Dwyane Wade the Victim of Salary Cap Maximization Issues By His Agent and Team

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Miami Heat general manager Pat Riley and salary cap expert Andy Elisburg have been widely praised not only for their ability to recruit LeBron James, Chris Bosh and Mike Miller to join Dwyane Wade and Udonis Haslem in South Florida but also for their ability to structure their contracts to fit within the confines of a $58.044 million salary cap.

Wade, however, has reason to be less than thrilled.

Wade, James and Bosh were all eligible to receive maximum contracts with a starting salary of $16,568,908. However, in order to accommodate the contracts of Miller and Haslem, each took less. The first year salaries in the contracts of James and Bosh have been finalized at $14,500,000, while the first year salary for Wade has been finalized at $14,200,000.

Wade’s $300,000 shortfall will wind up costing him $2,272,500 over the life of his deal.

Wade took less than his Big Three cohorts in order to accommodate Haslem. But part or even all of that sacrifice was unnecessary. The Heat had the ability to create the necessary room to allow Wade’s contract to match that of James and Bosh, with room to spare, through the utilization of some creative maneuvering.

Understanding how this would have been possible necessitates an understanding of certain league rules. 

The Heat wound up utilizing cap space for the first seven players on its roster (Wade, James, Bosh, Haslem, Miller, Mario Chalmers and Dexter Pittman). The other two were thereafter acquired with exceptions, allowing the Heat to exceed the salary cap with their signings. Joel Anthony was signed with the Larry Bird exception, at a cost against the salary cap of $1.1 million. Zydrunas Ilgauskas was signed with the minimum player salary exception.

Here is a depiction of how team salary looked for the Heat at the precise moment it leveraged the last of its cap space:

Heat_Team_Salary_Pittman

So how do we get from here to creating an additional $300,000 of room for Wade?

In three ways:

1. The basic math issue.

Notice the total above. It says $58,000,305. That’s $43,695 less than $58,044,000. That’s cap room that was never utilized. It was squandered.

Over the life of a six-year deal, that’s a total of up to $330,990.

2. A timing issue that leverages a technical league rule which stipulates that teams utilizing cap space can acquire players in trade even if acquiring such players would cause team salary to exceed the salary cap by up to $100,000.

James and Bosh were both acquired in trade. Therefore, this intricate rule would have allowed the Heat to exceed the cap by up to $100,000 in acquiring the same five players it had on the roster at the precise moment all of its cap space was used up if the acquisitions were sequenced such that the trade of either Bosh or James was technically executed last. The Heat chose not to do so. And so, they therefore squandered another $100,000.

Over the life of a six-year deal, that’s a total of up to $757,500.

3. Another timing issue concerning the treatment of Joel Anthony.

In order to sign Joel Anthony to a contract with a starting salary that exceeded the salary cap, the Heat were required to retain his Bird rights — at a cost against the cap until signed of $854,389.

In order to retain its right of first refusal to match any contracts Anthony were to sign with any other team, the Heat were required to extend him a qualifying offer to make him a restricted free agent — at a higher cost against the cap until signed of $1,060,120.

This difference in those two values created an opportunity for the Heat to leverage by altering the sequence of its signings, but it required a level of creativity.

The Heat, in accordance with cap rules, were permitted to unilaterally rescind Anthony’s qualifying offer at any point prior to July 23. Doing so would have eliminated the Heat’s right of first refusal and made Anthony an unrestricted free agent, but would have maintained his Bird rights at the reduced cost against the cap until signed of $854,389.

The Heat, therefore, could have saved $205,731 in cap room (i.e., the difference between $1,060,120 and $854,389) by taking four virtually instantaneous steps.

Step 1: Reach agreement on a contract with Anthony, just as actually happened. Anthony ultimately agreed to a five-year, $18.25 million contract.

Step 2: Rescind Anthony’s qualifying offer. Doing so would have produced an instantaneous $205,731 in additional cap room but maintained Anthony’s Bird rights.

Step 3: Complete the agreed-to trade of James or Bosh (per the description in the second way above).

Step 4: Sign Anthony to his five-year, $18.25 million contract.

Taking these four steps would have increased the Heat’s total available cap room by $205,731.

Over the life of a six-year deal, that’s a total of up to $1,1558,412.

***

So, in total, the Heat – or more to the point, Wade’s agent – squandered a total of $43,695 in potential cap space because of a math error, and another $305,731 because of sequencing issues in structuring the Heat’s free agent signings.

That’s a total of $349,426. Over the life of a six-year contract, it equates to $2,646,902.

Using just $300,000 of it, Wade’s first year salary could be bumped up from $14,200,000 to $14,500,000, putting him on par with his Big Three cohorts.

Of course, the Heat organization actually benefits from not having put Wade on par with James and Bosh. It is money they will not have to pay out in future salary obligations. It is money for which they will not have to face the luxury tax consequences in the years ahead. For owner Micky Arison, it all works out very well.

Not so much for Wade. Not only does he lose the extra money, but he also loses the distinction of earning the same money as James and Bosh. And, as such, he has still never once been the highest-paid player on his team during his NBA career.

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