How Flexible Is the Financial Future of the Utah Jazz?

Russ Isabella-US PRESSWIRE - Presswire

An in depth look at the business side of the franchise.

I think we can all agree that the Jazz have financial flexibility. We have heard countless times about the expiring contracts on the roster and the fact that the Jazz technically have almost zero dollars tied up to players in the future. In the last couple of months, mykoroberts and Frank5 have put up insightful fanposts on the future of the team and laid out the options and the financial obligations. I would like to do a similar exercise, but hopefully dig a little deeper into the matter.

Note: There are a couple of small errors in the calculations in this post, but the important stuff is all there and enough is intact to have a meaningful discussion. Feel free to point out errors in the comments. Thanks to peterjnovak for already helping fix some of the salary calculations.

The Jazz Financial Situation 101

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As you can see in the chart above (click to enlarge) the Jazz are committed to paying $67,016,281 in salary this season. The salary cap this season is set at $58.044 million and the luxury tax will be $70.307 according to nba.com. Hopefully you already have a good understanding of the difference between the salary cap and luxury tax, but if you don't here is a simple explanation: you can only spend money on free agents to total up to $58.044 million of total salary. After that you have to use exceptions to be able to sign free agents, including your own. If you spend more than $70.3 million, you are assessed a heavy fee or luxury tax. This will all make more sense as we look at the financial options the Jazz have.

The Jazz Do Not Plan to Pay the Luxury Tax Again

I don't have a lot of sources. I'm pretty much your typical Jazz fan. But I do have 3-4 different "sources" on this topic. As of now the Jazz will never pay the luxury tax again like they did in 2009-10. Basketball John wrote a nice piece here guessing at the same premise. Sure, anything could change, but the Jazz have felt the financial pinch of doing so, and from my understanding, they don't want to relive that. For this piece it is important, because we just need to imagine that the Jazz's personal Hard salary cap is $70.3 million.

For this season things are pretty set. The Jazz are close to hitting the luxury tax line, but they aren't dangerously close. And if they don't spend any further money this season, or take on more salary in a trade, they will be comfortably south of the luxury tax border. But let's take a look at the upcoming seasons.

Is There Such A Thing as Too Much Financial Flexibility?

If you refer to the previous salary chart, you will see that the Jazz actually only have $1.6 million definitely tied up to Jeremy Evans next season. Marvin Williams' salary in yellow is an early termination option, which means Marvin Williams can choose to exercise his option and force the Jazz to pay him $7.5 million to play one more year for the Jazz, or Marvin can opt out of his $7.5 million and become an unrestricted free agent, able to negotiate a long-term deal with any team. The Purple salaries of Derrick Favors, Gordon Hayward, Enes Kanter, and Alec Burks are team options, which means the Jazz can choose to pay those players that salary for that year, or else opt out of the contract, essentially making Favors, Hayward, Kanter or Burks free agents and dismissing them. Another certainty: unless the Jazz decide to trade one of those guys, they are going to pick up those options. The fact that the Jazz can pay the Core 4 $16.2 million total next season is a steal for the Jazz. The Green Salaries above are called qualifying offers, which we will get to down the line or possibly in another post.

First let's talk about next year. Even if the Jazz pick up all of the Core Four and Kevin Murphy's contracts AND Marvin Williams decides to pick up his option, the Jazz are only on the hook for $25.3 million. That means that the Jazz will have $32.7 million to spend on free agents, including their own (Mo Williams, Al Jefferson, Paul Millsap, etc). Let's delve into the many options, which is also the reason the Jazz brought Dennis Lindsey into the organization. He gets to help decide what direction the Jazz go with their oodles of cap space.

The Millsap or Jefferson Question

I believe that the Jazz plan on keeping both Al Jefferson and Paul Millsap on the team this entire year, but they will be faced with a decision between the two of them next summer. You may hear about the possibility of the Jazz keeping both Millsap and Jefferson after this season, but the only way that is plausible is if the Jazz decide that Favors or Kanter aren't in the plans at all, let alone ready to take a big role in the rotation. Bottom line: financially the Jazz can't afford to keep Millsap, Jefferson, Favors and Kanter and Hayward/Burks. But for fun, lets see what that would look like:

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Depending on whether or not Marvin Williams opts into his $7.5 million, the Jazz would have only $44-51 million committed to 8 or 9 salaries in 2013-14, which would be fine. But there are two problems. One is that I pretended that Millsap and Jefferson would both not only agree to a 4 year, $40 million contract, but that they would also agree to have it front loaded as much as possible. Jefferson and/or Millsap are both probably going to command more like 4 years $44-48 million and may not agree to have it front loaded. Secondly, and more importantly, is that Hayward and Favors will both be up for contract extensions in two seasons and realistically, Derrick Favors is going to command a maximum rookie contract extension and Hayward will command a salary of a premiere wing player. Factor in those facts and the salary starts to look like this in two seasons:

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All of the sudden during the 2014 offseason, the Jazz have $61+ million committed to only 10 players and still need to sign 3 guys, including a starting point guard, for less than $9 million. Obviously there are ways for the Jazz to cut some money, but not much and so far everything has been a conservative estimate, including the draft picks the Jazz will acquire next offseason (15th pick of our own and the 9th pick from Golden State). Derrick Favors' contract is a maximum rookie contract extension (he's going to get one from somebody, if not the Jazz) and Gordon Hayward's salary is the same as Nic Batum's (which I also think is a great comparison financially; argue differently in the comments, if you like). So you may, or may not be able to see the financial difficulties, let alone the continual roster imbalance the Jazz would have if they resigned both Al Jefferson AND Paul Millsap. It gets even worse during the 2015-16 season and onward. Again, I don't see it happening, unless the Jazz salary dump Derrick Favors or Enes Kanter, which isn't going to happen either if the Jazz don't want to be run out of town proverbially.

