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The Fate of Mike Miller

It’s still time for celebration in Miami, the Heat just having won its second NBA title in as many seasons. The champagne is still flowing, the parade is still upcoming, and the sheer joy of the moment is still bringing smiles to all of our faces.

For the front office, however, it’s time to get to work. There are tough decisions to be made.

Toughest of all may be the case of Mike Miller.

Miller is a truly wonderful guy. He’s classy. He’s humble. He’s a family man with a touching story. He’s a great teammate. He’s a great player. He can hit a barrage of clutch three-pointers to clinch NBA titles. He can hit them without shoes on. When he’s right, he can be the second most valuable player on the team.

But the Heat is in a difficult financial position and, as such, his tenure on the team is in doubt.

He knows it. He recently sold his beautiful Pompano Beach residence at auction in preparation.

Was he right? Were his actions premature? What are the alternatives for Miller and the Heat? 

Alternatives If the Heat Should Choose to Keep Miller

1. Do Nothing. Let’s call this the “preferred but unlikely to happen” scenario.

Some have suggested that this should be the preferred outcome. Miller is a great player who plays his best on the big stage. He is under contract for two more seasons. He sacrificed a bigger contract to be here. The Heat should reciprocate the loyalty.

This, however, is a very expensive point of view. Keeping Miller would cost the Heat at the very least an incremental $27 million in luxury taxes over the next two seasons, but possibly as much as $49 million, depending on how everything else works out.

To some of us, those amounts don’t matter much or, at least, shouldn’t matter much to a multi-billionaire. These are the ones among us who feel that the Heat should not only keep Miller but also add a mid-level exception player – and not just once, every season it is available – and not only that, but also buy first round draft picks to replace the ones that have been traded. These are the ones who don’t appreciate the differences between the $65 million payroll from last season, the $90 million payroll from this season (the most in team history), and the $150+ million their ideal scenarios would wind up costing in the years to come. That’s not fair!

If the Heat does elect to keep Miller, it will almost certainly look to offset the huge tax implications by amnestying Joel Anthony. By amnestying Anthony, the Heat would save between $15 million and $29 million in taxes over the next two seasons. So, is keeping Miller at the expense of Anthony worth paying an extra $11 million to $20 million (if you have designs on utilizing the MLE this season, the Heat would find itself almost certainly at the very high end of the range; if not, it would probably find itself somewhere around the average)?

2. Give Him a Partial Buyout With Back-End Offer. Let’s call this scenario the “James Jones 2.0.”

Back in June 2010, Jones agreed to a buyout below his partial guarantee which reduced his payout upon being waived by exactly $1 million. Doing so enabled the Heat to reclaim $311,828 of cap space for the free agent shopping spree to come. At the time, that was critical, as it afforded the Heat the ability to offer three max contracts.

In exchange, when the shopping spree was over, the Heat ended up giving Jones that money back in the form of a minimum salary contract. And so, despite being waived, Jones ultimately remained a member of the Heat.

The Heat could theoretically employ a similar strategy with Miller. This time, however, it would be for different reasons. Rather than as a means to free up cap space (of which the Heat will have none for many years), it would be as a means to preserve the amnesty provision for Anthony.

In order to create a negligible financial difference for the Heat between amnestying Miller and using this structure to instead amnesty Joel, an amount equal to the difference in their salaries, or $5.2 million, would need to be sacrificed by Miller as part of the buyout. Upon completion of the buyout, the Heat could offer Miller minimum salary contracts for each of the next two seasons that would pay him an additional $2.8 million. Sacrifice $5.2 million. Make $2.8 million back. Net loss to Miller: $2.4 million.

So… if the Heat were to want to retain Mike Miller at the expense of Joel Anthony, Miller would need to be willing to give up $2.4 million in order to make it a breakeven alternative for the Heat, financially speaking. Any more money sacrificed by Miller and the Heat would be coming out ahead, any less and the Heat would be coming out behind.

