With the Raptors off-season continuing apace, day after day, it's time to look at some of the possible ways in which things can happen for Toronto in the NBA free agency period. Today starts the discussion: Four scenarios, two Dans, one Raptors future. How will it all play out?
Read Part 1 of the discussion here.
Grant: Alright, Hackett. We laid the groundwork yesterday, and determined that simply letting all four free agents walk isn’t really a viable solution for the Raptors, not in and of itself. It leaves them with a far worse roster and minimal cap space with which to replenish that talent.
There’s a vocal corner of the fan-base that thinks maybe this team just didn’t have enough time to gel, and they might have a point. With Kyle Lowry’s wrist injury immediately following the Serge Ibaka and P.J. Tucker trades, the full roster only had four regular season games together (one of which DeMar DeRozan sat) before being thrown into a tough first round series against the rising Milwaukee Bucks, to say nothing of the bloodbath second round series against the Cleveland Cavaliers.
Masai Ujiri spoke yesterday of the need for a culture change, and certainly of a change of offensive style of play. He also said it was unrealistic to expect to retain all four free agents.
However, let’s do our due diligence. Why is that so unrealistic? If Toronto wanted to, could they just run it back, in theory?
Hackett: Well, first things first. Yes, they can theoretically keep them all. They have full Bird Rights to all of them, so they can go as far over the cap as they want to keep them (so long as they don't use the full mid-level exception, or participate in a sign and trade, which would trigger a hard cap). Going over the tax does not restrict a team's ability to keep it's own free agents at all. The problem is not in ability to keep them, but the cost associated with that.
As I covered in my last salary piece, keeping everyone without shedding salary would bring the total team salary close to $160M. I assumed sub-max deals starting at $31M for Lowry (5/$180M), $22M for Ibaka (5/$125M), $13M for Patterson (5/$75M) and $9M for Tucker (3/$30M). The luxury tax line this summer is projected at $121M, so you’d be about $36M into the tax. With salary being taxed at higher and higher rates the further over the tax line you are, that means an additional $114M in taxes (for reference, the Raptors total cost for salaries this season was about $110M, in a dead heat for 5th highest payroll league wide). That means a total cost for salaries of about $275M.
Grant: Yowza. I mean Rogers is Scrooge McDuck rich, but even they have limits. Even Mikhail Prokhorov didn’t spend that much in his new crazy owner phase, and he often doesn’t know where his 200 million dollar yacht is.
Hackett: Yes, clearly that’s pretty far beyond what any owner would be willing to spend. The hard part is pegging just how much the owners would be willing to spend. Masai Ujiri has been explicit that if the team is worth investing in (IE wins in the playoffs), the owners are ready to pay taxes. But that doesn't tell us how much tax they are willing to pay. Nor whether the level of success this season even meets that bar — winning one round and getting swept by the Cavaliers might not be enough to pay tax at all.
But let's start high, and assume the team is willing to pay a reasonable amount of tax. My best guess, based on Cleveland's spending of late and the reports of how much they lost, was that the Raptors could be roughly a break even team with a salary of about $135 million (so about $150-160 million total committed cash including luxury tax payments). So let's use that as a hard cap for these discussions.
As I outlined before, the salary commitments for next season are about $81 million without any of those free agents re-signed. That leaves us $54 million to work with, plus however much salary we can remove from that existing commitment. Looking at the guesses I made above for salaries, that's enough for Lowry and Ibaka, but not Pat or Tucker. If you want to bring back one or both of those two, you'd need to clear salary approximately equal to the salary you give them. Of course, you'd also have a couple million in cushion left over after signing the two big name free agents, so it doesn’t need to be a perfect match.
Grant: Let’s start with the biggest fish then. If you do need to get rid of Jonas Valanciunas or DeMarre Carroll to bring back either Tucker or Patterson, how exactly could this be done? The team would have to take significant salary back in any deal, no? Obviously unguaranteed contracts are a possibility, but are few and far between in the league. What’s the least salary Toronto could take back for each player?
Hackett: Shedding salary is actually much easier than taking on salary. Salary matching rules require teams who end a trade over the cap to make sure they take back no more than a certain amount of salary, usually between 25% and 75% more than they send out in the deal.
But they are not restricted to how little salary they can bring back. You can send out a huge salary and take back none at all. The trick is getting that deal to work for the other team in the trade.
So, first off, if the teams both needed to match salaries (if both teams were over the cap), then trying to clear salary by moving Carroll or Valanciunas would be very tricky indeed. The other team would need to send out $8-9M in salaries to be able to absorb one of those contracts. Which means the Raptors are saving a measly $6M in moving one of those players, with the returning player in all likelihood being less helpful to the team.
Grant: Not to mention the fact that Carroll has torpedoed his value to the point that it almost makes sense just to hang onto him and hope he can regain some semblance of health next season. Right now, you’d probably have to attach a least a future first round pick to get anyone to take the 2 years and 30 million dollars remaining on his deal, if not this years 23rd overall pick. But that’s neither here nor there; logistically, is there a way Toronto can do that without taking back money?
Hackett: Yes. Luckily, salary matching rules apply only if the teams are over the cap. If a team had enough cap room to absorb a contract without ending up over the cap after the trade, they would not be required to match salaries at all. There should be many such teams this summer (not as many as last summer, but still a lot). So the trick would be what return you get — or what additional cost — perhaps, as you mentioned, it’s losing your first round draft pick this year — there would be to convince a team to use their precious cap space on Valanciunas, Carroll, or even Cory Joseph instead of playing in the free agent market.
Grant: So basically what this boils down to, is that Toronto can keep all their free agents but due to the devastating tax number involved, it’s exceedingly unlikely that they will. If they want to keep even three of the four, they’ll likely to have to shed major salary to do so, or pay a slightly lower but nearly as devastating tax number.
Tomorrow and Friday, we’ll break down the scenarios behind keeping different combinations of the four, and how that will affect Toronto’s ability to improve the roster elsewhere. Stay tuned!