Salary Cap Update: Options for the Raptors in Free Agency

The Toronto Raptors are coming off a very successful season, with their two veterans establishing themselves as stars (again), their rookie taking home the Rookie of the Year trophy, and the team safely making the playoffs and gaining their young core some post-season experience over the course of a long series against a win-now opponent.

That’s a win.

But where do they go from here? Well, step one is figuring out what they have now, and what they are able to do to retain that and add to it. So, salary cap status time.

Current contracts

Player | Salary | Years Remaining
Pascal Siakam, $35.4 M, 2 years
Fred VanVleet, $21.3 M, 1 year (plus a player option)
Gary Trent Jr, $17.5 M, 1 year (plus a player option)
OG Anunoby, $17.4 M, 2 years (plus a player option)
Scottie Barnes, $7.6 M, 3 years
Khem Birch, $6.7 M, 2 years
Precious Achiuwa, $2.8 M, 2 years
Malachi Flynn, $2.1 M, 2 years
Svi Mykhailiuk, $1.9 M, 1 year
Armoni Brooks, $1.8 M, 1 year
Dalano Banton, $1.6 M, 1 year

That’s $116.1 M committed to 11 players, with a salary cap this year of $122 M, and a luxury tax line of $148.3 M.

Brooks and Banton both have small partial guarantees and could be waived to remove most of their salary from the books, but that doesn’t seem likely right now. Both will be restricted free agents (RFA) after this coming season with Early Bird Rights to allow the team to re-sign them if they so desire. RFA’s can sign with other teams, but if the Raptors decide they would prefer to keep them, they can match the offer the other team made and keep the player for that salary and term.

There will also certainly be a contract for Christian Koloko, who the Raptors just drafted, and will likely make the minimum salary, which is $1 M this season.

In any case, it is clear that the Raptors have no significant salary cap room, so they will be operating as an above-the-cap team this year, and any free agent signings will need to either be a) their own free agents being re-signed, b) acquired via sign-and-trade, or c) signed using an exception like the Mid-Level Exception (MLE), Bi-Annual Exception (BAE) or the minimum salary exception.

MLE: $10.3 M starting salary, up to 4 seasons in length
BAE: $4.1 M starting salary, up to 2 seasons in length

The minimum salary exception allows any team to sign any number of players to the minimum salary for up to two seasons of term.

Re-signing free agents

It is possible the Raptors pursue a major shakeup or addition this off-season, but the more likely scenario is that they try to keep their current team together and limit their additions to just-drafted Christian Koloko and perhaps one signing with the MLE.

They have several free agents of note.

Chris Boucher and Thad Young are the obvious major pieces that they would likely prefer to retain. Both players are unrestricted free agents (UFA), and have their full Bird Rights, meaning the Raptors are able to offer them any salary up to their maximum salary, and up to 5 years of term. They can also sign with other teams and as they are unrestricted; there would be nothing Toronto could do to prevent that if they like those offers better than what the Raptors are offering.

They do have other free agents of note though. Yuta Watanabe is a UFA as well, and has his full Bird Rights. However, after last season, it looks unlikely they would bring him back unless they lose one of the above players. The roster size limit may be the key factor here — teams can only have 15 players on the roster, and the Raptors’ roster is filling up quickly.

Two-way contracts

The other free agents to consider are their two-way players from last season, Justin Champagnie and David Johnson. Champagnie played a lot with the big club and looks to have a role moving forward and also seems like he has graduated past being a two-way player. Johnson perhaps not so much.

Two-way contracts allow teams to add two more players beyond the 15 man roster, and those players are essentially “minor league” players, who play primarily with the Raptors 905 in the G-League, but can be called up and play on the NBA team for up to 50 games, and earn the NBA minimum salary for games that they are up for. Their salary does not count towards the salary cap, so those contracts are not a concern except for there being only two of them available to each team each season.

