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Raptors Salary Cap Update: Predicting what Toronto does next after signing their rookies

With Jakob Poeltl and Pascal Siakam officially signed, the cap situation has changed slightly, and it might help us figure out what Masai Ujiri's plan is.

The Raptors signed their rookies Jakob Poeltl and Pascal Siakam. This has a very small impact on their cap situation -- instead of their cap holds being on the cap (an amount equal to the rookie scale salary for each player), their actual first year salary will count. That first year salary, in almost every case, is 120% of the rookie scale salary, the maximum a team can pay their first round draft picks. Rare cases of teams paying below this have been met with scorn for the front office involved, and often the players will hold out and not sign at all. It is safe to assume the full 120% will be paid to Poeltl and Siakam.

Here is the cap room situation after the signings.

Jonas Valanciunas
DeMarre Carroll
Kyle Lowry
Terrence Ross
Cory Joseph
Patrick Patterson
Jakob Poeltl
Lucas Nogueira
Bruno Caboclo
Delon Wright
Pascal Siakam
Norman Powell

Salary Cap: $94,143,000
Tax: $113,287,000
Apron: $117,287,000

That totals $73.8 million committed salary, or about $20.3 million in cap room.

Here are the cap holds for the various free agents for whom the Raptors have rights of some kind. Those rights allow the team to go over the cap to sign the free agent, to various contract amounts depending on the type of rights each player has. Note that for now, DeRozan hasn't signed yet and still counts against the cap as his cap hold, even though he has agreed to sign.

DeMar DeRozan
Luis Scola
James Johnson
Nando de Colo
Jason Thompson

To keep the rights to any of these players, their cap hold has to be kept, which eats into the available cap space.

DeRozan is re-signing with the team, so his cap hold definitely has to stay on the books, and the cap space shrinks from $20.3 million to $4.8 million. Note that this is essentially no cap space at all (as the mid-level exception [MLE], given to teams over the cap, is valued at $5.628 million this summer).

Why This Matters

First round draft picks are often signed even before the moratorium lifts if their team has no plans for cap space use. So, why would the team not have signed the rookies until now, and still not have signed DeRozan?

This is a fair question to ask, especially when the available cap room, which is $4.8 million now, was still only $5.5 million before the draft picks signed. Either number is less than what the Raptors could offer a free agent via the MLE if they stay over the cap.

There are two possibly answers. First, the Raptors could have been pursuing a trade to clear more cap space and offer more money (say, $10 million or more) to a free agent. With the market shrinking and very few difference makers still out there, I think this scenario is unlikely.

The second option where the small amount of cap room is more valuable than the MLE is in small money trades. When a team sends out a lot of salary in a trade (more than $10 million) they can bring back at least $5 million in excess salary even if they are over the cap. But in smaller trades, they are limited to roughly a 150% return on their outgoing salary (if they are over the cap). If a team is under the cap, they can instead use their cap space to absorb excess salary coming back.

So for example, if the team wanted to trade a $2 million player, they would only be able to absorb a $3.1 million player in return if they are over the cap. But, prior to signing the rookies, the Raptors had $5.5 million in cap room, so could instead absorb back a $7.6 million player using the same trade piece (the outgoing $2 million in salary plus the $5.5 million in cap room, plus a $100 thousand buffer the league allows on such trades).

So if the Raptors were looking for a way to trade, say, Lucas Nogueira ($1.9 million) or Delon Wright ($1.6 million) -- and I'm not saying they were -- and absorb a medium-sized contract in return, keeping that cap space available would have been useful to them. Now that the rookies have signed, that cap space shrinks by $650,000, which means either the trade they are potentially considering doesn't require as big a salary differential, or they have given up on these sorts of trades and are going to operate over the cap.

Operating over the cap has its benefits, as they can get the MLE and the BAE (bi-annual exception, a much smaller version of the MLE) to sign free agents, and keep rights to players like Nando de Colo. Unfortunately, with James Johnson signing with the Heat, his rights are no longer of any value.

In any case, you can never be sure with Masai, but signing the rookies now when they could have continued to wait suggests that we will probably see a DeRozan signing announcement soon (perhaps shortly after Summer League wraps up) and can start tackling the problem of adding talent to the team with over-the-cap solutions, like salary matching trades and signings with player rights as well as the MLE and BAE.

All confirmed salary numbers per