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Los Angeles Clippers: Salary Cap Maneuvering In Action

August 11th, 2014 4 comments

Update (08/29): The Clippers followed the logic presented in this post and created additional room below the hard cap by means of a trade. But how they went about it can certainly be questioned. The trade was rather costly, and their actions thereafter were rather surprising.

The Clippers traded Jared Dudley and a protected 2017 first round pick to the Milwaukee Bucks in exchange for Carlos Delfino, Miroslav Raduljica and a protected 2015 second round pick.

The 2017 first round pick the Clippers sent to the Bucks is lottery protected through 2019, otherwise it becomes a pair of second round picks in 2020 and 2021. With the Clippers all but certain to make the playoffs in 2017, the pick will surely be conveyed to the Bucks in 2017.

The 2015 second round pick the Clippers received was actually the Clippers’ own pick, which was previously traded to the Bucks if it falls within the 31-50 range, to the LA Lakers if it falls within the 51-55 range, and to the Denver Nuggets if it falls within in the 56-60 range. Now it stays with the Clippers if it falls within the 31-50 range. But with the Clippers all but certain to be a top 10 team this year, it will surely go to the Lakers or Nuggets, rendering its return worthless.

The trade therefore effectively becomes Jared Dudley and the Clippers’ 2017 first round pick to the Milwaukee Bucks in exchange for Carlos Delfino and Miroslav Raduljica.

The combined salaries of Delfino and Raduljica ($4.75M) were actually more than Dudley’s salary ($4.25M), but the trade produced a couple of hidden benefits. First, it added a 13th player, enabling the Clippers to meet their minimum roster requirements, at a net cost of no more than $500K. Second, it freed the Clippers from having to deal with up to $250K of potential bonus money to Dudley. In other words, as a result of the trade, the Clippers met the 13-player minimum roster requirement with a team salary of $80.2 million and with no imminent hard cap issues. They were even in a position to add a 14th player on or after December 17. 

This is one area where I’ve noticed some confusion: The Clippers were also in position to fill out the training camp roster beyond the 13, up to the full 20 if they so chose, if the additional seven were signed to non-guaranteed summer contracts and as long as all seven were waived prior to the start of the regular season. But there was substantial risk in doing so. In the unlikely event that one of the seven players were to be injured during training camp, and the recovery time were to extend beyond January 10, the Clippers could again be faced with the prospect of exceeding the hard cap. Among the available alternatives: simply not to add additional players to the training camp roster beyond the 13, take the risk of severe injury to such players, or take further action to lower team salary even more to protect against the unlikely risk that a summer contract player were to sustain a season-ending injury during training camp.

The Clippers chose to take further action. They waived both Delfino and Raduljica, and utilized the stretch provision to re-attribute their remaining $4.75M in combined salary obligations over a five-year period, resulting in an enduring cap hit to their waived players of $950K that will last through the 2018-19 NBA season. The Clippers are now left with 11 players under contract, and a team salary of $76.38M. That leaves them $4.45M below the hard cap, room enough to add up to as many as four players (which would bring the roster up to the 15-player regular season max), with plenty to spare for mid-season trade and/or signing scenarios. They can also bring in the full complement of players – as many as 20 – to training camp without risk of payout in the event of injury (through the use of Exhibit 9 contracts) as long as they start the regular season with no more than 15. But was waiving and stretching their two new players the right decision? 

The decision to waive and stretch Raduljica makes you wonder why the Clippers took him on as part of the trade in the first place. Raduljica only had $1.5M in guaranteed money remaining on his contract. It’s not as if the Bucks had any apparent need for the cap space that getting rid of him gave them. The Clippers, however, did have a need for that cap space. And stretching Radjuljica’s salary to recover most of it has produced a rather ugly $300K dead-money cap charge for the next five years. So why was he included in the trade at all? The Clippers still had remaining the full allotment of their $3.3M in cash for available for trade on the season. How much of it might you have given to the Bucks not to have to take on Raduljica’s $1.5M salary at all, and thus get rid of that $300K dead-money charge for the next five years? Whatever amount you choose, the forgone savings on luxury tax consequences produced by that dead-money charge alone would surely have more than offset it. 

