The Heat And The Salary Cap

No news shook the NBA universe quite like last week’s announcement from LeBron James that he would be returning to the Cavs. Heat president Pat Riley, who heard from James shortly before the news became public, surely felt the effects of the move as much as anyone. Still, it was just one of many pivot points for the Heat this month, one to which Riley and his staff responded swiftly with a five-year max deal for Chris Bosh, agreements with Dwyane Wade, Mario Chalmers and Chris Andersen, and a discount free agent signing of Luol Deng.

NBA: Playoffs-Charlotte Bobcats at Miami HeatIt was a combination of the use of Bird rights and cap space that appeared to be similar to the team’s original plan, sans LeBron. A report from Brian Windhorst of ESPN.com on the second day of free agency indicated that the Heat were telling free agents from other teams that they had more than $12MM to spend on starting salaries for them. Other dispatches cast doubt on that figure, but it was nonetheless an indication that the team planned on dipping beneath the cap.

The idea at the time appeared to involve James re-signing at the maximum salary, as he made it clear he wanted to do so no matter where he ended up, and Bosh and Wade accepting discounts. The Heat could have gone under the cap and split as much as $35,932,559 on starting salaries for Bosh and Wade in that scenario, though that would leave room to add only a player for the $2.732MM room exception and minimum-salary contracts. That figure is remarkably similar to the $35,644,400 in combined starting salaries that Bosh and Wade wound up with, assuming Bosh is indeed getting the maximum salary as has been reported. Yet if it was true that the Heat envisioned spending $12MM on outside free agents, it sounds like Bosh and Wade would have had to take less under the original plan, assuming the Heat intended to re-sign LeBron for the max.

Six days after Windhorst’s report that the Heat were telling free agents they had $12MM to spend, and four days before James announced that he would sign with the Cavs, the Heat came to agreements with Josh McRoberts and Danny Granger. The deals were equal to the full values of the non-taxpayer’s mid-level and biannual exceptions, respectively. It was a clear signal that Riley’s plan had changed, and the Heat were going to pursue a strategy of remaining over the cap. That meant the notion of adding Deng or any other free agent likely to command eight-figure salaries was out, if the team was to retain its core of James, Wade and Bosh. Staying over the cap would allow the Heat to pay up to the max to retain all three of its stars, providing that it did so and stayed under the $80.829MM hard cap that the use of the non-taxpayer’s midlevel and biannual exceptions triggered. It also meant that McRoberts and Granger would be the team’s most significant offseason additions, since the Heat would be limited to no more than minimum-salary deals for all but their own free agents.

That was what the Heat were signaling, anyway. They still could have gone under the cap, with Bosh and Wade splitting a pool of less than $24,260,231 to allow the team to sign another team’s free agent for more than the mid-level amount it gave to McRoberts. In that case, presuming James came back at the maximum salary, Bosh and Wade would each have to accept about only half of their maximum salaries, or one of them would have to take even less. Such a path never seemed likely, but the possibility of dipping beneath the cap remained, and it foretold the strategy that the Heat, if not entirely by choice, would eventually pursue.

The James decision was a game-changer for many in the league, and it spun Riley into a U-turn. He offered Bosh the five-year max to keep him from jumping to the Rockets or another suitor, trumping the four-year maximum offers that opposing teams were limited to making. He re-signed Wade at a starting salary of $15MM, roughly 75% of his max. He found a replacement at small forward in Deng, agreeing to pay him a $9.7MM salary for the coming season, and with the Deng deal, he turned the mid-level and biannual deals for McRoberts and Granger into contracts that relied on cap space instead. Riley renounced the rights to Udonis Haslem as part of clearing that room, but he used the team’s new position as an under-the-cap team to reward the sacrifice Haslem made when he turned down his player option and gave up $4.62MM. Haslem signed for the $2.732MM room exception, and, as Windhorst reveals, it’s a two-year deal. That means Haslem will see slightly more over two years than he would have made last season alone. It still may go down as a sacrifice for the Miami native, but given his declining play, there were no guarantees that he would have found a new deal next summer, when his old contract would have run out. Presuming his new contract is fully guaranteed, it locks in more money than he had previously been in line for.

