Hoops Rumors Glossary: Cap Holds

The Cavaliers have committed only about $75MM in guaranteed money to player salaries for 2016/17, but that doesn’t necessarily mean the team will open $17MM of room against the projected $92MM salary cap. In fact, it’s highly unlikely that the Cavs will have any cap space at all. Each of Cleveland’s own free agents will be assigned a free agent amount or “cap hold” until the player signs a new contract or the Cavs renounce his rights.

The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents before using Bird rights 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 kind of cap exception.

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: Two-year veteran’s minimum salary, unless the free agent only has one year of experience, in which case it’s the one-year veteran’s minimum.

A cap hold for a restricted free agent can vary based on his contract status. A restricted free agent’s cap hold is either his free agent amount as determined by the criteria mentioned above, or the amount of his qualifying offer, whichever is greater. Cavs combo guard Matthew Dellavedova is eligible for restricted free agency for a second straight offseason this summer. He signed for the value of his qualifying offer last year, and his qualifying offer amount would be $1,434,095 this year. Still, his cap hold is larger, at $2,179,824, because the Cavs will have his Bird rights and his salary of $1,147,276 is well beneath the league average. If Cleveland wants to keep his Bird rights, it’ll have to carry a $2,179,824 cap hold this summer until it either re-signs Dellavedova or he signs elsewhere and the Cavs elect not to match.

The Cavs only have Early Bird rights on LeBron James, but assuming he opts out, as expected, he’ll have a cap hold of as much as $29,861,650, or 130% of this season’s salary. A chance exists that his hold will be slightly lower, because no cap hold can exceed the maximum salary for which a player can sign. So, if the maximum salary for a player with 10 or more years of experience, like James, comes in below that figure, his cap hold will simply be whatever the max is. The projected max for James, based on a $92MM cap, is slightly above $30MM. So, if that happens, the Cavs would get a “discount” of sorts on James’ cap hold, since it would only be $29,861,650, and James is roundly expected to sign for the max. Either way, it won’t much matter for Cleveland, since whatever James’ cap hold is, it’ll wipe out that $17MM worth of would-be cap space, anyway.

An unusual case exists for the Grizzlies and P.J. Hairston, whom they acquired via trade from the Hornets this season. Memphis has his Bird rights, but the Hornets declined the fourth year team option on his rookie scale contract before the season, so the Grizzlies can’t pay him more than what he would have made in the option year, which is $1,253,160. That rule is in place so a team can’t circumvent the rookie scale and decline its option in an effort to give the player a higher salary, and it applies even if the player is traded after the option is declined, as in the case of Hairston. So, rather than coming in at 250% of this year’s salary, as would be the case with most players coming off rookie scale contracts, Hairston’s cap hold will be the option amount: $1,253,160.

If a team holds the rights to fewer than 12 players, cap holds worth the rookie minimum salary ($543,471) are assigned to fill out the roster. So, if a front office chose to renounce its rights to all of its free agents and didn’t have anyone under contract, the team would have 12 holds worth $543,471 on the cap, reducing its total cap space by about $6.5MM.

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 Jerry Stackhouse never signed elsewhere after his contract with the Nets expired at the end of the 2012/13 season, and the Nets have never renounced him, Brooklyn still has a minimum salary hold for Stackhouse on its cap. It’s been so many years since the Nets have gone under the cap that there’s been no reason for them to renounce their rights to players who, like Stackhouse, are no longer in the NBA. Keeping those cap holds allows teams some degree of cushion to help them remain above the cap and take advantage of the mid-level exception and trade exceptions, among other advantages afforded capped-out teams. Still, Brooklyn seems likely to at last open cap room this summer, so the Nets will likely renounce the Stackhouse cap hold in July, long after he retired.

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 and the Basketball Insiders salary pages were used in the creation of this post.

Earlier versions of this post were published in previous years.

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