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All-NBA Team Announcement Could Shape the Future of Free Agency

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Today’s announcement of the All-NBA teams for the 2016-17 season had much more far-reaching implications than in years past, thanks to new “Designated Veteran Player” rules in the new Collective Bargaining Agreement that reward certain players with higher maximum salaries than to which they might otherwise be eligible.

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 max salary).

The Designated Veteran Player rules allow players who qualify to sign Tier 3 max salary contracts (that 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 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 one of the previous three seasons.

In addition, the player must have never changed teams as a free agent. He could have only been traded during his first four years in the league. 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 extensions).

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 Designated Veteran Player Extension is signed, it must cover five new seasons, but 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 players who qualify, and don’t qualify, was confirmed with the announcement of the three All-NBA teams yesterday – which may have made certain players millions of dollars, and cost certain others those very same millions. Which, in turn, could have significant implications for how they approach free agency this summer and beyond. 

Those Who Have Qualified For This Summer

Four players will qualify for a Designated Veteran Player contract or extension this summer: Stephen Curry, Russell Westbrook, James Harden and John Wall.

Curry, an upcoming free agent with eight years of service, by virtue of having won back-to-back MVP awards, is eligible to re-sign with the Golden State Warriors as a Designated Veteran on a five-year contract starting at $35.4 million (35% of next season’s projected $101 million salary cap), and totaling up to $205 million. The most an opposing franchise can offer is a four-year contract starting $30.3 million (30% of the cap) and totaling up to $130.3 million — a $75 million gap that will all but guarantee the All-Star returns to Golden State.

Wall, who is entering his eighth season and has two years remaining on his contract, by virtue of having just made Third Team All-NBA, is now eligible to sign a Designated Veteran Player Extension with the Washington Wizards this summer. The extension would kick in with the 2019-20 season, after the two years and $37.2 million remaining on his current contract. It could have a starting salary of around $37.5 million (35% of my current $107 million salary cap projection for 2019-20), and pay out up to $168 million over four years.

Harden, who is entering his ninth season and has two years remaining on his contract (excluding a player option which he can void), by virtue of having just made First Team All-NBA, is now eligible to sign the same Designated Veteran Player Extension with the Houston Rockets this summer as Wall: 4 years, $168 million, beginning with the 2019-20 season.

Harden’s situation, however, is slightly different than that of Wall. Both can lock in a fifth year on their extensions – bringing them to 5 years, $217 million – by signing their extension next summer. But, to do so, they’d need to earn All-NBA honors again next season, a prospect which is perhaps far more likely for Harden than for Wall. And, unlike Wall, even if Harden doesn’t earn All-NBA honors next season, he would be eligible to sign the exact same contract as a 10-year veteran free agent in the summer of 2019. Which effectively means that Harden could actually lose money by locking in a Designated Veteran Player Extension this summer – while he’d have the security of locking in his subsequent max deal two years early, he’d be sacrificing a valuable year on the back end of it (that could wind up paying out $50 million or so) to do so.

Westbrook, who is entering his tenth NBA season and has one year remaining on his current deal (excluding a player option he can void), by virtue of having earned All-NBA honors in each of the past three seasons, is now eligible to sign a Designated Veteran Player Extension with the Oklahoma City Thunder this summer. The extension would kick in with the 2018-19 season, with a starting salary of $35.7 million (35% of the league’s current $102 million cap projection for 2018-19), and pay out up to $207 million over five years.

Westbrook, like Harden, would not get more money by signing such an extension this summer, versus signing a maximum contract in free agency as a 10-year veteran next summer. He’d simply be able to lock in his money one year early.

Both Westbrook and Harden could therefore choose not to pursue the Designated Veteran Player Extensions their teams would surely be eager to offer this summer. Which would be an ironic twist of fate, considering that neither should be eligible for such an extension. Westbrook doesn’t meet the tenure requirement (he’s entering his 10th season, one more than allowed) and both don’t meet the waiting requirement (each having waiting just one year since signing extensions last summer, two fewer than three-year requirement). The NBA and the players union executed a side agreement which specifically enabled Westbrook and Harden to qualify.

Those Who Have Qualified For Next Season

Kawhi Leonard, who is entering his sixth season and has two years remaining on his contract (excluding a player option which he can void) doesn’t yet meet the tenure requirement for a Designated Veteran Player Extension. But he has already qualified to sign one next summer, when he’ll be entering his eighth season with one year remaining on his contract. The extension would kick in with the 2019-20 season, with a starting salary of $37.5 million, and pay out up to $217 million over five years.

Those Who Helped Their Chances to Qualify in Future Seasons

Isaiah Thomas, who is entering his sixth season and has just one year remaining on his contract, won’t meet the tenure requirement for a Designated Veteran Player contract until 2019. But, by making Second Team All-NBA, he took a step toward qualifying in the future. Although he was traded twice during his NBA career, both were during his first four years in the league. He therefore retains his eligibility. Depending upon the length of the contract he signs as a free agent next summer (2018), he would qualify for a Designated Veteran Player contract in either of 2019-20 or 2020-21 if he remains with the Boston Celtics, and if he makes All-NBA in either of next two seasons.

