The New Orleans Pelicans are in a tight spot, as Oleh discussed days ago. How tight? If recent reports are accurate, Dell Demps has this team nearly on top of the NBA salary hard cap. What is it, and what does it mean?
Jason Calmes went long on the hard cap for Bourbon Street Shots weeks ago. Some of it was common knowledge on the salary cap. Some of it was known by most folks who talk the CBA often (how the hard cap in triggered and where it is). But one piece, as it relates specifically to New Orleans, was far more important than the remainder: Incentives and how they are applied to the hard cap.
Right of the top, all incentives are included in the hard cap calculation. Likely incentives are typically included in a player’s salary figure one finds reported in the standard locations, while unlikely incentives are not. So, the hard cap factors in these otherwise invisible unlikely incentives.
There are two salaries that are substantially impacted by those three sentences. Omer Asik's contract and the new one Jrue Holiday just signed.
Jrue Holiday is staying in NOLA with a deal that could be worth as much as $150 million: https://t.co/bOMzK4L0hW— SportsCenter (@SportsCenter) July 1, 2017
"Could be worth as much as $150 million" sounds like a massive overpay for Jrue Holiday. Now, consider for a moment that when dealing with hard cap calculation that sentence reads instead "worth $150 million," full stop.
Once the Pelicans trigger the hard cap, incentives are no longer probable but assumed to be earned. This year, for the purpose of the hard cap, Jrue Holiday counts for over $29 million on the Pels' books.
The $3.3M Rajon Rondo contract now has the Pelicans $486K below the luxury tax. New Orleans has 12 guaranteed... https://t.co/woppQsAi88— Bobby Marks (@BobbyMarks42) July 19, 2017
Bobby Marks of ESPN has computed New Orleans sits $486k below the luxury tax. These luxury tax calculations do not assume unlikely incentives, but instead the amount the Pelicans are expected to actually pay.
Hard cap calculations, on the other hand, do include unlikely incentives, which pushes the Pelicans number much higher. The salary apron (hard cap) is set $6 million above the luxury tax. Holiday's incentives can be roughly calculated to be $4.8 million a year; $24 million (difference of $150M max and $126M reported) divided over five years. Omer Asik has another $1 million in unlikely incentives. If you tack on another $5.8 million onto the Pelicans hard cap tab, they are just $686k under.
Have the Pelicans triggered the hard cap?
As Oleh outlined on Friday, signing Rajon Rondo for $3.3 million and Darius Miller for $2.1 million (recent insider report by Bobby Marks) means the hard cap is indeed in effect. The total amount of those two contracts is in excess of the taxpayer mid-level exception, one of the three ways (using the bi-annual exception or acquiring a player in a sign and trade are the others) to trigger the hard cap.
There is a small outside chance that Marks is incorrect and Miller was signed to a minimum contract for two years and $3.1 million, as initially reported by Sportando. In that case, the Pelicans have perhaps not triggered the hard cap; however, one should lean towards initial reports being less accurate than a savvy front office insider weeks after the fact.
If New Orleans sits just $686k under the hard cap, further roster refinement demands one thing: the team cannot sign another player, not even a minimum contract, without first shedding salary. That’s a big problem considering a valuable Dante Cunningham and his full bird rights continue to languish on the outside looking in.
Here are a few options.
Waive unguaranteed contracts: Jordan Crawford, Quinn Cook, and Axel Toupane are all easily removed from the Pelicans hard cap calculations with minimal cost. Toupane and Cook are currently guaranteed for $25k a piece; that amount increases for both to $100k this coming Tuesday. Crawford's contract fully guarantees on August 1st. However, their contracts are very small and waiving one (read Toupane) opens roughly $2 million under the hard cap. That is unlikely to be enough to re-sign Dante Cunningham.
Waive and stretch Omer Asik: This opens up a substantial amount of room this season for a significant long term cost. Asik has nearly $25 million in guaranteed salary. Stretching it over the maximum allowed seven years creates roughly $7 million in room below the hard cap. The cost, though, is a $3.5 million cap hit for each of the next seven years.
Moves requiring assistance
Salary dumping: This will cost the Pelicans in different ways. They could pay a team to take on a salary like Quincy Pondexter's in either cash (maximum amount New Orleans can send out is about $5 million this season), draft picks (the Pelicans own the rights to all of their own future picks), a combination of the two, or even taking on another smaller salary.
Buyout: Omer Asik again is the focal point. He and the Pelicans can negotiate to reduce the amount of salary he will be paid in exchange for releasing him from the contract — granting him freedom from rotting on an NBA bench for the next two seasons. Asik must agree, which is why this is not a unilateral option.
Trades in general: Rather than dumping salary, New Orleans could trade players for other players. However, the hard cap will be a limiting factor as they cannot add more than $686k in a trade unless salary is shed using other methods. Preferably, Dell Demps would like to partake in a trade bringing back an unguaranteed contract or two — so that the player(s) could be waived.
The main takeaway here is the New Orleans Pelicans must cut salary in order to continue making improvements to the roster. There are options available to do so with obvious and some yet to be determined drawbacks. Do not doubt they are hard at work and will press up to each and every deadline because the clock is ticking.