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The Path Forward: Measuring Risk

Balancing hope and expectations


It appears that just as the NBA moratorium comes to a close, Dell Demps is putting the finishing touches on the first edition of the New Orleans Pelicans. Late yesterday afternoon it was reported through numerous sources that Anthony Morrow has agreed to a minimum two-year contract with the Pelicans.

This is the kind of "around the edges" signing that many New Orleans writers were beginning to expect after the Al-Farouq Aminu was announced last Friday. Morrow is not anticipated to play a great deal of minutes for the Pelicans this year, but potentially more than the 9.3 MPG he averaged this season.

The first lengthy review of the Pelican off-season was published yesterday by Grantland's Zach Lowe. A general synopsis of his article is presented in the second paragraph, which I will quote in full below.

Once the Evans deal is complete, the Pellies will have six players locked up through 2015-16, tied with the Celtics for the largest number (excluding 2013-14 rookies) of any team in the league. Those six guys, plus draft picks and charges for empty roster spots, would take the Pelicans very close to the projected salary cap in the summers of 2014 and 2015. In other words, this six-man group could be the team: Evans, Holiday, Anthony Davis, Austin Rivers, Ryan Anderson, and Eric Gordon. To acquire that core, the Pelicans have sacrificed both future cap flexibility and a pick in next June's loaded draft, the key asset that swung the Noel-Holiday deal. Outside of Boston, which has quickly become Valhalla for any NBA front-office geek interested in a monster rebuild project, the Pelicans have had the league's most interesting offseason — a series of high-risk, high-reward gambles that have divided rival executives and gone against the grain of larger trends in NBA team-building strategy.

There are a number of things in that paragraph which I disagree with, but I will focus on the two most glaring. First, giving up a pick in "next June's loaded draft". As I outlined here immediately after the Holiday trade, the actual value of the Pelicans pick next year is terribly overblown by nearly everyone talking about it. The 2003 NBA Draft (the most loaded draft since 1984) produced a grand total of three "franchise cornerstones" in LeBron, Carmelo, and Wade. All of whom were selected within the first five selections (the pick traded to Philadelphia is top 5 protected). The 1984 NBA Draft produced a grand total of FOUR "franchise cornerstones" in Hakeem Olajuwon (1st), Michael Jordan (3rd), Charles Barkley (5th), and John Stockton (16th). At absolute best, assuming this NBA Draft class meets expectations, New Orleans might have traded away an Alvin Robertson (1984 - 7th) or David West (2003 - 18th) unless a John Stockton-esque player slips through the cracks. And that is with hindsight in mind.

Second,the point made that New Orleans has sacrificed future cap flexibility. To a degree, this is correct. Cap room, however, eventually turns into basketball players. Especially with the newer high salary floor of 90% of the salary cap. Just as draft picks eventually turn into basketball players, so to does cap space. And hoarding cap space, which New Orleans could have had over $20 Million next summer if they did not trade their draft pick or sign Tyreke Evans, does not guaranteed success.

For every Dwight Howard to Houston there are numerous Charlie Villanueva and Ben Gordon to Detroit moves in free agency. Cap Space, especially loads of it, is likely to turn out poorly for a small market team. The ability to sign players is even more volatile than the draft itself. Fanbases and GMs find themselves held to the whim of indecisive players concerned more with making a brand of themselves. That leads directly to market share and desires to go to marquee markets. New Orleans offers neither of these things. Take a look at this link from Sham Sports outlining the cap space actually available to NBA teams this summer. For ease of consumption, I have listed the top ten teams with cap space in descending order below.

Franchise Cap Space
Atlanta $35 Million
Detroit $28 Million
Utah $27 Million
Charlotte $21 Million
Milwaukee $20 Million
Houston $16 Million
Dallas $13 Million
New Orleans $12 Million
Portland $11 Million
Phoenix $8 Million

Beyond Houston signing Dwight Howard (after some clever maneuvering to shed even more salary) and New Orleans finding a way to fit both Holiday and Evans into the fold, what team has turned the asset of "cap space" into an improved basketball team? Detroit marginally so. Other teams have turned this cap space, this beacon of hope to the downtrodden in the NBA, into expiring contracts (i.e. more cap space next year) and first round picks in the 20's. Utah is the most obvious example. Just rolling their 401-Hope(k) over into the next off-season.

As Ryan Schwan has pointed out over at Bourbon Street Shots, a selection from 19-27 in the draft results in someone incapable of sustaining a rotation spot 66% of the time! In baseball 1/3 makes you an All-Star, in building an NBA roster it usually gets you fired. Also note from that link that the two picks New Orleans traded, even if they both end up in the top 10, net a solid starter 34% of the time. Holiday is a 100% solid NBA starter.

