Historically, chasing restricted free agents (RFA) has been a lost cause for NBA teams. In most cases a player will sign an offer sheet with a new team, only to have his original team match the contract three days later and retain the player.
The Portland Trail Blazers, however, are in a unique position and may be able to use their salary cap space, Paul Allen's deep pockets, and some fancy contract negotiation to buck the trend and successfully lure restricted free agents over the next couple seasons. In this article I'll lay out three different strategies for successfully acquiring RFAs and review how they apply to the Blazers.
What is a RFA?
Before considering the Blazers' situation, specifically, let's quickly review what "Restricted Free Agent" means in the NBA (if you are already familiar with the RFA process then skip to the next section). Former first round draft picks commonly become RFAs as their rookie scale contracts are expiring. At that time most players will either opt to sign an extension with their original team, or enter into restricted free agency (Note: The process is a bit more complicated than that, but this simplified version is sufficient for our purposes. For a detailed rundown of all the nuances of restricted free agency consult Larry Coon's CBA FAQ.) .
If the player enters restricted free agency he is free to sign a contract, known as an "offer sheet," with any team in the league. But there is a caveat: The player's original team has three days to match any offer and, if they do, they automatically retain the player. The terms of the contract, however, must be matched exactly, including bonuses, raises, salary advances, or any other structures. Importantly, during those three days the contract counts against the offering team's salary cap so they potentially lose out on signing other free agents. Given that most teams end up matching the offer sheet it is rare that teams tie up cap space in the often futile hope of acquiring a coveted RFA.
Despite those restrictions, teams have successfully lured away RFAs in the past by using CBA nuances to negotiate salaries that are incredibly unappealing and thus not matched by the player's original team. In recent years teams with cap flexibility and/or cash on hand have used three basic strategies to do this; impressively, the Blazers are in a position to leverage all three of those strategies in upcoming seasons.
Option 1: The Trade Kicker
General Manger Neil Olshey reportedly included a trade kicker, or trade bonus, in his offer sheet to the Oklahoma City Thunder's Enes Kanter earlier this summer. A trade kicker in a contract like Kanter's dictates that if the Thunder trade him he will automatically receive a bonus of up to 15% of his remaining guaranteed contract, not including option years. The cap hit of the bonus will be spread over the remaining years of the contract, but is paid by the player's original team. For example, after next season Kanter will have about $35 million left on his contract before his option year. If the Thunder trade him in the offseason, they will be forced to add 15% to his remaining salary, increasing Kanter's remaining pay by about $2.6 million over each of the following two seasons (all numbers approximate). This increase also counts against the salary cap for his new team.
There is an important caveat to the trade kicker: A salary including a trade kicker in any single season cannot exceed the maximum possible salary for that player for that season. Usually this means that a player signed to a maximum deal will be minimally impacted by trade kickers as the salary cap generally does not increase by much. But with the massive salary cap increases this season and next season it means that players like Kanter will be eligible to receive the full 15% bonus.
For example, before a trade kicker, Kanter's salary in 2016-2017 will be about $17.1 million, but after a 15% bonus it would be slightly under $20 million. Because of the large cap increase the full bonus will NOT push Kanter over his maximum possible salary for that season. Thus he will be eligible to receive the full 15%, despite the fact that he signed for the summer 2015 maximum.
Further, when trading a player with a trade kicker, the trading team has to consider his original salary, while the receiving team has to count his salary AFTER the kicker. Two teams over the cap would have an exceedingly difficult time completing a trade for a player like Kanter without adding a third party facilitator.
Thunder owner Clay Bennett has also been notoriously stingy; finding ways around paying first round draft picks guaranteed money and refusing to amnesty Kendrick Perkins despite his declining performance. He will likely be loath to give Kanter, a player who is possibly already overpaid, a bonus to play for another team.
Because of the contract offered by Portland, the Thunder will be unlikely and unwilling to trade Kanter going forward, regardless of his performance. They are essentially stuck paying Kanter $18 million in 2018 and 2019. By 2017 they will also have negotiated new contracts in excess $20 million annually for Ibaka, Westbrook, and Durant meaning that in two years the Thunder could owe $90 million to only four players.
In short, Olshey's offer sheet limited Oklahoma City's salary flexibility significantly, and likely vaulted them high into the luxury tax for multiple seasons. The Kanter offer sheet was a no-lose situation for Portland: if OKC had passed on matching, the Blazers would have had another young asset to evaluate. But when Kanter was matched, his contract significantly hamstrung a division rival. Further, while history suggests that Paul Allen is no longer willing to flat out waste money on players like Shawn Kemp, he is willing to spend money to improve the team, so Olshey likely would have had Allen's blessing to deal Kanter's contract in the future, if necessary.
