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April 23, 2015

How the salary cap jump could impact the Sixers

The cap is going to skyrocket when the new television money kicks in next summer

The NBA’s collective bargaining agreement is a complex creature, one filled with minutiae on top of more minutiae on top of even more minutiae. From all of said minutiae, loopholes are created within the league’s salary cap structure that teams can exploit. For example, the Sixers acquired JaVale McGee, Ish Smith, and Thomas Robinson late in the season, which allowed them to reach the salary floor without actually having to pay all of the $56.7 million that it entails. Here’s a live look inside Josh Harris’ office:

Seinfeld Gif

Gaining a complete grasp of every financial implication of the Sixers’ wheeling and dealing over the past few years takes a lot of time and effort, something I don’t require of you (or myself, for that matter) for this post. The first thing you need to understand is that Daryl Morey, master of the poison pill contract, is the Bela Kerolyi of sneaky salary cap gymnastics. And Sam Hinkie is Mary Lou Retton.

Here’s the major thing that you do need to know: Once the fat new national television contract kicks in next summer, the salary cap is going to skyrocket over the following two years. Right now, the cap is set at $63.1 million. Next year, it will make a small (projected) jump to $67.1 million, and then boom goes the dynamite. $89 million will be the (again, projected) number in 2016-17 and $108 million is the figure the year after.

As you would expect, the influx of cash is going to turn the league on its head. Over at ESPN Insider, Amin Elhassan did a really nice job breaking down the ramifications of such a massive jump in the cap for those of us not completely versed in the minutiae. Without trying to completely steal his article, I’m going to attempt to piggyback on his general points and add a Sixers slant to some of them.

1. 2015 isn’t the year to attempt to lock up anyone long-term in restricted free agency. At least not the top players, because it won’t work. The amount of max contracts is determined by a certain portion of the salary cap depending on how many years you’ve played in the league. For the Sixers’ purposes, most of the enticing free agent targets are young players coming off their rookie deals like (and don’t laugh at the names, it’s just for a frame of reference) Draymond Green, Kawhi Leonard, Jimmy Butler, Khris Middleton, etc. The maximum starting salary that any young gun can be offered this summer will be $15.7 million, or 25 percent of the cap.

In the past, rival suitors have signed restricted players to offer sheets of four years at the max salary and forced the original team to match it (like Charlotte made Utah do with Gordon Hayward’s contract last summer). Doing so this summer would only be a huge favor for the player’s original team, which will in all likelihood happily match the offer. Getting a top player locked in at a $15 million starting salary will be an awesome discount when in two years the same types of guys will be earning $25.3 million to start.

To quote the great Johnny Drama, locking in Draymond Green at $15.7 million and four years is like buying Microsoft in the ‘80s. It’s in the Sixers’ competitors’ best interest to nail down their promising young players this summer. It’s in the Sixers’ interest not to help them do so.

2. 2015 is the year to attempt to sign restricted free agents to short-term deals. Again, at least with the stars. If it’s in the teams’ interest to lock up players long term, it’s in the players’ interest to stay flexible so they can cash in when the cap jumps. In this case, the Sixers can help the players get what they want by saying something like this on July 1st:

“Hey Jimmy Butler, you’re pretty good, man. Do you want us to call you, James? Jim? J-Butt? Whatever suits you, we’re great with. Anyway, that dunk you had on Zaza was pretty cool.”

“Let’s talk a little shop: You don’t want to be locked in for four years at a discount, right? You bet on yourself this year and it already proved to be the right decision, so why don’t you bet on yourself some more? We’ll offer you a similar deal to the one Chandler Parsons signed last summer where you’ll get both max money and an opt-out clause in two years when the getting is real good. Is that something you would be interested in?”

“The Bulls will probably match, which would still be swell for you. Hopefully the new coach won’t run you into the ground like Thibs does, by the way. If the situation deteriorates and you continue to thrive individually, we’ll still have your number in a couple of years. And if Reinsdorf doesn’t match, we’ll take good care of you here. We think this Embiid guy you’re going to play with is pretty good.” 

(Note: I have absolutely zero idea if a move like offering Butler is on the Sixers' timeline. Think of this one simply as a suggestion.)

(SECOND NOTE: It has been brought to my attention from a few readers that if the Bulls offer Butler a max contract, the lowest offer sheet he could sign with another team is a three-year deal. In that case, the calculus obviously changes. I appreciate readers correcting me when I don't clarify something well enough or miss a key point.) 

3. That pesky salary floor is going up, too. Remember, there’s literally no penalty for failing to reach the floor except having to pay the difference out to everyone on the roster. Still, the floor is projected to be at $80.1 million for the 2016-17 season, and the Sixers very realistically could only have something like $10 million committed from the current players on the roster. Even if you factor in a couple of high draft picks over the next few years, they’re not even close to the floor. This is still pretty far down the road, but humor me with the hypothetical of someone like Hollis Thompson being in line for a huge extra payday if he sticks around.

4. Rookie deals become more valuable, which means draft picks become more valuable. Financially, there is a major benefit to the Sixers’ extra first-rounders potentially getting pushed back a year. Unlike max contracts and the salary floor, rookie contracts don’t rise proportionally with the salary cap. The number one pick of the 2015 NBA Draft will make roughly 7.1 percent of the cap, but next year the top selection will only make roughly 5.5 percent of the cap. The same deflation can be applied to every slot in the first round.

The other team that really stands to benefit from drafting under the new salary cap (if they can hit on some of their picks)? The Boston Celtics.

5. Dario Saric has a strong financial incentive to wait until 2017 before crossing the pond. Sorry, folks. I know you thought two years would be a long wait, but it very well could be three. I’ll let Elhassan take us home (again, Insider Only):

First-round picks become incredibly more important. It also means being on a rookie-scale deal really stinks for a player! Drafted and stashed international players (most prominently from European leagues) will have a greater incentive to delay coming over, as waiting three years allows them to circumvent the rookie scale (this is how Chicago signed 2011 first-round pick Nikola Mirotic to a three-year, $16.6 million deal this past summer).

For example, 2014 Philadelphia draftee Dario Saric has an NBA out in his European deal in 2016, but he's much better off coming over in 2017 to avoid getting locked into the discounted rookie rate, and instead be eligible for a lucrative deal.

In general, it seems like the salary cap jump is going to open up a window where more top players are willing to switch cities than usual. That's a subject for another day, but needless to say, I think that trend would benefit the Sixers.