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2020-21 Salary Cap Analysis: It’s a New Game

It's the end of September and with the Draft, Playoffs, and Free Agency finally behind us, we look forward to a new season starting next month .....

Whoops ... That was last year.

The New Reality

We are now living in what should be an alternate reality, but it's real. Many NBA owners are facing huge financial losses next year if substantial portions of the season are played without spectators. Owners and Players are still negotiating over schedules, the salary cap, and quite possibly other significant changes to the CBA (Collective Bargaining Agreement) to adjust to an unprecedented situation.

Nevertheless, the Blazers' season is over, and as fans we are already looking forward to an infusion of new players that will hopefully raise the competitive prospects of our team. So even though there's still significant uncertainty, we can analyze the Blazers' salary cap situation based on the current prevalent expectation that the salary cap will be artificially set at $109M to match last season's cap for the purpose of smoothing out large cap fluctuations in subsequent seasons.

Purpose

Three major options will be examined in this article -€” Operating with Salary Cap Room, Managing the Roster to the Tax Threshold Limit, and an unlikely All-In option. The purpose of this article is to explain and document the financial mechanics of these options -€” not to debate their competitive merits or what players might be involved in transactions. Those discussions are left for reader's comments.

Assumptions

An entire article could be devoted to a discussion about cap smoothing, but for this analysis I'll use the $109M figure and update it later if it changes. Bear in mind, that most of the Exceptions, Tax Threshold, Apron, and other financial amounts used in this article also scale with changes to the salary cap.

The NBA has announced the draft will take place on November 18, and presumably the players 2019-20 salary contracts will now terminate within a week to 10 days following that date, and the 2020-21 Moratorium and free-agency period will begin (that follows the normal timeline and the previous plan when an October draft date was tentatively scheduled).

The Blazers 2020-21 Roster Status (as of Sept 27, 2020)

Let's begin with a look at the Blazers under contract at the close of the 2019-20 season.

Guaranteed Contracts (7) - Dame, CJ, Nurk, Collins, Simons, Trent, Little

Partially Guaranteed Contract (1) -€” Ariza ($12.8M, $1.8M guaranteed)

Player Options (2) - Hood ($6.0M), Hezonja ($1.9M)

Bird Rights (2) -€” Whiteside, Swanigan

Non-Bird Rights (1) -€” Melo

Restricted Free Agent, Non-Bird Rights (3) -€” Gabriel, Hoard, Brown

Player Notes:

1. Hood is rehabbing from a torn Achilles tendon and will almost certainly opt-in to his 2020-21 contract.

2. Assume Hezonja will opt-in to his near-minimum salary contract. He could choose to opt-out and become an Unrestricted Free Agent to try to find a better salary or more playing-time with another NBA team, or a team outside the NBA. But in most scenario's, if he choses to leave he would likely be replaced by another minimum salary veteran, so his leaving would have a minimal effect on this analysis.

3. The Blazers have a financially significant decision to make regarding Ariza, so those options will be included. (His off-court issue will not be discussed.)

4. The Blazers will consider re-signing Whiteside, Melo, and Gabriel, so they will be included in this analysis.

5. Swanigan, who chose not to go to Orlando, is unlikely to be re-signed and will not be included in this analysis.

6. Hoard and Brown had Two-Way Contracts (which don't count toward team salary) and are unlikely to be signed to standard contracts. So they will not be included in this analysis, but could return on Two-Way Contracts.

Salary Cap Holds

Every Blazer free-agent that is not renounced incurs a salary cap hold that counts against the Team Salary for the purpose of determining [salary cap] Room. The cap holds for the players in this analysis are listed below. Un-renounced Traded-Player Exceptions (TPE) also count as salary cap holds.

