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Salary Cap Update: Absorbing the P.J. Tucker Trade

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The Raptors look like they have a rock solid rotation after the trade deadline. But what about next year?

NBA: Los Angeles Lakers at Phoenix Suns Mark J. Rebilas-USA TODAY Sports

The Raptors traded for P.J. Tucker, rounding out their rotation for their upcoming playoff run, and gave up little in return. Let’s consider the short term and long term implications of the deal.

The Trade

The Raptors traded P.J. Tucker for Jared Sullinger and their 2017 and 2018 2nd round draft picks.

Tucker makes $5.3 million this season and is an expiring contract. He is on the final year of a three year deal, so the Raptors will have his Bird Rights this summer.

Sullinger makes the Mid-Level Exception this year ($5.628 million), so the salary matching is very easy on this one. The two second round picks are expected to land at 50th or later in each draft, so are of very little value.

The deal takes the Raptors’ salary commitments this year to $108.6 million, about $14 million above the cap. For tax considerations, when taking into account some tax-related concerns (such as some assumptions about the incentives in DeMar DeRozan’s deal, plus minimum salary deals for Norman Powell and Fred VanVleet counting as veteran minimums for tax purposes), that number climbs to $110.3 million. With the tax threshold at $113.3 million, the team is still clear of any issues on that front.

The Summer

Gosh, the summer. This team is lined up to be able to do a lot. They have a lot of free agents, but they also have full Bird Rights for all of them (Kyle Lowry, Serge Ibaka, Patrick Patterson and Tucker), so they can re-sign them to whatever deal they feel like (up to the player’s maximum salary) and can offer more years and higher raises than anyone else.

The concern, as ever, is the luxury tax. Although ownership may well be willing to go into the tax if the team proves they can make the conference finals again, there’s a difference between going into the tax and piling up a $100 million tax bill.

Let’s take a quick look at the salary situation this summer. We’ll ignore the cap and focus entirely on the tax threshold, as there is basically no scenario where the team has any real cap room, not without bailing on most of the best players on the team. The following assumes that Lowry will opt out of his player option this summer, which he definitely will.

DeMar DeRozan $27,739,975
Jonas Valanciunas $15,460,675
DeMarre Carroll $14,800,000
Cory Joseph $7,630,000
Lucas Nogueira $2,947,305
Jakob Poeltl $2,825,640
Bruno Caboclo $2,451,225
Delon Wright $1,645,200
Pascal Siakam $1,312,611
Norman Powell $1,471,382
Fred VanVleet $1,312,611
First Round Pick (assumed 21st) $1,552,200

Total salary: $81,148,824

Projected tax threshold: $122,000,000

So, that leaves lots of room, right? Well, it disappears quickly. Here are the four free agents for the Raptors this summer, and their maximum allowable salary (obviously Patterson and Tucker will not be getting theirs, and probably not Ibaka, but for reference I’ve listed them all).

Kyle Lowry $35,700,000
Serge Ibaka $30,600,000
Patrick Patterson $30,600,000
P.J. Tucker $25,500,000

Tucker, interestingly enough, is the oldest of the bunch, but has only six years of NBA experience, so would be eligible only for the lowest bracket of the maximum salary. Ibaka and Patterson have eight and seven years experience respectively, so make a little more, while Lowry has 11 years experience and falls into the 10+ year veteran category, eligible for a full 35 percent of the salary cap.

Now, it’s possible none of those players get their max (in a couple cases, anywhere close to it). Lowry might or might not. Let’s guess at some reasonable contract values for the four players.

Lowry: 5 years, $180 million, 5th year player option

This gives Lowry $26 million extra beyond the most guaranteed money another team could offer him. We’ll assume for all of these that the team backloads the money as much as possible (Bird Rights allow for 8% annual raises) to keep the current day pay as low as they can to help with tax concerns. That would mean Lowry’s deal would start at about $31 million.

Ibaka: 5 years, $125 million, 5th year player option

Ibaka probably doesn’t command close to his max, but about $25 million a year sounds right. With the extra year of security and a player option to give him some control, the Raptors probably don’t need to go higher than this. Again, backloading would put his first year salary at $21.6 million.

