Tuesday, May 30, 2017

Kevin Durant's New Decision In This CBA Landscape

It always made the most sense last summer for Kevin Durant to sign a one year contract with a player option for a second year in order to have as much guaranteed money as possible while maintaining his flexibility this coming summer. As I wrote at the time, that allows him to sign his long-term deal after having 10 years of NBA experience, which means he's eligible for a maximum salary of 35% of the salary cap rather than the 30% he could have signed for at the time and in a summer with a higher salary cap (currently projected at $101 million) than last year's $94,143,000. However, he will now have to decide whether it's smart to take the same approach again and wait another year for that massive new contract that's coming or go for as much guaranteed as possible right now even though the Warriors only have his Non-Bird rights. Since there's such a long break before the start of the Finals this Thursday and already a ton of great preview pieces for that, I decided to take a look at KD's options and how they will affect what the team can do this summer under the new CBA and cap projections.
Durant and Andre Iguodala go all the way back to the 2010 Team USA squad with Stephen Curry.
The Warriors were diligent in their signings after Durant like I said they would need to be in order to not have any other new contracts locked in this year. Because they don't have his full Bird rights yet, they'll need to use cap space in order to give him the max salary possible. Quick primer on those special rights to re-sign your own free agents: you gain Non-Bird rights after one year with a team (can exceed the salary cap at up to 120% of the previous salary on a deal of 1-4 years with 5% raises), you gain Early Bird after two years with a team (can exceed the cap up to 175% of the previous salary on a deal of 2-4 years with 8% raises), and you gain full Bird rights after three years with a team (can exceed the cap up to the max salary on a deal of 1-5 years with 8% raises). Thus, he can only sign a four year, $152,005,000 contract this summer if they clear the space for his $35,350,000 starting salary by renouncing their rights to all other free agents aside from Stephen Curry, who needs to be the last player to officially re-sign since his cap hold is much lower than what he'll actually sign for (likely $205,030,000 over five years as he's eligible for the designated player veteran extension). That would only leave a little over $4 million in cap space to give to anyone else, though, and that's a problem since Andre Iguodala is also a free agent and a core part of the team. He's embodied their selfless culture with his passing mentality and willingness to come off the bench over the years, and there's a reason he was in the room for the recruiting pitch to Durant as they were teammates on both the 2010 and 2012 iterations of Team USA. Out of all the role players, the former Finals MVP is clearly the priority to retain.

This is also where the new CBA and the cap projection being lowered to $101 million comes into play. When the Warriors and Durant came to an agreement at the beginning of July, the cap projection was $107 million, and under the current CBA, his max salary for this summer would have been a little over $35 million since the 35% was calculated under a different formula of the Basketball Related Income. However, the projected cap was lowered to $102 million a few days later, and although that also lowered his max salary to $33.5 million, that took away more of their already limited spending power if having to use cap space to sign him again. My quick math was slightly off, but the impact was immediately clear. Then everything changed even further when the new CBA came to pass since it rightfully gave the players higher salaries that they were due in this new money environment with the huge TV contracts. Minimum salaries were raised from their fixed rates that were set in the 2011 CBA, and max contracts are now simplified to being 25%, 30%, or 35% of the actual salary cap, which brings KD's starting salary back over $35 million. Combined with the cap projected down again in April to $101 million, that meant that they lost almost $4.85 million in cap space from even the $102 projection last summer:


The minimum salary bump doesn't seem like much, but with that many empty roster spot charges, it adds up. I have seen conflicting information out there about whether players on rookie scale contracts like Kevon Looney and Damian Jones will count against the cap for what they originally signed for or their new salaries that were bumped up to the higher minimum, but after asking cap guru Eric Pincus and re-reading Article VII (j) in the new CBA, I'm operating under the premise that they will count at what they're being paid. In total, the higher minimum salaries add up to just under $2 million that they can no longer use.