Whiteside UFA / Bird Rights / $32.7M

Melo UFA / Non-Bird Rights / $3.1M

Gabriel RFA / Non-Bird Rights / $1.7M

Bazemore TPE $7.1M

Labissiere TPE $2.3M

Traded Player Exceptions

Traded Player Exceptions (TPE) have acquired a skeptical reputation amongst some fans because they often expire without being used (they have a 1-year life). While it may not be highly probable it gets used, it would be a mistake to dismiss the potential value of our $7.1M TPE. It allows us to accept a player in a trade without sending back a player, and it's fortunately above the salary of players previously signed with a Tax-payer Mid-Level Exception. In this unusual year, faced with large financial losses, there may be a team that wants to rid itself of a useful, but overly expensive rotation player (perhaps on a long term contract), particularly as they make other acquisitions.

Although it may seem unlikely that a team would "give away" a useful player for nothing, that is not the way most TPE's are used. A player can also be traded into a TPE for just draft picks and/or cash. But more often a team in a trade involving multiple players, or multiple teams, needs to create additional cap room by getting rid of one of their existing players, or they can't accept an incoming player's salary and need to redirect that player to a 3rd or 4th team that has a TPE. That was the way we acquired Robin Lopez, and last year the Clippers acquired Mo Harkless from us via Miami.

Team Salary, Salary Cap, and [salary cap] Room

Team Salary is a bit complex, but for the purpose of operating with [salary cap] Room, we can consider Team Salary to simply be the sum of all player salaries (not including Two-Way players), Dead Money (owed waived players), and all un-renounced cap holds and exceptions. A team's Room is then the difference between the Salary Cap and that Team Salary.

If a team has Room, it can use it to sign free agents or make trades without restrictions as long as it remains below the salary cap at the end of those transactions.

A very important concept is that a team can't operate with Room and then later use a Mid-level Exception [MLE], Bi-annual Exception [BAE], or Traded Player Exceptions [TPE's]. Therefore, to calculate Room, the amounts of those exceptions are added to the Team Salary, but are automatically renounced when a team has Room. (i.e. when the Team Salary without its exceptions is below the salary cap by at least the amount of the exceptions, the exceptions are lost.) A team can also choose to renounce its exceptions to create Room.

A team that operates with Room is given an additional Room Exception ($4.8M this year) that can only be used for Free Agents after its Room is consumed.

OPTION 1 - Operating Below the Salary Cap

Do the Blazers have Room?

Most fans assume that the Blazers will operate above the Salary Cap, i.e. they will not have Room and therefore will use Exceptions (such as a Mid-Level Exception). While that is the most likely case, it is not their only option. They could operate with Room below the Salary Cap. To calculate their potential Room the Team Salary of a 12-player roster must be calculated with an Incomplete Roster Hold (IRC) for each open roster slot. The "dead money" of contracts being paid to players that have been waived is also included along with all un-renounced Salary Cap Holds (including TPE's).

Therefore, to create maximum Room the Blazers would have to renounce the Bird Rights and Restricted Non-Bird Rights for Whiteside, Melo, and Gabriel. (The $32.7M cap hold for Whiteside, by itself, would completely wipe out all Room.) Ariza would also have to be waived (creating an additional $600K in dead money instead of his $12.8M in salary), and their 1st round draft pick traded for a future pick, or included with another even-salary player trade. Finally, the TPE's would also have to be renounced.

Blazer Maximum Room Calculation

PORTLAND

2020-21

1

Damian Lillard

31,626,953

2

C.J. McCollum

29,354,152

3

Jusuf Nurkic

12,888,889

4

Trevor Ariza - waived - IRC

898,310

5

Rodney Hood

6,003,900

6

Zach Collins

5,406,255

7

Anfernee Simons

2,252,040

8

Nassir Little

2,210,640

9

Mario Hezonja

1,923,136

10

Gary Trent Jr

1,663,861

11

Incomplete Roster Charge

898,310

12

Incomplete Roster Charge

898,310

Waive Ariza (Dead Money)

600,000

Subtotal (12 Players)

96,624,757

Previous Dead Money

4,757,775

Subtotal w/Dead Money

101,382,532

Salary Cap

109,140,000

Over Cap

(7,757,468)

Hence, by waiving Ariza and other renouncements, the Blazers could create $7.8M in Room, and then also have a $4.8M Room Exception. But they would have 5 open roster spots to fill (must have no less than 14 players on standard contracts). If they filled 2 roster spots with their Room and the Room Exception, without other trades they would still have 3 roster slots left to fill with rookie or veteran Minimum Salary Exceptions.

