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Rookie-Scale Extensions And Restricted FAs

As the NBA's third season under the latest Collective Bargaining Agreement begins, most of the changes written into the new CBA have now taken effect. The repeater-tax penalty is still a year away, but more punitive tax penalties will be implemented this season, and the annual increases to the salary cap, tax threshold, and cap-exception amounts are in full swing.

At this point then, the effects of the league's CBA are starting to become more obvious. Outside of the Nets, most teams are trying to avoid going too deep into tax territory, with even the deep-pocketed Lakers and Heat amnestying key role players to reduce the overall cost of their respective rosters. Under the new CBA, the three-superstar model has become less viable, draft picks are more valuable than ever, and cost-controlled players are crucial for building an annual contender without breaking the bank.

We've discussed the added value that threeand four-year contracts can provide for a team, and of course the NBA's rookie scale for first-round picks has resulted in many of the best bargains in the league. But there are other ways that teams can maximize cap flexibility, and one that's worth exploring is how clubs handle players coming off of those rookie-scale contracts.

During the first year of the new CBA, only five players received rookie-scale extensions: Derrick Rose, Russell Westbrook, Kevin Love, Danilo Gallinari, and Kosta Koufos. That meant that many extension-eligible players hit restricted free agency in the summer of 2012, and many of those guys landed big contracts that offseason. As our '12 Free Agent Tracker shows, Brook Lopez, Eric Gordon, and Roy Hibbert all signed maximum-salary deals, while Nicolas Batum and JaVale McGee also inked for $11MM+ annually.

What that offseason showed is that when a talented young player hits free agency, there will be plenty of interest, even if that player isn't viewed as a "sure thing." Lopez and Gordon had missed most of the 2011/12 season with injuries, but the Suns were still willing to offer Gordon the max, and Lopez may have fielded max offers of his own if the Nets hadn't locked him up first. Hibbert was healthy in '11/12, but wasn't an elite two-way player, yet it didn't take long for him to receive a max offer from the Blazers.

Batum and McGee didn't get max offers, but considering Batum's track record, the four-year, $45MM offer sheet he received from the Wolves raised a few eyebrows. As for McGee's four-year, $44MM deal, perhaps the Nuggets, who extended Gallinari and Koufos earlier in the year, would have tried to lock up McGee as well, for a few million dollars less, had he been on the roster before the extension deadline.

By comparison, as I outlined last fall, by the time the rookie-scale extension deadline passed in year two of the new CBA, eight players had inked new deals for a total of over $420MM. As illustrated below, both of those figures represented high watermarks for the last several years.


All those rookie-scale extensions meant that only a handful of intriguing restricted free agents were available this summer. As our 2013 Free Agent Tracker shows, Nikola Pekovic, Tyreke Evans, Tiago Splitter, Jeff Teague, and Brandon Jennings were this year's big restricted FA signings, and none of them received maximum salaries.

Pekovic and Splitter hadn't been eligible for rookie-scale extensions, since both players were second-round picks, so they hit the open market out of necessity, rather than because their respective teams' chose not to extend them. And among the other three top restricted FAs, it should have come as no real surprise that they didn't receive extensions last fall — the Kings were still owned by the Maloofs when Evans was extension-eligible, making a long-term commitment unlikely. And reports surfaced over the last several months that Teague and the Hawks and Jennings and the Bucks didn't see eye to eye, reducing the likelihood of a long-term marriage. Teague did still end up in Atlanta, but only after the Hawks had few other viable options.

In other words, here's the main takeaway from this past season: Virtually every team that wanted to keep a high-level restricted free-agent-to-be (and had the means to do so) ended up reaching an extension agreement with that player prior to free agency. Because these rookie-scale players aren't eligible for the same kind of maximum salaries that long-time NBA veterans are, even max deals like Blake Griffin's and James Harden's don't cripple a team's flexibility, as Chuck Myron of Hoops Rumors detailed recently.

Of course, since we're essentially only two years into this CBA, it's hard to argue that a pattern has been established. It's entirely possible that in the next few months we could see a repeat of that 2011/12 season, with plenty of fourth-year players heading for restricted free agency next summer, rather than agreeing to extensions. Still, to me it looks like teams have recognized another way to maximize value and flexibility.

Consider the Thunder a year ago with Serge Ibaka. Oklahoma City reached an agreement with Ibaka on a four-year, $49.4MM contract extension. Had Ibaka hit free agency this summer at age 23, he almost certainly would've received a max offer sheet, like Hibbert did a year ago. The Thunder would've matched, but it would've cost the team about $10MM over the course of his four-year deal. For a small-market team right up against the tax, $2.5MM per year is not an inconsequential figure.

Stephen Curry's four-year, $44MM pact with the Warriors is another example of a team rolling the dice a year early rather than opting to battle multiple suitors in free agency. Curry's extension was viewed as a major risk at the time, considering the ankle issues he had battled early in his NBA career, but in hindsight, the deal looks incredibly savvy. If Curry had been a free agent this summer, he would've had no problem landing a max offer. As is, the money Golden State saved by locking him up early was put toward bringing in a couple extra veteran contributors to round out the team's rotation.

As I previously noted, it's a little early to conclude that a pattern is developing, but the current offseason should provide a hint. So far, John Wall has signed a long-term deal with the Wizards, and Larry Sanders is closing in on an extension of his own with the Bucks. If last year represented a one-year blip, perhaps we'll only see two or three more new deals signed before the October 31st deadline. But if NBA teams view these extensions as a way to maximize their cap flexibility, we should see more than that. Paul George, DeMarcus Cousins, Derrick Favors, Gordon Hayward, Eric Bledsoe, Avery Bradley, and Greg Monroe are a few of the summer's other extension-eligible players, and I wouldn't be surprised to see most of them locked up by opening night.

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