Miami Heat Drop Below the Luxury Tax With Two Trades

February 18th, 2016 3 comments
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The Miami Heat completed a pair of trades prior to the 3 p.m. NBA trade deadline, achieving their season-long goal of dropping below the NBA’s $84.74 million luxury tax threshold.

As a result, Heat fans will almost surely not hear the words “repeater tax” again until at least the 2020-21 season.

The Heat were $11.3 million over the luxury tax threshold only July 10th. The path to tax avoidance was long and twisted, and included five trades.

On July 27th, the Heat executed two trades, sending Shabazz Napier and $1.1 million in cash to the Orlando Magic in exchange for a 2016 top-55 protected second-round draft pick, and Zoran Dragic, $1.6 million in cash and its 2020 second-round draft pick to the Boston Celtics in exchange for a 2019 top-55 protected second-round draft pick.

On November 10th, the Heat traded Mario Chalmers and James Ennis to the Memphis Grizzlies in exchange for Beno Udrih and Jarnell Stokes.

On February 16th, the Heat traded Chris Andersen and two second-round picks (the first is Miami’s 2017 pick if it lands in the top 40 or its 2018 pick if not, and the second is Boston’s 2019 top-55 protected pick acquired in the Dragic trade) in exchange for Brian Roberts.

The Andersen trade was critical, as it set the stage for today’s accomplishment. Pat Riley and the Heat organization knew that trading the injured Andersen’s $5.0 million salary in exchange for nothing in return would be rather difficult. So, at the cost of essentially one second-round draft pick, Miami mitigated the burden for a potential trade partner by swapping his salary for the more palatable $2.9 million salary of the capable veteran backup point guard Roberts, in the process saving $6.2 million even if things didn’t play out as planned. That left the Heat just $3.5 million over the tax threshold.

The rest was rather easily predictable, if not necessary inevitable.

Earlier today, the Heat traded Jarnell Stokes along with $721,300 in cash to the New Orleans Pelicans in exchange for a 2018 top-55 protected second-round draft pick. The cash payout is enough to cover the $273,401 remaining balance on Stokes’ $845,059 salary for the season, and net the Pelicans a $447,899 profit.

Later in the day, the Heat traded the newly acquired Roberts and their 2021 second-round draft pick to the Portland Trail Blazers in exchange for $75,000 in cash. Because the Blazers had a team salary below the salary floor(1), in addition to receiving a second-round pick from Miami, Portland also saved $1.9 million by taking on the $924,657 remaining to be paid on Roberts’ $2.9 million salary.

In accomplishing their goal, the Heat utilized their full $3.4 million allotment of cash for the 2015-16 season, but traded away just one rotation player (Chalmers, and they received back a rotation player in Udrih in return) and three of their second-round draft picks. Miami has now dealt away every first and second round pick available for trade through the 2021 draft.

The result? The Heat are now $218,000 below the luxury tax threshold.  Read more…

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

February 16th, 2016 No comments
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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.  Read more…

Should the Heat Build Around Goran Dragic and Hassan Whiteside?

February 12th, 2016 No comments
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The foundation of the Miami Heat’s future championship aspirations was supposed to rest largely on the shoulders of point guard Goran Dragic and center Hassan Whiteside.

Dragic was supposed to be a catalyst for the Heat offense, as he was for a Phoenix Suns offense that ranked eighth in the NBA in 2013-14 and seventh through the All-Star break last season before being traded to Miami. He was supposed to allow the Heat to play at pace, having flourished in transition with the Suns. He was supposed to be a force in the pick-and-roll, having been, statistically speaking, the best pick-and-roll ball-handler in the NBA two seasons ago.

Whiteside was supposed to rampage through the NBA with reckless abandon, utilizing his massive 7-foot, 7-inch wingspan to wreak havoc on both ends of the court. His superior shot-blocking, shot-altering and rebounding were supposed to make him the dominant defensive anchor the Heat has long-since coveted. His undeniable potential in the pick-and-roll and developing low-post game were supposed to make him an emerging offensive threat.

Things haven’t necessarily gone as planned.  Read more…

Heat Trade Mario Chalmers to the Memphis Grizzlies

November 10th, 2015 No comments
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The Miami Heat announced Tuesday night that it has traded veteran guard Mario Chalmers to the Memphis Grizzlies.

The Heat, in a four-player swap, sent Chalmers and forward James Ennis to the Grizzlies in exchange for guard Beno Udrih and forward Jarnell Stokes.

The financially-motivated trade will save the Heat a projected $7.8 million.

The Heat had a team salary of $92.4 million coming in the trade, which put it $7.8 million over the NBA’s $84.74 million luxury tax threshold. Exceeding the tax threshold could prove very costly for the Heat.

If the Heat exceeds the tax threshold, it would become the NBA’s first team to ever pay the “repeater tax,” which adds an extra $1 for every dollar by which a team is over the luxury tax threshold, over and above the incremental tax rates that would apply.