Should Hezonja chose to opt-out of his contract it would add $1.0M to the Room because his $1.9M salary would be replaced by another $0.9M Incomplete Roster Hold. There would then be $8.8M of Room, and 6 roster spots to fill.

Why Would the Blazers Choose to Use Room?

The obvious question is why use $7.8M in Room rather than the $9.3M MLE, BAE, TPE, and Bird Rights? There are only a few circumstances where it would make sense, but a GM must be aware of the possibility. For instance, if decisions were made to waive Ariza and not re-sign Whiteside (even for a Sign & Trade) or Gabriel, then those cap holds can be renounced without consequences.

The choice of acquisition tools would then depend on specific free agent and trade opportunities to determine whether $7.8M of Room and a $4.8M Room Exception would be more useful than the $7.1M TPE, $9.3M non-tax-payer MLE and a $3.6M BAE. Fortunately, that decision could be delayed until circumstances dictate, and no renouncements need to be made in advance. For instance, if no TPE opportunities were available, and 2 free agents were willing to sign for $7.8M and $4.8M, but one of them wouldn't sign for the $3.6M BAE, then using Room would be a solution.

Also keep in mind that Room is much more versatile than Exceptions. TPE's can only be used to receive a player in a trade (and can't be combined with a player's salary), and the MLE, BAE, and Room Exception can only be used for Free Agents. But $7.8M of Room can be used for Free Agents or Trades, and can be combined with a player's salary to acquire a player with a higher salary than allowed under the normal salary matching rules. For instance, if the Blazers (as a non-taxpayer) were to trade Hood ($6M) plus draft picks they could only take back $10.5M in salary (175%+100K of his salary) when operating above the salary cap. But they could take back $13.8M ($7.8M + $6M) in salary using that Room.

So while it is unlikely the Blazers will opt to use Room, it must not be dismissed as a possibility.

Operating Above the Salary Cap

MLE, BAE, Bird Rights

In most cases the Blazers would elect to operate above the Salary Cap using a combination of Exceptions and Bird/Non-Bird Rights for their free agents. The TPE's were listed earlier (the $7.1M TPE being most valuable). In addition, if their Team Salary (excluding cap holds) stays under the $138.9M Apron (about $6.3M above the Tax Threshold), they will have a non-taxpayer [full] $9.3M MLE and a $3.6M Bi-annual Exception (BAE). If their team salary would exceed the Apron after a transaction they can't use the BAE and they receive a $5.7M tax-payer MLE (TPMLE) instead of the full MLE. Fortunately, (it will be shown below) unless they make a large Sign & Trade (S&T) with Whiteside, it would be very difficult for them to exceed the Apron.

The Jody Factor

We don't know how much money Blazers GM Neil Olshey will be allowed to spend on next year's roster, or on large long-term contracts. Jody Allen, or whomever she has designated to manage the Blazers finances, will eventually make that decision.

One reasonable assumption is that Olshey will NOT be allowed to exceed the luxury tax threshold, which would be $132.6M if the salary cap is set to the estimated $109M, and the CBA formula is applied to determine the tax threshold. (The Owners and Players could renegotiate that formula, or any part of the current CBA.) The Blazers have been a taxpayer in each of the last two seasons, and if they are again in 2020-21, they would have to pay a repeater tax ($1/$1 over the tax threshold) if they become a tax payer for a 4th time in 2021-22 or 2022-23.

