A Fun (But Serious) Look into the Golden State Warriors Future

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Update (7/3/17):

Each of the Golden State Warriors’ critical free agents this summer have agreed to return: Stephen Curry will sign the 5-year, $201M supermax contract for which he qualifies; Andre Iguodala will sign a three-year, $48M contract; and that Shaun Livingston will sign a three-year, $24M contract (with a $2M guaranteed third season). That latter two contracts were made possible by Kevin Durant agreeing to accept the $31.8M starting salary that his Non-Bird rights would allow, about $2.8M less than the $34.7M max salary that he obviously deserves. But, in an unexpected development, he’ll apparently sacrifice more than just that.

Durant is reportedly taking $26.0M. That’s $8.7M less than the max which he rightly deserves, and $5.8M less than he had to take for the Warriors to keep Iguodala and Livingston. Taking that extra $5.8M reduction will end up saving owner Joe Lacob around $30M in salary and luxury taxes this season.

Durant’s sacrifice won’t cost him any long-term money. If he declines his player option next summer, as is all but certain, he’ll be an Early Bird free agent with two primary options (as detailed in the post below):

  • He can leverage his Early-Bird rights to lock in a raise of up to 75% (not over the max salary). For Durant, that’s guaranteed to be the max. At a $102M projected salary cap, it comes to $35.7M. Early Bird contracts can only be signed for between 2-4 years. So… that’s up to 4-years, $160M.
  • He can renounce his Early-Bird rights in favor Non-Bird rights. He might do that in order to be able to sign a one-year contract again next summer, which would qualify him for a full five-year max deal in the summer of 2019. But it comes at a cost: he can only get a 20% raise with Non-Bird rights. That’s $31.2M. So… that’s 1-year and $31.2M next summer, followed by 5-years and about $220M in the summer of 2019.

Both options are obviously compelling. But the real story here is his unnecessary and selfless sacrifice. Which ran along the lines of my secret plan for the Warriors this summer.

The post below was designed to show just how critical creative salary cap management will be in order to keep the Golden State Warriors together (and improving year after year).

My secret plan to address that concern: Try like hell to avoid the luxury tax this year!

If the Warriors would have been able to avoid the luxury tax, it would not only have saved gigantic money for the upcoming season but would have also pushed back the repeater tax clock two full years (to 2021-22). The combined savings would’ve been off the charts!

To do that would’ve been improbable. It would have required buy-in from several players (including from Durant, as ultimately happened) to be possible. And it would’ve slightly weakened the team for next season. But my logic was two-fold: (i) the slightly weakened team for next season would’ve still been the overwhelming favorite to win the title, and (ii) the long-term benefits associated with the massive savings would’ve been overwhelming – including potentially all but assuring the team could be kept together long-term, potentially redeploying a portion of the savings to keep re-tooling year after year after the upcoming season, etc. It was a story about sacrifice in the short-term in exchange for a massive gains in the long-term.

The ability for general manager Bob Myers to explain to his players that avoiding the tax for the upcoming season could essentially guarantee continuity and continuous improvement for the team in future seasons might’ve been compelling enough to make it work! That was my plan anyway. 😊

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Original Post (5/20/17):

The Brooklyn Nets paid an all-time NBA record $193 million in payroll and luxury taxes in the 2013-14 season.

The Cleveland Cavaliers have inched close to that record recently, having paid $165 million in 2015-16 and a projected $154 million this season. They could perhaps approach or even break it in either or each of the next two seasons.

You think that’s a lot?

It’s chump change compared to what could happen elsewhere in the years to come!

But back to that story in a second.

This week was all about the announcement of the league’s All-NBA teams.

The announcement had far-reaching implications throughout the NBA. Several highly-publicized players secured tons of money for themselves, thanks to the league’s new “designated veteran player” rules. Several other highly-publicized players lost out on tons of money.

But it also quietly had ramifications for a couple of players nobody seems to be talking about. Friends. Brothers in arms. Teammates. Klay Thompson and Draymond Green.

In the NBA, all max salaries aren’t built equal. There are three levels based on a player’s tenure: those with 0-6 years of experience are eligible for up to 25% of the salary cap (a Tier 1 max salary), those with 7-9 years of experience are eligible for up to 30% of the salary cap (a Tier 2 max salary), and those with 10+ years of experience are eligible for up to 35% of the salary cap (a Tier 3 “super-max” salary).

The designated veteran player rules allow players who qualify to sign Tier 3 super-max salary contracts (that can start at anywhere above 30%, but not greater than 35%, of the salary cap), even though they don’t meet the league’s tenure-based eligibility requirements for it. Such contracts can only be signed with the player’s prior team, must generally be for a full five years, and can contain annual increases or decreases of up to 8.0% of the first-year salary.

At current salary cap levels, that can add up to an extra $6 million or so per year.