Given that the Clippers ultimately did take on Raduljica in trade, the decision to waive and stretch him seemed like a logical decision. But the decision to stretch Delfino as well makes you wonder. Consider the alternative: Waiving and stretching Raduljica alone would still have created $1.84M of room below the hard cap, room enough for two additional players, bringing the roster to as many as 14. The Clippers would still have been able to fill out their training camp roster with up to the full 20 players without taking any risk associated with injury (through the use of Exhibit 9 contracts). And, of course, the approach would have allowed the Clippers to retain Delfino, and evaluate whether he could actually contribute once healthy. Plus, if not – if they truly wanted to get rid of Delfino – is it all that difficult to imagine the Clippers trading his contract closer to the trade deadline? Delfino had a $3.25M expiring contract, with a completely non-guaranteed second year at the same amount. Many teams consider expiring contracts with a large non-guaranteed additional year to be quite valuable. Plus, at the trade deadline, Delfino’s contract would only call for $1.1M in remaining salary obligations. Is it all that hard to imagine the Clippers finding a taker, one with the necessary room or a large enough trade exception to take on his cap hit of course, for up to whatever was left of their $3.3M allotment of cash for the season? Why, then, did the Clippers choose to waive and stretch Delfino? Are the four players the Clippers are going to sign over the next couple of weeks really all that much better than having two of those four plus Delfino? 

If you’re wondering why the Clippers didn’t just utilize the stretch provision on Dudley, bypassing the trade scenario, they couldn’t. The stretch provision only applies to contracts signed or extended under the current CBA. Dudley signed his extension under the previous CBA. (They could, however, have waived and stretched any other player on the roster – Matt Barnes, for example – and avoided the entire trade scenario). 

This is another area where I’ve noticed some confusion: When stretching a player’s salary, you re-allocate all of his remaining guaranteed salary over twice the number of seasons remaining on his contract plus one. Delfino and Raduljica have a combined $4.75M in remaining guaranteed money, and each has two seasons remaining on his contract. The fact that one is non-guaranteed does not matter; it is a season remaining on his contract. So the re-allocation is over five years, not three. Some are calling this a loophole of which the Clippers took advantage. I am not sure I agree. But you decide. If the stretch were to have been over three years, it would have created $3.17M of additional room for this year (leaving the team $3.82M below the hard cap, enough to sign as many as four additional players) and $1.58M of dead money for two additional years. With the stretch over five years, it has created $3.80M of additional room for this year (leaving the team $4.45M below the hard cap, still only enough for four more players) and $950K of dead money for four additional years. Since you could have added four additional players either way, the question becomes: Would you rather have a $1.58M dead-money charge for two additional years (years the team figures to be over the cap anyway) or a $950K dead-money charge for four additional years (including years for which the Clippers currently have nobody under contract, and cap room could be key)? 

So, let’s summarize the Clippers’ activities over the past three days… In order to free up an additional $3.30M of room below the hard cap (and as much as $3.55M if Dudley were to have earned his full bonus), the Clippers: (i) traded away their 2017 first round draft pick and (ii) incurred a $950K cap charge for the next five years. In the progressive luxury tax world, that can get quite expensive… and even more-so expensive if ever there is a time over the next five years when the Clippers are caught between utilizing the smaller vs. the larger mid-level exceptions, or aim to utilize cap space. Bear in mind that there isn’t a single player on the Clippers’ roster who has a contract which stretches out five years.

This series of moves makes you wonder: Were the Clippers fully aware of their hard cap issues when they signed Spencer Hawes and Jordan Farmar to the contracts they did? Were they fully aware of their hard cap issues when they gave CJ Wilcox the full 120% of salary scale in his first season (something the Chicago Bulls did not do with Marquis Teague in 2012 when they were facing their own hard cap issues)? Were they fully aware of all their alternatives for managing their team salary below the hard cap? Most important, was doing all of this really worth it? 

