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Goran Dragic to Miami Heat Would be Wonderful But Complicated

February 12th, 2015 Leave a comment Go to comments
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Note: In my effort to keep things organized, I have moved my update to reflect the acquisition of Goran Dragic to a separate post above. 

After LeBron James left last July, Miami Heat president Pat Riley said “I want this team to be as competitive as it’s ever been.” But he spoke of pursuing two simultaneous courses of action: trying to stay competitive for the following two seasons, while maintaining maximum flexibility for the all-important summer of 2016.

Riley acquiesced to those distinct courses of action by re-signing Chris Bosh and honoring his commitment to Josh McRoberts, contracts that weigh on the team’s summer of 2016 flexibility, but refusing to allow anything to increase the burden any further in filling out the roster.

The NBA has struck gold with the frivolous distraction that is professional basketball. The salary cap will explode higher than helium-sucking angels in the years to come, on the strength of an enormous burst in league-wide revenues. After a relatively tempered rise from the current $63 million to a projected $68 million next season, 2016-17 cap projections are expected to reach as high as $90 million (unless a salary cap smoothing mechanism is implemented), as the league’s massive new $24 billion TV rights deal takes effect.

With just the contracts of Bosh ($23.7 million) and McRoberts ($5.8 million) on the books, the Heat figures to have as much as $60 million of summer of 2016 cap space with which to work.

Will Riley again hit the jackpot in 2016, as he did in 2010?

Such a story could be painted: 2016 Hassan Whiteside could play the part of 2010 Dwyane Wade, the in-prime free agent superstar who loves Miami and recruits others to join him. He would be selling the opportunity to play alongside his dominant interior-oriented self and his ideally-suited perimeter-oriented frontcourt teammate Chris Bosh. He would be selling one of the NBA’s few universally appealing cities, an increasingly critical local income tax haven, as well as the organization’s track record of success. 

What is less clear at this point is which (unrestricted) free agents he would be selling it to. Beyond Kevin Durant, all else is speculation. It is possible that many top players could join the pool by accepting their player options or signing one-year contracts at the end of this season. It could wind up being one of the best free agent classes in recent history.

But for all the possibilities, 2016 doesn’t quite have the same feel as did 2010. The competition seems stauncher. The likelihood players leave their current situations seems lower. The risk seems greater. All of that cap space, then, is something of an illusion. It demands a duplication of success on the order of magnitude as during perhaps the best free agent coup in NBA history.

If Riley is not able to deliver upon it for a second time in less than a decade, with a significant portion of the league pursuing a similar approach, there may not be enough qualify players which whom to pick up the pieces. The Heat may essentially be forced to give some of its cap space away to players who don’t necessarily deserve it, in order to meet the league’s minimum team salary requirements. It is a high stakes gamble, from which a loss could be devastating.

In the absence of anything better, it’s an easy gamble to take. But would Riley be wise to forfeit some of his future flexibility if the right piece were to come along?

What if Riley had the opportunity to surround Bosh and Whiteside with a premium quality point guard, one who could not only help the present but also represent a building block for the future? Should he take it?

***

When the Phoenix Suns are the topic of discussion, the conversation always almost instantly shifts to the unorthodox three-point-guard lineup that head coach Jeff Hornacek often employs.

At times, having Eric Bledsoe, Goran Dragic and Isaiah Thomas on the court together has defied expectations. Point guard play is critical to the high-energy, fast-paced system Hornack employs. The trio ranks first, second and third on the team, respectively, in both points and assists. But is it a sustainable long-term model? Is it what Dragic wants for himself?

Those are the questions many seem to be asking about the Suns, who are barely clinging to the Western Conference’s final playoff spot as the All-star break looms.

Thomas came over in a sign-and-trade deal with the Sacramento Kings, inking a cap-friendly but nonetheless questionable four-year, $27 million contract last summer for the guard-heavy Suns. Bledsoe then signed a five-year, $70 million deal, which figures to keep him in Phoenix’s plans for the foreseeable future. These moves have encouraged Dragic’s many suitors around the league to try to pry him away with various trade offers, which the Suns have roundly rejected to this point.

In 2012, Dragic signed an absurdly cap-friendly deal with the Suns, agreeing to a four-year, $30 million contract. He will be a free agent at the end of the 2014-15 season should he choose to opt out of the final year of his deal, a move that is all but certain.

He’ll become an unrestricted free agent, and plenty of teams will line up to offer him a lucrative contract. He’ll be free to accept any one, and while the Suns would be in position to exceed any potential offers he gets, they’ll be powerless to stop him from leaving.