So let's explore another option. The Jazz are going to sign either Al Jefferson or Paul Millsap. Why? For one, the Jazz like Jefferson and Millsap and it makes sense to resign one of them, strategically and financially. Also the Jazz will be forced to spend about $25 million in free agent money next summer or else suffer penalties from the league. Spending $10-12 million on Jefferson or Millsap makes sense. It'll happen. Also the Jazz will have to address their starting point guard vacancy. The Jazz can do this either by throwing money at a max/near max free agent (Chris Paul, Tyreke Evans, Stephen Curry, Jrue Holiday, Brandon Jennings, etc) or by signing an average point guard for something in the vicinity of 4 years, $24 million. For instance, if the Jazz decided to keep Mo WIlliams around for the rest of his 4 year career, this would be a reasonable deal. Let's explore both options financially.

Mo WIlliams resigns

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Hopefully you can see what a difference letting Al or Paul go makes to the financial future of the team. In 2014-15, the Jazz have a starting point guard, have built around a team of Favors, Millsap/Jefferson, Hayward, Burks, Kanter, Mo WIlliams, Jeremy Evans, 2 players from the 2013 draft, and still have $13 million to use to sign or trade for other players without flirting with the luxury tax. That's a very good team. If the young guns develop into borderline all stars, that is probably a top 4 team in the West. Maybe better.

Can the Jazz Afford to Sign a Max Free Agent this Summer?

Maybe. Let's just stop kidding ourselves and move past Chris Paul. He isn't coming to Utah. Okay, that feels better. But could the Jazz pay Stephen Curry or Brandon Jennings or Jrue Holiday max-type money and keep everyone else around? Or maybe Hayward or Burks move to the point and we sign James Harden to a max deal? We're having fun aren't we?

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It's not completely impossible, but things get tricky in 2015-17. The Jazz would have Max-type Point Guard, Burks, Hayward, Millsap/Jefferson, Favors, Kanter, two 2013 picks, one 2014 pick, and maybe Jeremy Evans, but they would only have minimum exceptions and $3 million to get 3 more players. The bench would have potential to be very very thin. But I have to be honest with you. If the core 4 reach their potential collectively, this is probably a dark horse contender at worst. The other issue is that the $72 million bill in 2016-17 would make it easy for any team to offer Kanter or Burks more than the money I have made up for them and pry one or both of them away. The Jazz would have to shed quite a few good players and salary.

So What Are You Saying Exactly, Clark?

Glad you asked. What would I do, if I were Dennis Lindsey and Kevin O'Connor? First I must say what I think will happen. I think the Jazz will let Jefferson walk, sign Millsap to a 4 year, $44-48 million deal, resign Mo Williams for 3 years, $18 million, draft a point guard understudy with the Golden State Pick and fill the holes with guys like Randy Foye and Marvin WIlliams and hope that the young guys improve enough to carry the team to an elite status.

What I would do:

Resign Millsap for a front loaded, 4 year, $44 million contract with the understanding that he would start alongside Favors for the next two seasons and then come off the bench, still playing about 30 minutes a night in the last 2 years of his deal. I don't know if that would be enough to keep Millsap around, but I think it would be. Then I would offer either Steph Curry or Ty Lawson 4 years, $44 million if they make it to restricted free agency. Both have different strengths, but both would mesh very well with the young guys in Utah. I would use Golden State's 2013 pick to draft Myck Kabongo and groom him to either be the starter in 4 years, or one of the best backup point guards in the league. If both Curry and Lawson sign extensions, then I would resign Mo Williams, but only for a front loaded two year deal. Either way, I would do what I could to collect late first round picks and early second round picks. I would do this because you can get decent rotation players near the end of the first round by taking the best player available and they are also dirt cheap. The Jazz could acquire late first rounders by taking players with bad ($4-7 million) one year contracts for the next two seasons, along with a pick to alleviate taxes.

Here is my fantasy roster:

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Possible? Maybe. But again, things get tricky in 2016-17 and forward. This plan would almost certainly cost me either Enes Kanter or Alec Burks. And down the line, that might be okay. But as you can hopefully see from this exercise, the financial flexibility can go away quickly when you start handing out free agent contracts. The young guys are going to need to be paid eventually.

Take Home Message

So what else have we learned? For one, the Jazz have to be very careful about the contract extensions they hand out. They can't afford to overpay 2 or 3 players down the road. Secondly, the new collective bargaining agreement has helped teams keep their young stars to a degree. The four year contract extensions that Hayward and Favors and Kanter and Burks will be due, are less burdensome than the Kirilenko or Deron Williams contracts. Thirdly, the Jazz have to use this season to evaluate who they want to keep around to grow with the young guys. There will be a decision on Millsap and Jefferson next summer if there isn't one by the end of the season. And in many ways, Mo Williams, Marvin WIlliams and Randy Foye are also auditioning for long term deals with the Jazz moving forward. And lastly, the Jazz have thought about all of these things and considered all of their options already. Things will change and so will their plan, but bringing in Dennis Lindsey to add his expert opinion on which direction to take was such a smart smart move.

The Jazz have financial flexibility moving forward and how they use it will probably determine how good they can be in 2-4 years. And that is both exciting and terrifying to me. But it's also fun. Enjoy the ride and comment about what you would do given this information.

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