Digging even deeper, I fail to find how New Orleans has truly sacrificed serious flexibility in the coming years. Take a look at the free agents coming available next summer. What was $20 Million in cap space going to secure for the Pelicans next summer? Eric Bledsoe might be a free agent, likely commanding a similar number as Jrue Holiday is already being paid. The difference is we know Holiday can be a starting point guard in the NBA. Phoenix is hoping that Bledsoe is ready to operate the controls. Plus Bledsoe, as Evans this summer, will be a restricted free agent. Teams must overpay to some extent to wrangle RFAs from the team holding their rights.

Offering a contract that the league considers fair increases the likelihood that it will be matched. If the league on the whole considers the contract fair then the team holding rights should match, and if things do not work out as planned trade that player at a later date. This premium must be paid by small market teams. New Orleans maintains the ability to utilize the full MLE in each of the next two seasons while staying well below the luxury tax. Quality players are available around $5 Million a year. The below chart is updated to reflect the announcement of Anthony Morrow. It does not include the Room Exception that Demps may still use to bring on an additional player.

Age 2013-2014 2014-2015 2015-2016 2016-2017
Eric Gordon 25 $14,283,844 $14,898,958 $15,514,031
Tyreke Evans 23 $10,300,000 $10,763,500 $11,227,000 $11,690,500
Jrue Holiday 23 $9,213,484 $9,904,495 $10,595,507 $11,286,518
Ryan Anderson 25 $8,308,500 $8,491,500 $8,500,000
Anthony Davis 20 $5,375,760 $5,607,240 $7,070,730
Al-Farouq Aminu 22 $3,749,602
Jason Smith 27 $2,500,000
Austin Rivers 21 $2,339,040 $2,439,840 $3,110,796
Anthony Morrow 27 $884,293 $924,086
Brian Roberts 28 $788,872
Darius Miller 23 $788,872
Jeff Withey 23 $490,180
Pierre Jackson 21 $490,180
Total 23.7 $59,512,627 $53,029,619 $56,018,064 $22,977,018

The "OKC" model is always referred to in cases of roster building. But the biggest albatross on their books was acquired by trade and immediately signed over his value to avoid free agency. Kendrick Perkins, if the name is slipping your mind. A player whose salary led directly to the Thunder breaking up their nucleus, trading away James Harden for what is now Jeremy Lamb and Steven Adams. An All-Star traded for two summer league players and the right to pay Kevin Martin $10 Million to not play defense. We should note that Perkins at the time was 26, while Evans and Holiday are only 23.

Cap space is not what the Pelicans want to pitch to Anthony Davis over the next three years. The hope of lottery balls and free agent signings has past. Teams hope through these means to acquire what New Orleans already has, a franchise cornerstone. What Dell Demps did this season went beyond that though. He maximized the rules of the CBA and gained two more players before they reach their "maximum" deal. The Pelicans now have the best player off two different teams which finished AHEAD of them in the NBA standings.

Read this article by Tom Ziller on how Philadelphia was overpaying for Jrue Holiday in November. Holiday went on to make the East All-Star team and drag Philadelphia to the 9th best record in the East. Despite the turmoil caused by Doug Collins and Andrew Bynum.

Tyreke Evans is also considered overpaid at this point by some. Lowe refers to the 4 year, $44 Million contract as a "monster offer". Evans first year salary will not rank in the top 50 of player salaries next year. Top 50! Look at the names on that list. Andrea Bargnani making $11.3 million and he doesn't rebound or play defense. Kris Humphries will make $12 Million next season. In this NBA Tyreke Evans, a man who put up the 5th best PER among all SGs in the league, is overpaid? A guy with the capacity to guard three positions and handle the ball in crunch time is not worth that? I strongly disagree.

To put a bow on it, I fail to see how New Orleans has increased their risk at this point in their development. Risk is inherent in the NBA world. Dallas has dumped salary each of the last two seasons. First in hope that Deron Williams would sign with them. He did not. Then in the hope that either Chris Paul or Dwight Howard would come to Big D. Now the Mavericks are signing 31 year old point guards to 4 year, $29 Million deals. The Mavericks had cap space, a dedicated owner committed to winning, the 5th largest market in the country, and a legitimate superstar about to take a big pay cut. That got them FOUR POINT GUARDS and a chance to talk to Andrew Bynum.

New Orleans chose to hit a couple doubles this free agency. Solid doubles that put quick, young runners (23 years old each!) on base. The gamble is not on those players, we know that they are capable players. We hope that with diminished responsibility their efficiency will increase. The true gamble is on the clean up hitter striding to the plate. The superstar that the fans pay to come see. The Pelican clean up hitter is Anthony Davis. New Orleans depends on his growth not only as a basketball player, but as a leader. And that bet is a safe play.