To qualify for it, a player 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), and 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 any one of the previous three seasons.

In addition, the player must have never changed teams as a free agent, he can have only been traded during his first four years in the league, and he must be a free agent (in the case of a free agent signing) or have just one or two years remaining on his contract (in the case of an extension). And if it is an extension, a couple more rules apply. First, three years must have passed since the player signed his prior contract or extension. Second, if he has one year remaining on his contract at the time his extension is signed, it must cover five new seasons; if he has two years remaining on his contract at the time the extension is signed, it must (and can only) cover four new seasons.

The first wave of players who qualify, and don’t qualify, was confirmed with the announcement of the three All-NBA teams on Thursday.

Four players are now qualified for a designated veteran player deal this summer: Oklahoma City’s Russell Westbrook, Houston’s James Harden, Washington’s John Wall, and Golden State’s Stephen Curry. 

Harden and Westbrook, even if they sign designated veteran player extensions, wouldn’t actually get any more money than they could otherwise get when they ultimately become free agents (in each case as a 10-year veteran). For them, the designated veteran player rules are really just about locking in payouts for which they’d otherwise be eligible anyway. So… blah.

Wall, though he qualifies, probably won’t sign a designated veteran player extension this summer anyway because he could add an extra year onto it if he makes All-NBA again next season and signs the extension next summer. So… who cares?

Curry snagged (First Team) All-NBA honors, but he didn’t actually need it. By virtue of having won the MVP award in each of the last two seasons, he already qualified for the designated veteran player contract he’ll surely get this summer. It’ll take him from having the biggest bargain salary in the NBA this past season to what could be the highest salary in NBA history next season: $35.4 million (35% of next season’s projected $101 million salary cap). A five-year super-max contract starting at $35.4 million would total up to $205 million!

But we’ve been talking about a Curry super-max forever. So… whatever.

The most intriguing designated veteran player storylines came from those who didn’t qualify for it.

Indiana’s Paul George and Utah’s Gordon Hayward were the headline losers, missing out on potentially huge Tier 3 designated veteran player super-max extensions this summer.

But they weren’t the only ones who missed out. Klay Thompson did too!

Thompson would have qualified to sign a designated veteran player extension with the Warriors next summer if he had made an All-NBA team this season. The extension would have kicked in for the 2019-20 season, with an estimated starting salary of $37.5 million (35% of the 2019-20 salary cap) and total payout of $217 million over five years.

It’s not all bad for Thompson though. Unlike George and Hayward, he still has time to earn his super-max deal. He’ll qualify for it (starting in the same year, and having the same payout) if he makes All-NBA in either of the next two seasons.

His teammate Draymond Green snagged (Third Team) All-NBA honors, but his making it as a forward didn’t impact Thompson not making it as a guard. So, no worries there… It did, however, take a spot away from George and Hayward. And it also had interesting implications for himself.

Green won’t be eligible for a designated veteran player deal until 2019. But, by making Third Team All-NBA this season, he took a step closer. He’s now just one step away – if he makes All-NBA again in either of the next two seasons, he’ll be eligible to sign a super-max extension in the summer of 2019. It would kick in with the 2020-21 season, have a starting salary of somewhere around $39 million (35% of the 2021-21 salary cap) and pay out up to around $225 million over five years.

How good has the Warriors scouting been over the past several years?

They’ve drafted three players – Curry, Thompson and Green – who have each earned All-NBA honors at least once in their young careers, and could each qualify for super-max designated veteran player deals if they make it again.

But here’s the thing: they won’t each get one.

NBA teams are only allowed to have two of its players on designated veteran player deals at any given time. Curry will surely get one. Which leaves just one left for Thompson or Green!

That could set off one of the more hilarious battles in the years to come!

But that’s just one of the numerous storylines with which Warriors fans should have worlds of fun and intrigue both this summer and in the years ahead.

Kevin Durant is at the core of an entirely different one.

Durant holds the futures of Andre Iguodala and Shaun Livingston in Golden State squarely in his hands.

He’ll surely opt out of the final season of the two-year deal he signed last July, exactly as he’s always planned. And he’ll surely re-sign with the Warriors this summer, exactly as he’s always planned. And he’s probably even decided the type of contract he’ll sign with the Warriors this summer. But we don’t know what he’s thinking. Which creates some drama.

Durant doesn’t need (or qualify for) a designated veteran player contract. As a 10-year veteran, he is eligible to sign a super-max contract under the normal rules. He could seek the super-max of about $35.4 million for next season. He’d obviously deserve it if he does. But because the Warriors only have his Non-Bird Rights, they’d need to create cap space to fit it. They’d need to shed a ton of salary to do that, which would probably include renouncing both Iguodala and Livingston.