Now that we've established their limited flexibility if Durant wants to sign for the most he can right now, let's discuss some options. It helps that the different types of the Mid-Level exception also got bumped up, so although there's still a limit to the highest amount available to offer a single player, they can now offer a little over $4 million to two different players. That's not a ton in this era of high-priced rotation players, but it could give them the possibility of re-signing both Iguodala and Shaun Livingston on the same type of 1+1 deal that Durant is on. Then they could opt out next summer and re-sign again for much higher salaries to be "made whole" for their troubles since their Bird rights would be intact due to them not switching teams. That's what occurred with Manu Ginobli when the Spurs cleared space to sign LaMarcus Aldridge: they renounced his rights in 2015 before re-signing him to the Room MLE of $2,814,000 and then used Bird rights to sign him to a $14 million contract for this past season. Having those inflated salaries for the 2018-2019 season could get tricky as they delve into the Luxury Tax, though, and that still leaves only minimum salaries again to fill out the rest of the roster.

That's why Durant coming back for less than his max on another 1+1 deal could be the key to keeping the team together. If he re-signs through the Non-Bird exception, it could only be for $31,848,120 (120% of this year's salary), but it would allow them to stay over the cap and retain the rights to all of their other free agents to sign through their various forms of the Bird exception. It would also give them access to the higher versions of the Mid-Level exception, likely the $5,192,450 Taxpayer one, to use on an external player or someone they don't have the necessary Bird rights for like Ian Clark or JaVale McGee. Simply picking up his player option of $27,734,405 would also allow for all of this but doesn't provide any additional flexibility for the team, so he might as well take the raise and add on the guaranteed money of another option year just in case. This discussion is far from new, with Tim Kawakami even asking Durant when talking to him, Curry, and Iguodala about their futures, but it is worth looking at more closely as we get closer to free agency. When he does finally sign a long-term deal next summer, it can be through the Early Bird exception with the 8% raises I mentioned earlier, so with a salary cap projected at $102 million, that comes out to a four year, $159,936,000 deal. Thus, he'll be leaving over $3.5 million on the table this year but making it up and then some over the next four years:

SeasonEarly Bird in '18Non-Bird in '17
2017-2018$31,848,120$35,350,000
2018-2019$35,700,000$37,117,500
2019-2020$38,556,000$38,885,000
2020-2021$41,412,000$40,652,500
2021-2022$44,268,000TBD
Total:$191,784,120$152,005,000

There's definitely a chance he'll be able to make up that nearly $40 million gap in his next deal in 2021 since he'll still only be turning 33 that year, but locking it up with those Early Bird 8% raises while he's still in his prime could be prudent. Wanting to get those higher raises is part of the reason why LeBron James kept signing 1+1 deals the first two years of his current stint with Cleveland before signing a three year deal this past summer; he kept opting out in order to maintain his contractual flexibility and maximize his earnings. Durant can do something similar while also helping his team stay together, which wouldn't be a surprise given how willing he's been to sacrifice already.

Speaking of King James, it is amazing how well he's playing at age 32 in order to make his ridiculous 7th straight Finals appearance. Although I joked with friends before the playoffs about a 16-0 run to do Moses Malone's Fo' Fo' Fo' one better and cement their history as one of the greatest teams of all time, I'm going to pick the Warriors in 6 out of respect for LeBron's brilliance. As much as I'd like to see the Dubs go unscathed like the 2001 Lakers nearly did if not for an overtime loss in Game 1 of the Finals (the infamous AI step over of Cleveland head coach Ty Lue), there is some concern that the Cavaliers could turn the table on them like the 1989 Pistons that started 7-0, lost a couple to Michael Jordan's Bulls, and them swept the 11-0 Lakers that had beaten them in the Finals the year before. The Cavs currently have the third best playoff scoring margin ever, after all. However, Golden State is blowing away the record with their dominance, and their only loss since resting players in San Antonio on March 11th is a game in which they didn't play their starters in the fourth. This is the first ever "Finals Trilogy," and I wouldn't be surprised if the drama doesn't match its predecessors.

1 comment:

  1. Funnily enough, two days after I wrote this, ESPN reported that Durant is indeed willing to take less to help the team in the scenarios I outlined: http://www.espn.com/nba/story/_/id/19509826/kevin-durant-willing-take-less-max-keep-golden-state-warriors-core-intact

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