Hassan Whiteside Is Very Much A Part of Miami Heat’s Future

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It was a simple twist of fate. Had it not been for Chris Andersen’s sprained ankle, Chris Bosh’s strained calf and Josh McRoberts’ torn meniscus, he might not even be here. And yet, 7-foot rookie center Hassan Whiteside, the Miami Heat’s mid-season acquisition, is quickly becoming the team’s most vital player.

Whiteside has become the focal point of a fan base desperately seeking out hope for the future during a painful post-LeBron-James transition. He’s rewarding us all with boundless energy, youthful exuberance, and quick ascent. In his limited experience, Whiteside has been rampaging through the NBA with reckless abandon, utilizing his massive 7-foot-7-inch wingspan to throw down monstrous alley-oop dunks, snatch rebounds out of the sky from high above the rim, swat basketballs as Godzilla would planes, and generally wreak havoc on both ends of the floor.

Whiteside is averaging a staggering 16.6 points, 14.4 rebounds and 4.4 blocks per 36 minutes played. He is shooting 69.2 percent from the field, while players he is defending are shooting just 43.3 percent.

He was never supposed to be this good this quickly. For a city so long starved for anything approaching decent play at the center position, the extraordinary exploits of the budding 25-year-old have been a joy to watch.

But Whiteside is quick to clarify one thing: He is not a rookie, at least in terms of NBA designation. And that distinction, however technical, is more significant than you may realize. 

There was a whole other NBA career for the 2010 second-round pick out of Marshall – 19 games over two seasons with the Sacramento Kings that were as nondescript as the team for which he played. He partially tore the patellar tendon in his left knee before his pro career ever began, had surgery to correct later into the season, and never amounted to much of anything in 111 uninspiring big-league minutes.

Then there were D-League stops in South Dakota, to play for the Heat’s affiliate Sioux Falls Skyforce, and Hidalgo, Texas, to play for the Rio Grande Valley Vipers.

Then came banishment to China and Lebanon.

This past September, Whiteside signed with the Memphis Grizzlies, but was released before the season started. He then went back to Rio Grande, but was quickly traded to the D-League’s Iowa Energy, where he got off to an incredibly hot two-game start to the season – averaging 21.0 points on 82.6 percent shooting, 15.5 rebounds, and 6.0 blocks.

Whiteside says he then called every team in the league to ask for a workout, and all but the Heat turned him down. The Heat brought him in for a workout on Nov. 17. But while the organization was thinking it over, they lost him. The Grizzlies signed him to a second contract on Nov. 19. But he was cut a day later when Memphis needed to open a roster spot, and retuned to the Energy.

After a third consecutive cornea-etching performance for the Energy – 24 points on 11 for 12 shooting, 16 rebounds and 4 blocks – this time against Miami’s own D-League affiliate on Nov. 22, the Heat simply couldn’t refuse.

Out went Shannon Brown. In he came.

But here’s where things get interesting.

The Heat had no basis upon which to project such dramatic early success, but had no reason not to prepare for it in doling out a contract. The Heat had three options – offer him a one-year deal (which would make him a free agent next summer), a two-year deal (which would make him a free agent in the summer of 2016) or a one-year deal with a team option for a second (which would allow the Heat to control in which season he was to become a free agent), all at the minimum salary.

There are two types of free agency in the NBA: unrestricted and restricted. An unrestricted free agent is free to sign with any other team, and there’s nothing the player’s original team can do to prevent it. Restricted free agency gives the player’s original team the right to keep the player by matching a contract he signs with another team.

Restricted free agency exists only on a limited basis. It is allowed only for players coming off rookie-scale contracts, and for players who have been in the league three or fewer seasons.

Whiteside is technically a two-year veteran. This is his third year. Had they doled out a one-year deal, the Heat could have made Whiteside a restricted free agent this summer.

But here’s the thing: Restricted free agency only gives a player’s incumbent team the right to match a contract the player signs with another team. It still needs to have the means (either the necessary cap space or a large enough exception) to match it.

