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What Could a Ray Allen Opt Out Mean for the Heat?

The following post has been written in response to a column by Ira Winderman, a local beat writer who I enjoy reading and respect very much, in which it was stated that Ray Allen could not earn more from the Heat by opting out of his contract. As I often do all across the cyber universe of NBA basketball, I respectfully informed him that the Heat could in fact offer Allen both a higher starting salary and a longer contract by utilizing his Non-Bird rights if Allen were to first opt out. The revision of his column to reflect the correction has led to widespread speculation that Allen opting out is a forgone conclusion. While I have informed others of the possibility, I have never written about it on this blog because I do not believe it has a realistic chance to happen. I continue to believe that Allen will opt in by the June 29 deadline. The following post describes why. 

The plot keeps growing. And with it, so too the potential outcomes.

As expected, James Jones and Rashard Lewis have exercised their player options that will pay them $1.5 million and $1.4 million for next season, respectively. The Heat has also picked up its $4.0 million team option on Mario Chalmers.

The surprising revelation, however, is the apparent indecision of Ray Allen. Allen holds a $3.2 million player option. The common logic has been that – having hit the most iconic shot of the 2013 playoffs, perhaps the single biggest three-pointer in Miami Heat history, perhaps the single biggest field goal of his life, and, as a result, having won his second NBA title – he was surely rejuvenated and excited to return.

That notion now appears at least somewhat in doubt. 

There has been speculation of late that Allen’s indecision is related to his desire for a new, possibly longer and richer, contract from the Heat.

Allen could benefit by not opting in, by not settling for the one year, at $3.2 million, remaining on the two-year deal he signed last summer when he left the Boston Celtics.

Instead, the Heat could utilize the arcane Non-Bird exception in the NBA Collective Bargaining Agreement to offer him a new contract starting at up to 120% of his previous salary, or $3.7 million, when free agency begins in July. The contract could be for up to four years in length, with annual raises limited to 4.5% of the salary in the first year of the contract. That means Allen could earn as much as $15.8 million in a new deal.

But Riley has given no indication that that is what is going on. He’s given no indication that he’d even be willing to offer a multi-year contract. Like the rest of us, he appears to be eagerly anticipating Allen’s decision, which would suggest that new contract discussions may not be ongoing.

So what is Ray Allen doing?

There have been sporadic rumors throughout the course of the year that Allen always had in mind to opt out of his Heat deal in the hopes of signing with Boston for one year and retiring a Celtic. But with Boston having lost coach Doc Rivers, and now possibly former original Big Three teammates Kevin Garnett and Paul Pierce, perhaps leaving only not well liked former teammate Rajon Rondo, such a scenario would appear increasingly unlikely.

Could it be that he wants more money, or a longer-term deal, from the Heat?

If so, should the Heat give it to him? The Heat is already in a tight financial situation for the upcoming season, and Allen will be just shy of 39 years old at the end of it.

An Allen decision to opt out could have a domino effect on the rest of the roster.

It could mean that Mike Miller would be spared amnesty waivers for the third consecutive season.

Assuming that Arison is concerned about payroll, it would be difficult to imagine both Allen and Miller would be kept. It would be far too expensive, with total obligations for next season to an assumed 15-player roster then projected to hover somewhere greater than the $120 million range depending upon how things play out.

If Allen were to opt in, the Heat could lower that projection by roughly $14 million by amnestying Miller and replacing him with a minimum salary contributor. The savings for the following season, when the repeater tax kicks in, would be even more dramatic. For the 2014-15 season alone, Miller’s contract would cost no less than $23 million ($6.6 million in salary, plus at least $1.50-per-$1 in taxes, plus another $1-per-$1 in repeater taxes) but, in all likelihood, far more than that.

But if Allen were to opt out, the Heat could instead choose to retain Miller at a net increase in payroll for this season of around $4 million. Next season would still be equally problematic, but could be dealt with later.

Riley has stated that his preference is to keep his roster unchanged, save for the addition of a few minimum salary players (hopefully Greg Oden among them). Should Allen walk but the Heat otherwise remain intact, while the Heat payroll would increase rather sharply next season — around $4 million more than is currently projected — every player on the roster would be in a position to help out the season after – every player, except for Norris Cole, would have the ability to terminate his contract and restructure in a more cap friendly manner. Of course, that doesn’t mean they will, only that they could. The Heat would also still have the amnesty provision at its disposal.

Would you rather have Ray Allen and $4 million in payroll savings for next season or Mike Miller and the ability to preserve the amnesty provision for later use?

If you prefer the latter, would you then utilize that amnesty provision on Joel Anthony or keep it as an insurance policy for 2014-15?

If Anthony were amnestied and replaced with a minimum salary contributor, it would save approximately $6 million next season.

So… which of the following three would you rather have: (i) Ray Allen (possibly for one more year, or possibly on a longer term deal), (ii) Mike Miller and $2 million in payroll savings for next season but having already used the amnesty provision, or (iii) Mike Miller at an incremental cost of $4 million for next season but having retained the amnesty provision for possible use in a season in which Miller’s contract alone would cost no less than $23 million?

Or would you rather simply replace the $3.2 million salary that Ray Allen would be opting out of with the $3.2 million salary an MLE player would cost — say, on Samuel Dalembert, and then once again be forced to decide whether to amnesty waive Miller to recoup the $14 million in tax savings for next season alone but leave the team with no natural depth at the shooting guard position beyond his minimum salary replacement? The Heat isn’t planning to utilize the MLE otherwise.

However things ultimately play out, it is clear that the team has options and a certain degree of flexibility should Allen choose to opt out of the final year of his contract. Perhaps it would be nothing more than a prelude to a longer-term contract. But if not, it might still not be all that devastating for the Heat.

Miller would be a more than adequate replacement. Sure, it would cost Arison a few million dollars more next season, but the Heat might well be the better team next year for it. With Miller finally healthier than he has been at any point over the last five years, the Heat might finally be able to realize the dream that was put in place in the summer of 2010, that Miller would have a big role in the Heat rotation.

The sequence of events to come gives the Heat the advantage.

Allen needs to make his decision by June 29.

No free agent contracts can be executed prior to July 10. The deadline to utilize the amnesty provision is July 16.

The Heat has at least 11 days (and as long as an entire offseason) to contemplate whatever decision Allen ultimately makes and, if applicable, negotiate an MLE contract with an outside free agent. It has 17 days from the point Allen makes his decision to decide whether the amnesty provision should be utilized and, if so, on whom.

The hope is that both Allen and Miller return. Financial prudence would suggest that only one does. Which one could be up to Allen.

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