Jody could also decide to let Neil Olshey go "All-In" and use all available player acquisition tools to build next season's roster. I think that is much less likely, but I'll leave that debate for another article. What's important in this article is identifying what scenarios would drive the Team Salary over the Apron, which is the point that the Blazers lose their right to use the Non-taxpayer MLE and the BAE, and instead receive only the Taxpayer MLE.

A very unlikely third scenario, the Doomsday Scenario, would be for Jody to order Olshey to reduce the Team Salary as much as possible to mitigate potentially huge financial losses from playing the season without spectators. I prefer to not contemplate that scenario in this article.

OPTION 2 - Tax Threshold Limited Rosters

The Blazers are in a very good position to use most or all of their player acquisition tools and still stay under the Tax Threshold as long as they don't make a trade that significantly increases their team salary (such as a large Whiteside Sign & Trade).

Ariza's Guaranteed Salary Date & Trades

The exact date that Ariza's $12.8M contract becomes fully guaranteed is not known at this moment. It had been pushed out to October 18 when the draft was tentatively rescheduled for October 15. Presumably it has been pushed out again to just after the new November 18 draft date.

If Ariza is officially traded prior to his contract being fully guaranteed, only $1.8M counts as outgoing salary for matching purposes. If he is traded after the fully guaranteed date then $12.8M counts as outgoing salary. Nevertheless, it is fairly common to agree to a trade involving draft picks and players on or near draft night, but the trade not be executed for a week or so to take advantage of changes in player's salaries. Hence, if the Blazers do trade Ariza on or shortly before draft night, that would be the expected process.


Case 1 -€” Ariza Stays or is Traded

If Ariza stays, or is traded for an equivalent salary player(s) ($12.8M), the Blazers could keep their #16 draft pick, use their non-taxpayer MLE and BAE, and still have $5.7M to spend without exceeding the Tax Threshold.

They could spend that $5.7M with their TPE's, or use it to bring back Whiteside, Melo, or Gabriel, or acquire players using the Minimum Salary Exception. Of course, they could also increase the $5.7M by spending less of the MLE or BAE. If Ariza (plus potentially additional players, or our #16 draft pick) is traded, the difference between the returning and outgoing salaries will also increase or decrease that amount.

The Blazers have full Bird Rights for Whiteside so they can offer him any amount up to his maximum permitted salary, which is $32.7M. They have non-Bird Rights for Melo and RFA Gabriel, so they can offer Melo up to $3.1M, and can match any offer for Gabriel up to $1.7M. If they wish to spend more on Melo or Gabriel they would have to use part of their MLE or BAE.

Ariza Stay or Trade

PORTLAND

2020-21

1

Damian Lillard

31,626,953

2

C.J. McCollum

29,354,152

3

Jusuf Nurkic

12,888,889

4

Trevor Ariza/Incoming Trade

12,800,000

5

Rodney Hood

6,003,900

6

Zach Collins

5,406,255

7

Anfernee Simons

2,252,040

8

Nassir Little

2,210,640

9

Mario Hezonja

1,923,136

10

Gary Trent Jr

1,663,861

11

#16 Draft Pick

3,121,080

12

MLE

9,257,760

13

BAE

3,623,394

14

TPE/Whiteside/Melo/Gabriel

5,700,000

15

Open

Subtotal (14 Players)

127,832,059

Dead Money

4,757,775

Subtotal w/Dead Money

132,589,834

Salary Cap

109,140,000

Over Cap

23,449,834

Tax Level

132,627,000

Over Tax Threshold

(37,166)


Case 2 -€” Waive Ariza

If Ariza is waived it creates an additional open roster slot and adds $600K to this year's dead money, but the Blazers could keep their #16 draft pick, use their non-taxpayer MLE and BAE, use their entire $7.1M TPE, and still have $10.8M to spend without exceeding the Tax Threshold.