For every dollar by which the Heat exceeds the tax level this season, it will need to pay at least $2.50 in taxes. That rate increases to $2.75 per dollar for any incremental amount by which the Heat exceeds the tax by $5 million, increasing further to $3.50 per dollar for any incremental amount by which the Heat exceeds the tax by $10 million, increasing further to $4.25 per dollar for any incremental by which the Heat exceeds the tax by $15 million, and increasing an additional $0.50 for each $5 million increment thereafter.

The final tax tally is calculated based upon the Heat’s team salary as of the start of its last regular season game, which prompted months of speculation that Pat Riley would attempt to shed Chalmers’ $4.3 million salary to reduce the team’s burden. Chalmers was reportedly made available in trade throughout the summer, with the Heat asking for essentially nothing in return.  Read more…

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Heat and Grizzlies Discuss Potential Mario Chalmers Trade

November 3rd, 2015 No comments
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ESPN reported earlier today that the Miami Heat has had discussions with the Memphis Grizzlies regarding point guard Mario Chalmers.

The Heat currently has a team salary of $92.4 million, which puts it $7.8 million over the NBA’s $84.74 million luxury tax threshold. Exceeding the tax threshold could prove very costly for the Heat.

If the Heat exceeds the tax threshold, it would become the NBA’s first team to ever pay the “repeater tax,” which adds an extra $1 for every dollar by which a team is over the luxury tax threshold, over and above the incremental tax rates that would apply.

For every dollar by which the Heat exceeds the tax level this season, it will need to pay at least $2.50 in taxes. That rate increases to $2.75 per dollar for any incremental amount by which the Heat exceeds the tax by $5 million, increasing further to $3.50 per dollar for any incremental amount by which the Heat exceeds the tax by $10 million, increasing further to $4.25 per dollar for any incremental by which the Heat exceeds the tax by $15 million, and increasing an additional $0.50 for each $5 million increment thereafter.

At $7.8 million above the tax line, the Heat is facing a projected tax bill of $20.1 million.

Adding that potential $20.1 million to the $92.4 million in salary obligations to the team’s current players, as well as the $2.7 million in cash the Heat has already surrendered in trade and the $216K it has already paid to the departed Shabazz Napier, yields total projected payroll and related obligations of $115 million.

The most the Heat has ever paid was $103 million in 2013-14.

The final tax tally is calculated based upon the Heat’s team salary as of the start of its last regular season game, which has prompted months of speculation that Pat Riley would attempt to shed Chalmers’ $4.3 million salary to reduce the team’s burden.

The Grizzlies, however, are operating above the NBA’s $70.0 million salary cap and do not have a large enough exception to take on Chalmers’ salary without sending back salary to the Heat.  Read more…

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Miami Heat Enter 2015-16 Season As Most Enigmatic Teama in the NBA

October 26th, 2015 No comments
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The Miami Heat may well be the most enigmatic team in the league, as we head into the 2015-16 NBA season.

It is difficult to tell whether Pat Riley is building something special, or relegating his team to the atrocity of mediocrity. The current Heat incarnation is both supremely talented and deeply flawed. It is as promising as it is susceptible to the cruelties of age, injury, poor spacing and poor shooting. It has within it the potential to challenge the Cavaliers for Eastern Conference supremacy and the combustibility to ignite a second straight pre-playoff collapse.

Riley has tossed away multiple first-round draft picks in its effort to chase down LeBron in Cleveland, much like he did to snag him and Chris Bosh five years ago. Only this time around, there is no underlying guarantee that it is going to work.

It is as possible that the Heat has mortgaged its future to build an unremarkable team that will die a slow death as it is that the Heat is in the midst of spectacular turnaround that could vault the team into the realm of the game’s elite. Where within that range the Heat will fare is not yet clear.

Read more…

Josh Richardson Signs Three-Year Contract with the Miami Heat

August 3rd, 2015 1 comment
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Josh Richardson, the Miami Heat’s 2015 second-round draft pick, officially signed a three-year, $2.4 million minimum salary contract with the team on Monday.

The parties had reached agreement on the general terms of the deal last Tuesday, but needed the extra few days to iron out a few details with regard to the third year of the contract.

Richardson’s first year salary, $525,093, will be fully guaranteed. As of right now, including the associated luxury tax ramifications, it would cost the Heat an estimated $2.0 million. However, that amount could be reduced if the Heat accomplishes its goal to reduce, or even eliminate, its tax burden before the tally is finalized at the end of the regular season.