Portland was in a unique position to make this offer because they had the cap space to offer Kanter the max contract, the time to wait three days for the Thunder to respond, and the flexibility of a pending rebuild to spend multiple seasons developing Kanter. None of those circumstances are changing for the Blazers by next season and, as mentioned above, trade kicker contracts are maximally damaging in years with large salary cap increases, so we may see Olshey negotiate a similar offer sheet next summer.
Option 2: "Front load" the contract.
As a general rule, NBA salaries can only vary by as much as 4.5% per season (7.5% in rare cases). This restricts teams from "front-loading" or "back-loading" salaries to create artificial cap space. For instance, Portland could not have offered Ed Davis $14 million this season, and then $3 million for each of the next two seasons to save cap space.
That being said, there are two exceptions that allow players to receive a large chunk of their salary early in their contract: 1) Signing bonuses, 2) salary advances.
Teams have combined signing bonuses and salary advances in the past to make RFA contracts unpalatable to owners with limited cashflow. Several seasons ago, we saw the Blazers use this strategy to force the Utah Jazz to match an expensive deal for Paul Millsap, and then pry Wesley Matthews away from them the following summer using similar salary tricks.
In both cases Matthews and Millsap were reportedly offered a maximum 15% signing bonus and a maximally allowable 50% of their base contract for their first season as a salary advance, forcing the Jazz to pay a large portion of the contracts almost immediately upon signing. (Note that the 15% signing bonus is still distributed evenly across the contract, so general managers cannot game the salary cap with it.) The Jazz did not have as much cash readily available as the Blazers did, and decided to let Matthews leave, rather than being forced to pay him several million before the season started.
The 2011 CBA now limits signing bonuses for RFAs to 10%, but that could still be damaging to a team with limited cash on hand. For instance, if a RFA signed a 4yr/$40 million deal with a maximum 10% signing bonus and maximum 50% salary advance then he would be paid about $9 million, nearly a quarter of the total contract, before even suiting up for the new team.
The signing bonus has the added benefit of creating a mismatch between how much the player counts against the salary cap and what they are actually being paid. Although the effect is less substantive than the trade kicker salary to pay mismatch, that could still be a minor stumbling block while negotiating a trade.
The Blazers have used this in the past and Paul Allen is in no danger of going bankrupt at the moment so it is a safe bet that they will use this again to manipulate teams less willing to pay players upfront.
Option 3: The Gilbert Arenas Rule
As a team under the salary cap, Portland could also use the "Gilbert Arenas" provision to sign restricted free agents who entered the league as second round picks or were undrafted and have been in the league for only one or two years.
In those cases, teams under the cap can offer the player a first year salary of the mid-level exception, a second year salary with a 4.5% increase, and third year salary as high as the maximum for that player (see this article for full details). The offering team then gets to count the average salary of the entire contract against their cap for each season of the contract, while the player's original team must count the actual dollar amount of each season against the cap. For example, in 2012 Omer Asik and Jeremy Lin each signed a 3 year contract with Houston totaling roughly $25 million, with $15 million backloaded onto the final season. Since Houston was under the cap their cap hit was only roughly $8 million per season, but Chicago and New York (Asik and Lin's original teams, respectively) would have faced a $15 million cap hit in the final year of the contracts.
Portland will have this flexibility next season to offer similar contracts so it is worth keeping an eye on any 2nd round picks or undrafted players who start to make some noise around the league, especially if they're on a team at or near the cap. Olshey could make a move for them in the offseason if they fit Portland's roster composition
In the immediate future it is worth watching the Cleveland Cavaliers. Matthew Dellavedova and Tristan Thompson are both unsigned RFAs for the Cavs. Portland has been linked to Dellavedova, as well as to Cleveland in a potential Brendan Haywood deal. Will a Hayward deal include a gentleman's handshake that Olshey won't go after either of Cleveland's RFAs with one of the cumbersome contracts described here? If the Haywood deal falls apart will Portland go after Dellavedova?
More generally, Portland failed to attract any premier free agents this summer. This leaves Olshey with a conundrum - what should he do with Portland's cap space if he's unlikely to land an unrestricted free agent next year? Luring a RFA to the Blazers may be an alternative solution. Olshey could take advantage of the fact that there is less competition for RFAs because of the fear of the original team matching any offer, and use Paul Allen's money, large amounts of cap space, and the flexibility to take on unseemly contract structures to attract an otherwise unobtainable marquee player.