With 13,000 Miami Heat fans anxiously waiting in AmericanAirlines Arena to welcome its newest trio of superstars, Dwyane Wade, LeBron James and Chris Bosh were upstairs finalizing their contracts. Minutes later, they emerged from a cloud of smoke, along with some unexpected news: They all took discounts large enough to accommodate the potential signings of both Mike Miller and Udonis Haslem in the days ahead.
James and Bosh signed matching six-year contracts, which start at $14.5 million and pay out a total of $109.8 million. Wade took an even bigger discount to stay in Miami, signing a six year deal which starts at $14.2 million and pays out a total of $107.6 million. They could have received $125.5 million apiece if they had demanded the maximum value allowed under the NBA’s collective bargaining agreement.
Each was eligible for a maximum starting salary for next season of $16.6 million, 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, league rules give 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. Heat president Pat Riley therefore 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.
James and Bosh requested the longer term and higher annual raises on their contracts that necessitated the sign-and-trade structure in exchange for the reduced starting salary, to which Riley obliged.
The Heat’s trade partners were willing to accommodate the Heat, but it came at a steep cost.
To the Raptors, the Heat sent its 2011 first round pick and returned the first round pick it previously acquired from the Raptors in the Jermaine O’Neal – Shawn Marion trade in February 2009. By virtue of having traded away Bosh’s salary without receiving any salary in return, the Raptors will also receive a $14.5 million trade exception.
To the Cavaliers, the Heat sent a pair of first round picks in 2013 and 2015, a pair of second round picks in 2011 (previously acquired from the Thunder in exchange for Latavious Williams in a 2010 draft day trade) and 2012 (previously acquired from the Hornets in exchange for Marcus Thornton in a 2009 draft day trade), and gave Cleveland the option to swap first round picks in 2012. By virtue of having traded away James’ salary without receiving any salary in return, the Cavaliers will also receive a $14.5 million trade exception.
The newly-minted six-year contracts run through the 2015-16 NBA season. All three contracts, however, contain an early termination options after the fourth season that would allow each player to return to free agency in the summer of 2014, as well as player options after the fifth season that would allow each player to return to free agency in the summer of 2015.
With all three superstars wrapped up, it was time for the Heat and their fans to celebrate, and they greeted the NBA’s newest superstar trio in a fashion normally reserved for rock concerts and award shows. Wade, James and Bosh arrived into AmericanAirlines Arena in white Heat uniforms accompanied by plumes of smoke, lifted into the air on a forklift for their grand arrival amid an atmosphere more suited to a rock concert than a basketball game.
Heat president Pat Riley — the mastermind of the deals — and coach Erik Spoelstra sat in the stands, as did owner Micky Arison, all of them beaming.
But, for Riley, there is still substantial work to be done. Next up: Filling out the roster.
By dealing off Michael Beasley late Thursday night, Riley created an extra $4.96 million in cap space. With Beasley gone, it left second-year point guard Mario Chalmers as the only member of the franchise under contract, an expiring deal that will pay him $854K next season. Wade, James and Bosh now add another $43.2 million to that total. The Heat also has a $1.1 million tender offer in place that allows it to match outside bids for restricted-free-agent center Joel Anthony as well as a $1.5 million cap charge associated with the buyout of James Jones from last month. The Heat has a current team salary of $50.0 million.
The NBA announced on Wednesday that the 2010-11 salary cap has been set at $58.044 million. By the league’s convoluted salary cap math, that leaves the Heat with approximately $8.5 million to split between Miller and Haslem.
Miller agreed to a five-year deal with the Heat late last night worth up to $30 million, which will start at roughly $5 million. That leaves the last of the Heat’s remaining cap room – $3.5 million, which could yield a contract of up to $20 million over five years – to Haslem, if he chooses to accept it. The Heat could increase that total to as much as $4 million, or $24 million over five years, if it renounces its Bird rights (and qualifying offer) to Anthony. Riley called the situations with Miller and Haslem “fluid” but hopes to have both worked out in the coming days.
With six players in the fold, the Heat now has limited options with which to fill out the roster:
The Heat can sign NBA rookies to minimum salary contracts of up to four years in length (by utilizing cap space equivalent to the amount of a roster charge). Among the candidates for such a contract would be point guard Patrick Beverley, shooting guard Da’Sean Butler, and center Dexter Pittman.
They Heat, by virtue of having thus fair retained his Bird rights, can exceed the salary cap to offer Joel Anthony a long-term contract. Anthony is technically eligible to receive as much as the same six-year, $125.5 million contract which was available to Wade, James and Bosh. But now is not the time for Riley and the Heat to lose discipline. Anthony is a fringe NBA talent who is barely worth the minimum salary contract from which he opted out late last month.
The Heat can exceed the salary cap to offer minimum salary contracts. These contacts can be for up to two years in length.