million.
To arrive at its salary cap and luxury tax figures, the league took its $5.04 billion revenue projection, multiplied it by 44.74 percent and 53.51 percent respectively, subtracted projected benefits, and divided the result by 30. It then added the $1.9 million adjustment to the final tallies. On that basis, the new salary cap and tax thresholds were set.
The new salary cap has been set at $70.00 million, an 11.0 percent increase from last season. That is substantially larger than the $66.3 million initial projection from last year at this time (which contained no salary-related adjustment) and the $67.1 million project issued last April (which contained a $500K salary-related adjustment).
The new luxury tax line been set at $84.74 million, a 10.3 percent increase from last season. That is substantially larger than the $80.7 million initial projection from last year at this time (which contained no salary-related adjustment) and the $81.6 million projection issued last April (which contained a $500K salary-related adjustment). Read more…
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No sooner than did the Miami Heat’s major free agency dealings seemingly come to a conclusion did the organization decide to take another swing for the fences. Heat president Pat Riley is flying to Los Angeles to have dinner with Portland Trail Blazers power forward LaMarcus Aldridge.
Wait. What? How is that even possible?
The heavily lifting portion of the Heat’s summer was seemingly predicated on the contract decisions of three men: Luol Deng, Goran Dragic and Dwyane Wade. Wade seemingly completed the picture when he agreed to a one-year, $20 million contract. Deng had previously exercised his $10.2 million player option, while Dragic accepted a five-year, $86 million deal.
These actions leave the Heat with an estimated team salary of $94.3 million for the 2015-16 season, well in excess of the $67.1 million projected salary cap level and $12.8 million above the $81.6 million luxury tax threshold.
Unlike other suitors, such as the San Antonio Spurs, Los Angeles Lakers and Phoenix Suns and, the Heat do not have the necessary salary cap space to sign Aldridge outright. Therefore, should the it wish to acquire Aldridge, the Heat would need to execute a sign-and-trade transaction with the Trail Blazers. And with it will come some severe restrictions.
The latest CBA contains a new feature: the implementation of an “apron” that is slotted $4 million above the tax line. That would put the apron at $85.6 million. Teams are prohibited from exceeding the apron, even by a single penny, if they engage in certain transactions. On that list: using the $5.5 million midlevel exception, using the $2.1 million bi-annual exception, and acquiring another team’s free agent by means of a sign-and-trade.
The apron is a brick wall on spending, one that cannot be crossed for any reason. A team cannot exceed it even for a moment, and even if it were to subsequently drop back down below it. Merely approach it, and it becomes harder to make trades that bring in more salary than they send out, or even sign minimum-salary players when injuries strike. It is a menace constantly floating in the distance.
The Heat has a team salary which is currently well beyond the apron, which means that if it were to pursue a sign-and-trade, it would need to shed salary either prior to or as part of it. But before the Heat pursues any salary-dumping options, it first needs to know how much it will be required to purge. That, in turn, would depend upon the first year salary Aldridge would command in the contract the Heat would acquire.
As a nine-year NBA veteran, Aldridge would be eligible to receive a maximum starting salary of $19 million. The figure will be finalized when the salary cap is set on July 8th.
Sign-and-trade contracts must be for at least three seasons (not including any option year) and no longer than four seasons. With such a long commitment, it seems unlikely Aldridge would take any discount to that amount, particularly when considering two things: (i) maximum salaries are projected to spike 33 percent next season and (ii) maximum salaries increase 17 percent for 10-year veterans. Both are increases of which Aldridge would not be able to take advantage. Which means that by locking himself into a three-year deal this summer, his first year salary will be 36 percent lower than that which a player of his tenure could secure next summer. Read more…
Update (7/1/15): Luol Deng has exercised his player option. Dwyane Wade declined his option but his return is all but assured. The larger question is to what type of contract the Heat will sign him.
Ken Berger at CBS reported yesterday that the 2015-16 salary cap could jump as much as $2 million higher than the league’s latest projection of $67.1 million, which was made some time ago. Such an increase could have a meaningful impact on the Heat’s plans for Wade.
If the 2015-16 salary cap increases from $67.1 million to as much as $69.1 million, the tax threshold would increase from $81.6 million to as much as $83.8 million.
How much would a $2.2 million increase in the tax threshold help the Heat? If it were to offer Wade a one-year contract at the $22 million max, its payroll would reach into the neighborhood of $100 million. With an $100 million payroll, the tax obligation would fall from $58 million to $49 million. That’s a savings of $9.4 million!
Layer in a potential trade of Josh McRoberts, Chris Andersen or Mario Chalmers and Heat’s total payroll obligations, including repeater tax obligations, could fall to $12X million.
