With 13,000 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 through a cloud of smoke… along with some unexpected news. Not only is Mike Miller joining the party, as was expected, but Udonis Haslem too.
How is all of this possible?
In short, while the Heat had the necessary cap space to offer the Big Three full max contracts, they each agreed to take less. Riley then turned around and utilized the recovered cap space to secure the beloved power forward Haslem, as well as newcomer sharpshooter Miller.
Why would they so drastically reduce their salaries?
Well, pure generosity. Miller and Haslem are friends of the Big Three, and the Big Three did right by their friends in their desire to put together not only a championship-caliber roster but also a close-knit team.
How much did they sacrifice?
Each member of the Big Three was eligible for a max 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 have sacrificed four first round picks and two second round picks over the next five years.
The sign-and-trade approach increased the total potential value of the contracts of each of Bosh and James. They each, then, along with Wade, gave back a portion of that increase to accommodate the contracts of Miller and Haslem.
Here is a depiction of the Heat’s current team salary:
The Big Three took discounts in order to accommodate the following:
Mike Miller: The Big Three are taking a cumulative $3.4 million 2010-11 discount (the amount of cap space that would’ve remained after allocating maximum salaries to each of the Big Three), or $1.1 million each, to accommodate the contract of Miller. Over the life of a full six-year contract with maximum raises, that comes to $8.7 million sacrifice for each player.
Udonis Haslem: The Big Three are taking a cumulative $3.0 million 2010-11 discount (the value of Haslem’s salary less one roster charge), or $1.0 million each, to accommodate the contract of Haslem. Over the life of a full six-year contract with maximum raises, that comes to a $7.6 million sacrifice for each player.
Joel Anthony: The Heat have 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 requires 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 Heat have thrown away $144K in cap space simply because of salary cap errors (they remain $44K below the cap, and sign-and-trade rules would have allowed them to exceed the cap by another $100K). That equates to $48K per player, or $363K over the course of six-year contracts with maximum raises. It’s not a big deal, but it money the Heat essentially just threw away for no reason.
Here is a depiction of the discounts the Big Three are taking:
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.