Patterson: 5 years, $75 million, 5th year player option

Again, Patterson doesn’t come close to the max, but after guys like Bismack Biyombo got over $15 million per year last summer, even with a suppressed market this year you have to think Patterson will get at least that much. Again, you hope the extra year of security and control keeps his price reasonable. Backloading would start this deal at $12.9 million.

Tucker: 3 years, $30 million

With Tucker getting older and perhaps the market a bit cooler on him (and the Raptors less in need of his services than the other three), it’s hard to see a five year deal here. The $10 million per year might be a bit low, but let’s be optimistic for now. Backloading again would put the starting salary at $9.3 million.

So, recall we have about $40 million to play with before hitting the tax.

Lowry $31 million
Ibaka $21.6 million
Patterson $12.9 million
Tucker $9.3 million

That adds up to $74.8 million. Meaning if we sign all those deals and keep all the other players on the roster, you are looking at being $35 million over the tax line, with a team salary of almost $160 million. That $35 million translates to roughly a $110 million tax bill. So together with the $160 million team salary, the team is approaching $270 million in player salary costs. That’s ridiculous, and there is no way any owner would pay that much.

The good news is, it comes down fast the closer you get to the threshold. For example, dropping to only $30 million over the tax would drop the tax bill to about $85 million, cutting $25 million in taxes just by shedding $5 million.

I don’t know what amount of tax ownership would be comfortable with, but it’s not $100 million worth. If the team was only $20 million over the tax, the bill would be $45 million, meaning the total team salary cost would be about $190 million. Is that reasonable? Again, I don’t know. Cleveland reportedly lost about $40 million while winning the championship because they carried a total committed salary cost (luxury tax bill included) of $169 million in a $94 million cap. That would pro-rate to $183 million in a $102 million cap. The Raptors probably don’t make the Finals, but they might be in a better earning environment than the Cavaliers, so let’s call that a wash. That still suggests to break even on the year, the Raptors should be aiming for a $150 million total commitment at most, which would mean a salary of about $10 million over the tax line, a more reasonable amount of taxes to pay.

So, let’s be generous and consider $135 million as a budget-imposed hard cap for the Raptors (as a note, the idea that they will be this far past the tax means the Raptors will blow past the actual NBA hard cap, or tax apron, and will be ineligible to use the full Mid-Level Exception or receive a player in a sign and trade). That means they have $54 million in salaries to allocate to the players above, or more if they shed salary elsewhere.

Lowry is obvious, give him his $31 million, so they are left with $23 million. That’s just about enough for Serge Ibaka, with a million or so left over. So, if you want to sign Patterson, you need to clear about $12 million in existing salary to do so — perhaps that means DeMarre Carroll needs to be traded away to let Norman Powell take on his minutes for far less money. Say Carroll and one of the prospects or the pick (all worth roughly $1.5 million, give or take) get moved, that’s $16 million saved.

But if you trade Carroll, you almost certainly want to bring back Tucker. To do that, you need that $9.3 million. You already have almost $4 million left over from jettisoning Carroll, so to clear the extra $6 million Joseph becomes the obvious choice. Again, Joseph and a prospect or pick goes out, and the team saves $9 million, enough to sign Tucker, even if his price comes in a bit higher than projected.

Or maybe to sign Patterson (you needed to clear $12 million), you use Joseph right from the start, and add in a couple prospects (say, Nogueira at $2.9 million and the pick at $1.6 million) to shed enough salary, maybe get a future pick back in the deal. Then you have Carroll instead of Tucker.

Either way, the team will be faced with these sorts of questions this summer. There are many unknowns, for us and for the team (though the team at least presumably knows their budget); the player contract values assumed above could be wildly off base, we don’t know whether players actually want to stay here is another factor, as is the trade value (or lack thereof) of the existing contracts and prospects on the team.

So, what do you think about the team’s predicament this summer? As fans we mostly don’t care about how much money comes out of the owners’ pockets, but there are certain realities to be faced.

And how much do you just not care about this right now? The Raptors look primed for a run deep into the playoffs, and whatever the summer ends up looking like, that can be dealt with after a spring hopefully full of reasons to keep this team together.

As ever, all salary information comes from basketballinsiders.com.