There are also legal hurdles to this approach which make this low likelihood alternative an almost impossibility. If Miller and the Heat were to even discuss the possibility of a buyout followed by a future contract offer, it would be considered circumvention of the salary cap rules which specifically forbid a downward renegotiation of salary. In order for the strategy to work, Miller would need to agree to the buyout without being aware of the future contract offers which are designed to partially offset his loss. But why would Miller agree to sacrifice $5.2 million for no reason at all?

Alternatives if the Heat Don’t Want Miller and Don’t Care About the Tax Hit

3. Waive Him. Let’s call this the “only included to be thorough” scenario.

The Heat could simply waive Miller.

Waivers are a temporary status for players who are released by their team.

A player stays “on waivers” for 48 hours, during which time other teams may claim the player and assume his contract. Given the size of Miller’s contract, there is no chance he would get claimed.

If no team has claimed the player before the end of the waiver period, he is said to have “cleared waivers.” The player’s contract is terminated, the team owes the guaranteed portion remaining on his contract, the team’s team salary would continue to reflect the guaranteed portion remaining on his contract, and the player becomes a free agent. The only way for a team to terminate a contract early is through the waiver process.

This alternative would accomplish nothing. Miller would no longer be with the Heat. His contract would be paid out in full. And the Heat would get no cap or tax relief.

Alternatives For the Heat If Miller Were to Sacrifice His Salary

4. Hope He Retires. Let’s call this the “trumped by the next option” scenario.

This would involve Miller filing retirement papers with the league. He would be placed on the league’s Voluntarily Retired list, he would forgo his remaining salary, and the Heat’s obligation would be wiped off the books completely.

Miller would be unable to return to the league for one year (unless the restriction were to be overridden by unanimous approval from all 30 teams), at which point he’d be free to sign with any team.

But this isn’t happening. Miller has said that he feels healthier than he’s been in years, and wants to play for at least two more seasons. Good for him!

5. Buy Him Out. Let’s call this the “gift scenario that won’t happen.”

Mike can always choose to forgo the $12.8 million he is owed in the event that he is waived. This scenario would have the same effect as the retirement option above without the one-year restriction. In the event of a buyout, if he were to clear waivers, Miller would be free to sign with any team as a free agent, including the Heat (though the Heat would lose his Bird rights).

But why would he do that? Would you give back money you were owed if you were fired?

Alternatives For Miller to Get Paid AND the Heat to Remove His Salary

6. Trade Him. Let’s call this the “desirable but impossible” scenario.

The recent rejuvenation of Miller’s game might lead you to believe that his trade market has been revitalized. It hasn’t. At least not in any way that would be helpful to the Heat.

Even if Miller does provide some degree of value with his renewed health and improved play, his on-court value is more than offset by his untenable future salary obligations.

Miller has a toxic contract. He is owed $12.8 million over the next two seasons, plus, in the context of a trade, another $930K trade bonus which, by league rule, cannot be waived. Typically, toxic contracts can only be traded in exchange for toxic contracts in return. That accomplishes nothing for a Heat team whose primary goal would be to clear Miller’s salary off the books.

The Heat will exhaust all avenues in an attempt to trade him over the next three-plus weeks. They would gladly give Miller away for nothing in return. But there’s no team in the league that would take him. The Heat could try to throw in additional assets as an inducement. But they don’t have many with which to maneuver.

7. Hope He Retires For Medical Reasons. Let’s call this the “too late” scenario.

In this case, Miller would continue to receive his salary, but the salary would be excluded from the Heat’s team salary. Sounds wonderful! But it won’t work for Miller. Here’s why.

In such cases, the team must first waive the player, and can then apply for this salary exclusion no sooner than the one-year anniversary of the last game in which the player played.

The determination as to whether an injury or illness is career ending is made by a physician jointly selected by the league and players association. The determination is based on whether the injury or illness will prevent the player from playing for the remainder of his career, or if it is severe enough that continuing to play constitutes a medically unacceptable risk.

