Miami Heat Trades Chris Andersen, Adds Brian Roberts In Tax-Savings Deal

The Miami Heat has traded big man Chris Andersen and two future second-round draft picks and received back point guard Brian Roberts, as part of a three-team trade that includes the Memphis Grizzlies and Charlotte Hornets.

Shooting guard Courtney Lee will go from the Grizzlies to the Hornets, with small forward P.J. Hairston heading from Charlotte to Memphis, Andersen from Miami to Memphis, and Roberts from the Hornets to the Heat.

The Grizzlies will also receive four second-round draft picks in the trade, with two coming from the Hornets (Charlotte’s 2018, and one it got from Brooklyn in 2019) and two from the Heat.

The first of the two second-round picks the Heat will surrender will be in either 2017 or 2018. If the Heat’s 2017 pick lands in the top 40 (i.e., one of the first 10 picks of the second round), it will be conveyed to the Grizzlies and the Heat’s 2018 pick will be sent to the Atlanta Hawks as part of the James Ennis trade. If the 2017 pick does not land in the top 40, it will be conveyed to the Hawks, and the Grizzlies will receive the Heat’s 2018 pick.

The second of the two second-round picks the Heat will surrender will be the 2019 pick acquired from the Boston Celtics as part of the Zoran Dragic trade. That pick, however, is of limited value. It is top-55 protected, meaning the Heat will only get it, and thus will only be obligated to convey it, if the Celtics finish the 2018-19 regular season with one of the five best records in the NBA.

The financially-motivated trade will save the Heat $6.2 million — $719,226 in payroll savings and $5.5 million in forgone luxury tax payments.

The deal leaves the Heat $3.5 million above the NBA’s $84.74 million tax threshold. At that level, Miami is facing a projected tax bill of $8.7 million. 

Adding that to the $86.0 million in salary obligations to the team’s current players, the $4.0 in salary paid to former players prior to their trades (Andersen, Shabazz Napier, Mario Chalmers and James Ennis), and the $2.7 million in cash the Heat has already surrendered in trade, yields total projected payroll and related obligations of $101.3 million.

The most the Heat has ever paid was $102.8 million in 2013-14.

The Heat will likely pursue additional cost-reducing trades prior to the NBA’s Feb. 18 trade deadline, with an eye toward further reducing or possibly even eliminating its tax bill.

Among other possible scenarios, it could look to trade the newly-acquired Roberts as well as Jarnell Stokes, neither of whom figures to materially contribute to the team.

Trading both Roberts and Stokes (without taking back any salary in return) would allow the Heat to fall below the tax threshold, as well as afford it the flexibility to sign up to two additional players (though it would need to wait at least three weeks to add a player, longer if it has in mind to add two players, in order to again avoid crossing the tax threshold).

Both players have relatively little salary remaining to be paid on their expiring contracts – Roberts will have $924,657 left on his $2.9 million salary at the deadline, while Stokes will have just $273,401 left on his $845,059 salary (along with a fully non-guaranteed $980,431 salary for 2016-17).

There are nine NBA teams that can legally acquire Roberts without sending back salary in return (the Cleveland Cavaliers, Denver Nuggets, Golden State Warriors, Milwaukee Bucks, Minnesota Timberwolves, Philadelphia 76ers, Portland Trail Blazers, Utah Jazz and Washington Wizards), and 12 teams that can legally acquire Stokes without sending back salary (eight of the same nine as for Roberts, excluding the Wizards, plus the Brooklyn Nets, Los Angeles Clippers, New Orleans Pelicans, and Oklahoma City Thunder).

The most likely trade partners could be the Blazers, Sixers and Jazz, who each currently have a team salary below the league-mandated $63 million minimum. Portland, Philadelphia and Utah are $13.6 million, $2.9 million and $637,164 below, respectively.

Teams which finish the season with a team salary below the minimum are surcharged for their shortfall, with the money distributed among the players on that team. “Team salary” for the purposes of the minimum is calculated based upon the sum of all salaries that underlie each team’s current and previously terminated contracts as of the last day of the regular season, independent of how much the team may have actually paid out on those contracts. Teams below the minimum can therefore save a great deal of money by trading for a player at the trade deadline. By doing so, the full value of the contract for which they will have traded would count toward the minimum team salary calculation, thus reducing the shortfall, even though more than two-thirds of it will have been paid by the team which traded the player.

The Heat, however, has increasingly few assets with which to entice a potential trade partner. It does not currently have any first-round picks available for trade (no matter how far into future), just two second-round picks (all the way out in 2021 and 2022) and just $721,300 of available cash.

That amount of cash should be enough to offload at least Stokes, as it offers a potential trade partner not only the funds to pay his remaining salary obligations but also a profit of up to $447,899. A team with an open roster spot could essentially just trade for him, waive him instantly thereafter, and pocket the profit.

It is difficult to project a potential trade partner for Roberts, but perhaps a team such as the Blazers would take an interest as additional point guard depth for its playoff push. The Blazers utilize shooting guard C.J. McCollum in a backup role to Damian Lillard as opposed to the only other true point guard on the roster, Tim Frazier, who only plays meaningful minutes when Lillard doesn’t play. Even if the Heat were to offer essentially nothing in return, the Blazers would actually save more than $1.9 million by taking him. Miami could throw in its 2021 second-round pick, if necessary, to sweeten the deal.

If the Heat is unable to complete a tax-reducing trade by the trade deadline, it could still potentially leverage the cap positions of the Blazers, Sixers and Jazz at the end of the regular season, in a perhaps less evident way.

Much as with trading for a player at the deadline, teams below the minimum can save a great deal of money by claiming players off waivers who have been released by their teams late in the regular season. By doing so, the full value of the contract they will have claimed would count toward the minimum team salary calculation, thus reducing the shortfall, even though virtually all of it will have been paid by the team which released the player.

Miami will surely monitor the salary cap situations of the three after the trade deadline, as it evaluates whether to take such an approach.

If the Heat is able to avoid the tax this season (and assuming it will avoid the tax next season as well, which is all but certain), the repeater tax – which triggers if a team pays the tax for a fourth time in five years – will not be an issue in Miami until at least the 2020-21 season.

But even if it does pay the tax this season, the repeater tax still won’t be an issue for the Heat until at least the 2019-20 season, so it isn’t necessarily as big an issue as one might think, particularly with the Heat’s total salary obligations now at a more manageable level.

Nonetheless, the trade does produce significant savings for the Heat at the cost of essentially one future second-round draft pick, and puts it in position to think about possibilities for dropping below the tax.

The trade also creates a $2.15 million trade exception for the Heat, which will now have trade exceptions of $2.15 million, $2.13 million, $1.7 million and $1.3 million. Trade exceptions can be used for up to a year, to acquire player(s) in trade without sending back salary. They can’t, however, be combined, and will be lost if the Heat elects to utilize cap space as it pursues its free agency plans next summer.

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