The Raptors have already signed one two-way player for this coming season, an undrafted free agent by the name of Ron Harper Jr.

Anyway, two-way players become RFAs when they finish their contracts. As such, Champagnie is an RFA. However, since he has no Bird Rights (has only been with the team for one season, as compared to the two seasons needed for Early Bird Rights, or the three seasons needed for full Bird Rights), they can only offer him slightly more than the minimum salary. I suspect he could be had for the minimum anyway, and the team can offer up to 4 years of term but would likely offer only 2, which would leave Champagnie as an RFA again at that time, and with full Bird Rights.

Johnson could be signed to another two-way deal if he and the team were interested in that. It seems unlikely the team would dedicate a full roster spot to him at this stage.

With all those assumptions in place, the Raptors end up with about $29 M in room under the tax line, which they likely won’t be looking to exceed this year, to re-sign Boucher, Thad and sign someone with the MLE.

Longer-term considerations

Before we get into exactly what contracts the Raptors might bring guys back on, or offer to other teams’ free agents, or what trades they may pursue, let’s take a look at what the salary situation looks like moving forward.

First off, next summer. Here are the players who will be hitting free agency next summer (and presumably wanting a raise):

Fred VanVleet, $21.3 M, 1 year (plus a player option)
Gary Trent Jr, $17.5 M, 1 year (plus a player option)
Armoni Brooks, $1.8 M, 1 year
Dalano Banton, $1.6 M, 1 year

Brooks and Banton we can deal with as needed, but Fred VanVleet and Gary Trent Jr are two high value pieces hitting unrestricted free agency and who you don’t want to lose at all, let alone for nothing. Keeping each will require a significant raise. Both will have full Bird Rights, so can be offered up to 5 years starting at their max salary.

Fred’s maximum salary that offseason would be $37.7 M. It seems unlikely he would command a full maximum salary, but a significant raise on his $21 M seems likely.

Trent’s maximum salary that offseason would be $31.4 M. Again, this is very high for him, but again he would likely get a significant raise on his current salary.

This offseason, the Raptors are actually eligible to sign VanVleet to an extension. Extension rules limit the salary they can offer him now versus when he hits free agency, but the maximum they can offer him now is in my opinion a pretty good ballpark for his value. The maximum extension they can sign him to this summer is as follows (includes this season’s salary):

2022-23: $21.3 M (current contract)
2023-24: $25.5 M
2024-25: $27.5 M
2025-26: $29.6 M
2026-27: $31.6 M

That’s essentially a 4 year extension at $28.5 M a year. Whether that would be sufficient to get VanVleet to sign it ahead of hitting free agency might be the question.

Trent is not eligible for an extension, so they will need to deal with his raise in free agency.

If we assume VanVleet gets the above $25.5 M, and Trent gets a starting salary of say $20 M, then the team would be about $26 M shy of the tax line, with 9 players signed. If Boucher, Thad and the MLE signing are signed with term for about the $29 M (plus a typical annual raise of 5-8%) mentioned above, then the Raptors would project to be about $5 M above the tax line. Not a huge deal, but probably something they’d like to avoid if possible until they consider themselves a true contender.

Even longer-term

The following summer the situation gets even tighter. They will see three different players up for a raise, Pascal Siakam (noted all-NBA star), OG Anunoby (seemingly desired all across the league if you believe the trade rumours), and Precious Achiuwa (who will be coming off a very inexpensive rookie scale deal so even a moderate pay rate is a significant raise).

All three will have full Bird Rights, so the team can potentially offer them up to their maximum contracts.

Pascal’s max contract would start at $39.8 M (though if he qualifies for the early supermax by continuing to make all-NBA teams it could be as high as $45.3 M), and that is probably about right.

OG’s max contract would start at $38.8 M. This is probably high for him but that depends on what his growth looks like between now and then. Perhaps $30 M is a more realistic price tag.

