How New CBA Changes Will Impact the Miami Heat

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When the NBA’s new collective bargaining agreement becomes official, benefits should abound for both players and teams. Minimum salaries, rookie-scale contracts, the mid-level exception, the bi-annual exceptions, and maximum salaries are all increasing, which should placate most players. Various rules will be implemented to entice players to remain with their existing teams, which should placate most teams.

(For full details on all the changes in the new CBA, clink this link.)

But all those changes do come at a consequence – it will be more difficult for teams to rebuild through free agency, teams like the Miami Heat.

The Heat is, as president Pat Riley declared, a rebuilding team.

But Miami has compiled a solid core of multi-talented youngsters — in guards Tyler Johnson and Josh Richardson, forward Justise Winslow, and center Hassan Whiteside — from which to work. And it has a strong lead guard in Goran Dragic to spearhead the charge.

In his first season, Winslow showed promise as a defender. But his offense at times proved to be so limited that defenders constantly sagged away from him, often effectively relegating the Heat to playing four-on-five basketball. If he improves his shooting, he could quickly become one of the Heat’s most vital players. If he doesn’t, his future as a starter (or even on this team) could quickly be jeopardized.

Imagine, for a moment, a Dragic – Johnson – Richardson – Whiteside four-man unit.

In an offense system designed to capitalize upon it, what was once a shocking inability to space the floor – predicated largely on the always imperfect backcourt tandem of Dragic and Wade — could now be considered a strength. And depending upon where Richardson – who led the entire NBA in three-point shooting percentage after the All-Star Break, at 53 percent – and Johnson – who shot 41 percent on three-pointers last season (excluding heaves), despite often being miscast on offense as a point guard, which has continued on this season at full detriment to his development — level off with their shooting, a potentially big one at that.

That type of shooting could provide Whiteside — now a franchise cornerstone with his four-year, $96.4 million contract secured – the much-coveted floor-spacing into which to maneuver.

At 7-feet, 265-pounds, and with a ridiculous 7-foot-7-inch wingspan, Whiteside alters the geometry of the game. He’s not at all a back-to-the-basket big — and the Heat is doing the offense a huge disservice by treating him as such — but he can a huge initiator of offense, whether or not he ever even touches the ball. He hasn’t yet mastered the art of either the pick or the roll, but he has the tools to become of the best roll men in the NBA. And, even if not, his mere presence in the paint sucks in defenses with more force than a Dyson. That yields tons of garbage points and offensive rebounds for him, and open shots for others.

This Heat team may not be showing it on the court thus far this season, but it has the potential to be fast in transition and to capitalize upon a type of floor spacing in the half court it hasn’t had in quite some time.

Imagine what Dragic, a relentless attacker of the rim, and Whiteside, a dominant interior presence, could do in an offense that spaced the floor around them. Is it so preposterous to envision a constant stream of Whiteside pick-and-rolls, and swished corner three-pointers when defenders rotate away from Heat shooters to try to stop it?

Is it so preposterous to imagine that with Whiteside down low; Richardson and Johnson to space the floor around him; and Dragic’s speed and ability to break down a defense; that the team could develop into be a force with which to be reckoned, if they’re able to add a star player or two — perhaps a power forward to replace the unfortunately departed Chris Bosh, a small forward that would allow the Heat to stagger Johnson and Richardson, or both?

The organization has maneuvered around various salary cap issues in order to maximize its free agency options to achieve that goal. The summer of 2017 will be a particular emphasis, with the Heat able to begin the process of removing the salary of Bosh from its cap sheet on or after Feb. 9, 2017 and the salary of Johnson set to soar the season thereafter.

(For full details on Bosh’s contract and its impact on the Heat’s salary cap situation, including potential cap relief and a possible return of his salary to the Heat’s cap sheet in the seasons thereafter, click this link.)

But the new agreement, when ratified, will have several implications for the Heat in pursuit of its desired summer of 2017 rebuild. 

