Downbeat #1640: The Weird Thing About to Happen in 2015 Free Agency

By now it is common knowledge even among casual NBA fans, that the league's salary cap is about to explode as a result of massive new media contracts that were inked last year.  Several weeks ago, the NBA, as it oft does, issued some revised projections on just where the future cap (and luxury tax line) is projected to be in the upcoming NBA seasons.

While the 2015-16 salary cap is anticipated to rise at a relatively reasonable rate of 6.3% (up to $67.1MM next year), the league now projects the 2016-17 salary cap to explode to $89MM in 2016-17 (33% year over year growth) and $108MM in 2017-18 (18% year over year growth).

Of course, what this means to NBA players is that it is better to be a free agent in the summers of 2016 or 2017 (pending lockout notwithstanding) than in 2015. The primary reason for that is because a player's first year salary and potential raises are fixed at the time he signs his NBA deal (player only gets up to 4.5% or 7.5% annual raises).  Accordingly, if the salary cap is projected to rise at a rate that exceeds the rate of a player's eligible annual raise, all else being equal, the player would be better off signing a new deal each year, instead of a long-term deal this summer.

Let me give an example.  Last summer Gordon Hayward signed a contract with the maximum first year salary of $14.7MM and a total value of $63MM.  Had he signed a one year maximum contract instead (disclaimer: something the rules prevent in his situation), and just planned on earning a maximum salary in each of the 3 subsequent years, he'd be looking at earning a total of $85.7M in that same 4 year period. That is a substantial increase no matter how you slice it.

It must be stated however that in the scenario above, Hayward takes on substantial risk that he isn't worth a maximum contract in future years. Recall that Hayward had a down season in 2013-14, if he followed that up this past season or even if he regresses next year, would the Jazz still give him a maximum contract in the following year?  The answer is likely no. Thus Hayward had to weigh the risk of taking the security of a $63MM contract over the potential for an extra $22MM over that same time span.

The Hayward example clearly is not a game changer and a player in a similar situation this year will likely look to sign a maximum 4 (or 5 years if he is planning on staying with home team) guaranteed contract.

But what if we were not talking about a Hayward level player. What if we were talking about a Lebron James level talent?  Would Lebron bypass guaranteed future dollars in exchange for the ability to be a free agent in each year that the salary cap explodes?  Well, the answer to that question is already yes as this is exactly what Lebron did last summer.  Instead of signing a maximum 4 year, $88MM contract with Cleveland, he chose a 2 year deal with a player option (in essence a 1 year contract, though the 2nd year is guaranteed for him) worth a total of $42MM.  Clearly, if you are LeBron James, one down season (or even 2) isn't likely to dissuade all potential NBA suitors from bidding full price should he become a free agent again. Thus the risk is minimal.

So how will all of this play out in July of 2015?  Well, we are now 1 year closer to the first large salary cap jump in 2016 and as the simple Hayward hypothetical math demonstrates above, it is far better to be a free agent in 2016 and 2017 than it is in 2015. Accordingly, many more, if not all of the "maximum" level pending free agents may look to sign 2 year deals like Lebron did last summer.

Let's look at a real world example, LaMarcus Aldridge. As a 9th year pro he is eligible to re-sign this summer in Portland for a 5 year, $108MM contract that will pay out as follows: 2015: $18.8MM, 2016: 20.2MM, 2017: 21.6MM; 2018: $23.1MM, 2019: $24.5MM.

Now lets say instead he wants to go the year by year route (always signing a second year player option to preserve some level of guarantee), his 3 year payout would be as follows: 2015: $18.8MM, 2016: 29.1MM, 2017: 30.3MM, which is a total of $78MM (vs only $60MM if he signs a full length deal in Portland over that same time period).  But focus on the differences in years 2 and 3 alone, that is almost a $10MM per year jump each. Clearly, should Aldridge believe he is going to maintain his current playing level, he could cash in substantially higher if he chose to sign 1 year deals in each of the next 2 summers.

But why stop at 3 years you ask? Simple, as Aldridge's age continues to advance, he would at that point be more likely to try to sign a long-term deal (also the cap is projected to level off after 2017-18).

What all of this amounts to, is that in the first time in a very long time, both players and owners will be looking to sign shorter term contracts.  Players like Lebron, Aldridge, Kevin Love, Marc Gasol, Kawhi Leonard, Jimmy Butler, DeAndre Jordan, Draymond Green, and Paul Millsap could all bypass 4-5 year contracts in order to sign deals that will allow them to sign much larger long-term contracts in the following years.

Teams such as Los Angeles, New York, Dallas, Houston, San Antonio will heavily recruit these players to leave their current clubs in order to take a short-term deal, with a wink and a nod that a long-term max contract in 2016 or 2017 will be available (yes, I know that wink and nod isn't legal but let's not pretend it doesn't happen).

So how does this affect our small market Utah Jazz you ask? Well, unless Salt Lake City eliminates state taxes, develops a beachfront and some night life in the next month, landing a big name free agent remains off the table.  But where there is a potential shakeup at the top of the salary scale, there could be fallout later on for players that might interest the Jazz AND where the Jazz might also be willing and able to offer them a contract the players desire but their current team would not want to offer.

