Although a team like the Cavaliers has only committed about $28.5MM in guaranteed money to player salaries for 2012/13, that doesn't mean Cleveland will have $30MM to spend on free agents. Each of the Cavs' own free agents will be assigned a free agent amount or "cap hold" until the player signs a new contract or has his rights renounced by the team.
The following criteria are used for determining the amount of a free agent's cap hold:
- First-round pick coming off rookie contract: 250% of previous salary if prior salary was below league average; 200% of previous salary if prior salary was above league average
- Bird player: 190% of previous salary (if below average) or 150% (if above average)
- Early Bird player: 130% of previous salary
- Non-Bird player: 120% of previous salary
- Minimum-salary player: Portion of minimum salary not reimbursed by the league
In the case of a Cavalier free agent like Anthony Parker, the cap hold this summer will be $4.275MM — because Parker will have Bird rights, his free agent amount is calculated by taking 190% of this year's $2.25MM salary.
Cap holds cannot exceed the player's maximum salary. So while the Cavs' Antawn Jamison has Bird rights like Parker, his free agent amount is not calculated in the same way. 150% of Jamison's $15.08MM 2011/12 salary would exceed his maximum salary, so his cap hold will be worth the max-salary for a player with 10+ years of NBA experience — likely $18MM+.
A cap hold for a restricted free agent can vary based on his contract status. A restricted free agent's cap hold is the greatest of:
- His free agent amount as determined by the above-mentioned criteria
- The amount of his qualifying offer
- The first-year salary from an offer sheet he signs with another team
Cavs swingman Alonzo Gee will qualify for restricted free agency this summer, coming off his third NBA season. Because he was earning the minimum salary, his cap hold would typically only be about $854K. Since he'll be a restricted free agent though, the amount of his qualifying offer, $1.06MM, will count against Cleveland's cap. If Gee eventually signs an offer sheet with another team that includes a first-year salary of, for instance, $4MM, that figure would count against Cleveland's cap until the team decided to match the offer or let Gee go.
If a team holds the rights to fewer than 12 players, cap holds worth the minimum rookie salary ($473,604) are assigned to fill out the roster. So if the Cavaliers chose to renounce their rights to all their free agents and release all the players on non-guaranteed contracts, the team would have five players and about $28.5MM left under contract. However, seven holds worth $473,604 would be added to the team's cap, reducing its total cap space by about $3.3MM.
Cap holds aren't removed from a team's books until the player signs a new contract or has his rights renounced by the club. For instance, since Wally Szczerbiak never signed elsewhere after reaching free agency with Cleveland, the Cavaliers still had an $18MM+ hold for Szczerbiak on their cap until they recently renounced him. By keeping Szczerbiak's free agent amount on their books, the Cavs were unable to claim room under the cap, but retained many of their cap exceptions that otherwise would've been lost had they renounced him and fallen too far below the cap.
The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents and then using Bird exceptions to re-sign their own free agents. If a team wants to take advantage of its cap space, it can renounce its rights to its free agents, eliminating those cap holds. However, doing so means the team will no longer hold any form of Bird rights for those players — if the team wants to re-sign those free agents, it would have to use its cap room or another form of cap exception.
Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.