Among the more direct impacts, several player salaries will increase:

  • Josh Richardson’s salary for 2017-18 will increase from $1,014,746 to $1,471,382. It will continue to be non-guaranteed through Jun. 30, 2017, and fully so thereafter.
  • Rodney McGruder’s salary for 2017-18 will increase from $905,249 to $1,312,611. It will continue to be non-guaranteed through Aug. 1, 2017, then $452,625 guaranteed through the first regular season game, then fully so on Jan. 10, 2018.
  • Willie Reed’s player option for 2017-18 will increase from $1,087,745 to $1,577,230.
  • Justise Winslow’s 2017-18 salary will increase 15 percent, from $2,705,040 to $3,110,796. His 2018-19 salary, should the Heat choose to exercise its team option by Oct. 31, 2017, will increase 30 percent, from $3,448,926 to $4,483,604. The increases, however, will not impact the Heat’s cap sheet.

Certain cap holds will also increase:

  • Luke Babbitt’s $1,014,746 cap hold will increase to $1,471,382.
  • Roster charges (for carrying fewer than 12 players on the roster during the summer) will also increase, from $562,493 to $815,615.
  • The cap hold (and subsequent salary) for the Heat’s 2017 first-round draft pick will increase (see below for details).

After accounting for all of these changes, Miami currently projects to have as much as $14 million in available cap space based upon the league’s current $103 million cap projection. With Bosh relief, the total will grow to $39 million. It will grow further, to $41 million if Dion Waiters were to decline his player option ($3.0 million), to $42 million if Reed were to do the same ($1.6 million), to $46 million if the Heat were to waive and stretch the $6.0 million salary of Josh McRoberts or $47 million if the Heat were to trade him.

From that, the cap room required by the Heat’s first-round draft pick (assuming Miami keeps it) would need to be subtracted.

The cap hit for all unsigned 2017 first-round draft picks will increase 38 percent from where they were under the current agreement. The actual salaries will increase 15 percent in 2017-18, 31 percent in 2018-19, and 46 percent in both 2019-20 and 2020-21.

The cap hit the Heat would incur depends upon where it drafts. At #1 overall, it would be $7.0 million. At #7 (Miami has the seventh worst record in the NBA today), it would be $3.8 million. At #14 (the latest pick in the lottery), it would be $2.5 million. The cap hits would equal the salaries, assuming the player receives 120 percent of his scale amount.

What does it all mean?

If we assume (i) the Heat will get Bosh cap relief and (ii) the Heat will end up with, say, the #7 pick in the draft as a rough guideline: Miami would have between $36 million and $44 million (depending upon the assumptions for McRoberts, Waiters and Reed) of available cap space to pursue potential free agents next summer.

That’s still a hefty sum, and several star level players will be available.

Among those who will be available: point guards Stephen Curry, Chris Paul and Kyle Lowry; no star shooting guards, but the Heat with Johnson and Richardson is stocked with them; small forwards Kevin Durant, Gordon Hayward and Danilo Gallinari; and power forwards Blake Griffin, Serge Ibaka and Paul Millsap, among others.

You could transform the rebuilding Heat into a title-contender with one or two of those players surrounding the Heat’s youthful core, and the Heat has the money to do it.

The problem for Miami is that it will become incrementally more difficult to acquire top-level talent with that money in the new CBA.

Why? A few reasons:

First, maximum salaries are increasing.

Under the current agreement, there are three maximum salary tiers in the NBA: (i) players with 0-6 years of service can receive 25 percent of the salary cap, (ii) players with 7-9 years of service can receive 30 percent of the salary cap, and (iii) players with 10+ years of service can receive 35 percent of the salary cap.

This basic rule is not changing in the current agreement, but the calculation of those maximum salaries will change. Whereas before those max salaries weren’t exactly calculated by taking the salary cap number and multiplying by the above-mentioned percentages, now they will be. Much easier to calculate. But also a 6-7 percent boost.

Max salary projections for 2017-18 will consequently increase from $24 million to $26 million for a 0-6 year veteran, from $29 million to $31 million for a 7-9 year veteran, and from $34 million to $36 million for a 10+ year veteran, respectively.

This rule would decrease the Heat’s remaining cap space if it were to sign a max-salary player.

