Last time out, we took stock of what the Raptors’ current salary situation looks like, as well as how their cap sheet is trending for summer 2020 and 2021, to get an idea of the big picture before diving into the decisions to be made this summer.
So now having done that, let’s dive into some of the upcoming calls to make.
Patrick McCaw is a restricted free agent. To maintain his rights, the Raptors will need to extend him his qualifying offer (QO), which is a one year contract offer for $1.9M. He can accept that, or negotiate another deal with the Raptors or another team. The Raptors don’t have his Bird or Early Bird rights, so offering him a contract above that salary (or matching such an offer made by another team) requires them to use an exception.
The minimum salary they can offer a free agent is about $0.9M, but for tax purposes (which will be crucial, as we will see momentarily), will count as $1.6M. So the $1.9M QO for McCaw is very low risk and provides the team a level of control over a player they might want to hold onto.
Moving along from least to most important, Danny Green is the next free agent in line. It’s hard to say what salary the market will peg for him, but a continuation of his $10 million this year would probably be in the right ball park. The term will be a question, at his age I imagine he’ll want as much term as possible, and I suspect the Raptors won’t want to give him five years.
Suffice to say the Raptors have his Bird Rights and can offer Green pretty much whatever it would take to sign him. Whether they will or not (or, more specifically, can afford to), we’ll dive into later.
Now the big one: Kawhi Leonard. If he wants to stay, the Raptors will offer him a maximum contract for whatever length best suits him, with a player option in the final year. The starting salary for this summer, assuming the above projection is correct, would be $32.7M. The Raptors have his full Bird Rights, meaning they can offer him a deal up to five years in length, and can offer him eight percent of that first year salary as an annual raise, while other teams are limited to four years and five percent raises. So the maximum offer from the Raptors works out to $190M over five years ($37.9M/year). While any other team can only offer $141M over 4 years ($35.2M/year). This is true even if the other team acquires Leonard in a sign-and-trade transaction: the only path to the higher raises and longer deal is re-signing with the Raptors to play with the Raptors.
Now, the long term might not be what Leonard wants. He is approaching 10 years experience in the NBA, and maximum salaries in the NBA jump up for players at key experience milestones. A player with six or fewer NBA seasons under their belt can sign for a starting salary up to 25 percent of the cap. Once the player hits seven years experience, that goes up to 30 percent. At 10 years, it goes up to 35 percent.
So, Leonard needs to play two more seasons to hit his 10 year experience mark. Ideally, he would be a free agent as soon as he hit that mark, so that he could immediately sign a long term contract at his new higher maximum salary.
There are risk considerations with any deal structure, but consider the two obvious scenarios. First, Leonard could sign a long term deal now, as outlined above, and guarantee himself $190M if he signs in Toronto (or $141M elsewhere). In that case, he’s hitting free agency at age 31 or 32 (assuming he opts out of the final year of those deals) — and any team signing him to a long term deal is doing so for his decline years, and signing up to paying him heavily in his age-35 and 36 seasons. The market for that may not be great, and that’s leaving aside the possibility of him getting hurt between now and then. So the big pay day is likely the deal he signs now in that scenario.
But if Leonard wants his big payday contract to come at that 35 percent max, he could sign essentially a bridge contract now. If he were to sign a 3 year maximum contract with the Raptors (or another team), with the third year a player option, that might represent the best of both worlds. If he suffers any major injuries, or declines swiftly, he can opt into that third year, and still recoup about $100M of salary — a decent chunk of that big contract he could sign now.
But if he is healthy and still dominant in a couple of seasons, which doesn’t seem wildly unlikely, he can opt out of that third year, and hit free agency with exactly 10 years experience under his belt. And then he’d be a 30 year old superstar free agent in the middle of his prime with a likely market for his services that would gladly lock him up for his age 30-34 seasons.
And if that’s the case, the contract he could sign then would dwarf the one he can sign now. Assuming he has full Bird Rights at that time, and re-signs with his team, assuming the cap keeps growing year to year as it is projected to for the next couple seasons, his maximum starting salary would be $43M, which works out to $250 million over five years.
So the 2+1 option looks pretty great for Leonard. It also gives him a little leverage over the team to make sure they stay good around him, as he can bolt again in a couple seasons, a level of control a few superstars have been using of late to avoid being at the mercy of their front offices.
More Kawhi Math
Ah, but isn’t the financial leverage the Raptors actually have all tied up in that five year offer, compared to the four years other teams can offer? Well, yes and no. Mostly no. Toronto can offer the higher raises, which helps a little even over a shorter term. A 2+1 deal from the Raptors would be $68M plus a $38M option ($106M guaranteed income), while from another team it would only be $67M plus a $36M option ($103M). Small difference, but a difference.
More importantly, remember that the assumption above with the $250 million payday is that the player has full Bird Rights when signing. If Leonard signs with another team this summer, then opts out after two years, he would have only Early Bird Rights — meaning he can get the bigger raises, but cannot receive the fifth year. That’s a big deal: that 5th year represents $57M of the $250M in the contract. So unless Leonard is willing to sign another one year deal at the time, to get three years with his new club so he can then sign a 5 year deal, he’s still better off signing with the Raptors (financially). And that’s just another risk to throw on the already at-least-somewhat-risky idea of delaying signing the five year deal until two summers from now.
So, if Leonard wants the most money secured now, the Raptors are the choice. If he wants to take a shorter deal to get to that huge payday as fast as possible, the Raptors are the choice. Now, there are lots of other factors besides financial. But the Raptors at least have the edge in one area.
In any case, we’re left with a big question mark when planning the off-season. Leonard either re-signs or he doesn’t. There are variations that could affect the planning for the future like him taking a one year deal (which would be odd), but for now let’s assume it’s either a 3 or 5 year deal at his maximum salary with a player option in the final season.
So, either Kawhi re-signs, or he walks, and we’ll go into both possibilities tomorrow. In the meantime, feel free to hit me up with any comments, questions or trade/signing proposals and I’ll do my best to answer.
Player contract information per basketball-insiders.com