And since the luxury tax is calculated as of the last day of the regular season, any potential trades don’t need to happen now (though the clarity would certainly be reassuring). Trading, say, the $1.6 million in salary obligations remaining on the $5.0 million expiring contract of Andersen at the trade deadline — for which the Heat could offer up to $3.4 million in cash and/or a possible 2018, 2020 or 2021 second round draft pick — would save a whopping $18.4 million in taxes for a team with an $100 million payroll (plus the $1.6 million in salary savings, less any cash sent). However, the Heat would need to find a trade partner with enough cap room (or a large enough trade exception) to take on Andersen’s $5.0 million cap hit without sending anything back in return, and that gets harder to find as more time passes.
Winding up with total payroll obligations of $12X million is a hefty some of money, to be sure – a would-be all-time record in total payroll obligations for the Heat – but this is not your typical spending problem. It would be just a one-time issue. The Heat will become very affordable next year, all but assured not to cross the tax threshold. Which would guarantee it does not pay “repeater tax” rates again until at least the 2019-20 season (pending rule changes). Also bear this in mind: the new TV deal, which starts in 2016-17, will itself instantly increase owner PROFITS by an average of $18 million per year, and rising annually. So, would Arison be willing to endure the cost of giving Wade the max for one year?
What would offering Wade a one-year contract at the $22 million max mean for the Heat? The Heat could enter the summer of 2016 with Dragic (PG), Winslow (SG/SF) and Bosh (PF) under contract, and up to $42 million of cap space to spend on Whiteside (C) and another player (assuming a McRoberts trade and an $89.1 million salary cap). Of that $42 million, Whiteside’s max would be $21 million but, at this point, one could reasonably suspect he would command far less. Which leaves enough room for…
That has to be math that the Heat organization itself is doing, right? Would they offer Wade one-year at the max? Would Wade accept?
The wait is almost over.
NBA free agency officially begins at 12:01 am on July 1. But for the Miami Heat, the uncertainty starts to be clarified 23 hours and 58 minutes before that.
Heat guard Dwyane Wade and forward Luol Deng have until 11:59 pm on June 29 to decide whether to exercise the player options – for $16.1 million and $10.2 million, respectively – on their contracts. If the deadline passes and the Heat has not heard back, both players by default will have chosen to join guard Goran Dragic in opting out and becoming unrestricted free agents.
If Wade and Deng both opt out, the Heat would start the summer with as much as $19 million of room below the projected $67.1 million salary cap. But, realistically, it won’t have any cap room at all.
That’s because the Heat is expected to quickly resolve the free agency status of Dragic.
Dragic has indicated that he enjoys Miami, and will remain with the Heat if his financial goals are met. The Heat paid a steep price to get him, headlined by two future first round draft picks, which tells you everything you need to know about how willing they will be to pay him his money. Dragic will be eligible to receive a five-year deal, with a total payout of as much as $108 million. If he gets it, his contract would start at $18.9 million, and rise to $20.2 million for the 2016-17 season.
For a player entering his age 29 season, however, it could prove to be an overpay, even with the cap due to rise dramatically next year. A smaller deal that pays out the max in the first year, declines by the max in the second year, before again maxing out for the final three years would be a nice concession by Dragic, in that it would give the Heat more flexibility for the summer of 2016 but still pay out a lofty $97 million. That may still seem like a hefty sum, but it would represent a 10 percent discount from a max contract, and a whopping 30 percent discount from a potential max contract a player of his tenure could sign the following summer. If he acquiesces, his contract would still start at $18.9 million, but his 2016-17 salary would fall to $17.4 million.
If the Heat re-signs Dragic, it would still be capped out even if Wade and Deng decline their options. Utilizing cap space, therefore, is not a realistic option for the Heat this summer. Read more…
The sharp divide between Dwyane Wade and the Miami Heat represents a unique challenge for team president Pat Riley.
For the past 12 years, the Wade name has been synonymous with that of the Heat organization. Wade has often been viewed as an extension of it, and perhaps its most vital member. He has advocated for it. He has delivered it fans, players, titles and money. He has sacrificed a great deal of personal earnings for the benefit of it.
Riley would love to reward him for everything he has done. But in a world of salary caps and luxury taxes, where championship aspirations are a way of life, doing so becomes a sentiment that is far more easily felt in theory than delivered in practice.
Wade has unquestionably been the biggest star of the Heat’s past. But Riley needs to consider its future. Time marches on. Skill-sets erode. Injuries mount. What is best for Wade may no longer be what is best for the Heat organization, and that’s where things get dicey.
