Jusuf Nurkic and the Portland Trail Blazers reached a contract agreement that ended his restricted free agency today. According to reports from multiple media sources, the center signed a 4-year, $48 million deal to remain in Portland. Nurkic’s signing gives the Blazers 14 players under contract. It also pushes them past the luxury tax threshold, which may affect how their roster develops in the coming year. Though it seems like a move to preserve the status quo, Nurkic’s signing may become a bellwether move. It’ll either cost them extra cash—signifying Paul Allen’s coffers flying open—or it’ll require them to trade away one of their current players to preserve financial integrity.
Absolute precision with Portland’s salary cap is difficult, as exact details of Nurkic’s payment schedule have not been released. $48 million divided equally over four years is slightly different than $48 million starting at a lower salary and increasing with incremental raises. For purposes of this exercise, we’re going to assume the latter scenario.
Here are the approximate numbers we know of. we know of.
- Heading into the offseason the Blazers owed $110.5 million in guaranteed salaries to 8 players.
- Since then they have agreed to sign, or pick up contracts for, Anfernee Simons, Gary Trent Jr., Nik Stauskas, Seth Curry, and Jake Layman. Those moves bring them to 13 players and add $8.3 million to their total, which now reads $119.3 million.
- Assuming an incremental-raise scenario, Portland’s bill for Nurkic in 2018-19 will be $10.6 million. This is the best case. It raises their obligation to $129.9 million.
- If the Blazers keep or add a minimum-salary 15th player (Wade Baldwin IV, for example), that will leave the total at $131.4 million.
As reported last week, the NBA Salary Cap for 2018-19 is $101.8 million. The Luxury Tax Threshold is $123 million, the Tax Apron $129.8 million.
The Blazers were well over the cap line before they signed anybody this summer. That was never in doubt.
Nurkic’s new contract pushes them over the tax threshold and right to the apron. As long as they don’t take on that 15th player, there’s a chance they’re still under the apron, depending on accounting, but it makes little difference practically.
As of now, the Blazers cannot receive a player via sign-and-trade or use more than the non-taxpayer mid-level exception (which they’ve already used most of to sign Curry and Trent). The tax apron functions as a hard cap for them in this way. Unless they trade away salary, those avenues for player acquisition are closed.
Portland can still used the Traded Player Exceptions it owns until they expire. Obviously that would take them into the tax stratosphere, but it’s an option. The tax apron does not restrict TPE usage.
At their current salary level, Portland’s penalty at the end of the year will be around $10.8 million. Adding a 15th player would push the penalty to $13.5 million. This is on top of their regular salary obligation.
Ed Davis Explained
The numbers above makes clear why re-signing Ed Davis to that 15th slot would have come dearly. Even the modest salary of $4.4 million would have pushed Portland’s salary obligation to $134.3 million, then piled on penalties of $19.5 million.
- Portland’s total cost for the current 14-player roster, plus tax penalties, is $140.7 million.
- Their total team cost with Davis on board would have been $153.8 million.
- That’s a $13.1 million difference. They likely decided Davis wasn’t worth $13.1 million.
Even if all of the above made your eyes blur. here are five critical implications of the Nurkic signing that you need to know.
- Taking on new players will get exorbitantly expensive now. The next $3.1 million in salary Portland pays will incur a tax penalty of $1.75 dollars per dollar spent. That’s $5.4 million additional for that $3.1 million contract...a total cost of $8.5 million. For every dollar over $3.1 million, the penalty goes up. Example: if the Blazers use their TPE to trade for a player making $10 million, they’ll pay $28.9 million in salary and penalties on that contract. Don’t hold your breath.
- With Nurkic on board, Portland’s salary obligation in the Summer of 2020 rises to $87.3 million against a projected salary cap of $116 million. The catch: that number accounts for only five Blazers under contract. On paper they’ll have a little less than $29 million to play with that summer, but factor in minimum-salary cap holds and the available space dwindles to somewhere around $22 million. To use that amount on a single player, they’d need to carry eight minimum-contract players on the roster. They’d also need to refrain from making any cap-significant signings or trades between now and 2020. Again, don’t hold your breath.
- Not only does crossing the tax threshold incur a penalty, it removes a financial reward for the franchise. Luxury Tax dollars are redistributed among all non-tax-paying teams. If ten teams end up paying $100 million total in tax penalties, the other 20 franchises get $5 million each. That’s a relatively small amount per team, but it increases the actual cost of staying over the tax. This is important because...
- Tabulation of salaries for luxury tax purposes are not made until the end of the season. A team can start the year over the tax line without paying an extra dime. Where they end the year determines whether they’re a taxpayer or tax receiver. Re-signing Nurkic incurs no penalty for Portland now. If they do not reduce their salary obligation by the end of the year, they will pay tax penalties and lose out on the tax windfall.
- Right now the Blazers are approximately $6.9 million over the tax threshold. Al-Farouq Aminu makes just over $6.9 million and will become an unrestricted free agent at the end of the year. If the Blazers want to stay under the tax line and they cannot trade away a higher-salary player to do so, trading away Aminu for a second-round pick and/or cash would accomplish that.
The decision to pick up Wade Baldwin or another 15th man will be the first indication of Portland’s immediate direction. If they decide against keeping Baldwin or taking on a 15th contract, the reason may be financial.
Obviously if the Blazers use the TPE, they’re either planning a bigger salary-dump trade or are fine with exceeding the tax threshold. That’ll be another indication.
After that, look for Portland to accelerate efforts to unload one of their albatross contracts. If they don’t take on significant extra salary and they don’t make money-saving trades, watch for Aminu to be moved before the trade deadline for nothing in return.