Salary Cap Update: Reviewing the Raptors right now... and later

Not much has changed since the last update we did, except for the Raptors looking like they are finished, happy to sit nominally below the tax line, with flexibility to add some salary later in the season. In his recent press conference, Masai Ujiri made it clear that the major moves were finished, suggesting the team might sign a couple of non-guaranteed players (camp invitees), and that the rest of the summer was in GM Bobby Webster’s hands.

So it looks like Toronto is probably done, barring a couple of potential small signings. With that in mind, let’s recap where the team is now, and look ahead to next summer.

Right Now

Here are the committed salaries for this coming season.

Kyle Lowry $28,703,704
DeMar DeRozan $27,739,975
Serge Ibaka $20,061,729
Jonas Valanciunas $15,460,675
C.J. Miles $7,936,508
Lucas Nogueira $2,947,305
Jakob Poeltl $2,825,640
Bruno Caboclo $2,451,225
Delon Wright $1,645,200
OG Anunoby $1,645,200
Norman Powell $1,471,382
Pascal Siakam $1,312,611
Fred VanVleet $1,312,611
Justin Hamilton $1,000,000
Alfonzo McKinnie $815,615

McKinnie will count for a higher salary for tax purposes, just like Van Vleet does. I’ve included him here in spite of him being a partially guaranteed camp invite, as currently he’s the 14th man, and the roster minimum is 14 players, so even if he is waived, he’ll need to be replaced with someone who makes at least as much as he does (the minimum). Lowry and DeRozan once again have only their non-bonus salary in this list for the moment.

Previously I had said that Siakam also counted as a higher salary for tax purposes, but that is not true. Rookie scale contracts are exempt from that rule, which applies, as written in the CBA, only to contracts signed with a free agent. A free agent includes anyone coming off an NBA contract, or a rookie signing if they are a 2nd round pick or an undrafted free agent — but does not include a 1st round pick signing their entry contract. So that clears about $150,000 off of the previous team salary estimate.

Those salaries total to $118.1 million, roughly $1.1 million below the tax. So if the team stays as is, and Lowry and DeRozan don’t earn any bonuses, they will not be taxpayers at the end of the year. Spending into the tax to add real talent makes sense — but it’s a harder sell to guarantee a tax bill to add a minimum salary player who likely doesn’t move the needle at all.

If the team does intend to spend into the tax, though, we add the potential incentives for Lowry and DeRozan (with the usual disclaimer about the unreliability of bonus information) which brings the team to between $120.4 million and $121.9 million in total salaries. That means between $3.4 million and $4.9 million in room to spend below the hard cap. The Bi-Annual Exception ($3.29 million) is still available to the Raptors to chase an above-minimum free agent, but the list of available players doesn’t exactly inspire confidence. The team may be better off to simply let the young players have a chance to play more.

The Raptors do still have those trade exceptions (TPE) from the Carroll and Joseph trades, so they can absorb some salary in trades, but with being so close to the hard cap, this would again have to be a small salary, not likely a significant player — especially with the Raptors unable to trade their upcoming picks (having already traded their 2018 picks and not being allowed to trade consecutive future 1st round picks).

One other note: recently I discovered that the precise wording for the repeater tax penalty in the CBA is a little different than I (and most others) had assumed. The common interpretation of the rule is that if a team pays the tax in 3 out of 4 years, they become a repeater tax team — and as such, if the Raptors paid tax this year, they would be at risk of paying repeater tax (a steeper tax rate applied to teams that are repeat offenders) in year three of this window, with that third year satisfying the 3 years out of 4 requirement. But after reviewing the document, it is actually a check of the 4 years prior to the current cap year. Meaning in that third season of the window, 2019-20, the seasons used for the repeater tax check would be 2015-16, 2016-17, 2017-18 and 2018-19. Two of those are already in the books with no tax paid, so the worst case would be 2 out of 4 years being a tax team — meaning there is no danger of the team being stuck with the repeater penalty in that final year.

Next Summer

So, this year looks pretty done, and with limited flexibility, I wouldn’t hold out much hope for any major moves in-season either. It is likely this team as constructed will be the same one we see in the playoffs next spring, and heading into free agency next summer.

There is a chance the Raptors could extend some of their upcoming free agents before then — Norman Powell is eligible for a 4 year, $42 million contract, and can sign an extension anytime between now and next June 30th. In all likelihood he will wait for restricted free agency, where he could easily get a larger offer. Bruno Caboclo and Lucas Nogueira are also eligible for extensions, and would need to sign them before the start of the regular season this year, though with the team’s centre depth it seems unlikely for Nogueira to get one, and Bruno’s case is complicated. Fred Van Vleet is not eligible for an extension, and will be a restricted free agent next spring.

The Raptors also have a few rookie scale players whose next seasons’ team options could be declined, in Poeltl, Wright and Siakam. But that is not remotely likely, so we’ll assume their options are picked up.

But leaving aside those possibilities, the committed salaries for next summer are as follows.

Kyle Lowry $31,000,000
DeMar DeRozan $27,739,975
Serge Ibaka $21,666,666
Jonas Valanciunas $16,539,326
C.J. Miles $8,333,333
Jakob Poeltl $2,947,320
Delon Wright $2,536,898
OG Anunoby $1,952,760
Pascal Siakam $1,544,951
Alfonzo McKinnie $1,378,242
Justin Hamilton $1,000,000

I’ve included McKinnie here again on the second year of his deal, since again the team will have to sign someone anyway to fill his spot if he is removed.

The above totals to $116.8 million. That’s a high number. The tax threshold is currently projected to increase to $124 million next season, leaving the team little wiggle room beneath it, though I would expect the team, if there is any success this year, to venture into the tax next season anyway.

Of course, it’s not as simple as having $7.2 million in excess room below the luxury tax line. The team needs to have 14 players signed at minimum, and the list above has only 10. Add four minimum salary slots, and that total comes to $122.8 million. So the team could in theory duck the tax again — but this year it would mean a significant loss in talent, replacing a guy like Norman Powell with only minimum salary players.

But as noted, I doubt the team will look to duck the tax again in the second and possibly most important year of their three year window. So, add on whatever salary Powell ends up making (ballpark roughly $15 million or so?), and take off one of those minimum salaries we put on, and that puts the Raptors about $12 million into the tax. That would translate to a $21 million tax bill. That’s probably a reasonable position for the team to be in. Any contracts for Bruno or Van Vleet that are above the minimum salary would similarly increase the team salary and resulting tax bill.

The Raptors could also look to add talent using those TPEs at this point. They won’t be able to use any sign and trades, as that would activate a hard cap on them again, but after the 2018 draft is done, they will be free to use their 2019 picks in trades, and could go hunting for a mid-level salary to add to the team (with a $7.6 million and $11.8 million TPE to choose from). But that exception doesn’t stop them from being taxed on those salaries. So, for example, adding a player with an $11.8 million salary using the Carroll TPE would mean an additional cost to the team of $64 million including tax. If they were to try to add salary via trade, or in free agency via the tax-payer Mid-Level Exception, look for the team to move on from another large salary, whether that is moving Valanciunas or a somewhat smaller contract like Miles.

I think that about covers the outlook for this season and next with the way things stand now. If you have any questions or comments, please fire away.

As ever, thanks to basketballinsiders.com for the source data on existing contracts.