Getting Creative With Dwyane Wade

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I have a request. I try to write posts which I believe are unique, in depth and insightful. I hope you agree. I therefore ask that you please not simply copy my work without providing proper credit. It feels rather awful to see my work being exploited. If just you ask, I am more than willing to help out anyone and everyone in any way I can.

Dwyane Wade has long proven that winning NBA titles with the only professional organization he has ever known – the Miami Heat — is his primary motivation in playing the sport he loves so much.

His actions for the Heat organization over the course of his brilliant thirteen-year career have served as that proof. He has recruited for it. He has surrendered the spotlight (during the prime of his career) for it. He has sacrificed huge salary dollars — $25 million, to be exact — for it.

Wade may well go down in history as having been perhaps the Heat’s best ever player, despite having never been its highest paid player. He has guided the Heat to five NBA finals appearances and three NBA titles, and has done so while comporting himself with class and dignity.

The future Hall of Fame shooting guard has talked about playing at least three more years. He is likely to want that last large, multi-year contract to close out his career which he so rightly deserves for all that he’s done. But would he be willing to compromise on his desire, if it meant a legitimate shot to pad his title count?

If so, how big of a sacrifice would he be willing to make? And could, or would, the Heat return the favor?

If Wade were willing to make a sizable leap of faith, the Heat could have the tool its needs to manipulate the salary cap to an extreme advantage – maximizing cap space for BOTH this summer AND next summer, all while paying Wade a cumulative total that likely meets or exceeds his current desire.

Let’s review how. 

In 1983, the NBA implemented the first-ever modern “salary cap.” The theory was that it would create more parity amongst its member teams. Only about six or so of the league’s 23 teams had traditionally dominated the free agent bidding. The cap would allow many more to bid for available free agents.

The salary cap, which was to take effect for the 1984-85 season, would be set at an amount equal to the greater of: (i) a predetermined minimum team salary and (ii) a calculated figure equal to 53 percent of the league’s projected gross revenues divided by the 23 teams in the league.

The cap, however, would not be a hard cap on spending. Instead, it would contain a few exceptions that would allow teams to exceed it under certain circumstances. The most famous exception was one which allowed teams to exceed the cap in order to re-sign their own players.

The exception would be officially termed the “Qualifying Veteran Free Agent” exception, but would be come to be known colloquially as the “Larry Bird exception” (and any player who qualified for the exception would come be known as having “Bird rights”), presumably because the exception was negotiated for with Boston Celtics star player Larry Bird’s upcoming free agency in mind.

The exception still exists today.

However, creative accounting would open several loopholes in its implementation.

One major flaw was that simply by manipulating the timing of the signing of free agents, teams could circumvent the cap rules in unintended ways. Teams with cap room could sign all the free agents they want (up to the salary cap) and THEN exceed the cap to re-sign its own free agents using the Bird exception.

This flaw was addressed with the introduction of “free agent amounts” (or more commonly known as “cap holds”). Cap holds are temporary placeholder charges against team salary for a team’s own free agents. They are designed to protect against a team from using all of its cap space to sign outside free agents and then circling back to its own free agents to exceed the cap in signing them to contracts that utilize their Bird rights. A team’s ability to do this is now very limited — only to the extent a player’s first year salary would exceed his cap hold.

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 players on minimum salary contracts are equal to the minimum salary for two-year veterans for the upcoming season, but for most other players are generally between 120 percent and 250 percent of their previous salary.

The cap holds can be released in order to free up the associated 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.

A second major flaw was that teams could sign players to excessively small one-year contracts, with the promise to give them substantial raises that utilize their Bird rights the following season. This flaw was exposed when in 1994-95, Chris Dudley of the Portland Trailblazers and Danny Manning of the Phoenix Suns both signed one-year deals with their respective teams at small salaries, and the next year, Bird rights in hand, signed new contracts for far in excess of the cap.

This concept was addressed in the 1995 Collective Bargaining Agreement, with the implementation of a three-year waiting period before a player could attain his full Bird rights.