Back in 2003, the Washington Wizards were able to take advantage of a loophole in the NBA’s salary cap system when they outbid the Golden State Warriors for Gilbert Arenas, a restricted free agent after being a second round pick in 2001. The Warriors were over the cap and thus could only use an exception to re-sign Arenas.

Gilbert was at the time an “Early Bird” free agent, a designation classified for players who have played with their incumbent teams for two years. A team could use the Early Bird exception to re-sign its own free agent for up to 175-percent of his salary in the previous season or 108 percent of the average player salary in the previous season (104.5 percent in today’s CBA), whichever is greater. Golden State could therefore only match an offer sheet for up to the amount of the Early Bird exception, which was about $4.9 million at the time. Washington signed Arenas to an offer sheet with a starting salary of about $8.5 million, which Golden State was powerless to match.

This loophole was addressed in the 2005 CBA with the “Gilbert Arenas” provision, where it was ruled that an offer sheet made to a restricted free agent in his first or second year in the NBA could not contain a first-year salary greater than the (full) mid-level exception. To put this in context of 2003, the Wizards would only have been able to offer the mid-level exception, which at the time was $4.9 million. Golden State would therefore have had the option to use its Early Bird rights to match the offer sheet for Arenas, if they chose to do so.

The rule change does two primary things: It limits the size of a potential first year salary that a player with one or two years of experience can get on the open market(1), and it guarantees that the player’s prior team can utilize the Non-Taxpayer Mid-Level Exception (for one or two year veterans; assuming, of course, it has access to it) or his Early Bird rights (for two-year veterans who have been with their previous teams for both years) to match it.

While the provision only applies to players with one or two years of experience, players with three years of experience can still be made restricted free agents, and since full Bird rights are accrued after three years, their prior teams are generally in a position to leverage those Bird rights to match any outside offers up to and including a maximum salary.

These rules combine to make it nearly impossible to wrestle away any players with three years of experience or fewer. The case of Whiteside, however, is somewhat unique.

By virtue of the two years of experience that Whiteside has already accrued, the Heat will not have the protections of the Gilbert Arenas provision.

But it gets worse. While Whiteside has accrued two years in the league, those years were not in Miami. Therefore, the Heat also has not accrued those two years toward his Bird clock.

Retaining him therefore becomes problematic.

Had they signed Whiteside to a one-year contract, the Heat, which projects to be capped out this summer, ran the risk of not being able to match a high enough outside offer and losing him outright after the season, despite his potential restricted free agent status.

Whiteside would have become only a “Non Bird” free agent this summer, a designation classified for players who have played with their prior teams for only one season. A team can use the Non-Bird exception to re-sign its own free agent to a contract of up to four years in length, starting at up to 120 percent of either his salary in the previous season or the then-current minimum salary, whichever is greater. For Whiteside, that would have been just $1.2 million.

The Mid-Level exception would likely have been the best tool the Heat would have had to match an outside offer, which will be worth either $3.4 million (via the Taxpayer Mid-Level Exception) or $5.5 million (via the Non-Taxpayer Mid-Level Exception) depending upon how things play out.

Using the larger mid-level exception automatically triggers a hard cap at the “apron,” the point $4 million above the projected $81.6 million luxury tax level. The apron is a brick wall on spending, one that cannot be crossed for any reason. A team cannot exceed it even for a moment, and even if it were to subsequently drop back down below it. Merely approach it, and it becomes harder to make trades that bring in more salary than they send out, or even sign minimum-salary players when injuries strike. It is a menace constantly floating in the distance.

In other words, had the Heat signed him to a one-year contract, Whiteside would have become free agent this summer, and the Heat would have been powerless to match any outside offer with a starting salary greater than $5.5 million. And if that outside offer started at more than $3.4 million, the Heat would have become hard-capped at the apron for all of next season, severely restricting their summer plans.

Therefore, offering Whiteside a one-year contract was not really all that appealing for the Heat.

