Examining The Grizzlies’ Cap Situation

2013's most popular subject of trade rumors to date has arguably been Grizzlies forward Rudy Gay. Since Grantland's Zach Lowe reported on January 4th that Memphis had made Gay available, the veteran forward has seemingly been linked with half the teams in the league, including the Suns, Raptors, Kings, and Wizards, among others.

As many others have written over the last couple weeks, the Grizzlies aren't exploring the market for Gay because they're dissatisfied with his play on the court. The 26-year-old is a crucial piece of a team that is on track to finish in the top four in a tough Western Conference. Rather, it's the Grizzlies' cap situation, and Gay's pricey long-term salary, that makes him a potential trade candidate.

Gay is earning about $16.5MM in 2012/13 and is in line for modest raises over the next couple seasons — he'll make $17.89MM in 2013/14 and has a player option worth $19.32MM in 2014/15. It's a lot of money for a player averaging 17.8 PPG and shooting a career-low 41.4% from the floor, and it's one of a handful of big deals that contributes to a total Grizzlies payroll exceeding $74MM this season.

With Robert Pera's new ownership group in place in Memphis, it's unclear exactly how comfortable the team is with being above the tax line ($70.31MM). At less than $4MM above the tax this year, the extra charges applied to the Grizzlies wouldn't be exorbitant, but being in the tax could become more problematic beginning next season. If the team doesn't move any of its current players, it could be on the hook for more than $73MM in 2013/14 and $65MM+ in 2014/15, without even having filled out its roster.

The repeater tax, which penalizes repeat taxpayers by exponentially increasing the tax on every dollar spent above the threshold, is on the horizon, but it shouldn't worry the Grizzlies. To qualify as a repeat taxpayer, teams must be over the tax line for four of five seasons, a line Memphis isn't in danger of crossing — even if the club were to remain in the tax through '14/15, the only money currently on the books for 2015/16 is Mike Conley's $9.59MM salary and Tony Wroten's $2.18MM team option, which should make staying under the tax threshold fairly easy. Still, tax penalties in general increase substantially next season, and the Grizzlies aren't the Lakers, Knicks, or Nets, all big-market teams that are comfortable with paying that premium.

If the Grizzlies hope to sneak below the tax threshold this season, Gay represents their best chance to do that, since he appears to be the most expendable of the club's three most expensive players (Gay, Zach Randolph, and Marc Gasol). It's not their only solution, but the alternate options are tricky.

Marreese Speights is the Grizzlies' only non-core piece earning $4MM+ this season, and has seen the team reduce his playing time this year. But the Grizzlies would be hard-pressed to find a taker for Speights without taking any salary back themselves. Other players could also be packaged in deals to get Memphis below the tax line, but the team is already carrying the minimum 13 players, so simply dumping salaries isn't as easy as it may seem.

If the Grizzlies don't find a deal they like for Gay or Speights, I expect the new owners to bite the bullet and pay the few extra million in taxes that the current roster will cost. But with more punitive penalties on the way for 2013/14, we should probably plan on seeing the Grizz aggressively explore ways to trim the payroll over the summer.

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