Miami Heat Use Amnesty Provision on Mike Miller

It was inevitable. But it is still painful.

He made a ridiculous seven 3-pointers against the Oklahoma City Thunder in the clinching game that gave the Miami Heat the 2012 NBA championship. He made one of the most iconic 3-pointers, shoeless, in an elimination game and an incredible 11-18 overall against the San Antonio Spurs that ultimately gave the Heat their second consecutive title a year later.

Now the Heat’s affable 3-point marksman is gone, essentially gone for good, after three seasons of playing alongside LeBron James, Dwyane Wade and Chris Bosh in Miami.

The Heat invoked their one-time right to waive a player through the NBA’s amnesty provision, electing to utilize it on 33-year-old Mike Miller in advance of Tuesday’s 11:59 p.m. deadline.

It had to be done. Despite his clutch and mechanically perfect shooting stroke, Miller was the fourth highest paid player on the Heat’s roster behind James, Bosh and Wade. But there were many months during Miller’s three years in Miami when he wasn’t even the eighth man in the rotation.

The Thunder trade of James Harden, the New York Knicks refusal to match the offer sheet of Jeremy Lin, the Memphis Grizzlies trade of Rudy Gay, and now the Heat amnesty of Miller were all done for the same reason: the new CBA in operation. 

Heat owner Micky Arison was one of five NBA owners who voted against the current CBA back in December of 2011. It was mostly a symbolic move – he knew the agreement would pass either way. But the point that Arison was making was clear: the harshest elements of the new contract, the more penal luxury tax system among them, were clearly aimed directly at the Miami Heat.

The Heat may be two-time defending champions and the top pick to take the title again next June, but they’re paying the price to be the best. As a result of the new CBA, the NBA will amplify its already painful luxury tax penalties by instituting a more punitive “incremental tax” that starts this season, and an even more onerous “repeater tax,” aimed at teams that have paid the tax in four out of five seasons, starting next season.

These punitive tax consequences are affecting the Heat in a way with which dynasties of the past never had to deal. The luxury tax as a concept was only started in 2002. When the Chicago Bulls outspent their nearest competitor by a whopping 30% in support of their dynasty in 1997, they didn’t need to worry about luxury tax consequences. They didn’t need to worry about luxury tax consequences when they led the league in spending the following season either. Neither did the Lakers and Celtics dynasties of decades past.

The Heat has produced three straight finals appearances, two straight titles, without ever having led the league in spending – not even close – and yet the new and more punitive tax rules have started to destroy its continued existence as presently structured. It is, quite simply, far more difficult to build a dynasty now than it has ever been in the history of the NBA.

By waiving Miller and his $6.2 million contract for next season through the amnesty process, the Heat realize a savings of $16.4 million in luxury taxes for this coming season, with that savings to rise to upward of $40 million over the next two seasons. Because the tax bill is not computed until the end of the regular season, the Heat could seek to further reduce their exposure in the interim through trade.

Under amnesty rules, Miller is now ineligible to return to the Heat until after the 2014-15 season, the expiration date of the contract the Heat waived.

Prior to the announcement, some had speculated in recent days that the Heat might instead choose to bypass utilizing the amnesty provision in order to protect against a long-term or career-threatening injury to Wade, James or Bosh, who each carries a far more substantial contract than Miller. That, however, was never a realistic assumption.

In the unlikely event of such an injury, the Heat can still produce the very same tax savings as the amnesty provision allows through the long-term injured player exclusion. If a Heat player were to sustain such an injury at any point during the coming regular season, the Heat could choose to waive the player, and would then be able to apply for the salary exclusion on the one-year anniversary of the last game in which the player played, well in advance of the 2014-15 tax computation deadline. Exactly as with the amnesty provision, the player would continue to receive his salary, but his salary would be excluded from team salary. Thus, saving the amnesty provision for such a situation would be largely meaningless.

It would be equally unwise for the Heat to have saved the provision for use in case of severe underperformance by a member of the Big Three. Any notions of utilizing amnesty next summer as a means to create the necessary cap space to pursue a significant outside free agent were exceedingly unrealistic. Even without the contract of Wade, James or Bosh, the Heat would still project to be over the salary cap for next season, currently estimated at $62.5 million, and thus relegated to the utilization only of the larger, full Mid-Level Exception.

Utilizing the amnesty provision this summer therefore became the only logical conclusion.

It may disappoint some Heat fans frustrated by a move motivated strictly by finances, to the detriment of the on-court product. But perspective is required. Despite the move, Arison is showing a remarkable willingness to spend in support of the Heat’s three-peat goal. And the Heat, even without Miller, project as strong favorites in that pursuit.

The Heat’s payroll will almost certainly cross $110 million after the roster is finalized. That’s the most ever in team history, and by an absurd amount. Last season’s record $97 million payroll was $13 million more than ever before.