They could spend that $10.8M to bring back Whiteside, Melo, Gabriel, or acquire players using the Minimum Salary Exception. Of course, they could increase the $10.8 M by spending less of the TPE's, MLE or BAE, and any trades they make would also increase or decrease that amount.

Ariza Waived

PORTLAND

2020-21

1

Damian Lillard

31,626,953

2

C.J. McCollum

29,354,152

3

Jusuf Nurkic

12,888,889

4

Open

5

Rodney Hood

6,003,900

6

Zach Collins

5,406,255

7

Anfernee Simons

2,252,040

8

Nassir Little

2,210,640

9

Mario Hezonja

1,923,136

10

Gary Trent Jr

1,663,861

11

#16 Draft Pick

3,121,080

12

MLE

9,257,760

13

BAE

3,623,394

14

TPE

7,100,000

15

Open/Whiteside/Melo/Gabriel

Ariza Waived

600,000

Subtotal (13 Players)

117,032,059

Dead Money

4,757,775

Subtotal w/Dead Money

121,789,834

Salary Cap

109,140,000

Over Cap

12,649,834

Tax Level

132,627,000

Over Tax Threshold

(10,837,166)

Case 3 Additional Trades

Since (non-TPE) trades up to $20M result in incoming/outgoing salary differences of $5M or less (due to salary matching rules), they can be factored into one of the above two cases without exceeding the Luxury Tax Threshold. Only multiple trades that each returned significantly more incoming than outgoing salary, or re-signing Whiteside to a $10M+ contract for ourselves, or for a Sign & Trade, would significantly limit our ability to use the MLE, BAE, and TPE without exceeding the Tax Threshold. Hence, the Blazers are in a very good position to use a combination of their player acquisition tools to take advantage of most opportunities that might occur and still stay under the Tax Threshold.


OPTION 3 - ‘All-In' Roster

a.k.a. The Whiteside Blockbuster S&T

Largely because we are in an unprecedented situation with owners facing huge losses if the season is played without spectators, there may be an unusual opportunity for the Blazers to pick up a "good player" with a "bad contract". A team with a player on a very large multi-year contract could save a huge amount of money with a Salary Dump trade for Hassan Whiteside, if the Blazers (Jody) were willing to take on a large contract in the interest of creating a contending team in Dame's prime.

The Blazers could use Bird Rights to Sign & Trade (S&T) Whiteside with a 1-year guaranteed contract at whatever salary was necessary to satisfy the CBA's 125%+$100K matching rule for an incoming player. The necessary salary has nothing to do with Whiteside's true value as a free agent. The amount would be immaterial to his receiving team if it satisfies their objective is to save money by jettisoning a much more expensive contract.

Although S&T's must be for at least 3-years, the last 2 years can be non-guaranteed, allowing the receiving team to waive Whiteside after 1 year at no additional cost. Whiteside would have to agree to the S&T, but since he would be receiving a salary probably two to three times what he could get as a Free Agent, it would be very unlikely for him to refuse the trade. Additional draft picks, cash, or players could also be attached to a trade to incentivize one side or the other to do a deal. However, under CBA rules that prohibit aggregating the salary of a player signed with Bird Rights for 2 months, Whiteside's salary alone would have to satisfy the matching rule, i.e. adding another Blazer player to the deal can not reduce the amount of Whiteside's salary.

As an example, the most obvious trade target would be Blake Griffin. His salary in 2020-21 is $36.6M, and he is owed an additional $39.0M in 2021-22. To satisfy the matching requirements, Whiteside would have to be signed to a $29.2M 1-year guaranteed contract. Detroit would then save $46.4M (plus taxes) by waiving Whiteside after 1 year.

Another target could be Kevin Love, who Olshey reportedly tried to acquire in a trade last February. His 2020-21 salary is $31.3M, so Whiteside's matching salary would be $25.0M. Love is owed another $31.3M in 2021-22, and $28.9M in 2022-23. So Cleveland's could save an astonishing $66.5M. Of course, other players with somewhat lessor salaries could also be targeted as long as Whiteside would consent to the S&T.