When NBA fans try to list the top point guards in the league, Dragic’s name is rarely thrown into the mix, but he’s an extremely talented point guard — an effective scorer, with range on his shot and touch around the rim, who can distribute the ball and carve up defenses by getting into the lane and wreaking havoc.

Last season, Dragic was seen as the league’s biggest All-Star snub. He was eventually named to the All-NBA third team and won the most improved player award. But he has publicly acknowledged some frustration with his long spells playing off the ball alongside two other point guards, and has said that “every team in the NBA is an option to me [in free agency next summer].”

Such statements strike fear into the hearts of Suns management, and may prompt them to react.

On Wednesday, Suns general manager Ryan McDonough admitted the “roster balance is a little off, and that’s my fault. We are a little too backcourt-heavy, especially in terms of guys who, you know, I think you’d define primarily as scorers in the backcourt. So I think at some point we’ll need to balance that out, try to get a little more size, a little more frontcourt scoring and rebounding.”

Earlier today, president of basketball operations Lon Babby said the team will be very active on the phone lines over the next seven days.

The Suns would presumably prefer to trade Thomas at the deadline but, afraid of losing perhaps its most productive and efficient offensive weapon for nothing, may be forced to consider the possibility of trading Dragic instead. They’ll want a lot in return.

Should the Heat take interest?

If Riley can somehow put together a package to entice the Suns to part with Dragic, he’d be a nice addition.

But trade scenarios are fraught with complications.

The Heat would need to somehow put together a grouping of players with total salaries ranging from $4.9 million to $11.4 million in a straight up trade for Dragic, who is making $7.5 million this season. A baseline scenario that involves Josh McRoberts‘ $5.3 million salary would be a possibility, which would not only meet the legal requirements for a trade but also clear $5.8 million off the books for the summer of 2016, as would a scenario involving Luol Deng, who is earning $9.7 million and has a 15 percent trade kicker that would raise it $10.2 million if he were traded at the trade deadline, for whom the Suns displayed an interest last summer. But would either player be enough for the Suns to even engage in trade discussions with the Heat?

The Heat’s draft pick scenario is equally tenuous.

The Heat still owes a future first round pick to satisfy the terms of the LeBron James sign-and-trade from the summer of 2010 (a structure that probably could have been avoided, and one that haunts the Heat to this day), a pick which the Cavs traded to the Wolves who then traded it to the Sixers. The pick is top 10 protected in 2015 and 2016, and unprotected in 2017. In accordance with the Ted Stepien rule, the earliest first round pick the Heat can therefore trade at the moment is their 2017 first, and they can only trade it on condition that they will have already satisfied the last of their pick obligations to the Sixers by 2015. The trade would technically be phrased as a pick in the “next allowable draft,”which would be two years after the final pick obligation to the Cavs is dealt which, by rule, would be in either 2017, 2018 or 2019. But assuming the Heat make the playoffs this season, the pick obligation to the Sixers would be conveyed in 2015, which in turn would mean that the Suns would receive the Heat’s 2017 first round pick. The Heat could place as many or as few protections on the pick as the two sides would negotiate. But would the Suns even want a draft pick that far out?

Would a potential trade scenario involving Josh McRoberts or Luol Deng, the Heat’s 2017 conditional first round pick (with whatever protections), and perhaps the Heat’s 2015 second round pick, in exchange for Dragic even tempt the Suns?

A possible trade poses equally difficult questions for the Heat.

Would it even be worth it for the Heat to throw in a 2017 first-rounder for a player who will become an unrestricted free agent this summer?

It’s a risk. If the Heat trades away its 2017 pick, the next first round pick it could trade would be in 2019 (until after the 2017 draft, at which point the Heat would become eligible to trade its 2018 pick). So, however you feel now about the Heat’s lack of assets, you’d need to plan to feel that way for four more years.

But here’s the thing: the Heat projects to be capped out this summer. Unless a significant roster shake-up occurs, the Heat won’t be able to offer an outside free agent anything more than the $5.5 full million mid-level exception. The first round pick can therefore be viewed as the cost of acquiring Dragic’s Bird rights, likely the only way they’d have a shot at signing him for the long-term.

It would also give the Heat a significant edge in re-signing Dragic. Any team that acquires his Bird rights could give him a salary up to the max without regard to the salary cap (others would need to use cap space, which thins out the number of potential suitors), as well as a longer term (5 years vs. 4 otherwise) and higher annual raises (7.5 percent of the first year salary, rather than 4.5 percent otherwise) than any other team could offer.

