FanPost

Implications of the Changing Salary Cap Figures

ESPN ran a story today that laid out the projections of the salary cap in upcoming seasons. Click here for full article. The quick summary is that the cap is expected to go up from 63.1M to 67.1M this year, then 89M in 2016 and 108M in the summer of 2017 because of a huge new TV contract. These numbers are dependent on the players not opting out of the current CBA. Rather than ponder the likelihood of that case, I decided to focus on the implications for the Hawks.

First and very important to all cap discussions is the rookie deal. Rookie salary scales are set at the time of the CBA and therefore aren't indexed to the cap max in real time. In 2014 the number 1 pick was paid 4.592M out of a 63.1M cap or 7.3%. In 2017, the number pick will receive 5.09M out of a projected cap of 108M or 4.7%. This means that until the CBA is reopened that rookie deals will be even bigger bargains than they are now. If you can get rotation players out of your 1st round picks then you will have more money to land veterans. Start cheering for the Timberwolves to get their house in order so we can get an extra middle of the 1st rounder to plug in. 2nd rounders also gain in value as the minimum contracts are established in the CBA and not indexed to the cap. In 2017 the max is 562K. Currently a 2nd rounder is normally 0.8% of the cap and that will drop to 0.5% of the cap in 2017.

There are 2 contract types that are directly indexed to the cap and those are the MLE and the Max Contract. The MLE is a simple item that likely won't come into play for the Hawks or many other teams while the cap climbs quickly. Simply put expect it to climb from 5.3M to around 8.2M The Max Contract is the big mover in this changing landscape. Let me explain it with the 3 basic examples:

Restricted free agents coming off their rookie deal:

Last year the likes of Gordon Hayward and Chandler Parson got this type of max deal at a starting salary of 14.7M. This summer Greg Monroe will likely get 1M more in starting salary. This is the max that players like Enes Kanter and Nikola Vucevic can get. The summer after that when Anthony Davis is a restricted free agent the max should increase by 5M dollars. The max for the following summer when Dennis Schröder is eligible for a second contract should be another 5M dollars more in the 26-27M dollar range for the starting salary.

7-9 Years of experience free agent:

This is the category that most players coming off their rookie extension or 2nd contract will fall. Paul Millsap is in this category as I believe he'll have 9 years under his belt this summer. The max he should be eligible for this summer is in the 19-20M range. That number would increase by almost 6M a year, so the summer that Al Horford becomes a free agent he would be eligible for a starting salary of around 26M. Then the year that Jeff Teague is a free agent that number would be around 32M. I'm not saying that is what any of those players will be making but it is what they could be offered.

10+ Years of experience free agent:

This is the category that applies to Lebron James, Chris Paul, and other aging vets. These players are eligible for 35% of the cap total. Essentially that would me 22-23M this summer and then 7M more each summer. 30-31M in 2016 and then 36-37M in 2017. Everyone will need to recalibrate what they think of in terms of salaries. No Hawks fall into this category at the moment except for Elton Brand and he's not a max guy anymore.

The other side of the market:

So far I've discussed this from the perspective of what players could get. The other big effect is on the buyers. With expiring contracts and current max levels every team will have space in 2016 and 2017. This summer the Hawks will basically have 28M in space (I'm not going to get into hold details at this time). If they spent all of that money to retain Paul, DeMarre, and even Pero then the following summer when Al and Kent become free agents, the team would have almost 34M in space to handle them. Whether that means that Al gets a 26M a year deal I can't say, but the almost every team in the league could make a substantial offer for him.

My conclusions:

The Hawks are in a position to pay their key free agents as much as anyone else. The question will be should they. I think Paul Millsap and DeMarre Carroll have the potential to be bargains because their free agency is earlier than the big bump in the cap. I also suspect it will be hard to sign marginal free agents this summer to longer, bargain contracts because smart agents will look for 1 to 2 year deals so they can take advantage of each team finding an extra $20M in their jeans. Next summer, even though Al will be eligible for more than double his salary it is still relatively less than the summer after that when Steph Curry comes off his deal to be eligible to make over 30M in salary. The projections to the salary cap indicate that the Hawks could keep their basic window on this roster together until the summer of 2017. That is when Jeff is likely the first major salary casualty because he'll be a free agent at the age of 29. While I don't think he's a max salary candidate, he's price tag will be hard to figure in that market. Everyone will have money to spend that summer, so if he's still playing at an elite level someone may value him more than the Hawks who seem to have a succession plan ready for that position.

In addition to figuring out the smart price tags in this new economy, the Hawks need to hit on their draft picks. If Dennis, Muscala, Edy and this years picks are all playing key roles in the rotation in 2017 then the Hawks will have more cap room to keep that window propped open. Paradoxically, while hitting in the draft can be a great advantage expect teams to roll the dice more because the cost of missing is less punitive until there is a new CBA because each mistake is a smaller percentage of the cap. That's not a great strategy though as it ignores the opportunity cost of getting an adequate player with the pick. Bottom line, don't skimp on scouting. Get it right. While this Hawks front office hasn't been perfect in the draft, they at least value 2nd round picks and get something out of them. The previous two Hawks front offices under the ASG didn't accomplish much in the 2nd round and squandered an opportunity to cheaply fill out a better bench.

I think by 2017 you'll see the 4 year college player gain popularity for late 1st and 2nd round picks over the International stash player. The reason why I believe this is the influx of cap room will drive up prices for veteran free agents beyond the quality supply. In response I think you'll find teams actively filling the end of their bench with lower price contributors with lower ceilings as the inefficiencies of a wave bad contracts cycle through.

If the Hawks new ownership is inclined they could have 3 shots at bringing a title to Atlanta before things get shaken up. I like those odds.

A FanPost expresses the opinion of the community member who wrote it and not that of the blog management.