***

Second, new “Designated Veteran Player” rules will make it increasingly difficult to pry top-level players from their prior teams.

The newly-created exception will allow certain players, those who qualify, to sign five-year contracts that start at up to the Tier 3 max (35 percent of the salary cap), even though they only meet the league’s tenure-based eligibility requirements for a Tier 2 max (30 percent of the salary cap). The difference? About $6 million per season!

To qualify, a player must achieve certain criteria. Among them:

  • He must be entering his eighth or ninth season in the NBA (in the case of extensions) or have just completed his eighth or ninth season in the NBA (in the case of free agent signings).
  • He must be a free agent (in the case of a free agent signing) or have one or two years left on your contract (in the case of extensions). And if it is an extension, three years have to have passed since you signed your original contract.
  • He must meet one of the performance criteria. Included on the list: Making one of the three All NBA teams in either the previous season or the prior two, winning Defensive Player of the Year in either the previous season or the prior two, or winning MVP in one of the previous three seasons.
  • He must never have changed teams as a free agent, and he could only have been traded during his first four years in the league.

The last criterion is particularly daunting. It will put the Heat at a major financial disadvantage in competing for any free agents who qualify.

Among those would-be free agents in the summer of 2017, Stephen Curry already qualifies. A potential departure from Golden State is now nearly impossible to believe. With the Warriors, he will be eligible to sign a five-year deal with a projected starting salary of $36 million and a total payout of $209 million. With any other team, he would only be eligible for four years, with a projected starting salary of $31 million and a total payout of $133 million. Curry is about to turn 29 years old; there’s no way he’s leaving that extra $76 million on the table!

Blake Griffin and Gordon Hayward could also qualify for the pay bump if they make the All NBA First, Second or Third team this season.

This one rule alone could (if not necessarily will) knock out most of the players on the top-level talent list.

***

Third, the new Over-38 rules will greatly enhance older players’ desire to return to their prior teams.

The Over-36 Rule discourages this type of manipulation of the salary cap rules. The rule kicks in when a player signs, extends or renegotiates a contract that is four or more years in length, and the player will be older than 36-years-old when at least one of those seasons begins. The presumption is that those seasons are likely to come after the player has already retired. Therefore, upon execution of the contract, his salary for the seasons in which he is over 36-years-old at the start are automatically reallocated for salary cap purposes towards the earlier seasons of his contract, in proportion to the salary in each of those seasons. As the player proves the presumption wrong and continues playing, his cumulative remaining salary cap charge is then averaged over the remaining term of the contract at the start of each subsequent season.

The rule will remain the same in the new deal, but will only start to kick in once a player turns 38 years old. The rule change will greatly benefit aging stars such as Chris Paul and LeBron James, who were part of the NBPA’s executive committee, if they target max deals in the future.

Paul, for example, would have been limited to a four-year max deal paying out approximately $162 million this summer under the current Over-36 rules. With the shift to Over-38, he will now be eligible for a five-year max deal worth approximately $209 million. That’s an extra $48 million!

***

These rule changes could potentially further entice Stephen Curry, Blake Griffin, Gordon Hayward, Chris Paul and others not to pursue free agency. The list of available top-tier players could therefore be rather small for the Heat this summer, and the chance of getting one (and particularly two, with the changes in the max salary and roster charge rules) even smaller.

Heat president Pat Riley and salary cap expert Andy Elisburg are surely considering all of this right now, and may as a result be altering their plans – to incorporate things like trade scenarios.

The problem with any potential trade scenarios, though, is that despite what could become more than $16 million of cap space in February if the Heat gets Bosh relief, it doesn’t have many assets to entice a potential trade partner to give up a key asset of its own.

The Heat currently has just one first-round pick (2023), two second-round picks (2022 and 2023) and limited cash ($3.1 million out; $3.5 million in) available for outright trade.

Miami owes its 2018 first-round pick (top-seven protected in 2018, unprotected in 2019) and its 2021 first-round pick (unprotected) to the Phoenix Suns, making it currently unable to trade any of its first-rounders in not only those seasons but also in 2017, 2019, 2020 and 2022 (teams can’t trade all of their first-round picks in consecutive future seasons). The Heat’s nearest first-round pick available for trade is therefore in 2023. And since teams can only trade draft picks up to seven years into the future, the 2023 pick would be the only one available for trade.

