2014 NBA Free Agency: A closer look at free agent cap holds

Has it been 2 weeks? It feels like yesterday I was outlining what the Hawks Cap Space could look like. Well, we should further this discussion by looking deeper into the Hawks' current Free Agents. This should hopefully make it clearer to see the Hawks options for this offseason with Elton Brand, Gustavo Ayón, Shelvin Mack, Mike Scott, and Cartier Martin.

What the heck is a Cap Hold?

A Cap Hold is loose terminology that refers to either:

• Incomplete roster charge
• Team Salary charge for unsigned First Round Draft Picks
• Team Salary charge for "Free Agent Amounts"

The purpose for a Cap Hold is to close a loophole in the Collective Bargaining Agreement (CBA). The CBA affords a team exceptions to certain Free Agents that allows the team to exceed the Salary Cap in order to sign said Free Agent. Before Cap Holds were in place, it made sense for teams to sign as many other Free Agents up until they reached the Salary Cap and then sign their own Free Agents using exceptions.

This scenario defeated the purpose of having a Salary Cap, so the solution the Owners came up with was to put a charge for each Free Agent a team has. The Cap Hold for each Free Agent is loosely based off of the maximum amount said team would be expected to sign their Free Agent for. This is not exactly the value the Free Agent will sign for, which leads to scenarios where a team may want to hold off signing a Free Agent (if they plan to sign the Free Agent for more than the Cap Hold) or sign their Free Agent immediately (if the Cap Hold is greater than the Salary the Free Agent is willing to accept). Reproduced from www.cbafaq.com below is the associated Cap Holds, as you can see the Cap Hold depends on the rights the team has for their Free Agent as well as the previous salary:

(Table via Larry Coon's excellent CBA faq)

Kind of free agent	Previous salary	Free agent amount
Any	Minimum salary	Portion of minimum salary not reimbursed by the league (see question number
Larry Bird, except when coming off rookie scale contract	At least the estimated average salary	150% of his previous salary
Larry Bird, except when coming off rookie scale contract	Below the estimated average salary	190% of his previous salary
Larry Bird, following the fourth season of his rookie scale contract	At least the estimated average salary	200% of his previous salary
Larry Bird, following the fourth season of his rookie scale contract	Below the estimated average salary	250% of his previous salary
Larry Bird, following the third season of his rookie scale contract	Any	The maximum amount the team can pay the player using the Larry Bird exception
Early Bird, following the second season of his rookie scale contract	Any	The maximum amount the team can pay the player using the Early Bird exception)
Early Bird (all others)	Any	130% of his previous salary
Non-Bird	Any	120% of his previous salary

Any team can remove a Free Agent Cap Hold by renouncing their rights to said Free Agent. This implies that the team cannot sign said Free Agent with their associated Bird, Early-Bird, or Non-Bird Rights. This does not preclude the team to sign said Free Agent with Cap Space, a Mid-Level Exception, the Bi-Annual Exception, or Disabled Player Exception. For practical purposes, renouncing a Free Agent nearly always implies the team will not resign him.

Knowing the Cap Holds of the Hawks Free Agents is only half the battle as some of the Free Agents have unique rights that will undoubtedly dictate their next contract.

Elton Brand

The Hawks signed Elton Brand last season to a one-year contract worth $4,000,000. Since this was the first year with the Hawks for Elton, he is considered a Non-Bird Free Agent. This implies that the Hawks can exceed the Salary Cap in order to resign Elton to a contract starting at $4,800,000 (120% of his previous salary). If you are being a realist, do not expect this to happen.

One important caveat with Elton Brand is that if he signs a one-year contract with the Hawks, then he will have veto power over any trades involving him. This is because at the conclusion of a one-year contract, Elton Brand will have Early-Bird Rights with the Hawks. If Elton is traded on a one-year contract, then he loses Early-Bird Rights. This is protected in the CBA, so Elton would receive a de facto no-trade clause.

Expect Elton and Danny to make a swift decision regarding a contract this offseason. The main reason for this is because Elton's Cap Hold of $4,800,000 is likely to be more than he would command in the open market and more than Danny Ferry is likely to pay.