In a sense, we are all very lucky that the Big Three chose to take less money to ensure there was enough cap space to accommodate Miller and Udonis Haslem under the salary cap back in July of 2010. Without that gesture, there would be no Miller to amnesty, no $40+ million in savings to create. Instead of being the favorites to win another title next year, this team could be in the midst of being blown up for financial reasons. Then again, if history were being re-written to accommodate an alternate reality, the Joel Anthony signing certainly never happens. Without that mistake, Miller is still a member of the Miami Heat and the Heat likely presses on with the Big Three, and Miller, still intact.

Miller will continue to receive his full $12.8 million in salary for the next two seasons from the Heat, unless he is claimed during the 48-hour amnesty-waiver period, in which case the Heat’s obligation will be reduced dollar-for-dollar by the amount of the highest bid. The minimum possible bid would be $2.8 million for the two remaining seasons on his contract.

If he is not claimed through amnesty waivers, Miller will become an unrestricted free agent, free to sign with the team of his choice. The Heat could also reduce its obligation to Miller in the event he signs a new contract as a free agent. However, it wouldn’t be a straight dollar-for-dollar offset. Instead, the savings for each of the next two seasons would be equal to one-half the difference between Miller’s new salary, whatever that may be, and the minimum salary for a one-year veteran.

The decision to amnesty Miller reveals a bit of a split in the Heat front office. Just four days earlier, Riley insisted the Heat would bypass the team’s amnesty option, despite the millions of dollars such a move would save. Riley even went so far as to say “we’re not using the amnesty” in a conference call with reporters last week. Clearly, the savings were too big for Arison to pass up.

And, clearly, every dollar mattered. The Heat could instead have chosen to amnesty Anthony at a savings of roughly $10.6 million for this season, and upwards of $25 million over the next two seasons. The added $6 million in savings for this season, and approximately $15 million for two seasons, was enough for Arison to bypass using the provision on Anthony.

That calls into question a few other decisions Riley has made over the past few weeks.

Chris Andersen was offered a second year player option at great cost to the Heat. Both Rashard Lewis and James Jones elected to opt into the final year of their contracts rather than opt out and be offered new contracts with nearly identical salaries at substantially lower cost to the Heat. All three moves seemed relatively innocuous at the time, but will cost the Heat approximately $6 million next season.

That’s roughly equivalent to the forgone savings than the incremental savings for this season of choosing to amnesty Miller instead of Anthony.

It’s also just slightly less than the difference between utilizing the Mid-Level exception in now seeking out a replacement for Miller or otherwise upgrading the roster, and instead utilizing the minimum salary exception to accomplish the same goal. The larger contract would have all but assured the possible addition of certain intriguing options at positions of need. Though the Heat can still utilize the Mid-Level exception, given their current payroll, they will almost certainly choose not to do so.

Despite the emotion of Tuesday’s announcement, the Heat roster is taking shape exactly as has always been expected. The team now has 12 players under guaranteed contract – three short of the regular season maximum. Among the intriguing options include point guard Mo Williams, shooting guards Ian Clark and Daniel Gibson, small forward James Ennis, power forwards DeJuan Blair and Jarvis Varnado, and centers Samuel Dalembert, Greg Oden and Justin Hamilton.

No matter what has happened, or what will happen for the rest of the summer, the Heat is still a heavy favorite to win the 2013-14 NBA championship.

1 Response

  1. RemoteHeatFan says:

    As this is not necessarily the right ‘thread’ for it, but it does revolve around the cap issues 🙂

    I have this funny suspicion that when ’14 comes around that the big three will opt out. I also believe that they will be in the finals again. So it will be 4 years straight in the finals. Somehow, someway, I do not think that anyone is going to want to let the train end. I suspect that there will be financial sacrifices made by the big three to help relieve the tax issue. It would not surprise me to see Wade offer to take 1mm less than Bosh to help keep the team intact. I suspect that Bosh will take between 10 and 12. LeBron, looking at all of this also will not go ‘max.’ I see the three of them combined making less than when they first showed up together. They will do another 5 year deal with a 3 year out and let Riles get in the replacements.

    I suspect that Haslem will opt in. I suspect that Anthony if he is still here will opt in. I suspect they will take the option on Cole. So assuming we have a 15-12-11 cost on the big three, plus the 4.6 Haslem, the 3.8 Anthony, the 1.5 Bird, the 2 Cole, we are at a 49.9 payroll. They will have to figure out what to do with Chalmers.

    I am wondering if Allen/Battier will be at the level they are now and will come back on the cheap.

    I am just stuck on the fact that the three took less to do what . . . play with each other, to win championships. They already showed that the dollar is not what is driving them. I don’t see them blowing it up.

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