Precious’ max contract would start at $32.4 M. Again, very high for him, but you can probably safely pencil him in for $15-20 M even if he is just a functional starting C at that point.

Pascal is another guy who is eligible to sign an extension this summer. If he waits for next summer to have that conversation, he could be eligible to sign an extension at that bigger salary number mentioned above, but if he signs the extension this summer, this is the maximum they can offer:

2022-23: $35.4 M (current contract)
2023-24: $37.9 M (current contract)
2024-25: $39.8 M
2025-26: $43.0 M
2026-27: $46.2 M

This would add only three years to his current contract. The maximum his contract can have on it at any time is 5 years, so if they wait a year to sign this they could add an extra year on the end.

Now, if Pascal is signed for about $40 M in this season, OG for about $30 M, and Precious for $15 M (let’s be optimistic here), and the same contracts as the last section are assumed for Fred and Gary, then they are looking at 7 players signed and $10 M shy of the tax line. So very likely pushing into the tax even just adding minimum salary or rookie scale contracts.

The following season Scottie Barnes is due his first big raise, but there is a lot of uncertainty around a new national TV deal and cap spike so there’s no need to worry about that for now.

The short version of the two stories above: the Raptors are likely capable of keeping their core together while avoiding the tax or just going a short distance into it. But if they start signing bench players or mid-level players with term, they will quickly run into issues keeping the core together. They may need to prioritize one over the other as soon as this off-season to avoid problems in future years.

Options

So, now we return to this off-season. With the context above, the Raptors need to be careful with what sort of long term salary they commit to non-core pieces right now.

That leaves them in an awkward spot. For next season they can afford to have some non-core players on the books, but probably not all three of Thad, Boucher and an MLE guy. The season after, they likely can’t fit any of them unless they are willing to go deep into the tax or lose a core piece.

This will hurt their use of the MLE, as most teams will be offering 3 or 4 year deals, and if the Raptors restrict themselves to one or two years, they’ll lose out on some players based on the total guaranteed money in such a deal.

Another complicating factor for the MLE usage is Christian Koloko. As noted above, he will likely earn the minimum salary this year. However, the Raptors will be planning for the future, and if they only use the minimum salary exception to sign him, they can only offer two years. That would result in him hitting restricted free agency two years from now, and the team would only have his Early Bird Rights, which limits what they can offer to him when trying to re-sign him, and also opens themselves up to heavily backloaded offer sheets from other teams. Suffice to say, it’s a non-ideal situation for a team to find themselves in with one of their prospects.

The way around this problem is to offer a player a three year contract. This is the ideal length, as it is short enough that they would still be a restricted free agent at the end of it (young players who are not first round picks get to be unrestricted free agents once they have 4 years of experience), but long enough to accrue full Bird Rights, allowing the team to re-sign the player to whatever amount they like.

But as noted, you can’t offer three years with the minimum salary exception. So if the team wanted to do that, they’d have to use a small slice of their MLE for Koloko. He’d still make about $1 M, so the leftover MLE would reduce in value from $10.4 M to $9.4 M. Not a massive decrease, but it could be enough to leave their offer to potential MLE signings a little short of the competition.

Combine that with the restriction on term, and the Raptors may find themselves picking from the bottom of the barrel in the MLE market this summer.

Boucher and Thad are a similar story. If Boucher, for example, has a 4 year offer at the full MLE available to him, but the Raptors only want to offer 2 years, they’d need to increase the annual salary rather significantly to make up for that. Probably not quite double, but also probably well above $15 M.

As for Thad, he might not have offers with term on the market anyway, so he might be open to just signing a one year deal around $10 M or lower depending on the demand for his services.

But if you need increased salaries for those two, you might end up with no significant room under the tax for an MLE signing at all.

It’s a tricky balancing act, so Raptors fans should be careful with their expectations for additions to be made this summer.