Draymond Green, who is entering his sixth season and has three years remaining on his contract, may or may not have a Designated Veteran Player Extension in his future, given the expense of the roster construction of his Golden State Warriors, but he could soon become eligible. He won’t meet the tenure requirement for one until 2019 but, by making Third Team All-NBA, he’s taken a step closer. If he makes All-NBA again in either of the next two seasons, he’ll be eligible to sign a Designated Veteran Player Extension in the summer of 2019. It’d kick in with the 2020-21 season, have a starting salary of $39.2 million (35% of the my own personal $112 million current cap projection for 2020-21), and pay out a whopping $227 million over five years.

Jimmy Butler could also have a Designated Veteran Player contract in his future. But, by virtue of the dynamics of his contract situation, earning Third Team All-NBA likely did not improve his chances of snagging one. If he makes one more All-NBA team in the years to come, he’ll qualify (assuming he remains with the Chicago Bulls). If he doesn’t, he won’t.

Those Who Didn’t Qualify

Four players with big money on the line didn’t qualify, which could have far-reaching implications for their futures: Blake Griffin, Klay Thompson, Paul George and Gordon Hayward.

Griffin never really had a shot. And he wouldn’t have gotten, or deserved, a super-max extension if he did.

Thompson, who is entering his seventh season and has two years remaining on his contract would have qualified to sign a Designated Veteran Player Extension with the Golden State Warriors next summer if he made an All-NBA team. The extension would have kicked in with the 2019-20 season, with a starting salary of $37.5 million and a total payout of $217 million over five years.

Thompson, however, can still qualify for the same Designated Veteran Player deal (starting in the same year and having the same payout) if he makes All-NBA in either of the next two seasons.

Thompson, therefore, now begins a fun battle for Designated Veteran Player candidacy with teammate Draymond Green in the years ahead. Since each team is only allowed to have two of its drafted players on such deals at any given time, only one can get it (assuming Stephen Curry gets one)!

George, who is entering his eighth season and has one year remaining on his contract (excluding a player option which he can void) would have qualified to sign a Designated Veteran Player Extension with the Indiana Pacers this summer if he made an All-NBA team. The extension would have kicked in with the 2018-19 season, with a starting salary of $35.7 million and a total payout of up to $207 million over five years.

As a result, George will now play out the final year of his contract and enter the summer of 2018 free agency class. But there could be some fireworks in the meantime.

George has been the subject of numerous trade rumors, driven by speculation that he is hell bent on playing for his hometown Los Angeles Lakers. Now that George didn’t qualify, those rumors will surely intensify.

The Pacers will, however, have a certain degree of leverage they would not have had under the current collective bargaining agreement. That’s because he could still qualify for the very same Designated Veteran Player contract next summer that he didn’t qualify for this summer if he makes All-NBA this upcoming season: five years, $207 million. The most the Lakers could offer: four years, $132 million. That’s a $75 million difference.

The Lakers (and others) therefore face a couple of difficult decisions as relates to George – not only whether to pursue him, but also when to pursue him. If they pursue him in trade this summer, they might be forced to sacrifice significant assets to get him. If they wait to sign him in free agency next summer, they could lose him entirely (if he makes All-NBA next season and the extra $75 million only the Pacers could offer proves too irresistible pass up).

Hayward, who is who is entering his eighth season and has $16.7 million player option, would have qualified to sign a Designated Veteran Player Extension with the Utah Jazz this summer if he made an All-NBA team. The extension would have kicked in with the 2018-19 season, with a starting salary of $35.7 million and a total payout of up to $207 million over five years. To qualify to get it, though, he would have first had to have exercised his player option for next season. It’s unclear as to whether he would have done that, and even more unclear as to whether the Jazz, who face a challenging financial future, would even have given him a super-max deal if he did.

Hayward will now almost certainly decline his $16.7 million player option, and enter the summer of 2017 free agency class.

He could re-sign with the Jazz on a one-year deal with a player option for a second, which would qualify him for a Designated Veteran Player deal if makes All-NBA in either of the next two seasons. But, given that he’s never made it before and the competition for those coveted All-NBA slots continues to get stiffer, that approach is unlikely.

It’s more likely that Hayward will pursue a long-term deal this summer.

The question now becomes: How long?

The Jazz can offer Hayward a five-year deal that pays out $176 million. That’s $45 million more than the four years and $130 million that any other team could offer. That’s a big advantage.

If Hayward’s decision is predicated on locking up the most money he possibly can this summer, that would clearly be his best option. And the Jazz would certainly offer it.

But his he’s more focused on maximizing his career earnings, it may not be.

That’s because Hayward becomes a 10-year veteran in just three seasons, at which point he will become eligible for a Tier 3 max contract (as a 30-year-old): he could grab a 5-year, $227 million deal to close out his career. If he wants the flexibility to capitalize upon it, his best option could be to sign a three-year deal this summer (with a player option for a fourth season).

The problem for the Jazz: Any team in the NBA can offer a 3+1 deal (and any team would have his full Bird rights when it’s done)!

The largest three-year deal the Jazz can offer: $98.1 million. That’s not all that different than the $95.4 million any other team can offer. And after factoring in state taxes differences, Utah’s financial advantage could be wiped away entirely!

Which means that Hayward could maximize his career earnings no matter where he signs his 3+1 deal this summer. Which, in turn, means he can make his decision based purely upon where he wants to play. Among the teams with a surefire interest: the Boston Celtics and Miami Heat.

Will either team be able to steal him away from the Jazz?

Only time will tell.

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