Was the trade even necessary at all, let alone the actions taken thereafter? If you were deciding for the Clippers, would you rather have: (i) what you have now – room for four minimum-salaried players who can be signed at any time, enough flexibility with which to reasonably maneuver below the hard cap throughout the regular season, and a cap-clogging $950K charge that will remain on the books for the next five years or (ii) what you had before the trade – Jared Dudley, your 2017 first round pick, and a 13th player on a minimum salary contract to be signed three days into the regular season?

Before answering, consider this: That 2017 first round pick may have considerably more value than you realize. Yes, the Clippers will likely be an excellent team that year, and it will therefore likely be a pick at the bottom of the round (the next CJ Wilcox, perhaps). But it has just as much, if not significantly more, value in trade. As a result of the Dudley deal, thanks to the Ted Stepien rule, the Clippers are now restricted from trading any first round draft picks until the year 2019 (and further restricted from trading a first round draft pick unconditionally until  the year 2021). How far out is 2019? It is a full two years after the last of every current Clipper player contract expires. Do you really want to start trading first round draft picks that far into the future? Of course, none of us can know which players might be available in trade in the years to come. But that’s not really the point. We know that trade scenarios will likely emerge. We know that the Clippers will likely need draft picks to facilitate those trades. And we know they are now left without any. Think about how many times you’ve identified a player you wanted in trade over the past couple of years, and said to yourself to just throw in a first round pick to make it work. That’s no longer an option. 

Maybe you’d still choose to do the trade, because that three days into the regular season thing sucks. It means you can’t bring the 13th player into training camp. Or, if you do, you need to sign him on a summer contract, hope he doesn’t sustain a season-ending injury, waive him prior to the start of the regular season, and hope he clears waivers before re-signing him. But here’s the thing: Being forced to wait three days into the regular season to sign that 13th player, versus being able to sign him right now and having him for training camp, could well be the result of mismanagement by your team’s own salary cap expert. The reason why that player couldn’t be added now if you didn’t do the trade is because, when including the potential full Dudley bonus, it would put the team a mere $16,015 above the hard cap. That’s inconsequentially small. It’s so small, in fact, that if your salary cap expert were on top of things, he could have been able to extract it from, for example, the first year of the rookie scale contract of Wilcox (who would still, after all, make 118% of his scale amount, and he could be returned to his full 120% in his second year and thereafter). If your team’s own salary cap expert had recognized the issue and structured things slightly differently, so that the 13th player could be signed now, without any risk of season-ending injury during training camp (because even that would keep you below the hard cap), would you still choose to do the trade? Are the four new players you’re about to get really that much more valuable to you than Dudley and your favorite one of those four? 

Maybe you’d still choose to do the trade, because doing it frees the Clippers not only from Dudley’s salary for this season but also from his $4.25M salary for the 2015-16 season as well, a salary which is now gone, replaced by a $950K charge. But why is that helpful? Why is it so important to you to reduce the team’s future salary obligations? Do you truly know what you are trying to accomplish in doing so? Perhaps you are concerned about a potential hard cap again for next season. Bear in mind that the Clippers will only face a hard cap next year if it utilizes the larger mid-level exception (or receives an outside free agent by means of a sign-and-trade transaction). If the Clippers instead utilize the smaller mid-level exception, there is no hard cap. The Clippers could spend as much as they want. Do you really have a good enough grasp on whether you even want the Clippers to use the larger mid-level exception, given all the restrictions it would impose, or how trading Dudley would facilitate that? Do even the Clippers themselves, at this point? So why make a trade to protect a future scenario which at this point may not even be considered likely to occur? And, even if it were, isn’t it always much less expensive to salary-dump a contract when it has one season remaining rather than two? So why not dump Dudley’s contract next summer instead, if need be? It gives you time to see if it’s even necessary, as well as to see if Dudley can turn his career around, and become the man he was just two years ago in Phoenix – the man the Clippers liked enough to name their opening day starter last year. He is still, after all, just 29-years-old.

I am admittedly ignorant when it comes to matters of L.A., so I leave it to you to determine for yourselves whether you think the Clippers, given the alternatives at every point along the way, managed their salary cap situation as you would have wanted.