Ultimately, it’s a lesson in the difference between agreements and official contracts, and the importance of timing in NBA free agency. When Riley made deals with McRoberts and Granger, there was nothing binding that stipulated that they were for the mid-level or biannual exceptions. They were simply good-faith agreements that the pair would be paid those amounts, whether it required cap space or exceptions. In fact, those deals couldn’t have been more than merely agreements at the time they were struck, since they took place during the July moratorium. Miami could have made those deals official on July 10th, the first day after the moratorium and the day before LeBron made his announcement, and in so doing the team could have informed the league that it was using those exceptions on McRoberts and Granger. That would have prevented the team from clearing the cap room it wanted after LeBron left, and the maneuver almost certainly would have forestalled any agreement with Deng.

Riley didn’t get what he was after this summer, but by remaining flexible, he’s put together a near-certain playoff team from the ashes of LeBron’s departure. The Cavs, by contrast, have yet to return to the postseason since the last time LeBron played for them.

Photo courtesy of USA Today Sports Images.

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24 thoughts on “The Heat And The Salary Cap

  1. Z....

    Do the Heat still have room to add an Emeka Okafor (assuming he is healthy) or Ekpe Udoh, and then 1 or 2 wing players?

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    • HoopsRumors

      They can sign all the minimum salary players they want, but when they used the room exception to make Haslem’s deal official today, that meant they’re done using cap space. I think the last unofficial deal they have left is for Chris Bosh, and they’ll use Bird rights to sign him.

      So to answer your question, yes, but only if those guys will come for the minimum.

      –Chuck

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      • Z....

        I was a bit confused by some of the piece…Did they end up using their mid level exception and bi annual exception to sign McRoberts and Granger? or did they just use cap space? If they used cap space, wouldnt that leave those exceptions available?

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        • $67479336

          Once they went under the cap they were left with only the room exception. They used the room exception on Haslem making them ineligible for those exceptions.

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          • Z....

            right, but what I’m not understanding is the fact that free agency isnt over, so how are they under the cap if they’re still in need of filling out multiple roster spots? Is it just the simple fact that they announced certain signings before others?

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            • $67479336

              I’m not sure i understand the question. Any chance you can clarify and i can try and answer for you.

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              • Z....

                I feel like I’ve confused myself here…the main thing I wanted to clear up is if they could still sign one of the 2 Cs I mentioned, and add 1 or 2 players on the wing. I originally calculated that they should have about $3-4 million in cap space before you calculate McRoberts and Granger. I had assumed that they’d use that space to make a signing or 2, and then fill out the roster with minimum salary players, putting them over the cap by a couple of million. McRoberts and Granger would still get the MLE and BAE in that scenario, and they’d be well under the luxury tax line, which is approximately $77 million…I guess I did that wrong…

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                • Z....

                  I just realized I forgot about James Ennis and Justin Hamilton’s partially guaranteed salary…

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                  • $67479336

                    Alright i see where you became confused. The McBob/Granger signing was originally discussed as exemption signings because they were operating under the assumption that they were signing those players around the Big 3. Once Lebron decided to go to Cleveland it changed the salary cap situation leaving only Norris cole’s contract, and cap hold for bird rights and draft picks. This left them briefly under the cap as they restructured the team. As soon as a team goes under the cap they are no longer eligible to use the exceptions they planned to use to sign those players forcing them to instead use cap space. They will not be eligible for those extensions until next off season presuming that they stay over the cap. This left them with only the room exemption which they used to sign Haslem. Signing either of those centers would be unlikely as they will likely seek more then a minimum contract, however if they were willing to accept the minimum you would be free to sign them. Since the team has used all its cap room and the only available exception the only contracts they can hand out till fill out the roster is minimum salaries.

