Heading into the 2016-17 NBA season, extensions for veteran players had all but vanished for several years — the result of changes to the league’s Collective Bargaining Agreement that make it more beneficial for players to finish out their existing contracts and enter free agency thereafter, even if they plan to re-sign with their prior teams.
The rapidly rising salary cap – which has reached an all-time record $94.1 million this season, a whopping 34.5 percent increase from $70 million in 2015-16 – has, however, created a short-term opportunity for teams to leverage intricate salary cap rules to offer key players extensions that, in some cases, can be too tempting to pass up.
Many teams are finding themselves with more salary cap space than quality free agents on which to spend it. For these teams, that cap space can be used to simultaneously renegotiate and extend the contracts of its key players, giving them more up-front money in exchange for more seasons under team control.
This is exactly what the Houston Rockets elected to do with its key player, James Harden, in what to this point has been the most intriguing utilization of cap space thus far this summer.
Contract renegotiation is a concept largely attributed to various other sports. Only very rarely do they occur in the NBA. They can only occur on or after the third anniversary of the original signing date of a contract (or extension or renegotiation), and they can only increase a player’s salary. To do so, a player’s team must have salary cap space to cover the full amount of the proposed increase.
Heading into this season, Harden had two seasons remaining on his contract — $16,784,032 for this season, and $17,811,626 for next.
Though he signed a “maximum” five-year rookie-scale contract extension in October 2012 that ran through the 2017-18 season, the subsequent jump in the salary cap meant that he was set to earn far less than his current maximum salary for this season. Read more…