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2017 NBA Free Agency: New Orleans Pelicans salary cap primer

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Where do the Pelicans stand? What options do they have in the coming days?

NBA: New Orleans Pelicans at Los Angeles Lakers Gary A. Vasquez-USA TODAY Sports

The start of NBA Free Agency is just mere hours away.

Twitter will soon come alive at roughly 11 PM local time as if Stephen Curry is on another hot streak in a late West Coast game roasting some poor opponent from 35 feet. Adrian Wojnarowski, in his fresh new gig at ESPN, will be on Sportscenter with Scott Van Pelt and a special episode of The Jump with Rachel Nichols.

Jrue Holiday and the New Orleans Pelicans are reportedly meeting at the very beginning of the proceedings and it would not be a surprise if an agreement is announced shortly there after. Remember, Anthony Davis and his maximum extension was announced at precisely 11:01 PM central in 2015. A likely outcome is that the terms of this contract have already been agreed upon between the Pelicans front office and Holiday’s agent. Both Jrue and brother Justin Holiday have been working out at the Pelicans facility on Airline Drive this month. Oleh outlines this in more exhaustive detail below.

If Jrue Holiday does agree to a contract with New Orleans, it is very likely the Pelicans will operate above the salary cap. This means they will have bird rights to Dante Cunningham (and Donatas Motiejunas though I doubt he is staying in NOLA), the mid-level exception (up to 4 years, $36.1 million and abbreviated MLE), the bi-annual exception (up to 2 years, $6.7 million - abbreviated BAE), and minimum contract exceptions remaining. Both the MLE and BAE can be divided between multiple players.

Minimum contracts increased dramatically from $543k last season for a rookie to $815k in the new NBA CBA and the Pelicans will likely sign second round draft pick Frank Jackson with a minimum exception. An alternative would be to portion off a piece of either the BAE (2 year maximum) or the MLE (4 year maximum) for Frank Jackson. The 30th pick, Josh Hart, will start at $1.1 million on his mandated first round rookie deal for a point of reference.

If Jrue Holiday elects to sign elsewhere, the Pelicans have two options. Dip below the salary cap and operate as a room team or hope they can work out a sign-and-trade with Jrue’s preferred destination to remain above the cap and maintain their exception. If they go below the cap and renounce all three free agents and two trade exceptions, New Orleans will have a little over $12 million in space to work the free agent market.

The Pelicans can create more space by trading away other current players. Omer Asik, Alexis Ajinca, and Quincy Pondexter are the most likely candidates here. Waiving and stretching the remainder of Asik’s contract provides nearly $7 million in cap space and $3.5 million in dead money for the next seven seasons. Dell Demps could get creative and scratch out a lot of cap room but at the cost of future assets (trying to move Asik and Ajinca) and/or depth (instead focusing on trading away E’Twaun Moore or Solomon Hill).

However, a sign-and-trade might return Jrue Holiday’s replacement. If Holiday is interested in the Minnesota Timberwolves, who signed him to a 4 year $111 million contract in Nate Duncan’s Mock Off-season (still time to listen!), then possibly Ricky Rubio could find his way to the Crescent City. Alternatively, if a player is not in the return the Pelicans could net a massive trade exception. I’m skeptical on the sign-and-trade front for New Orleans. Possible? Absolutely. Likely? Why would other teams help the Pelicans out unnecessarily?

Since Jrue Holiday’s meeting is scheduled when it is and all of the reporting in recent days leaning heavily to his market shrinking, I expect him to re-sign quickly. The dollar amount is going to be big, probably too big considering Nico Bagiuo’s assessment of Holiday’s value back in March. Five Thirty Eight’s CARMELO estimates Holiday’s value at $87 million over the next five years, or an annual value of about $17.5 million. Don’t be shocked if Jrue’s contract is five to seven million more than that per year.

After that signing, Jrue’s brother Justin is likely on the docket. He too is in line for a substantial overpay. At that point the luxury tax may come into play for the Pelicans. Is Tom Benson capable of paying it? Sure. Willing? Pump the brakes. If the team was coming off a playoff berth behind Anthony Davis and DeMarcus Cousins, it would be far more certain. Should the luxury tax be a hindrance, expect Dante Cunningham to sign elsewhere.

Possibly the most exciting two weeks of NBA news is upon us: First free agency, and then before you know it, Cheick Diallo is going to be lighting it up in Las Vegas. Jrue and Justin might get overpaid, but an alternative where the Pelicans are starting a G-League worthy point guard could be worse and result in Cousins bolting next July. There are worse outcomes than being a capped out team with a 50-win ceiling. Don’t forget too quickly the last seven years of rooting for this franchise.