The financial cost to the Blazers of this type of "All-In" trade can be staggering. Below are examples of potential Blake Griffin or Kevin Love Salary Dump trades for Whiteside plus our #16 draft pick. I'll assume Ariza is waived in these scenario's. The BAE and Non-Taxpayer MLE would be lost and replaced by the TP-MLE and a minimum salary veteran because our team salary would exceed the Apron. I'll also replace the $7.1M TPE by another minimum salary veteran, but the TPE would remain available. These are probably the minimum practical cost scenarios because if the Blazers went "All-In" this far, it's hard to imagine not also using the TP-MLE to finish the job. The total salary plus tax cost would be $170.2M for Griffin, and $153.2 for Love.

The player acquisition tools remaining would be the $7.1M TPE and non-Bird Rights for Melo and Gabriel. Using those tools would incur additional taxes in the range of $2.50 or $3.25 for each dollar spent.


Minimum Practical Griffin Trade Scenario

PORTLAND

2020-21

1

Damian Lillard

31,626,953

2

C.J. McCollum

29,354,152

3

Jusuf Nurkic

12,888,889

4

Blake Griffin

36,600,000

5

Rodney Hood

6,003,900

6

Zach Collins

5,406,255

7

Anfernee Simons

2,252,040

8

Nassir Little

2,210,640

9

Mario Hezonja

1,923,136

10

Gary Trent Jr

1,663,861

11

TP-MLE

5,717,934

12

Minimum Vet

1,620,564

13

Minimum Vet

1,620,564

14

Minimum Vet

1,620,564

15

Ariza Waived

600,000

Subtotal (14 Players)

141,109,452

Dead Money

4,757,775

Subtotal w/Dead Money

145,867,227

Salary Cap

109,140,000

Over Cap

36,727,227

Tax Level

132,627,000

Over Tax Level

13,240,227

Apron

138,928,126

Above Apron

6,939,101

Tax

24,350,567

Total with Tax

170,217,793


Minimum Practical Love Trade Scenario

PORTLAND

2020-21

1

Damian Lillard

31,626,953

2

C.J. McCollum

29,354,152

3

Jusuf Nurkic

12,888,889

4

Kevin Love

31,300,000

5

Rodney Hood

6,003,900

6

Zach Collins

5,406,255

7

Anfernee Simons

2,252,040

8

Nassir Little

2,210,640

9

Mario Hezonja

1,923,136

10

Gary Trent Jr

1,663,861

11

TP-MLE

5,717,934

12

Minimum Vet

1,620,564

13

Minimum Vet

1,620,564

14

Minimum Vet

1,620,564

15

Open

Ariza Waived

600,000

Subtotal (14 Players)

135,809,452

Dead Money

4,757,775

Subtotal w/Dead Money

140,567,227

Salary Cap

109,140,000

Over Cap

31,427,227

Tax Level

132,627,000

Over Tax Level

7,940,227

Apron

138,928,126

Above Apron

1,639,101

Tax

12,645,397

Total with Tax

153,212,623

Summary

This article is an analysis of the Blazers Salary Cap options heading into the 2020-21 Draft and Free Agency/Trade period. It is based on the most prevalent current belief that the 2020-21 Salary Cap will be artificially inflated to the 2019-20 level to smooth out radical changes to the cap in subsequent years. However, the salary cap is still being negotiated by the NBA Owners and Player Association, so this article will be updated when more definitive information is known.

Three major options were examined -€” Operating with Salary Cap Room, Managing the Roster to the Tax Threshold Limit, and an unlikely All-In option. What the Blazers choose to do will depend on what players are available as other teams face an unprecedented financial situation, and how much Jody Allen wants to invest in the Blazers.