Had they signed Whiteside to a one-year contract with a team option for a second year, the Heat would have had the flexibility to control when Whiteside was to become a free agent. This would have been something of a best-case scenario for the Heat in that it would have allowed the Heat to evaluate his performance for this season before deciding upon the appropriate course of action, but the structure wasn’t without its severe challenges.

Adding a team option to a contract imposes several restrictions on how the contract can be structured. First, an option year cannot pay out less than the year prior; this did not present a problem in the case of Whiteside because his was to be a minimum salary contract, which by rule increases in value every year. Second, and more importantly in the case of Whiteside, the terms of any partial guarantee in an option year need to be identical to the year prior; this presented possible complications for both the Heat and Whiteside.

For the Heat, Pat Riley negotiated to give Whiteside just a $100,000 partial guarantee on his $769,881 prorated minimum salary for this season. The presence of a team option, therefore, would have required the Heat to guarantee the same percentage of Whiteside’s salary for next season as implied by the $100,000 for this season; that’s a $127,468 guarantee on his $981,348 salary for next season. Of course, since any partial guarantee on the second season would be subject to the Heat’s prior exercise of its team option (i.e., if the Heat chose not to exercise their player option, the partial guarantee on the second season would become irrelevant), this was a manageable complication for the Heat.

For Whiteside, the presence of the team option would have required, assuming the option were exercised by June 29th, that his second year salary would be just $127,468 partially guaranteed all the way through January 10th of next season (the point at which all salaries across the NBA become guaranteed for the rest of the season). Whiteside instead negotiated for his contract to be $245,337 (25 percent) partially guaranteed on August 1st, $490,674 (50 percent) partially guaranteed on October 31st, and fully guaranteed on December 1st.

Therefore, while a one-year contract with a team option for a second would clearly have been the best structure from the perspective of the Heat, Whiteside likely refused.

And so, the Heat bypassed both the one-year contract and the one-year contract with a team option for a second year in favor of a straight two-year contract, with $100,000 in guaranteed money to serve as an enticement for Whiteside to accept.

Whiteside is under contract to the Heat through next season. His contract pays out (a now-guaranteed) $769,881 this year, and calls for a non-guaranteed minimum salary of $981,348 next year, which will become 25 percent partially guaranteed on August 1st, 50 percent partially guaranteed on October 31st, and fully guaranteed on December 1st. The contract could soon become one of the biggest bargains in the whole of the NBA.

The two-year contract now appears prophetic. It is the only thing keeping other teams from swooping in and offering Whiteside a contract greater than the value of the full Mid-Level exception this summer, a contract which, even though it may have retained his restricted free agent rights, the Heat may have been powerless to match.

Whiteside’s contract extends through the 2015-16 NBA season. By the time it is over, he will have accrued four years of NBA experience, making him ineligible for restricted free agency. He will become an unrestricted free agency during the summer of 2016.

If he continues to progress along his current trajectory, he can expect a massive payday.

So what happens in the summer of 2016?

It depends upon how much you think Whiteside will be able to command in free agency.

Whiteside will be in the very same position two summers from now as was Chris Andersen this past summer. Remember what the Heat did with Andersen?

Andersen had been playing for the Heat for two years, each at the minimum salary, and therefore, by rule, carried with him a cap hold equal to the minimum salary for a player with two-years of experience.

Cap holds are placeholder charges against team salary for a team’s own free agents. They are designed to protect against a team using all of its cap space to sign outside free agents and then circling back to its own free agents utilizing their Bird rights, which allow teams to exceed the cap to re-sign their own players.

Cap holds can be released in order to free up the cap space, but it comes at a cost. To release such cap holds, a team can either re-sign the free agent, at which point his cap hold is replaced with his new salary, or renounce him, at which point his team forfeits his Bird rights.

The amount of the cap hold depends upon several factors, including the player’s previous salary and what kind of free agent he is. Cap holds for most players are between 120 percent and 250 percent of their previous salary, but for players on minimum salary contracts are equal to the minimum salary of a player with two years of experience(2) for the upcoming season.

