Max Contract Scenarios For 2013 Free Agents

March 4 2013 at 1:09pm CDT By Luke Adams

Two players in this summer's free agent class, Chris Paul and Dwight Howard, are considered locks to earn maximum-salary contracts. Two other free-agents-to-be, Josh Smith and Brandon Jennings, aren't necessarily viewed as maximum-caliber players, but still may receive max offers from a desperate team. Meanwhile, Andrew Bynum is no longer a certainty for a max deal due to health concerns, though it's not out of the question that a club rolls the dice on him.

While these five players will all be in the "max-contract" discussion this summer, CBA rules dictate that if all five guys were to receive maximum offers, none of them would be earning the same amount. A specific player's maximum salary is determined by a number of factors, including service time, previous salary, and the league's basketball related income.

In determining exactly what maximum-salary offers for these five players would look like, let's first consider service time. The NBA's maximum salary is divided into three groups when it comes to service time — players with 1-6 years of experience are eligible for a smaller max than players with 7-9 years of experience, who in turn are eligible for less than veterans that have played 10 years or more. Of our five marquee free-agents-to-be, only Jennings has fewer than seven years' experience. Howard, Paul, Bynum, and Smith were all members of either the 2004 or 2005 draft class, meaning they each fall into that 7-9 range.

As I outlined last July, the maximum salary for players with 7-9 years of experience in 2012/13 was $16,402,500. However, Howard, Paul, and Bynum all earned salaries higher than that amount this season. How? Well, long-term contracts allow players to exceed the maximum in future seasons as long as the first year of the contract adheres to the max. Howard, Paul, and Bynum are all in the final year of long-term deals, so they're all earning well above the max by now.

Because those three players are already earning more than the max, CBA rules ensure that they won't have to take a pay cut next season — their respective maximum salaries will be worth 105% of this season's salary. For instance, Howard is earning $19,536,360 this season. 105% of that amount is $20,513,178, which will be the maximum salary he can earn for 2013/14.

Because they kept Howard through the trade deadline, the Lakers retain D12's Bird Rights, meaning they're allowed to offer him up to five years, with 7.5% raises. The same goes for the Clippers and Paul, as well as the Sixers and Bynum. As such, here's what maximum offers for these three guys would look like:

5yearFA

Rival teams with the necessary cap space or the ability to sign-and-trade would be able to offer Howard, Paul, and Bynum contracts for up to four years, with only 4.5% raises. Here's what those offers would look like:

4yearFA

As the charts show, the drop-off in guaranteed money from a max five-year deal is signficant. I'm skeptical Bynum will receive a max offer this summer, but let's consider Howard's and Paul's scenarios. Signing with a team besides the Lakers or Clippers, respectively, would take $30MM+ in guaranteed money off the table for Howard, and $27MM+ for Paul. If Howard and Paul are still performing at an elite level in 2017, they'll make up a good chunk of that salary in the 2017/18 year of their next contracts. Still, it's hard to guarantee elite production and good health that far in advance, so there'd certainly be an element of risk if either player decides to change teams.

Now, let's circle back to Smith. Unlike the three players we've already covered, Smith, at $13.2MM, wasn't earning more than the max this season. That means the max salary for a player with 7-9 years of experience will apply to him next season. Calculating Smith's contract scenarios isn't as easy as starting with this year's $16,402,500 maximum though, since that figure will increase next season, based on the NBA's projected BRI. We won't know exactly what the new max will be until July, but for argument's sake, let's assume it increases by the same rate as it did last July — about 5.77%. That would put Smith's maximum first-year salary for 2013/14 at $17,350,125. Here's what a max offer from the Hawks and from another team would look like for Smith:

Joshsmith

Finally, we arrive at Jennings, whose earning potential is significantly less than our other four marquee free agents, simply based on his service time. The Bucks guard will be finishing up his fourth season this year, meaning he's only eligible for what would have been a $13,668,750 salary in 2012/13 — that's the amount that players like Eric Gordon and Roy Hibbert are earning in the first year of the max contracts they signed last offseason. For Jennings, that maximum figures to increase a little for '13/14. As we did with Smith's 7-9 year max, let's assume that the 1-6 year max will increase at the same rate it did last summer, about 5.77%. That would mean Jennings' first-year max for '13/14 would be $14,458,437. Here's what his max scenarios would look like:

Brandonjennings

Jennings certainly won't receive that five-year maximum offer from the Bucks — James Harden and Blake Griffin were the only players prior to this season that received that true max. Griffin will actually earn even more than my estimated $83MM, since starting two All-Star games during his rookie contract made him eligible for a higher max, but Harden's deal with the Rockets will be in the ballpark of that $83MM figure. For Jennings, his best chances of landing a maximum offer involve signing an offer sheet with a rival team, forcing the Bucks to decide whether or not to match. In that case, he could sign for up to four years, with 4.5% raises, as detailed above in the right-hand column.

I don't expect all five of these marquee free agents to sign maximum-salary contracts this summer, but it only takes one team willing to go all-in to quickly change the free agent landscape. Given how many clubs are expected to have significant cap space in July, it certainly wouldn't be a shock if three or four of these players received max offers. Still, not all max contracts are created equal, so be sure to consider these figures as free agent chatter heats up in the coming months.

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