The Cost of All Those Traded Draft Picks Becoming Clearer for Miami Heat
In the summer of 2010, the Miami Heat changed the course of team and league history. As a result of two trade calls held with the NBA league office in less than an hour on July 10, the Heat completed sign-and-trade transactions with both the Cleveland Cavaliers and Toronto Raptors, acquiring LeBron James and Chris Bosh in the process.
James and Bosh were to be paired with Heat incumbent free agent Dwyane Wade as the launching point for what would ultimately become the Big Three era. In the three subsequent seasons, the Heat have gone on to reach the NBA Finals all three times, winning the NBA championship twice. Their pursuit of a third consecutive title begins tonight.
Amidst the jubilation of the day, some questioned the manner in which Heat president Pat Riley chose to acquire his two new players. The Heat had the necessary cap room at the time to sign them outright. Why, then, pursue the trade?
Both players were eligible for maximum salaries of $16.6 million in the first year of any new contract signed, whether it was with their prior teams, with the Heat, 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. Both players’ home teams were eligible to offer their respective player one more year (six instead of five) and bigger annual raises (10.5% instead of 8%). That translated to a maximum potential offer of $125.5 million over six years, versus the $96.1 million over five years that the Heat could offer.
James and Bosh utilized the structure not to make the increased money, but rather to mitigate the impact of taking less. They leveraged the sign-and-trade structure to take a reduced starting salary of $14.5 million – $2.1 million less than the maximum – in order to accommodate the contracts of Mike Miller and Udonis Haslem. (Wade, too, did the same).
Each structured the longer six year deal with the higher 10.5% maximum raises, but with the lower starting salary. The contracts paid out $109.8 million over the six years, roughly $15.5 million less than they otherwise could have made had they accepted full max deals.
The sign-and-trade structure, however, came at a cost for Miami.
The Heat, to start the summer, had eight first round draft picks over the following seven years. Of the eight, the Heat traded away four to complete the transactions – two to the Raptors for Bosh, and two to the Cavaliers for James. The Cavs also negotiated for two second round picks.
The cost of those draft picks sacrificed is now becoming clearer.
To the Raptors, the Heat sent:
- The Heat’s own 2011 first round pick; it became No. 28 overall
- A future lottery-protected first round pick from the Raptors, which the Heat had previously acquired in the February 13, 2009 trade that sent Shawn Marion, Marcus Banks and cash considerations to the Raptors in exchange for Jermaine O’Neal and Jamario Moon
According to the details of the 2009 deal, the Toronto pick was originally a lottery-protected 2010 pick. When the Raptors missed the playoffs during the 2009-10 season, two things happened: (i) the Heat received a 2010 second-round pick from the Raptors (which they ultimately utilized to select Da’Sean Butler at No. 42), and (ii) the Heat received a first round pick in the first year from 2011 through 2014 that Toronto made the playoffs. If the Raptors failed to make the playoffs by 2014, it was to become an unprotected first round pick in 2015.
On Friday, that pick officially became the No. 20 pick in the 2014 draft.
To the Cavs, the Heat sent:
- The Thunder’s 2011 second round pick (originally acquired by the Heat in the Latavious Williams trade); it became No. 54 overall
- A swap right on the Heat’s own 2012 first round pick; it went unexercised
- The Hornets’ 2012 second round pick (originally acquired by the Heat in the Marcus Thornton trade); it became No. 34 overall
- The Heat’s own 2013 first round pick; it became No. 30 overall
- A future protected Heat first round pick
As the final piece to the James trade, the Cavs will receive the only remaining draft obligation which has yet to be determined. It has protections to ensure it won’t be more valuable than was originally projected. It will be Top-10 protected in 2015 and 2016, and fully unprotected in 2017 if not already conveyed.
With the exception of a miraculous combustion that sinks the Heat to one of the ten worst teams in the league next year, it will be conveyed in 2015. And with it the last remaining obligation of the original James and Bosh sign-and-trade transactions will be completed.
As a result of this final obligation, the Heat have been prohibited, in accordance with the Ted Stepien rule, from trading away any future first round picks until 2017 at the earliest. That still holds true today.(1)
How the James and Bosh sign-and-trades worked out is a matter of perspective.
These trades are what prompted both players to take lower average salaries over longer-term deals in order to accommodate the contracts of close friends Miller and Haslem. Both Miller and Haslem have had a monumental impact on the Heat at various points throughout the Big Three era. Miller hit several critical three-point field goals during his amnesty-waiver shortened tenure with the Heat. Haslem continues to be an inspirational leader and playoff starter.
On the other hand, what might the Heat have otherwise done with the Nos. 28 and 54 picks in 2011, No. 34 pick in 2012, No. 30 pick in 2013, No. 20 pick in 2014, and an as yet undetermined pick in 2015?
What youthful potential contributors might the Heat have selected?
How damaging has it been not to have been able to include a first round draft pick in any trade scenarios for all these years? What players might the Heat have otherwise acquired? Nikola Vucevic? That was Riley’s vision in the summer of 2012. It was his dream. He spotted the potential All-Star talent at a time when nobody else did. But he had no assets to get a deal done.
Were Miller and Haslem worth all of these forgone draft picks?
What if I told you that the Heat could have instead offered James and Bosh at or near full maximum contracts over a five-year term (paying them each at least $4 million more over those five years in exchange for the sixth year guarantee they have today, but don’t really need) AND retained all those draft picks, at a cost of just Miller OR Haslem? Was Miller or Haslem, whichever you least prefer, really worth four first round picks and two second round picks over the subsequent seven years? If you knew then that Nikola Vucevic could be the Heat’s starting center as it opens the 2014 playoffs against the Charlotte Bobcats tonight, would you have sacrificed one of them to make it possible?
Whichever structure you would have preferred in making them happen, the acquisitions of James and Bosh have undoubtedly worked out spectacularly well for the Miami Heat, its owner, and its fan base.
(1) If the Heat’s 2015 first round pick is conveyed to the Cleveland Cavaliers, to complete the LeBron James sign-and-trade, the Heat will thereafter be able to trade away its 2016 first round pick. The pick which is to be conveyed is Top-10 protected in 2015 and 2016 and unprotected in 2017.