Details on the new CBA and the designated player veteran extensions are continuing to roll out. Basketball Insiders has obtained a copy of the term sheet and salary cap expert Eric Pincus has been explaining the changes and specifically what is going on with the designated player veteran extension. Here’s what all those details mean for the New Orleans Pelicans and Anthony Davis.
Three important points of clarification are apparent. First, the maximum salaries are 25%, 30%, or 35% of the actual salary cap. Before, the calculations were far more obtuse concerning different benefits and the amounts were based off a slightly lower number than the actual reported salary cap. Three cheers for simplicity. Second, maximum raises on a contract have increased from 7.5% to 8% for players staying with their current team and from 4.5% to 5% for players leaving in free agency. Third, the designated player veteran exception is available to players on their original team or a team that traded for that player while he was on his rookie contract. A designated player veteran exception (I’ll use DPVE from here on out) is available to players entering their eighth or ninth season.
Remember, if Davis forces a trade, another team cannot offer a DPVE.
Qualifying for the DPVE requires selection to an All-NBA team or winning the defensive player award in the previous season or in two out of the last three previous seasons. An MVP in any of the three previous seasons also qualifies. Anthony Davis will enter his eighth season in the summer of 2019. There will be two seasons remaining on his contract, the 2019-20 season and a player option for the 2020-21 season. There is absolutely no reason for Davis to take the player option at this point so let’s ignore that.
Davis will not be a free agent in the summer of 2019. He could, potentially, demand a trade to another franchise. This is how Chris Paul forced his way out back in 2011. New Orleans could offer a renegotiation and extension at that time, assuming the renegotiation rules have not changed. This is what both the Oklahoma City Thunder and Houston Rockets did this past summer with Russell Westbrook and James Harden. Updating the potential length of such extensions means Davis would not be forgoing additional years by signing early. Just freedom of choice. And a lot of money.
It’s easier, however, to compare apples to apples and consider what the Pelicans and other teams could offer in the summer of 2020. If Davis is selected to a 2020 All-NBA team, wins the 2020 Defensive Player of the Year, or is selected in 2018 and 2019 for either honor, or wins the MVP in 2018, 2019, or 2020, he is eligible for the DPVE. New Orleans can offer five years beginning at 35% of the salary cap (this is the bonus of the DPVE) with 8% raises. The rest of the market can offer four years beginning at 30% of the salary cap with 5% raises.
Assuming a $115 million salary cap (the NBA most recently projected $114 million for 2020-21 and have regularly undershot these estimates, plus we enjoy dealing with fives and zeros), New Orleans could offer five years, $233 million while the best the rest of the NBA could offer is four years, $148 million. Yes, $85 million more. Even just comparing the first four years of the deal, the Pelicans offer is worth nearly $32 million richer.
Before the DPVE, the difference in what teams could offer a free agent largely hinged on the fifth year and slightly higher raises. The entire difference over the first four years, while millions of dollars, could typically be counted on two hands. Both offers started at the same point, whatever the maximum the CBA allowed. Now the new CBA adds on another layer, giving the home team, and only the home team, 5% more to offer in the first year. At a $115 million salary cap the difference is $5.75 million in year one and continues to grow over time.
Superstars can still leave. The NBA will not change that. What they are attempting to do is to provide substantial incentives (like $85 million more guaranteed) to keep players with the team that drafted them.
Will it work? We have a couple summers to see this new clause in action before the Pelicans get a swing. Upcoming free agents like Paul George, James Harden, and Russell Westbrook should provide the New Orleans front office with some information. For Anthony Davis the question may become rings or money. So far the difference hasn’t been enough to keep superstars from chasing rings. Is $85 million enough to tip the scales?