Read more…

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A View Into the Miami Heat’s Local TV Deal

August 4th, 2014 No comments

“This is a hobby of passion, it’s not a business… The reality is we’re not a big market team. Where we find ourselves struggling is our local TV revenue is smaller than big markets…”

That was Heat owner Micky Arison in July of 2012, describing the difficulties of sustaining a winning basketball team while maintaining some semblance of profitability under the auspices of the new and far more restrictive Collective Bargaining Agreement.

Local rights deals for sports franchises are in the midst of a tremendous boom in the television landscape that social media sculpts, as regional sports networks (RSNs) bid up prices to secure access to one of the few remaining DVR-proof properties. And when I say “boom,” I want to do more than just evoke the idea of growth: In 2011, the Los Angeles Lakers signed the richest local television rights deal in NBA history; the 20-year contract with Time Warner Cable included the launch of two new regional sports networks – one English channel and one Spanish channel – and averages a payout to the Lakers of approximately $200 million per year, for a total value of $4 billion!

To give you an idea of just how astronomical that is: It’s roughly 10x the $20 million payout the Heat currently generates from its own longstanding TV rights deal. In fact, the average annual payout on the Lakers’ deal is more than what the Heat currently generates in total revenues!

The Heat is at a substantial disadvantage when it comes to negotiating the payout on its TV rights deals. That’s because the size of a team’s local television rights deal is directly proportional to the projected number of television households tuned into its broadcasts. The Heat, by the NBA’s own definition, is a small-market team. Read more…

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NBA Sets Salary Cap and Tax Level Numbers for 2014-15

July 9th, 2014 No comments

On Thursday July 10 at 12:01 a.m. ET, the NBA’s 2014-15 season begins. That’s when the league’s salary cap, luxury tax threshold, maximum salaries and other figures all adjust to their new values.

Most NBA business ceases for the first several days of July as the league conducts its annual audit to determine the league’s 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 on the season came in at an all-time high $4.52 billion, up 5.3% from the previous year and more than $50 million higher than initially projected. On that basis, the league then projected revenues for next season to increase another 4%, to $4.71 billion.

To get the salary cap for the season ahead, they take 44.74% of that projected amount, subtract projected benefits, and divide by 30 (the number of teams in the league). Adjustments are then made to the cap if players received too much (or too little) in salaries and benefits for the completed season relative to the finalized revenue figure; this serves as a mechanism to maintain the integrity of the agreed-to revenue spit between owners and players. The luxury tax uses a similar formula, but is based on 53.51% of projected revenues.

The finalized figures were announced at 5 p.m. Wednesday in a memo distributed by the league to all member teams.

The new salary cap has been set at $63.065 million, a 7.5% increase from last season. That is slightly less than the $63.2 million estimate teams had been using since April, but higher than previous forecasts. Last year at this time, the league initially forecasted a cap of $62.5 million, before increasing it to $62.9 million in November and again in April.

The new luxury tax line will be $76.829 million, a 7.1% increase from last season. Tax projections started at $76.1 million last year at this time, before rising to $76.6 million in November and $77.0 million in AprilRead more…

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Miami Heat Struggling Early In Free Agency

July 3rd, 2014 10 comments

The Miami Heat would love to get younger.

The Heat would love to get some youthful assistance on the wing, as protection for Dwyane Wade as his advancing age and health restrictions cause him to miss so many games and render him so ineffective in so many others.

The Heat would love to get a youthful presence down low, a big man capable of imposing his will on the block and the boards.

But for as much as we, as fans, have dreamed it to be so, it was never truly possible. Supremely talented youth is almost never a possibility on the open market. The very nature of NBA rules makes it virtually impossible to attract youthful talent in free agency.

The intensity of recruiting these days is such that the vast majority of all of the best free agents will have once been first round draft picks. Such selections provide their teams the promise of cheap labor over an extended period – via four year “rookie scale” contracts which make it categorically impossible for them to shake free during the interim. If not for being operated under a set of rules which were collectively bargained, the concept alone would surely violate anti-trust laws.

