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Analyzing the implications of Lillard’s probable “super max” contract

The Trail Blazers guard is reportedly set to sign a Designated Veteran contract extension.

NBA: Golden State Warriors at Portland Trail Blazers Troy Wayrynen-USA TODAY Sports

Yahoo’s Chris Haynes has reported that Trail Blazers star Damian Lillard will likely sign a Designated Veteran contract extension — commonly called a “supermax” — this summer. Haynes’ article confirms a March report from ESPN’s Brian Windhorst stating that Lillard and the Blazers were negotiating an extension.

Let’s dig into the specifics:

What is a supermax contract?

A supermax extension will pay Lillard up to 35 percent of the team’s salary cap in year one of the deal, instead of a normal maximum salary of 30 percent for a player with his experience.

Lillard technically hasn’t qualified for the 35-percent maximum yet, but making an All-NBA team this season, a virtual certainty, will do it:

How long will Lillard’s contract last and how much will he be paid?

Supermax contracts can cover up to five seasons, but NBA rules prohibit players from having more than six years remaining on their current deals. Since Lillard has two years left on his current contract an extension signed this summer can only add up to four years to his deal, expiring as late as July 1, 2025.

Here’s the year-by-year breakdown of what Lillard’s contract might look like:

  • 2021-22 salary: $42.3 million
  • 2022-23 salary: $45.7 million
  • 2023-24 salary: $49.1 million
  • 2024-25 salary: $52.5 million
  • Total: $189.7 million

These figures use a conservative-ish salary cap projection of $121 million for the 2021-22 season and assume Lillard will receive the maximum allowed 35 percent of the cap with maximum eight percent raises.

What other details could the contract have?

The contract could have a player option or a team option. It’s unclear if it will have either, but Lillard will be motivated to push for a player option (see below).

Contract extensions cannot add no-trade clauses, but the league rules will prohibit the Blazers from trading Lillard for one year after he signs the extension.

A trade bonus can technically be added to this deal, but trade kickers do NOT exercise if the bonus takes the player’s salary over the maximum allowed salary. Since Lillard is, presumably, signing a supermax it would take a massive jump in the salary cap for this to become relevant. It’s unlikely Lillard will fight to add a trade bonus.

Is this a good deal for Lillard?

There is, however, one catch for Lillard: as mentioned above he has two seasons remaining on his contract so if he signs this summer the extension can only add four additional years (i.e. it would expire in 2025). If he waits until next season he can sign an extension that expires in 2026.

The one-year difference is not trivial. His 2025-26 salary will probably exceed $50 million.

The obvious benefit to Lillard is that it locks in nearly $200 million in guaranteed salary immediately. Signing an extension now also accelerates the timeframe for his next contract, which could maximize long-term earnings by locking in his final pre-38 years old deal a season earlier.

Here’s a hypothetical scenario:

If you’re eyes are glazing over, don’t worry, this is super confusing.

Here’s the gist of it:

  • Assuming he negotiates a player option, Lillard can sign his next extension three years after he signs this extension (i.e. 2022).
  • Players are restricted in how much money they can earn after they turn 38, so it behooves them to lock in as much money as they can approaching that age.
  • Being able to sign another extension in 2022 may help Lillard do that, maximizing career earnings even if the current extension does not run as long as possible.

Is it a good deal for the Blazers?

I’ll write more about this in the future but the important thing to know is that this extension does nothing to Lillard’s current contract. The financial impact of Lillard’s contract will not change for the next two years.

More theoretically, signing players to supermax deals is a risk. Lillard likely won’t have a total falling out like John Wall but he may experience a deterioration in skills like Chris Paul has. Paying a declining player north of $50 million a year is a hard ask.

Lillard’s contract will also eat up a huge percentage of the salary cap — more than 35 percent since his eight percent raises will probably outpace annual cap increases. As we’ve seen with the Rockets who tried to stay contenders this season while managing cap by shedding Trevor Ariza and Luc Mbah-a-Moute, having stars with high-end contract can lead to problematic personnel decisions.

With that said, the Blazers, of course, don’t have much choice in the matter. Lillard is an All-NBA level talent who has repeatedly proven his worth so keeping him on the roster is of paramount importance. General Manager Neil Olshey will need to offset the financial obligations to the top end of the roster by finding useful players on value contracts going forward — “hitting” on first round draft picks being the classic model.