After a fantastic 2019-20 season, the Raptors enter this off-season a few months later than expected and with a lot of their key rotation players hitting free agency. With their apparent long term plans for the summer of 2021, they will need to tread carefully with who they sign and to what contract in the coming year.
Before we can even get into what the Raptors’ can or should do this off-season, we have to throw in some uncertainty in terms of the salary cap thanks to the pandemic and its impact on league revenues. An obviously unforeseen situation for the Raptors and the NBA, but as a result, now we’ve got some serious stuff to cover here.
The Salary Cap Situation
First off, that big picture question: what happens with the cap?
Revenues are plummeting from the lost gate money from the end of the season and playoffs. Although the Disney World Bubble saved their TV revenue, that gate and concession revenue loss will still impact the league’s financial picture. It’s rather stark to discuss a global pandemic in these financial terms, but it’s what we have to acknowledge at this point.
Typically, the salary cap for each season is determined based on a projection of revenues for the following season — which in turn is determined based on a 4.5 percent increase from the previous season’s revenue.
This season’s revenue is going to be well below what was expected. So even if we base next season’s cap on a small increase from that, it will drop quite precipitously from the current cap value. In addition, there are considerations in the CBA that ensure that overspending relative to revenues won’t continue. So this season, players will get paid more than the 50 percent of revenues they are owed, because revenues came in so much lower than expected. That will get scaled back via the portion of their salary held in escrow being returned to the owners, but when that happens, the cap is also artificially decreased the following season. So if left to operate as usual, the cap would be even lower than the low revenues this year would cause.
Fortunately, due to these highly unusual times, the NBA will certainly not operate as usual. The league and players’ association will be having discussions on how to approach the cap, escrow, and the revenue split between owners and players before free agency kicks off this off-season. They will likely decide on a higher escrow, to allow any overspending to go back to the owners, which would allow them to set the cap higher than it should be set and still meet that 50/50 split of revenues.
From there, the question becomes: what will the league set the cap at? They could set it at the value that had been previously projected ($115 million). They could set it lower than this year’s $109 million — just not as low as the projected revenue drop would indicate. But based on what other leagues, including the NBA, have tended to do in revenue drop situations like this (typically related to shortened seasons due to lockouts) is to simply keep the cap flat. Stick with the $109 million cap for next year, and possibly even the year after, until revenues return to their normal, predictable status.
We’ll approach this whole Raptors salary and free agency review as though the NBA decides to do just that, keep a flat $109 million cap (and $133 million luxury tax line) for next season and the season after. By the time the team needs to make the actual decisions, those details will be known — for this coming season at least. But keep in mind as we look at numbers here that the cap coming in higher or lower would impact all of this.
Toronto’s Roster Right Now
Technically, we are still in the 2019-20 season, so any trades on the night of the NBA Draft (on October 16) will use slightly differeant salaries. Since we’ll be focusing on free agency during this fall’s upcoming off-season, we’ll look only at 2020-21 salaries for now.
Player | 2020-21 Salary
Pascal Siakam: $30.6M
Kyle Lowry: $30.5M
Norman Powell: $10.9M
Patrick McCaw: $4.0M
OG Anunoby: $3.9M
Stanley Johnson: $3.8M (Player Option)
Terence Davis: $1.5M
Matt Thomas: $1.5M
Dewan Hernandez: $1.5M
The Raptors also have the 29th pick in the draft, which comes with a $1.5 million cap hit.
Pascal’s number is a little higher than we had pegged earlier, as he just made the All-NBA Second Team, earning him 28 percent of the cap as his max instead of 25 percent. Players who make All-NBA teams or win MVP are eligible to earn up to the 30 percent max instead of just the 25 percent max most RFAs are eligible for. The Raptors specifically negotiated a staged raise associated with those achievements — if Pascal had won MVP, he would have gotten the full 30 percent; first team, 29 percent; and with a second team nod he gets 28 percent. If he had landed on the third team (which I was banking on and I suspect the Raptors expected as well), Siakam would have stuck at 25 percent.
