Heat and Grizzlies Discuss Potential Mario Chalmers Trade
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.
Memphis would need to send between $2.8 million $5.5 million of salary back in a straight up trade for Chalmers.
Possibilities within that range include Matt Barnes ($3.5 million), Vince Carter ($4.1 million), Tony Allen ($5.2 million) and Brandon Wright ($5.5 million). All, however, would be exceedingly unlikely trade candidates.
The Heat is constrained in potential trade scenarios not only by its desire to reduce payroll for this season but also by its unwillingness to take back any contracts that include long-term money. The team has big plans for the summer of 2016, when the salary cap is projected to vault higher on the strength of the league’s massive new national TV rights deals, and limited projected cap room with which to execute upon them.
At the league’s projected $89 million 2016-17 salary cap, barring trade scenarios, the Heat figures to have as much as $37 million of cap space with which to retain free agents Dwyane Wade and Hassan Whiteside, as well as add another player(1).
Wright can’t be traded until Dec. 15. Even then, he has a long-term contract that pays out not only $5.5 million this season – higher than that of Chalmers – but also $5.7 million in 2016-17 and $6.0 million in 2017-18.
Allen is a stater for the Grizzlies. He also has a long-term contract that pays out not only $5.2 million this season – higher than that of Chalmers – but also $5.5 million in 2016-17.
Carter’s contract contains not only a $4.1 million salary for this season but also a $4.3 million salary for 2016-17 which is guaranteed for $2.0 million, as well as a 15 percent trade kicker which, by rule, he cannot waive in a straight up trade for Chalmers. Incorporating the kicker (which would be paid by the Grizzlies but count against the Heat’s tax calculation) would increase his salary for this season for purposes of the tax to as much as $4.9 million – higher than that of Chalmers – and would subtract as much as $2.4 million of cap space for next season (the exact amounts would depend upon the date of the trade).
Barnes has an expiring $3.5 million contract – less than that of Chalmers – but such a swap would only produce $2.8 million in savings for the Heat this season and seemingly make limited strategic sense for either party.
A potential trade scenario is therefore far more likely to involve multiple Grizzlies players with smaller salaries, and multiple players from the Heat (which already has the maximum 15 players under contract).
The underlying math would suggest it is most likely that if a deal were to be executed, it would include not only Chalmers but also the expiring $2.2 million contract of Grizzlies veteran point guard Beno Udrih – the Grizzlies are rumored to be disappointed by Udrih’s perceived lack of conditioning, athleticism and defense – and the Heat’s James Ennis.
A trade framework that involves Chalmers and Ennis in exchange for Udrih and any one of its low-salaried players (point guard Russ Smith; shooting guard Jordan Adams; or power forwards JaMychal Green, Jarnell Stockes or Jarrell Martin) would mathematically work for both parties.
Some scenarios could potentially save the Heat big money.
By way of example, a potential trade of Chalmers and Ennis for Udrih and Green would save the Heat nearly $8 million, reducing its total salary obligations to a more manageable $108 million, without reducing any future flexibility.
But that’s not all.
If the Heat were to then waive Green (who has a $150,000 partial guarantee on his $845,059 salary), the savings would increase to more than $10 million(2)(3), reducing its total salary obligations to $105 million. And, as an added bonus for doing so, the Heat would be left just $4.9 million above the tax line, a potential trade of Chris Andersen away from avoiding the repeater tax altogether, which, if accomplished at the trade deadline, could plummet the Heat’s total salary obligations all the way down to $91 million(4) and make for cumulative savings of $24 million.
While trade discussions between the Heat and Grizzlies have been characterized as preliminary, any deal that could potentially save the Heat upward of $10 million is one the team will surely consider even if, strategically, it may not be in the best interests of the team.
There are hypothetical Mario Chalmers trade scenarios that could save the Heat even more money, but they involve a complexity beyond the scope of reality. For example, a Heat trade involving the expiring contracts of Chalmers and Luol Deng ($10.2 million) in exchange for JaMychal Green and the expiring contract of Jeff Green ($9.6 million) would be legal, and could save the Heat nearly $17 million. But it would require Deng to consent to the trade (he has a trade bonus, a part of which he would need to forego to make the math work), it would increase the Grizzlies’ payroll by $3.8 million, it would cause the Grizzlies to press right up against the tax line (Memphis is currently $4.3 million under the tax line, and this trade would increase its cap hit by $4.1 million), and it would require a willingness by both parties to make such a trade.
What would appear strange about these discussions is that the Heat chose to retain James Ennis, who had a non-guaranteed contract, at what projects to be a total $3.2 million cost. If saving roughly $10.4 million were so critical to the Heat as to trade away a key contributor such as Chalmers, why would the Heat choose to spend $3.2 million on a player who is not?
(1) The $37 million figure left over for Dwyane Wade and Hassan Whiteside includes an ability for the Heat to exceed the cap to retain Tyler Johnson.
(2) The Heat’s total savings could increase slightly, to as much as $11 million, if, after acquiring him in a Chalmers deal, the Heat were to subsequently trade Green without receiving back any salary in return or if the Heat were to release Green and another team were to claim him off waivers. Since his $150K partial guarantee effectively equates to 27 days of salary (for purposes of the tax calculation), the Heat could potentially keep him on the roster until Nov. 20, essentially free of charge beyond his guarantee, while it seeks out a potential trade partner (and evaluates whether to keep him, which would net the team a solid two-way rebounder but eat $2.6 million into its savings).
(3) It would also provide the Heat with a $2.1 million trade exception.
(4) With the Heat then just $64K below the tax level, it would need to wait until the very end of the season to add a 14th or 15th player for added depth heading into the playoffs (which, given the Heat would be below the tax level, would add no more than $64K in total cost).