And, yet, it doesn’t get much better for these players after just the four years. At that point, the door opens, but only very slightly. The player is then to enter free agency in restricted fashion, such that any agreement he strikes with any team can be matched by his prior team and, in-so-doing, obligate said player to play for his prior team under its terms. These rules are so restrictive that, typically, the only option for any team desiring such a player is to severely overpay for him, in the hopes that his prior team refuses to match such ludicrous payouts. Most teams don’t even bother to bid on such players. And, thus, by the time the better former first round draft picks are truly free to consider other alternatives, somewhere between eight and nine years will have already passed them by.  Read more…

Miami Heat Create NBA-Record $55 Million in Potential Cap Space

June 29th, 2014 5 comments

Many years from now, Saturday, June 28, 2014, could be remembered as a critical day in Miami Heat history. It marks the day when guard Dwyane Wade and forwards Chris Bosh and Udonis Haslem declared their intentions to join LeBron James and Chris Andersen in opting out of their contracts. It could ultimately mark the day in which the destruction of the Big Three era was initiated in earnest, or the day in which the remodeling of Pat Riley’s two-time championship-winning creation received a major boost.

Agent Henry Thomas, who represents all three players, has reportedly informed Heat president Pat Riley of their choices. Wade will exercise his Early Termination Option for the remaining two years and $41.8 million on his contract, Bosh will do the same for the two years and $42.7 million remaining on his contract, and Haslem will not exercise his player option for the lone season remaining on his $4.6 million contract.

Technically, there is no mechanism to notify the league that an option or ETO will not be exercised. Since the contracts of Wade and Bosh contain ETOs for this summer, they are required to inform the league of their intentions. Since Haslem’s contract contains a player option, he need do nothing but wait.

These actions, particularly in the wake of James, Wade and Bosh meeting last week on Miami Beach, make it rather clear that the Heat’s stars, as well as its supporting players, have decided to work together to provide the Heat the salary-cap flexibility with which to add additional components to a roster that earlier this month lost in the NBA Finals to the San Antonio Spurs, cutting spectacularly short the Heat’s bid for basketball immortality – four straight NBA Finals appearances and three straight NBA titles, a feat which has only been accomplished once in league history.

Without the opt-out decisions, the Heat would have gone into the offseason far in excess of what is projected to be a $63.2 million salary cap for the 2014-15 season, and without much ability to materially improve. Instead, the moves enable the Heat to create as much as an all-time NBA-record $55 million in cap space with which to reconfigure the roster(1).  Read more…

A Chris Andersen Decision to Opt Out Could Have Mutual Benefits

June 28th, 2014 No comments

Chris Andersen is impossible to ignore. The sometimes-bearded, sometimes-Mohawked 6-foot-10 forward/center has his nearly luminous skin filled in technicolor artwork to mask the body of a man who is part enigma, part cult hero, part unlikely role model.

Andersen’s popularity stems from some cosmic combination of hops, hustle, hair and history. His boundless energy speaks volumes about a life predicated on endurance.

If you’ve followed the story of his life, you might wonder how it’s possible that he’s been able to endure. Or where along his path you might have quit. The “Birdman” never has – not after impossible childhood circumstances, not after tragic personal relationships, not after the drugs that forced a mandatory two-year suspension from the league, and certainly not after the most bizarre of stories destroyed his reputation.

In May of 2012, detectives in the Internet Crimes Against Children unit of the Douglas County, Colorado came to his door – confiscating both his computers and his dignity, causing widespread rumors and whispers of hard drives and the age of consent, and forcing him to live under the worst kind of suspicion. He was amnestied by the Denver Nuggets two months later. Nobody would touch him. Serious talent wasting away. He kept quiet while his life was falling apart. Six months passed by. Nothing. His lawyer finally spoke up, proclaiming his client’s innocence. Within a week, Miami had signed him.

The next phase of his life story couldn’t be scripted much better. It’s a story of equal parts success and sacrifice.

A championship. A new two-year contract. Minimum salary. He was eligible for more. We all wanted to give it to him. He deserved it. But he sacrificed for team, his owner and his fans. Then, last September, complete vindication. It was revealed that he’d been the target of an elaborate online extortion plot engineered by a woman in rural Manitoba, Shelly Lynn Chartier. The case was so complex that even he didn’t know exactly what happened. He’s moved on. He even has a TV show in the works, called “Urban Outdoorsmen.”