Riley has always dreamed big. In the past decade, he’s acquired Shaquille O’Neal and LeBron James — arguably the NBA’s two greatest post-Michael-Jordan era players — and paired them with Wade to secure the franchise’s five NBA finals appearances and three titles.
It would not be difficult to suspect that he has visions of grandeur once again – this time with his sights set on 2016, when Kevin Durant and a host of others hit the market in the first summer under a new TV deal that could send the NBA salary cap skyrocketing to $89 million.
To facilitate his vision, whatever it may be, Riley would strongly prefer that Wade opt into the final year of his contract for next season at $16.1 million, setting him up to become a free agent for the summer of 2016. This requires Wade to have a ton of trust, and the leap of faith that Riley will ultimately take care of him.
Wade seems to prefer to decline his player option and seek the security of $20 million annually to close out his Hall of Fame career. The rift has led to speculation that Wade’s long-term future with the Heat could be in doubt. Read more…
What was thought to be a relatively straightforward summer for the Miami Heat has hit a snag over contract talks with Dwyane Wade.
Wade must decide by June 29 whether to opt out of the final year of a contract that would pay him $16.1 million next season.
The star shooting guard hinted last month that he intended to exercise his option, a heavily-preferred scenario for the Heat organization. However, the 33-year-old is now considering the possibility of opting out in order to secure one last lucrative long-term deal, and is reportedly willing to test the open market and leave the Heat, if necessary, in order to get it.
There is believed to be a sizable gap between what Wade is demanding and what the Heat is offering. That impasse has led to speculation that Wade’s long-term future with the Heat is in doubt.
Despite the uncertainty, it seems highly unlikely that the Heat would part ways with the biggest star in its history. Neither Wade nor the Heat would want such an outcome (nor would any other team in the NBA which Wade would consider likely be willing to pay him what he seeks anyway). Such tensions are merely a tactic employed by either party to gain leverage during the very early stages of what figures to be a challenging multi-month negotiation. But there are real concerns that underlie such posturing.
Wade’s desire for one last big contract from the Heat can easily be justified: He has guided the Heat to five NBA finals and three titles, he played a critical role in luring LeBron James and Chris Bosh to Miami, he has comported himself with class over the course of a brilliant twelve-year career, and he has sacrificed substantial salary in order to give the Heat flexibility over the past five years.
Last summer, in order to give the Heat flexibility to augment its roster, Wade opted out of the final two years of a contract that would have paid him $41.8 million. He instead accepted a rather shocking two-year, $31.1 million deal, which included a player option for next season.
As a result, over the first five years of what might have otherwise been the full six-year maximum contract we were all eager to give him to stay in the summer of 2010, Wade has now sacrificed a total of $18 million for the betterment of his team. If he were to exercise his option, that sacrifice would increase to $27 million.
It only seems natural, then, that Wade would want a show of appreciation in return.
Wade reportedly wants to opt out this summer, with the hope that the Heat would give him a three-year deal that would extend past his 36th birthday. The Heat would love to give it to him in theory, but paying him what he’s seeking would present significant challenges in practice. Read more…
The Miami Heat officially received its expected consolation prize on Tuesday night for missing the 2014-15 playoffs by a single game: the tenth pick in the 2015 NBA Draft, which will be held on June 25 in New York City.
After finishing the regular season with a 37-45 record, the tenth-worst in the league, the Heat had an 87.0 percent chance to secure the pick.
The challenge for Pat Riley and the front office will now be to utilize the pick to identify a player who can address critical areas of need off the bench for the Heat next season, but perhaps equally importantly develop into a starter for 2016 and beyond.
The Heat has had a good deal of success with its lottery selections in the past (e.g., Dwyane Wade, fifth pick in 2003), but such success has been far from guaranteed (e.g., Michael Beasley, second pick in 2008).
This marks the twelfth time in team history that the Heat has held a lottery pick, and just the fourth since the turn of the century. The expansion-era Heat held six consecutive such picks from 1988 through 1992 (including two in 1990) and, after trading away what would become a lottery selection in 1993, two more in 1994 and 1995.
With the stakes rather high this time around, the Heat are hoping for similar success. The current Heat team is both extremely expensive and deeply flawed, with an obvious need for depth at the wing positions, in the form of players who can space the floor and play solid defense. The Heat may not have too many options to address those needs in the years ahead. It will very likely have only the smaller $3.4 million taxpayer mid-level exception with which to improve this summer (and may even bypass using it), and a significant portion of the expected salary cap flexibility for the summer of 2016 could be allocated toward securing the services of Hassan Whiteside for the long-term. A high draft pick this year represents a unique opportunity for the Heat: the chance to snag a very good player at a very inexpensive price for at least the next four years. Read more…