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                    • Z....

                      Ok…I think I get it now. So once they go under the cap at all, they lost those 2 exceptions…So if they waited to announce those signings after filling out the rest of the roster, thereby going back over the cap, that wouldnt have mattered?

                      I do see how they’re capped out though. I figure Okafor will probably get somewhere in the $5 million range if he is healthy (teams wont be willing to go anywhere near what he was making on his previous contract). Udoh on the other hand seems like someone that could probably be had for the minimum…I’ve been scouring through free agent lists over the last week trying to figure out what players they could target on the wing to provide athleticism and shooting, preferably someone that can play the 2 guard. I’m trying to figure out how an NBA team can possibly make a decision like that, when there are so many similar players, most of which are unreliable options. I wonder if they’d consider giving DeAndre Liggins another look

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                      • $67479336

                        I’m not 100% on how that works you seem to need a doctorate to completely understand the CBA. From the way i read it simply going under prevents you from having those exceptions but i could be wrong on that. However each exemption comes with several triggers that can prevent you from using other exceptions or hard cap you at the tax apron, so even if it were technicality possible it would likely be very hard for teams to accomplish getting into the right tax threshold without using an exception that would interfere with that move. link to cbafaq.com is a great site if you’re trying to brush up on the CBA it might help you understand aspects of it better. Also if you have Twitter the FAQ’s author Larry Coon is a great follow for these sorts of things he typically answers questions nightly on these sort of things although he’s typically backed up. Hopefully if i said anything that was incorrect Chuck will come back and set the record strait.

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                        • Z....

                          ya its been a year or so since I visited the CBA FAQ website (I forgot it existed)…I dont have twitter, but that seems like a pretty cool thing for that guy to do…Thanks for the help

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                          • $67479336

                            Not a problem. I’ve turned in to a total NBA junkie and i know how hard it is for the real experts to get to everyone’s question all the time so i try and chime in when i feel i have something to offer. Besides lets be real I’m a junkie i can’t turn down a chance to talk basketball.

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                            • Z....

                              same here…my friends are pretty sick of me bringing up sports all the time, especially when I try to explain analytics to them…

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                        • HoopsRumors

                          As best I can tell, I think your main point of confusion, Z, is something Lovesic7 was correct about in an earlier comment. You lose the mid-level and biannual exceptions when you go under the cap, and they’re replaced by the room exception. Does that clear it up? Let me know if you still have questions.

                          –Chuck

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                          • Z....

                            If a team briefly goes under the cap, and then goes back over it, do those exceptions still turn into the room exception? Thats probably the simplified version of the final question

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                            • HoopsRumors

                              If a team goes under the cap, it can’t get the regular mid-level or biannual at any point that season, no matter whether it exhausts its cap room or not. The team could use other exceptions to bring its team salary well over the cap, but it wouldn’t matter. The regular mid-level and biannual would still be off-limits.

                              –Chuck

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                              • Z....

                                thank you for clearing that up. Thats definitely where I was confused. I also forgot about 2 players lol

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                          • $67479336

                            Thank you for confirming that. I was pretty sure i was correct, but it’s nice to get confirmation from someone much smarter then me on these subjects.

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                            • HoopsRumors

                              No problem! When you work with this kind of stuff every day, it kind of gets burned into your brain whether you want it there or not, haha!

                              –Chuck

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            • HoopsRumors

              You can easily exhaust your cap space before you have a full roster. Lots of teams do it, and it’s not necessarily a reason to panic. They have Bird rights to officially re-sign Bosh and Chris Andersen, and they converted Shabazz Napier’s cap hold into a contract this evening, so by my count, that’s 11 players. Add three or four minimum salary players, and you’ve got your roster.

              –Chuck

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              • Z....

                thats what I’m saying though. So wouldnt that mean they arent under the cap? I felt like I understood this a lot better before, but this particular article is confusing me. Or am I confusing myself?

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