The question now, for Heat fans, is how his journey will continue. Has a decision to make. He has one year left on his minimum salary contract if he wants it. Or he can opt out. It would appear he’s made it. It would appear he intends to opt out.  Read more…

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Miami Heat Trade Up to Acquire Shabazz Napier in 2014 NBA Draft

June 26th, 2014 No comments

The Miami Heat had perhaps never been as obvious about their intentions as they were in preparation for the 2014 NBA Draft. They wanted former UConn point guard Shabazz Napier.

They got their man, by making a trade for his draft rights with the Charlotte Hornets.

In return, the Heat dealt draft rights to its two picks P.J. Hairston (26th) and Semaj Christon (55th), a 2019 second-round draft choice, and $1 million in cash.

Napier was projected by many to be a mid-first round pick, with teams such as the Orlando Magic, Atlanta Hawks and Chicago Bulls showing strong interest. The Heat had made an all-out effort in recent days to move up in the draft to improve their odds of selecting him but lacked the resources to get up too high.

Yet as the draft continued, Napier’s name kept getting bypassed.

When he was ultimately selected at No. 24 by the Hornets, there was a brief moment of exasperation. The NBA’s draft order is determined as the inverse of each team’s record at the end of the preceding regular season. The Heat had tied the Portland Trail Blazers and Houston Rockets, finishing the 2013-14 regular season with identical 58-24 records. The NBA therefore held a pair of tiebreakers among the three teams on April 18 to determine the allocation of pick Nos. 24, 25 and 26. Portland, which had previously surrendered its pick to the Hornets in a February 2011 trade for Gerald Wallace, ultimately won a tiebreaker with Miami and Houston, and Houston then won a tiebreaker with Miami. The Heat, therefore, appeared to have lost out on Napier because of draft order tiebreaker unluckiness.

Moments later though, it became apparent that the Hornets had made their selection of Napier on behalf of the Heat. The Heat were apparently unwilling to wait and hope that Napier would fall to them two spots down. Between the Hornets at No. 24 and the Heat at No. 26 stood the Rockets, who are vying for the services of free-agent-to-be LeBron James. The Heat were fearful that the Rockets could poach Napier, a James favorite, as a means to improve their roster, to make the Heat a less desirable destination for James, or both.  Read more…

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Would the Big Three Take Less to Help the Miami Heat?

June 21st, 2014 5 comments

Update (6/28): I wrote the following article several weeks ago, and posted it exactly one week ago. Since that time, several things have changed (e.g., the Heat traded up in the draft to select Shabazz Napier, several Heat players opted out of their contracts, the Heat have been rumored to be seeking a trade partner for Norris Cole, etc.), which slightly alter the figures presented in this post. This table provides an updated depiction of the hypothetical situation described below.

The day LeBron James, Dwyane Wade and Chris Bosh agreed to join together with the Miami Heat in the summer of 2010, they laid out a plan. They would each play four years together, then re-evaluate. They each signed nine-figure, six-year deals containing opt out rights prior to the final two. They were expecting titles. We all were.

Through the first three of those years, all was as projected to be. Three straight NBA Finals appearances, two straight titles. But that was before this past year turned into a disaster, before they got throttled by the San Antonio Spurs.

James, Wade and Bosh are all on vacation now, a sort of rejuvenation for a trio who have played more basketball over a four year stretch than any other in league history. They will each take some time to consider their futures, to consider whether or not they wish to terminate their contracts.

The wait is unnerving. It is a reminder that the Heat and James, in particular, have a very uncertain future together, that his potential free agency, which could arrive in just days, looms over this city with as much significance as did Wade’s four years ago. It’s caused us to lose our equilibrium. It’s caused us to lose our perspective. We need to “get a grip” on reality. The Miami Heat, as presently constructed, can still be a championship-caliber team.

Sure, the team has it flaws. Lots of them. And they need to be addressed. But we, as fans, are hoping for much more than that. Cutting corners in the repair of a leaky dam will eventually cause it to burst. Like it did in 2006-07. Which caused 2007-08. Nothing short of a complete overhaul, then, will appease us.

