We’ve covered the current and projected salary situations for the Raptors, and we’ve summarized the free agency decisions and options the Raptors will have this summer.
Now, to the big question. Does Kawhi Leonard re-sign with the Raptors, or not? And what does that decision do to Toronto?
First, say Kawhi re-signs. Yay!
Add his $32.7M to the totals in part 1 for 2019-20 and you’ve got a team sitting at $151.4M against the tax. That’s $19M above the tax line, projecting to a $41M tax bill at the end of the year ($190M total roster cost). Still, to re-sign Kawhi? That’s a bill you pay if you’re Toronto.
So, that’s the easy part. Let’s assume Patrick McCaw is kept at his qualifying offer (QO), or replaced by a minimum salary of some sort; there is very little difference financially. The remaining free agent is Danny Green.
This will be a demonstration of how punitive the tax gets the further above the tax line you go. The Raptors are starting out paying a $41M tax bill on $19M of over-tax salary. Now let’s add Danny Green’s $10M salary we assumed above. That brings the team salary to $160M, $27M over the tax. You’ve added $8M in salary compared to a minimum salary player.
And the new tax bill, with that extra $8M? A whopping $74M. That $8M cost them $33M in taxes, because with the Raptors more than $20M over the tax line, every dollar costs them on the order of $4 of taxes. And it keeps going up the further over the tax you are.
So, this year’s total salary plus tax is $163M. We’ve established that it’s reasonable for a contender to pay such a bill, and even a larger one like the $190M mentioned above — the Raptors would likely make a lot of that back in the extra ticket and merchandise sales from a deep playoff run. But the total bill the Raptors would be lined up for after adding Danny Green would be around $235M. That’s a very different story.
We can say “oh, they can afford it” all we like, but the reality is that the decision makers for the Raptors will likely not sign up to such a bill.
But surely they won’t just let Green walk (unless he gets an out-sized offer from another team). And this is where the trades at the draft or this summer come in. At the draft may be better — it’s always better to avoid going deep into the tax beforehand, rather than trying to get out of it later, as enemy GM’s will charge an arm and a leg to take on salary from a team in financial trouble. As the Raptors found out this season, when they traded bit players earning near the minimum salary off the end of the roster along with future second round picks to get their tax bill down in-season. But in the summer, more teams will have cap flexibility to work with, so either timeline works.
Assuming the team can handle the tax bill laid out for if Kawhi re-signs, to also re-sign Green they just need to clear his salary. Whether that’s trading one of Norman Powell or Fred VanVleet, who should both have some more value after this playoff run than before it, or trading Serge Ibaka for a less expensive backup big (this seems like a likely move), is up to you in your trade proposals. Just find a way to clear that ~$10M, and you are set, at least for this summer. Even clearing a good chunk of that $10M, and overall increasing salary a little bit is still a far cry from the massive increase we outlined above.
And on that note, we should really look at the following summer again. Re-signing Kawhi Leonard may come with a promise — the current veteran core is all set to expire in summer 2020, meaning the team will have loads of cap room, and a need to add talent around Leonard and Pascal Siakam. And the team may promise to chase a star, another max salary player, to add to those two that summer.
So, let’s take a look. Adding Kawhi’s $35.3M (the max raise from his 19-20 salary), that brings the team total up to $66.8M, leaving $49.2M in cap room. That’s still plenty to sign a star free agent — a 7-9 year veteran would command a max salary the same as Kawhi’s, give or take ($34.8M). Which leaves about $15M in extra roster salary you can add.
If Danny Green signs for $10M for multiple seasons, that eats up most of that extra salary, meaning you have to let players like Kyle Lowry, Marc Gasol, and VanVleet walk if you want to chase a max free agent. Likely you’d only be able to keep one of those guys anyway, and it’s just a question of which one you want. But signing Green the summer before to a deal with longer term takes away that option, unless you make additional moves to clear even more cap space.
Just something to keep in mind when thinking about re-signing Danny Green. He’ll be looking for a longer term, and the Raptors have a pretty good reason not to give it to him. At least if Kawhi re-signs and they have their eyes on a big addition in 2020.
Speaking of which...
Doomsday scenario (well, not really, the Raptors did just win a championship, after all). Kawhi bolts. As we noted in part 1, the Raptors have no cap room to add another significant talent, and aren’t that far off the tax. The team gets worse, with success resting on Siakam’s development and Lowry dragging the team to success again.
Now obviously it’s never ever going to happen because we are firming in Camp He Stay. But let’s look at it anyway. What do the Raptors do if Leonard does go?
Well, most of that depends on the longer term planning, rather than worrying too much about this coming year. Certainly they won’t want to go into the tax again. As noted above, the team can add up to $14M in salary without entering the tax, so they could re-sign Danny Green if they wanted to keep the team competitive around Siakam and Lowry. Or they could trade a bunch of guys away and blow it up, obviously intending to keep Siakam but otherwise shedding their veteran talent in favour of more picks or prospects.
In either case, so long as they don’t add too much salary, the more pressing concern is the following summer. Whether they stay competitive or bottom out for a year, there is a quick turnaround to adding another star with that ocean of cap space they could have in 2020. So again it’s the long term salary they need to be careful about adding. With that in mind, let’s take a look at summer 2020 again, this time assuming Kawhi is not on the team, and instead exploring some options for keeping more of the rest of the team together.
So, we have the same situation as before. OG Anunoby, Norm and Pascal’s rights, plus their first rounder, and $84.5M in cap room. The maximum salary for a 7-9 year veteran will be about $34.8M. So the Raptors could have room to chase two max free agents that summer, and have about $17M left over to keep another piece on the team — say, a Fred VanVleet, perhaps.
Or if they want to chase only one max free agent (or can only get one to come), they could hunt other, lower cost free agent targets. Or they could bring back some of the veterans (assuming they haven’t traded them yet), perhaps Lowry or Gasol on one year deals, then re-enter 2021 free agency hunting for yet another star.
So perhaps the team might be back on track fairly quickly even if Leonard does in fact leave.
Which, again: he stay.
Hopefully this breakdown left you with enough of a big picture for the Raptors to help guide any trade suggestions or free agency dreams. Feel free to hit me up with any questions or suggestions in the comments.
Player contract information per basketball-insiders.com