Would he be willing to sign with the Heat long-term?

It’s a risk. One the Heat would have no way to mitigate. The Suns can allow the Heat to speak with Dragic as part of ongoing trade discussions, but Dragic is not eligible to sign an extension (either in conjunction with a trade or thereafter) nor are the Heat, by the letter of the rule, technically allowed to even broach the subject of a possible future contract. The NBA considers such discussions to be among the most severe violations a team can commit. It would be naive to think such conversations do not happen anyway. But the point is clear: neither Dragic nor the Heat could make any formal commitment to each other.

How much would the Heat be willing to spend to sign him long-term?

Dragic will command a hefty deal next summer. It may take more than you think.

Our minds need to stay flexible to the realities of the NBA of today: A dollar today is simply not the same as a dollar in the future. Not with the salary cap projected to jump 40 percent over the next two seasons, and by maybe as much as 60 percent when you factor in a potential lockout during the summer of 2017.

Dragic will undoubtedly be cognizant of that fact. He will certainly push to mitigate the potential rise in the salary cap for seasons during which he will already be under contract by locking in as much as he can this summer(1). His maximum starting salary for this summer projects out to an estimated $19 million. That may seem crazy until you consider that for a player in the same position as Dragic, a maximum salary figures be around $25 million the following summer.

If the Heat were to acquire Dragic’s Bird rights, a $19 million starting salary equates to an estimated $109 million over five years. All others would be able to offer $81 million over four.

If you are not prepared to offer at least $81 million over four years, Dragic could potentially get a higher offer elsewhere. Is that, or whatever amount you are thinking, a wise investment for a player who will be 29 years old at the start of the contract? By the end of a four year deal, he’ll be 32. If it’s five years, he’ll be 33. This isn’t exactly a young player.

How much would re-signing Dragic reduce the Heat’s flexibility for the summer of 2016?

The Heat cannot make any moves that will compromise the possibility of retaining Whiteside. Whiteside is still a long way from becoming a veritable star, but he clearly has the potential to become one and the Heat would be foolish to compromise its flexibility to spend whatever it takes to retain him. So, with that in mind, let’s do the math that Riley would surely do as part of his thought process.

Let’s assume a 2016-17 salary cap at $90 million. At those levels, maximum contracts would be as follows: $21 million for a player with less than seven years of service, $25 million for a player with between seven and nine years of service, and $29 million for a 10+ year veteran.

So take $90 million. To it, subtract: (i) $23.7 million for Bosh, (ii) $5.8 million for McRoberts, (iii) however much think it will take to retain Whiteside (who would qualify for a max of $21 million in this scenario)(2), , (iv) however much of the $19 million you will have given Dragic the year before (after incorporating his annual raise, if any), and (iv) eight roster charges, at $4.3 million total. If you will have traded away McRoberts in the Dragic deal, then add back $5.2 million. That’s how much cap space you’ll have left(3).

That leaves, at the very least, $15 million of cap space for the Heat if they retain McRoberts and $20 million without him, assuming the most conservative of scenarios, in which Dragic and Whiteside both command the max. Could you get it up to $29 million – enough for, say, Kevin Durant? Perhaps by giving Dragic a contract with a maximum starting salary that actually declines for the 2016 season before rising back up again? Perhaps by asking Whiteside to take slightly less? If Durant isn’t a possibility, who else would you target? How much would you allocate to Wade?

How does the unprecedented uncertainly surrounding future cap levels, including the prospect of potential salary cap smoothing(4), play into your thinking?

These are all the questions that need to be answered in conjunction with a pursuit of Goran Dragic.

***

To this point, the Suns have been dead-set on re-signing Dragic to a new contract. If that were to change, the Suns would surely demand a big haul in return, which isn’t something the Heat are in position to offer. But if they are so willing, the Heat would certainly be wise to engage.

Notes:

(1) Dragic could also choose to sign a one-year contract this summer, and become an unrestricted free agent in the summer of 2016, knowing that many teams will have saved up plenty of cap space and missed out on all of their potential superstar acquisitions. But, then at 30 years old, it would be a substantial risk.

(2) If you feel Hassan Whiteside will command a first year salary of $6.3 million or less, then this number would instead be replaced by his $980,431 cap hold.

(3) The Heat would also have a 2016 first round pick with which to deal, as well as the team option on Shabazz Napier and the non-guarantee minimum salary contract of James Ennis. 

(4) If the league were to agree to a salary cap smoothing mechanism, the salary cap could potentially drop significantly. That, however, is unlikely (at least in my perspective).

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