While the Heat can’t trade away its 2017 first, it can trade away the value inherent in the pick, by legally circumventing the rules in a couple of different ways:

  • The Heat can swap its 2017 first-round pick for a 2017 first-round pick from a trade partner.
  • The Heat can use its 2017 first-round pick to select a player in the draft at the behest of a potential trade partner, and then complete the trade after the selection is made. This type of maneuver would be applicable to trades completed after the season is over.

While the second scenario wouldn’t apply in season, with the Heat’s 2017 first-rounder increasing hugely in value as the team continues to struggle, the first scenario could represent tremendous value to almost any potential trade partner (swapping picks, of course, would only be valuable to those trade partners who project to have a less favorable draft pick). Correspondingly, it would represent huge risk for the Heat.

As far as player assets, all Heat players are currently tradeable other than Tyler Johnson, for whom the Heat faces a host of restrictions.

Johnson: (i) can’t be traded until Jan. 31, 2017, (ii) can’t be traded without his consent until Jul. 10, 2017, (iii) can’t be traded to the Brooklyn Nets under any circumstances until Jul. 10, 2017, (iv) has a 15 percent trade bonus, and (v) has a contract which explodes higher, to $19.2 million, for each of the last two seasons.

Which means that if the Heat is to leverage a player as the asset to entice a potential partner in trade, that player is likely to be Dragic if an established veteran is required, or Richardson or Winlsow if a youngster with promise is required.

***

The question for the Heat then becomes: How do you start to rebuild if you’re probably not going to get superstar-level talent?

Do you sell off pieces in exchange for draft considerations, and build through the draft? Even if it sacrifices prime Dragic and/or Whiteside years?

Do you risk your 2017 first-round pick, your most valuable asset, to swing for a blockbuster trade of a player perhaps a step below All-NBA-level talent?

Do you try to improve through trade, but without utilizing your 2017 first-round pick? What trade could you even make that would simultaneously be significant enough to produce a material difference and reasonable enough to believe it could actually happen? How would you both replace the value of the player you’ve traded AND improve (within the confines of cap rules)?

Do you build through free agency?

The free agency route would seem the most likely at this point.

One player to watch out for: Serge Ibaka.

Ibaka has been given a more prominent role this season upon his trade from the Oklahoma City Thunder to the Orlando Magic. He has taken well to it thus far, posting a near career-high in scoring (14.8 points per game) on impressive efficiency, as game ventures further out to the perimeter. Ibaka has become a rare, truly defensively-capable stretch-four, averaging career highs in three-pointers made (1.4 per game), attempted (3.5 per game) and percentage (40.4 percent).

Imagine the type of floor spacing the Heat could generate around a Dragic-Whiteside pick and roll, with Johnson, Richardson and Ibaka to space the floor around it.

Imagine how imposing an Ibaka-Whiteside front line could be, allowing the Heat’s potentially undersized and out-muscled (assuming Dragic, Johnson and Richardson) perimeter defenders to push up closer to their defensive assignments.

Would it, along with a potentially high first-round draft pick this summer, be enough to vault the Heat into the realm of title contention?

Perhaps not. That was always going to be exceedingly difficult, and now more-so with the changes in the new CBA to come.

Could it form the makings of a top-tier playoff team (with still some cap room to spare)?

Perhaps.

***

While the Heat’s salary cap position would not changed significantly with the implementation of the new CBA, what was always an unlikely scenario – the concept of adding a high first-round pick AND potentially on or even two max salary players – now becomes even more unlikely.

Expect the Heat organization to react accordingly.

4 Responses

  1. heat fan says:

    Great analysis. So there is no amensty clause in this CBA?

  2. Albert says:

    @heat fan
    Nope. No amnesty clause in the new CBA.

  3. Bo215 says:

    Great article. Thanks Albert!

  4. Waders says:

    Great insight. Great article.
    One question however, accordingly how?

    “Expect Heat organization to act accordingly. “

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