So that is $88.2 million in committed salary for next season to 10 players (including that first round pick). With a salary cap of $109 million, and the minimum salary cap holds that sit on empty roster spots, that means at most, they could have $19 million in cap room, if they let all their free agents walk and want to sign another team’s free agent.
They could clear a very small amount more room by waiving Davis, Thomas, or Hernandez, but they certainly will not do that. If Johnson opts out, they could have a little more room, but I would not expect that to happen after the season he had for the contract he originally got.
The Raptors could go out and chase a free agent this off-season with that $19 million, but this year’s free agency class is pretty weak, so their best bet sure seems to be to try to retain some of their own free agents instead. The good news is that teams can go over the cap to keep their own free agents, so they have more room than just that $19 million to work with if they plan on trying to keep the band together.
And before anyone asks: no, you cannot use that $19 million in cap room first then sign your own free agents to go over the cap. If you want to use your rights to re-sign players, those players have cap holds that sit on the books and prevent you from making a maneuver like that unless the cap hold is small enough.
We’ll come back to that when looking at next summer. For now, just know that the Raptors’ current free agents all have really big cap holds and the option to sign a free agent and then re-sign their own free agents is mostly not possible.
So then, Plan A: Toronto re-signs some of its own free agents. Before we get into the details of who the Raptors would want to re-sign, let’s pause and look ahead one off-season. Because that’s where the Raptors are almost certainly looking as well.
The Big Plan
It’s Giannis, right? I mean, that’s the move, right? OK, hold that thought. Specific players aside, the Raptors are currently lined up to have their core three players for the future intact while maintaining a slot for a maximum salary player. This is still true even if the cap stays flat as we’ve assumed, though it would have been easier to pull off if the cap climbed by $10 million from this year to 2021-22 season as originally projected.
Here are the committed contracts and the low cap hold free agents the Raptors can keep on their books in the summer of 2021.
Player | 2021-22 Salary
Pascal Siakam: $33.0M
Norman Powell: $11.6M (Player Option)
Matt Thomas: $1.8M
Dewan Hernandez: $1.8M
OG Anunoby: $11.6M (cap hold)
Terence Davis: $2.1M (cap hold)
Norman Powell will likely opt out of that final year, if he even comes close to replicating his success from this past year. If he doesn’t, and seems likely to opt in, expect the Raptors to try to move his contract at the deadline. For now, assuming he will opt out is how we’ll approach this.
Now add in the second year of this draft’s first rounder and the first year of the following draft’s first rounder. (I used the 20th pick, assuming the 11th best record, to make sure we capture the likely worst case cap hit.) The Raptors would have the above five players (excluding Powell) and two draft picks locked in for $54.1 million in salary. That’s seven slots, meaning Toronto would also have five empty roster spot cap holds at $900,000 each — so let’s set their total cap commitment at $58.6 million.
With a presumed $109 million cap, that means $50.4 million in room to add additional talent to that group of seven. One of those pieces to add would be the max salary free agent Toronto will want to sign that summer. If it is Giannis, or someone else with his experience, that max salary is 30 percent of the cap, or $32.7 million.
If — to pull a recently relevant example out of the air — the Clippers crap the bed and Kawhi Leonard sees the error of his ways and wants to return to the North, he would be eligible for the 10-year veteran max, which is 35 percent of the cap, or a total of $38.2 million.
That leaves either $17.6 or $12.2 million in extra room for Toronto. But wait, there’s more: signing that max free agent will actually free up one of the empty roster spot cap holds — remember that $900K I mentioned? — sitting on the cap, so those numbers will increase to $18.5 or $13.1 million.
So, take that as a best estimate right now: the Raptors will have somewhere between $13.1 million and $18.5 million to work with in 2021 before considering this coming fall off-season.
It’s a hefty number, but we can’t just forget about this coming off-season, not with a handful of key Raptors becoming free agents and with some huge choices to make in the short and long term. Now that their 2019-20 season is over, we have to ask: what should Toronto do this fall?
Let’s address all of that tomorrow.
All salary information from Basketball Insiders or my own calculations.