But if Durant is willing to take $31.8 million (the maximum 20% raise from his current $26.5 million salary that his Non-Bird rights would allow), perhaps on another one-year deal with a player option for a second season, the Warriors wouldn’t need to fit him into cap space. They could not only re-sign Durant but also leverage the full Bird Rights of Iguodala and Livingston to re-sign them both as well (despite blasting past the salary cap). Golden State could then pay Durant back by maxing him out next summer.

(The Warriors have perhaps the most intriguing future in the whole of the NBA. The storylines could go on forever. I have already drafted a six-page post (that I probably won’t publish) on Durant’s decision alone.)

Durant’s generosity could keep the current Warriors core intact for several more years – a scary proposition for its Western Conference competitors, and the league as a whole!

But thinking about what that could do to Golden State’s payroll is just about the most fun a cap nerd can possibly have.

Nobody’s talking about it yet. But they will. It’s too juicy not to.

Picture this:

Curry gets his $35.4 million. Durant gets his $31.8 million. Iguodala and Livingston get substantial salaries to return (which the Warriors will push to extend out just two seasons). Golden State executes some combination of re-signing Ian Clark for up to the $7.8 million his Early-Bird rights would allow (which they don’t do), re-signing Zaza Pachulia for up to the $3.5 million his Non-Bird rights would allow (which they may or may not do), utilizing the $5.2 million Taxpayer Mid-level Exception (a portion of which they may utilize if Pachulia doesn’t return), and rounding out the roster with minimum salaries. That could cause the 2017-18 Warriors to shatter the Brooklyn Nets record for highest single-season payroll plus luxury tax ever, blasting way past the $200 million mark (reality is probably closer to around a still eye-popping $175 million)!

But that’s just the starting point for what could happen over the next several years.

Get this:

Curry is about to sign what could be a five-year 35% super-max deal, that could start at up to $35.4 million next season and pay out up to $205 million over the next five years. That contract could pay him $44 million in the 2020-21 season alone!

Durant has numerous ways to structure his future deals with the Warriors, but he’ll surely be on 35% super-maxes after next season. Assuming he takes the $31.8 million this summer (for the benefit of Iguodala and Livingston), he could then lock in another $160 million or so over the following four years as a free agent next summer. If he takes $31.8 million this summer and another one-year deal next summer (around $35.7 million), he could top it off in 2019-20 with a five-year deal that would pay out an estimated $217 million. Any which way, he would earn at least $41 million in the 2020-21 season alone!

Thompson would qualify for a designated veteran player 35% super-max if he makes All-NBA in either of the next two seasons, which would start in 2019-20 and pay out up to around $217 million over the following five years.

Green would qualify for a designated veteran player 35% super-max if he makes All-NBA in either of the next two seasons, which would start in 2020-21 and pay out up to around $225 million over the following five years.

Thompson and Green can’t both sign 35% super-maxes (assuming Curry does), but one can. And the other can always sign a traditional 30% max deal. Which could pay the two a combined $75 million or so in the 2020-21 season alone!

The Warriors, in the 2020-21 season alone, could theoretically have three guys on 35% maxes (Durant, Curry, and either Green or Thompson) and another on a 30% max (Thompson or Green). That’s $160 million just for those four players!

From there, is it really all that hard to picture the other eight to 11 guys earning at least another $40 million combined?

Throw in some combination of Iguodala and/or Livingston (if they’re re-signed to contracts that far out, which they won’t be), a capable starting center in the talent range of a Pachulia (for whom they won’t offer much more than the minimum), an Ian Clark or two in reserve (it’s minimums or nothing, baby!), mid-level signings (nope!), first-round picks (very bottom of the round makes them not much higher than minimums), and some minimum-salary players and you could easily break $200 million in payroll alone that season. And that’s before luxury taxes!

Such a Warriors construct would be serial luxury taxpayers, which would make them repeater taxpayers starting in 2019-20. Repeater rates add $1 in taxes for ever dollar by which a team is over the luxury tax threshold. That’s when things could start getting insanely expensive!

Slap repeater taxes onto a $200 million payroll?

An assumed $112 million 2020-21 salary cap (my current projection for that season) makes the luxury tax line around $136 million. That’s $64 million over. Which equates to – get this – another $375 million in repeater taxes!

Could we be looking at the world’s first ever $575 million basketball team by 2020-21?

Of course not. But it’s fun to think about.

(And, on a more serious note, it illustrates how critical it will be for the Golden State Warriors to make wise decisions and cleverly negotiate with its key players in the years ahead. A key focus for this summer will be the planning for the 2019-20 season. That’s when Klay Thompson becoming a free agent and the Warriors becoming a repeater taxpayer converge to create what could very easily be a $300 million payroll if Iguodala and Livingston are offered contracts that extend at least three years out. It’ll be an intriguing summer in Northern California!)

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