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A Story of Sacrifice for the Miami Heat

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The contracts are all signed. The final numbers are all in.

We now know exactly how much each member of the Big Three sacrificed, why exactly they sacrificed, and where exactly the savings went.

Each member of the Big Three was eligible for a maximum salary of $16.6 million in the first year of any new contract signed, whether it was with their prior teams or with anyone else. But while the starting salary was to be the same no matter where they signed, the NBA’s Collective Bargaining Agreement gives the home team a financial advantage when it comes to re-signing its own players. The home team is eligible to offer his player one more year (six instead of five) and bigger annual raises (10.5% of the first year salary instead of 8%).

Sign-and-trade transactions capitalize on this concept, in that they allow the to-be-traded player to be technically signed by his home team, and then be immediately traded to his new team. Pat Riley structured sign-and-trade transactions with both the Raptors (for Bosh) and Cavaliers (for James). No maneuvering for Wade was necessary because the Heat is already his home team.

The Heat’s trade partners were willing to accommodate the Heat, but only at a very steep cost. To the Raptors, the Heat sent its 2011 first round pick and returned the first round pick previously acquired from the Jermaine O’Neal trade in February 2009. To the Cavaliers, the Heat sent its 2013 and 2015 first round picks, gave Cleveland the option to swap first round picks in 2012, as well as a pair of second round picks. In total, the Heat surrendered four first round picks and two second round picks over the next five years to make the sign-and-trades happen.

The sign-and-trade approach increased the total potential value of the contracts of each of Bosh and James. Without the sign-and-trade approach, each would have been eligible for a five-year contract, starting at $16.6 million with annual raises of up to 8% of the starting salary, totaling $96.1 million. With the sign-and-trade approach, each player, and Wade, became eligible for a six-year contract, starting at $16.6 million with annual raises of up to 10.5% of the starting salary, totaling $125.5 million.

Each player then gave back a portion of that increase to accommodate the contracts of Miller, Haslem and other such things. The Big Three took discounts in order to accommodate the following: 

Mike Miller: The Big Three took a cumulative $3.1 million first-year salary discount to accommodate the contract of Miller (equal to Miller’s $5.0 million first-year salary, less the amount of cap space that would have remained had the Big Three all signed maximum contracts). They split the discount evenly, amounting to $1.0 million per player. Over the life of a full six-year contract with maximum raises, that comes to an $8 million sacrifice for each player.

Miller then finished off the sacrifice by himself taking an even bigger discount, an estimated $21 million. Miller was reportedly offered $50 million over five years from both the Los Angeles Clippers and New York Knicks, but took the Heat’s offer of $29 million over five years. 

Udonis Haslem: The Big Three took a cumulative $3.0 million first-year salary discount to accommodate the contract of Haslem (equal to Haslem’s $3.5 million first-year salary, less one roster charge), at the request of Wade, who took disproportionate share of the discount. Wade reduced his first-year salary a further $1.2 million ($9 million over six years) to accommodate Haslem, while James and Bosh reduced their first-year salaries a further $900K ($7 million over six years).

Haslem then finished off the sacrifice by himself taking an even bigger discount, an estimated $13 million. Haslem was reportedly offered a five-year, $33 million mid-level exception contract from both the Denver Nuggets and Dallas Mavericks, but took the Heat’s offer of $20 million over five years.

Joel Anthony: The Heat elected to keep the $1.1 million qualifying offer to Anthony, a restricted free agent, in place. The qualifying offer gives the Heat the right to keep Anthony, by matching a contract the player signs with another team. But it alone required the Big Three to take a cumulative $587K discount, or $196K each. Over the life of a full six-year contract with maximum raises, that comes to a $1.5 million sacrifice for each player. The decision to retain the qualify offer is troubling, not only in that it costs the Big Three some money, but also in that it implies that Riley is preparing to give Anthony a big raise. Anthony has been on the market for nearly two weeks now, and has not garnered even a shred of interest. He is a fringe NBA talent who is not worth any more than the minimum salary from which he opted out. Now is not the time for Riley to lose discipline.

Salary Cap Errors: The Big Three took a cumulative $144K first-year salary because of salary cap errors by Heat management. Riley and crew made two small errors: they structured the order of their signings incorrectly, and they didn’t utilize every available dollar to the team under the salary cap. The Heat threw away $44K of cap space, seemingly because they chose to provide each player a nicely-rounded starting salary. Additionally, had the Heat structured the signings of all five players (Wade, James, Bosh, Miller and Haslem) such that the sign-and-trade transaction for James or Bosh was technically completed last, the collective bargaining agreement allows teams to exceed the salary cap by $100K in such circumstances. The $144K squandered equates to $48K for each member of the Big Three, or $363K over the course of six-year contracts with maximum raises.

Here is a depiction of the discounts the Big Three are taking:

Heat_discounts_taken

In an era where we complain that athletes only care about two things – legacy and money – three of the top players in the NBA, three potential future Hall-of-Famers have agreed play together, even at the risk of diminishing their own individual greatness, and have agreed to take less money to accommodate their friends.

Here is a depiction of the Heat’s current team salary:

Heat_team_salary_it's_official

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