The type of player that the Jazz would be looking for is a young veteran free agent who can come in and supplement the current core and have the opportunity to take a leap in a new situation.  The type of player that would be looking at the Jazz is a guy who does not like his current role in his current organization and would want the opportunity to be given a chance to shine elsewhere and receive maximum dollars over the short-term (Jazz can offer about a $16MM starting salary should they waive Trevor Booker and other non-guaranteed players).

Surveying the market I think there is a good example of that type of mutually beneficial contract that was signed last year. Namely, that of restricted free agent Chandler Parsons, and his 3 year max offer sheet that he signed with Dallas last offseason. That offer was ultimately not matched by Houston as Daryl Morey thought it was too immovable and beyond the value of Parsons for the Rockets.  The unique factors of restricted free agents, namely: the fact they have not had a major NBA payday yet, the possibility they want a short deal (2 years with player option in year 3 is the shortest) to enable them to become unrestricted free agents asap, and the reality that they are all young and fit the timing of the Jazz re-build; makes this market especially appealing for the Jazz this offseason.

There are a handful of restricted free agents that might merit a big offer on a short deal this summer, most of them are not likely to be changing teams, due to the home team looking to keep said players.  Below I list 3 players who I think are decent options/risks, but please note I also considered: Kawhi Leonard (He is San Antonio's future), Jimmy Butler (all-star and MIP won't be let out of Chicago), Khris Middleton (I've been told by insider there is zero % chance MIL let's him go),  Draymond Green (Doubt Golden State breaks up their young championship core).  I also crossed off the following players as guys the Jazz would not be interested: Enes Kanter (no explanation needed), Tristan Thompson (not a good fit with Rudy Gobert and Derrick Favors), and Patrick Beverly (not what Quinn Snyder would want in his PG).

The Restricted Free Agent: Iman Shumpert, SG , 6'5", 220 pounds, 24 years old.

The Offer: 3 Years, $30MM, player option after year 2.

Why Jazz Would Consider: Make no mistake, $10MM per year for a SG with a career PER of 10.7 and 3 point percentage of 34.2% is not ideal. Before you scoff too much at that price tag, please remember that if $6MM is about 10% of the salary cap in today's dollars, then  $10MM is about 10% of the cap in 2017 salary cap dollars. Salary inflation is coming and it's coming fast.

So why would the Jazz add another average shooting SG to their squad? If you've watched any of Cleveland's playoff games, you'd know the answer to that.  Shumpert at 24 is still prone to mistakes, but he is also capable of being an elite defensive player in the right situation, like when he would be teamed up with Favors and Gobert.

Advanced stats do not love what he does but he does have the kind of moxie players love to have around, as witnessed by Lebron's almost instant bond with him since he came over from New York. Ideally with the Jazz I think he could develop into Tony Allen lite but with a 40% 3-point shooting stroke.

Why He'd Consider Utah: Money. Lots of money. Also, he does have a pre-existing relationship with Favors from their college days, but that probably does not amount to much.  The reality of Shumpert's situation in Cleveland is that they will have very little to pay him after re-signing Lebron, Love and Thompson this summer. So a decent sized deal could be enough to pull him to a new location and make Cleveland choose to pass.

The Restricted Free Agent: Tobias Harris, SF/PF, 6'8", 226 pounds, 22 years old.

The Offer: 3 Years, $45MM, player option after year 2.

Why Jazz Would Consider: Harris is a multi-positional player that could fit in several spots with the Jazz.  Coming off a season in which he averaged career highs of 17.1 ppg, 6.3 rbg and 36.4% from 3, Harris could slide right in as the Jazz's starting Small Forward, moving Hayward back down to the shooting guard spot and allowing Alec Burks and Rodney Hood to take over the second unit wing minutes.

Additionally, Harris could be used a lot in small ball lineups as the playmaking power forward, much as Golden State uses Draymond Green.  This of course is a big dice roll, but if it fails it does not cripple the Jazz materially from a salary cap standpoint long-term.

Why He'd Consider Utah: While Scott Skiles has done a lot to try to debunk rumors in the last few days, there is a lot of smoke that suggests that Harris and his new Orlando coach did not get along in Milwaukee.  Accordingly, finding a new team to jump to, one with more upside and a more consistent role, could help convince Tobias to take Utah's money.

The Restricted Free Agent: Brandon Knight, PG/SG, 6'3", 189 pounds, 23 years old.

The Offer: 3 Years, $45MM, player option after year 2.

Why Jazz Would Consider: Knight is probably the most accomplished name of the 3 listed so far, but he did taper off quite a bit last season after being dealt to Phoenix.  It probably isn't a good sign that in his 4 years in the NBA, he's already on his 3rd team, but Knight does bring some things to the Jazz that they don't currently have.  Namely, he is a decent shooting PG who also works well off ball and away from the action.  That could be the ideal pairing for Dante Exum for the next couple of years until he is able to take on full-time PG duties himself.  Further, the two could easily switch defensive assignments as Exum has plenty of length to cover NBA wings and let Knight take on ball defensive duties.  In many ways, Knight might be the player we all hoped we were getting in Trey Burke.

Why He'd Consider Utah: Playing with the Suns last year put a damper on Knight's free agent plans of cashing in big.  It could have been because he failed to fit in with Eric Bledsoe, or perhaps he just didn't have enough time to learn what Jeff Hornacek wanted him to do.

In any event, Knight could be looking to get to a better situation and Phoenix may scoff at paying nearly $30MM annually to PGs.  This could leave the Jazz in a good position move in a swipe a young improving player.