Richardson’s second year salary, $874,636, is completely non-guaranteed unless he is kept on the roster past August 1, 2016. The contract structure therefore provides the Heat maximum flexibility for the summer of 2016. The August 1 guarantee date ensures that the team will have all of July to pursue its free agency plans before deciding whether to either keep Richardson or waive him at no cost. Keeping him would subtract just $331,165 from the Heat’s summer of 2016 cap space.(1)

Richardson’s third year salary, $1,014,746, was the source of the week-long delay. It was originally to be both non-guaranteed and subject to a team option. Instead, it will not contain a team option but will be initially non-guaranteed. However, it will become fully guaranteed if not waived on June 30, 2017.  Read more…

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Miami Heat Trades Zoran Dragic to Boston Celtics

July 27th, 2015 No comments
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The Miami Heat has traded shooting guard Zoran Dragic to the Boston Celtics, along with $1.6 million in cash to cover his salary with a $100K profit(1) and the Heat’s second-round draft pick in 2020. In return, the Heat will receive a top-55 protected second-round pick from the Celtics in the 2019 NBA draft.

The agreement comes a day after the Heat reached an agreement to trade point guard Shabazz Napier to the Orlando Magic. The Heat traded Napier to the Magic along with $1.1 million in cash in exchange for a top-55 protected second-round pick in 2016.

The second-round picks being returned to the Heat essentially have no value. The Magic and Celtics would need to have one of the five best records in the entire NBA in 2015-16 and 2018-19, respectively, for the Heat to get them. Otherwise, the obligations are extinguished.

The Heat also receives trade exceptions equal to the salary of each player: $1.7 million for Dragic(2), and $1.3 million for Napier. Miami has up to one year to utilize each exception, which can be used to acquire player(s) making up to value of the exception plus $100K in trade or on waivers without sending back salaries in return. The exceptions cannot be combined.  Read more…

Miami Heat Trade Shabazz Napier to Orlando Magic

July 26th, 2015 8 comments
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The Miami Heat has agreed to trade point guard Shabazz Napier and $1.08 million in cash to cover his base salary(1) to the Orlando Magic in exchange for a top-55 protected second-round pick in the 2016 NBA draft. The deal will be formally announced on Monday.

The second-round pick being returned to the Heat in exchange for Napier essentially has no value. The Magic would need to have one of the five best records in the entire NBA in 2015-16 for the Heat to get it. Otherwise, the obligation is extinguished.

The Heat will also receive a $1.29 million trade exception as part of the trade, equal to the amount of Napier’s total salary. The Heat will have up to one year to utilize the exception, which would allow the team to acquire one or more players with total salaries of $1.39 million in trade (or on the waiver wire) without sending back any salaries in return.

That, by all accounts, is a terrible return on investment for the No. 24 pick from the 2014 NBA draft. It means the Heat essentially traded its 2014 first round pick (No. 26), its 2014 second-round pick (No. 55), its 2019 second-round pick and $1 million in cash in exchange for one season of Napier.

Worse still: Napier showed flashes of promise during his rookie season; he was a low-cost player set to make just $1.3 million this season; and the Heat had him under team control for at least the next three years, after which he was to become a restricted free agent.

Why, then, have the Heat agreed to pull the trigger on the trade?  Read more…

Analyzing the Miami Heat’s Approach with Josh Richardson

July 17th, 2015 No comments
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Update (July 28, 2015): Josh Richardson reportedly agreed to a three-year, $2.4 million minimum salary contract with the Miami Heat on Tuesday. Richardson will make a fully guaranteed $525,093 this season. The second year, worth $874,636, will reportedly be partially guaranteed. The third year, worth $1,014,746, will reportedly be subject to a team option. 

The team option would provide the Heat the additional flexibility described below but, given the partial guarantee on the second year, the overall structure of the contract as presently constructed might not be optimal. If the second year is partially guaranteed and the third is subject to a team option, the third year must have the same guarantee percentage and schedule as the second year. By removing the team option, the guarantee percentage and schedule for each of the last two years can differ. Therefore, look for Richardson and the Heat to consider this and possibly change the structure before executing the contract. 

The Miami Heat has very much liked what it has seen thus far from Josh Richardson during summer league.

The Heat selected Richardson with the 40th overall pick in 2015 NBA draft, but the versatility and defensive prowess he displayed during summer league in many ways reflects the first-round grade placed upon him by general manager Pat Riley. Richardson was 24th overall on the team’s draft board.

So why has Riley yet to approach Richardson about a contract?

Well… The roster is still in flux. And as long as that holds true, there is no pressing need for Riley to do so… yet.

When a player is selected in the second round of the draft, he remains the exclusive property of the team that selected him until at least the September 5th immediately following the draft.

At that point, the team needs to make a decision.

In order for the team to retain draft rights to the player, it must submit to him a “Required Tender” by September 5th. The tender is an offer of a contract that affords the player until at least the immediately following October 15 to accept, has a term of one season, calls for at least the minimum salary applicable to the player, and can be fully non-guaranteed.

If the team does not issue a tender by September 5, the drafting team loses its exclusive rights to the player, and the player becomes an unrestricted free agent the following day.

The Heat really likes Richardson, and will not let that happen.

Once (or before) the tender is issued, the player has three primary options: (i) forgo the tender and instead negotiate with the team for a different contract, (ii) forgo the tender and instead seek employment outside the NBA, or (iii) accept the tender and play under its terms for the season to come.  Read more…