Bird rights were (and still are) bifurcated into three forms:

Non-Bird: players who had been with their prior teams for one year could only utilize the exception to sign for up to 120 percent of their previous salary,

Early-Bird: players who had been with their prior teams for two years (or if more than one team, changed teams only by means of a trade) could only utilize the exception to sign for up to the greater of 175 percent of their previous salary or 108 percent (104.5 percent today) of the average player salary in the previous season, and

Full Bird: players who had been with their prior teams for at least three years (or if more than one team, changed teams only by means of a trade) could utilize the exception to sign for any amount.

If a player is renounced by his prior team, the player can only be re-signed with cap room or an available exception other than the Bird rights which were just sacrificed. At the conclusion of the subsequent contract, the appropriate level of Bird rights would be restored (when including the addition of the just-completed year).

The rules regarding Bird rights remain in effect today, largely as detailed in 1995, with only one exception — the “any amount” to which a player can be signed after accruing three years of service with his former team was limited to the maximum salary, when maximum salaries were introduced as part of the 1999 Collective Bargaining Agreement.

“Bird rights” represent the most widely used exception to the salary cap still to this day.

But are still loopholes which can be exploited, and one could potentially help the Heat, and Wade, tremendously.

The Heat could potentially sign Wade to a single-season $1.6 million minimum-salary contract this summer — which would allow the team to direct all of its cap space elsewhere — and return the favor by leveraging his Bird rights to give him up to a potential $35.4 million maximum salary (based on current cap projections of $107 million for the 2017-18 NBA season) next summer.

Here’s how it would work:

  1. The Heat would renounce Wade this summer. His $30 million cap hold would be released. His Bird rights for this summer would simultaneously be surrendered.
  2. The Heat would allocate the full $40 – $45 million of cap space elsewhere and then, when it’s all used up, circle back to Wade to give him a one-year $1.6 million minimum salary contract (utilizing the minimum salary exception). The contract would contain a $1.6 million player option for a second season as a small insurance policy against injury, which he wouldn’t intend to exercise.
  3. After playing out the season, Wade would automatically have his full Bird rights restored next summer (having played for the Heat for at least three consecutive years).
  4. The Heat would utilize those Bird rights to sign him to a new contract in the summer of 2017, one which contains a starting salary of up to the $35.4 million projected maximum salary, annual raises of up to 7.5 percent of his first-year salary, and a term of up to four years in length. That’s up to $157.5 million, on top of the $1.6 million he’d be making next season.

To think the Heat would dole out $159.1 million to Wade over the next five years is ludicrous. The point, however, is this: in exchange for one year at the minimum salary, the Heat would be able to return the favor, within the rules of the current Collective Bargaining Agreement, by offering anything up to that amount. However much they’d actually choose to give would be a negotiation between the two parties.

But here’s the best part: If Wade were to play out the coming season at the $1.6 million minimum salary, his cap hold as a free agent in the summer of 2017 (before he signs his up to maximum contract) would be the minimum salary for a two-year veteran that summer: $1.0 million.

What does that mean?

The structure would allow the Heat substantial benefits f or each of the next two summers:

  • for this summer, it could direct all of its cap space elsewhere and then circle back to Wade after all of its cap space is used up to give him his $1.6 million minimum salary contract, and
  • (ii) for next summer, it could direct all of its cap space beyond Wade’s minimal $1.0 million cap hold elsewhere, and then circle back to Wade after all of the rest of its cap space is used up to give him his up to maximum-salary contract.

But there’s a catch: The Heat won’t technically be able to promise Wade that second contract next summer. Any such pre-arranged deal would be illegal. But nothing prevents Wade from reading between the lines. If he were to put his trust in the organization that drafted him all the way back in 2003, he could dramatically alter his chances at another title.

Of course, it would be perfectly reasonable to conclude that Wade would be unwilling to take such a risk.

And even if he were, it’s unclear for whom he might be willing to do so. Perhaps there’s only one player for whom he would consider it. Perhaps that man is Kevin Durant.

If Wade were to consider such a possibility, with a small concession from Whiteside, could potentially become mathematically possible for the Heat to sign Durant and retain both Whiteside and Wade.

So the question becomes: Would Wade be willing to sign a single-season minimum salary contract if it meant the Heat could retain Hassan Whiteside and sign Kevin Durant, and if the Heat were willing to return the favor by signing for anything up to a full maximum contract the following summer?

Only time will tell.

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