Big swings

Finally, there are also scenarios where the Raptors pursue a big upgrade, maybe at C, maybe for any star that becomes available. If the upgrade is big enough and the Raptors consider themselves contenders right away, they could go ahead with such a deal even if it means going into the tax immediately or in the near future.

Let’s quickly go over the assets they have available in such a trade this off-season.

They can trade a core piece or pieces, of course. None of the core players have any complications in their contracts that would make a trade difficult, so that’s pretty straightforward.

If the Raptors want to add in draft picks to sweeten a deal, they have all of their first round picks moving forward. So they are limited only by the general rules about future first round draft picks — you can’t be without a 1st round pick in two future drafts in a row, and you can’t trade a 1st round pick more than 7 drafts from now.

If they don’t want to trade a core piece, or a trade requires additional salary to be sent out along with one of the core pieces to match a much bigger salary coming back, there are a few options.

First, they do still have a $3.1 M traded player exception (TPE) from the Lowry trade, and a $5.2 M TPE from the ensuing Dragic-Young trade. These are exceptions created when trading one big salary out and receiving less salary back — you are allowed to bring in the remaining difference in a future trade without sending out matching salary in return. These TPEs last for exactly one year, so the Lowry one would need to be used quickly, but it is an option. You can’t, however, combine a TPE with a player or another TPE to bring back a bigger salary. So, for example, you can’t send out Trent’s $17.5M salary and use the Lowry and Dragic TPEs to help bring back a $25.8 M player. You can only use the Lowry TPE to help bring in a player making $3.1 M or less, or the Dragic TPE to bring in a player making $5.2 M or less.

**Edit note: there was an error in the above paragraph that had the wrong number for the Lowry TPE. It originally had the two TPE values combined into one larger one ($10.1 M) due to a spreadsheet error, and has been fixed now.

The other options to create matching salary are sign-and-trades of their own free agents, Boucher and Thad. Teams with players’ Bird Rights are allowed to sign players specifically to trade them to another team (who the player is essentially signing with). This is what happened with Kyle Lowry and the Heat last season, instead of signing outright with them, Lowry signed with the Raptors and was immediately traded to the Heat for Goran Dragic and Precious Achiuwa.

So if Boucher, for example, wanted to sign with another team for, say, $12 M a year, but that team had only the MLE to offer, they could instead engage the Raptors to sign-and-trade Boucher to them at that salary, so long as they could send back a salary large enough to match Boucher’s money.

The trick with such a deal is that there is a rule called Base Year Compensation (BYC), that applies only to sign-and-trade scenarios. The idea is to prevent teams from doing these sign-and-trades freely. BYC prevents a player from being used easily to match salary in a trade. If a player receives a big (>20%) raise in a sign-and-trade, their salary counts differently for the two teams making the trade. The team trading for him has to send out enough salary to match the full salary of the player, as usual. However, the team signing-and-trading him can only use either his previous year’s salary or half the current year salary, whichever is greater.

So in Boucher’s case, for example, if he is signed-and-traded on that $12 M contract, the receiving team (let’s assume they are a tax-paying contender, those teams have to match salary more closely than other teams) has to send out at least $9.5M to match his salary. But the Raptors can only use his prior year’s salary ($7 M) or half the current salary ($12 M / 2 = $6 M), whichever is greater, in this case the $7 M, to match the incoming salary. Usually teams can figure out how to make the salary differences work, but it’s something to be careful of when constructing potential trade scenarios.

Worth noting that Thad’s previous year salary is much higher, so a sign-and-trade with him is much less likely to have to worry about the BYC rules.

*****

So, that basically outlines what the Raptors have to work with this summer. I’ve left out any specific targets they could chase, as their options are fairly open this year, but with the MLE limitations noted above, the more exciting names may not be an option for them anyway unless they look to pull off a bigger trade.

Feel free to propose trades and signings in the comments below, and I’ll try to answer any questions you might have about the above or other salary cap mechanics involved in those proposed moves.

All salary information per my own tracking and basketballinsiders.com.