A tear down and restructure requires sacrifice. It requires James, Wade and Bosh to each opt out of his contract and take less. Much less. It’s the only way. But is it possible?  Read more…

Where Do the Miami Heat Go From Here?

June 20th, 2014 No comments

The Miami Heat’s bid for a three-peat – to many, the ultimate basketball accomplishment, and a prerequisite for dynasty status – has fallen short. In the wake of this frustrating failure, we’re all left wondering what the future holds. We’re all left wondering if this is the end of something great, or maybe just a bump in the road at the start of something greater.

LeBron James, Dwyane Wade and Chris Bosh are all eligible to become free agents this summer, but, following last Sunday’s crushing loss to the San Antonio Spurs, they deflected questions about their NBA futures. They each plan to take some time and talk with their families before eventually deciding how to move forward. The wait is infuriating. The uncertainty unnerving.

Of the 15 players currently under contract, 13 can or will become free agents at season’s end.

There are eight players with expiring contracts: Greg Oden, James Jones, Mario Chalmers, Michael Beasley, Rashard Lewis, Ray Allen, Shane Battier and Toney Douglas. Battier will retire. Allen may retire. The status of the rest remains unclear.

There are five players with player options/ETOs: James, Wade and Bosh, as well as Udonis Haslem and Chris Andersen. Haslem and Andersen are likely to be back with the Heat next season, though they may opt out of their contracts to help the Heat maneuver around salary cap issues. Andersen has reportedly already declared his intention to decline his option.

The final two current Heat players are under contract through next season as well: Norris Cole and Justin Hamilton. Hamilton’s salary is non-guaranteed.

The Heat also has its first round pick (No. 26 overall), its second round pick (No. 55 overall), and its 2013 second round pick James Ennis to consider.

Amid this cloud of uncertainty, the Heat did receive a bit of good news in April, when the NBA issued new projections for the 2014-15 salary cap and luxury tax thresholds. All 30 teams were informed via league memorandum that an increase in the cap from this season’s $58.6 million to $63.2 million next season is expected. A corresponding rise in the luxury tax threshold from $71.7 million to $77.0 million is also expected. These are the last non-binding forecasts that will be provided by the league until the official cap and tax thresholds for next season are announced in early July, following a league-wide audit.

With the gravity of these projected increases, many of us have been seduced into thinking that the Heat will have the necessary maneuverability with which to materially improve this summer. But does that line of thinking have any basis in reality? It all depends upon what you believe James, Wade and Bosh are willing to sacrifice.  Read more…

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Dwyane Wade’s Looming Free Agency Decision

June 18th, 2014 15 comments

With the 2013-14 NBA season now at its tragic end, it seems as though the biggest topic of conversation is whether LeBron James is going to opt out of his contract with the Miami Heat, two years prior to its expiration, and explore his options as a free agent. As pundits weigh in and teams’ salary cap experts scramble to figure out how they might be able to get their hands on the greatest player of this basketball generation, Dwyane Wade’s potential free agency looms quietly in the background.

Wade just completed the fourth of a six-year $108 million contract he signed in the summer of 2010. He, like James, structured his contract to give himself the ability to opt out after both the fourth and fifth seasons. The first of those opt out decisions needs to be made by June 30.

We as fans can’t possibly overstate the importance of Wade to the Heat franchise, both on and off the court, but we also can’t ignore his advancing age or the health restrictions that cause him to miss so many games and render him ineffective in so many others. And so, we tell ourselves that the Heat brass needs to try to persuade him — for all of his undeniable status as a Heat legend, as well as the chief co-linchpin alongside Pat Riley who brought the Big Three together — to opt out and instead take a Tim Duncan-style pay cut for the good of Miami’s flexibility.

We tell ourselves that Wade should take a discount because he simply isn’t worth the $42 million he has coming to him over the next two years. We tell ourselves that Wade should take a discount because he is making tens of millions of dollars in endorsement money. We rationalize our convictions any which way we can. We ignore the reality: Wade is owed this money.  Read more…

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