An interesting point was raised recently by the incomparable Bobby Marks in his piece for HoopsHype. With all the hype for the summer of 2016, based mostly off a massive cap jump, no one has paid much attention to who is actually available that summer. It's LeBron (staying in Cleveland) and Durant, and then it falls off very fast. Of the four top guys Marks first lists in his story, DeMar DeRozan is one of them, and that's pretty much all you need to know about that.
But as he points out in his article, the following summer has an impressive list of veteran, mid-peak and young stars ready to hit the market. Curry, Paul, Westbrook, Ibaka, Griffin... The list goes on.
It is my opinion that the Raptors should be swinging for the fences with free agents. Masai seems to agree, with the team positioning itself for a sit-down with LaMarcus Aldridge this summer. And obviously if the opportunity arises, you want to be able to sign one of these guys. So let's look at what the next couple summers look like, because planning for that has to start now with Jonas Valanciunas and Terrence Ross up for extensions.
First, summer 2016. I won't bother with detailed tables of every player's salary this time around. Instead, the key information.
First, the cap level is projected to be at $89 million. The maximum salaries, based on that number, will be starting at $21 million, $25 million and $29 million depending on NBA service time. As a note Durant and DeRozan both fall under the $25 million milestone.
Second, the Raptors have committed $51.9 million in salaries next summer. That includes an assumption for the cap holds for their two picks (about $3.5 million combined). That leaves about $37 million in cap room.
Next, their free agents. DeMar DeRozan can opt out (he will). JV and Ross will be restricted free agents if they aren't extended this summer. Luis Scola and James Johnson will be unrestricted free agents. The Raptors still hold Nando de Colo's rights. Together these players' cap holds eat up an additional $45 million in cap room.
So, decisions. If we assume that the Raptors want to have $25 million clear to potentially sign Durant should he inexplicably choose to come to Toronto, they need to shed all but $12 million of those cap holds. That means letting every one of those free agents walk except Valanciunas (he has an $11 million cap hold). The good news is this decision, if left until free agency, can be made after finding out if Durant will sign here. If he doesn't, you can still bring all those guys back.
The trick is the impact on extensions. If JV and Ross sign extensions this summer, that increases the committed salary. It means no signing Durant unless via sign and trade or if someone else gets dumped in the meantime. For example, if JV signs a Kanter-esque deal (probably optimistic there) and Ross signs an extension at his cap hold amount ($9 million), that leaves only $13.5 million in cap room if everyone else walks. Then to get to $25 million you'd need to trade Kyle Lowry or DeMarre Carroll or a combination of Patterson and Cory Joseph, with no salary coming back. Tough to do.
So based on that, I would say that if Valanciunas and/or Ross are extended this summer, it signals that management is now looking past 2016 and targeting 2017 as the place to potentially pick up a star in free agency.
In that case, there will still be decisions to make in summer 2016, but those decisions would be predicated on summer 2017 cap room. So let's look at that now.
The summer after the cap boom - it has a cap boom of it's own, due to the way the cap is calculated. If ever there is a year where the teams spend too little on player salaries, not only do the players get paid the difference at the end of the year, the following year's cap is adjusted upwards to reduce the chances of another shortfall. So in 2016, with a giant leap in the cap, most teams will be spending to the cap and not over it. Or if they do go over it, not very far over, certainly with very, very few teams getting close to the tax or even exceeding it. And on the other side, there will undoubtedly be more cap floor teams than ever. The result is that the average amount a team will spend will be around the cap level.
This is an issue because the cap is calculated to distribute 50 percent of revenue to players, and to set the cap the league looks at the typical spending patterns of teams and determines that on average, a team will spend about 12 percent above the cap. So in most years the cap is set at about 89 percent of the expected average team salary to get the money distributed right. So in 2016 teams will be expected to spend, on average, $100 million on player salaries. But the average will come in around $89 million. So there is an $11 million shortfall, per team. This is a massive number.
So, when calculating the 2017 cap, the NBA will follow all the same steps as usual, and will come up with a cap of about $97 million. Then they will add the shortfall from the previous season, bringing the total to $108 million. This is the reason for that second big jump in the cap. In the years to follow, the cap will settle back down, with projected levels of $100 million, $102 million and $107 million, as the cap keeps rising but the shortfall adjustment isn't there after the inflated cap in 2017-18.
(Note that the shortfall is probably bigger, and the base salary cap in 2017 smaller, but I tried to keep this as simple as possible for clarity's sake, and that final $108 million projection is what matters.)
So that brings us to the projected cap of $108 million for 2017, which is the starting point for our discussion on what to do this summer with extensions and next summer in free agency. Which we will get to next time.