If the injury exclusion is granted, the player’s salary is removed from team salary:

(i) If the player played 10 or more games that season, on the one-year anniversary of the player’s last game.

(ii) If the player played fewer than 10 games that season, 60 days after his last game, or the one-year anniversary of his last game in the previous season, whichever is later.

The one-year anniversary of Miller’s last game would be playoff time next season. That’s too late to get any tax relief for next season. Any such relief, therefore, wouldn’t come until the following season, which accomplishes nothing. As a result, this is not a viable (or possible, since he hasn’t suffered a career-ending injury anyway) alternative.

Had Miller elected for surgery to correct the multiple herniated discs in his back last offseason, and had he retired as a result, this might have been a viable, and perhaps ideal, option at the time. But not anymore. Which is fine. Seeing any player forced to retire for medical reasons, let alone one with the character of Mike Miller, is never a preferred alternative.

8. Amnesty Him. Let’s call this the “inevitable” scenario.

Amnesty is a one-time opportunity for teams to release one player through the waiver process and remove him from their team salary and luxury tax computations. However, as with any other waived player, the team must continue to pay the guaranteed base salary remaining on the contract of its amnestied player.

For a player to be eligible for the amnesty provision, he must be on his team’s roster continuously from July 1, 2011 to the date he is amnestied, without signing any new contract, extension, renegotiation or other amendment in the meantime. Thus, for the Heat, only Miller, Anthony, Udonis Haslem, LeBron James, Chris Bosh and Dwyane Wade are eligible. Given his combination of salary and productivity, Miller would appear to be the logical choice.

The provision is only available to be used during the first seven days after July Moratorium. For next season, that’s a window of July 10 – July 16, 2013.

As with any other waived player, another team may place a claim in order to acquire the player before he clears waivers if they have the necessary cap space to do so. But amnesty is different from the normal waiver process in that it allows teams to make either a full or partial waiver claim.

When a team makes a full waiver claim it acquires the player, assumes his full contract, and pays all remaining salary obligations; the waiving team has no further salary obligation to the player. A full waiver claim, in the case of Miller, will not happen.

A partial waiver claim is a bid for a single dollar amount. If no team makes a full waiver claim, the player is awarded to the team submitting the highest bid in a partial waiver claim; the amount of the partial waiver claim is then subtracted from the waiving team’s continuing obligations to their amnestied player. The minimum possible bid a team can make is the minimum salary applicable to the player for all remaining guaranteed seasons of his contract. In Miller’s case, that’s $2.8 million. It is unlikely that any team will place a partial waiver claim on Miller.

The waiving team may not re-sign or re-acquire the player for the length of his contract. If Miller were to be amnestied, therefore, he would not be allowed to become a Heat player again until after the 2014-15 season.

***

Miller was the fourth free agent the Heat added in the year the Big Three was assembled, and was supposed to have been a core player alongside James, Wade, and Bosh. Things didn’t work out that way. His back injuries derailed huge swaths of his first two seasons in Miami, leaving him almost forgotten when Erik Spoelstra summoned him in the final game of last year’s NBA Finals, in which he promptly made seven consecutive three pointers as the Heat won the championship. He’s now healthier than he’s been in more than half a decade.

Here’s the irony in all this. Given the state of Dwyane Wade’s knees, Miller has become a wonderful luxury for the Heat as the ideal floor-spacing alternative. He could finally become the core player he was always supposed to be. But given the range of possible alternatives, unfortunately, there is only one logical conclusion. Miller should be amnestied. And with it would come to an end the tenure of one of my favorite Heat players of all time.

“Business is part of basketball just like injuries,’’ said Miller, aware he could be an amnesty casualty. “If their business is to financially improve this team, they’re going to definitely do what’s best for them and I completely understand. That’s part of basketball. I’ve been traded before, too. I understand, and that’s what you sign up for.’’

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