The Heat exploited Andersen’s small cap hold to retain his Early-Bird rights, charging only the two-year minimum amount against the Heat’s salary cap position. They then utilized the rest of its cap space elsewhere, and circled back to him, leveraging his Early-Bird rights to exceed the cap in offering a two-year, $10.4 million deal.

Whiteside, by virtue of playing at the minimum salary next year, will carry a minimal cap hold of $980,431 to be charged against the Heat’s cap position as he enters free agency in the summer of 2016.

So, whatever the Heat has planned for 2016, at a cost of just $980K, they can use up all their cap space to do it, and then, after it is all used up, circle back to Whiteside to give him a contract that exceeds the salary cap (utilizing his Early-Bird rights). The Heat can exceed the salary cap to re-sign him to a two, three or four year deal with annual raises of as much as 7.5 percent of his starting salary.

But there is a giant catch: The Heat can only utilize this strategy to give Whiteside a starting salary equal to 104.5 percent of the NBA’s average salary in the prior season (2015-16), which figures to be roughly $6.3 million. That may not be enough to re-sign him if he continues to perform at this level.

If you believe that Whiteside will command a starting salary of greater than roughly $6.3 million when he becomes an unrestricted free agent in the summer of 2016, then the Heat can’t use his Early-Bird rights to give it to him. Instead, the Heat would need to fit his entire starting salary into its available cap space.

Of course, that would mean that over the next year and a half, Whiteside will have become something of a star in the making. And if that’s true, the Heat would presumably be more than happy to utilize as much of its summer of 2016 cap space as is necessary to grant him the long-term contract he requires.

The Heat figures to have plenty of summer of 2016 cap space with which to work.

The cap is expected to rise from a projected $67.8 million next season to anywhere from $87 million to $90 million the following year (unless a salary cap smoothing mechanism is implemented), as the league’s massive new $24 billion TV rights takes effect.

The Heat therefore figures to have anywhere from $57 million to $60 million of summer of 2016 cap space(3). Re-signing Whiteside to a starting salary of greater than $6.3 million would eat into that cap space, but it would be well worth it if he continues to play like this.

Whiteside will be eligible for a starting salary of up to the maximum, which for him projects to be somewhere between $20 million and $21 million. The final figure will be set when the 2016-17 salary cap is set in the first week of July 2016.

Whiteside won’t be bound to accept anything the Heat offers (as an unrestricted free agent). But this is Miami – land of sun, beaches, half-naked women, no state income taxes, and home to the team that gave him his first shot at glory – not a bad spot to call home for the North Carolina native.

The Heat will also have a financial incentive no other NBA team will. All teams, including the Heat, will only be able to offer Whiteside a contract of up to four years in length. But the Heat, by virtue of having his Early Bird rights, will be able to offer Whiteside annual raises of up to 7.5 percent of his first year salary; all other teams will be limited to 4.5 percent. Depending upon the first year salary he ultimately gets, that could mean an extra $4 million for choosing to stay in Miami.

Whiteside, while not legally bound to the team beyond next season, is therefore very much a part of the Miami Heat’s future!

Notes:

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(1) The second-year salary in such an offer sheet is limited to the standard 4.5 percent raise. The third-year salary can jump considerably — it is allowed to be as high as it would have been had the first-year salary not been limited by this rule to the Non-Taxpayer Mid-Level exception. The salary in the fourth season may increase (or decrease) by up to 4.1 percent of the salary in the third season. The offer sheet can only contain the large jump in the third season if it provides the highest salary allowed in the first two seasons, it is fully guaranteed, and it contains no bonuses of any kind.

(2) The cap hold for a player with one year of experience coming off a minimum salary contract is the minimum salary for a one-year veteran.

(3) Only Chris Bosh ($23.7 million) and Josh McRoberts ($5.8 million) currently have guaranteed contracts that extend through the 2016-17 season.

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