If Elton is resigned by the Hawks, then expect a two-year deal with the 2nd year either as a team option, non-guaranteed, or both (creative financing as some may call it). This ensures that Elton will not have the ability to block a trade. In addition, the Hawks would have Early-Bird Rights to Elton at the end of the season if the Hawks choose to decline the team option. This could be extremely useful in a sign-and-trade transaction. Or, the Hawks could pick up the team option and use Elton Brand as filler salary in a trade. This would be attractive to other teams because if Elton Brand has a non-guaranteed contract, then said team could trade away salary for Elton's contract. Said team could immediately waive Elton and effectively rid themselves of Team Salary.

Or Danny might just do a solid for Elton and give him that one-year deal with a de facto no-trade clause. They are Dukies. Either way, this is the most intriguing contract story-line for the Hawks this offseason (even if it is only me who finds these story-lines compelling).

Gustavo Ayón

Last offseason, the Hawks acquired Gustavo through the waiver process. The Milwaukee Bucks waived him after having picked up his team option, as detailed by Mark Deeks. While this may seem like a complicated process, it does not affect much for Gustavo from a practical perspective. He earns Early-Bird Rights since he did not clear waivers (the Hawks claimed him, therefore he did not clear) and would have had Early Bird Rights had he not been waived. So that puts his Cap Hold at $1,950,000¹.

One interesting development with Ayón is the potential for him to be a Restricted Free Agent (RFA). This can be ensured if the Hawks tender Gustavo a Qualifying Offer (QO) of $1,875,000. A QO is effectively a standing one-year contract offer for Gustavo. The reason for tendering a QO is that tendering a QO gives the Hawks the Right Of First Refusal, i.e. the ability to match any contract that Gustavo agrees to with another team. This was a situation that the Hawks and Jeff Teague went through last year.

There are lots of avenues that the Hawks could pursue with the free agency of Gustavo Ayón, all of which depends on the Hawks valuation of Gustavo. If the Hawks do not value Gustavo, then expect the Hawks to quickly renounce him and his $1,950,000 Cap Hold. If the Hawks do value Gustavo, then it only makes sense² for the Hawks to tender him a QO. This is because the Hawks will already have $1,950,000 counted towards their Team Salary and offering the QO will not increase this. You might as well get the benefits of the Right of First Refusal, right?

All in all, the decision for whether the Hawks value Gustavo will be made swiftly. The first day to tender a QO is the day after the playoffs end and the last day to tender is June 30th. We shall find out soon enough.

Shelvin Mack

Shelvin had quite the audition for the Hawks in the 2012-13 Season with two 10-day contracts and then securing a 2-year contract. This 2-year contract was effectively a rest-of-season contract with an invite to training camp as the 2013-14 Season was non-guaranteed. The Hawks were free to cut him at any point before January 10th this season without having to pay the remainder of his contract.

Why the 2-year deal instead of a rest-of-season contract then an invite to training camp? Precisely because this offseason Shelvin has Early Bird Rights³. If the Hawks had signed Shelvin to a 1-year deal for this past season, then Shelvin would have been able to veto any trade. This may not seem like a big deal, but it is an unnecessary risk that can easily be avoided with a non-guaranteed 2nd year.

The Hawks have a decision to make with respect to tendering Shelvin Mack a QO of $1,148,163. But with a Cap Hold of $915,243 (Shelvin was minimum salaried last year), the only way Shelvin does not receive a QO is if the Hawks believe that Shelvin is not worth more than a minimum salary.

Mike Scott

Mike Scott is coming off his first ever NBA contract, a 2-year veteran minimum contract that will give the Hawks Early-Bird Rights if they so choose to exercise them. Per the CBA, Mike Scott is also eligible to be a RFA if the Hawks tender him a QO of $1,115,243 (this would also be his Cap Hold if a QO is tendered). If the Hawks do not make Mike Scott a RFA, then his Cap Hold for the offseason is $915,243.

A few caveats for Mike Scott. If Mike Scott signs his QO (or any 1-year deal with the Hawks), then he would receive veto power over any trades for this season since he would gain Bird Rights at the end of the season.

An often misunderstood notion of RFA is that Mike Scott would then be an Unrestricted Free Agent for the 2015 offseason. This is not true, Mike Scott could still be a RFA in the 2015 offseason. This is because RFA for non-1st round rookie scale players exists for their first 3 seasons. This actually happened to Ivan Johnson when in 2012 he signed his QO with the Hawks. The next offseason, the Hawks did not extend a QO for Ivan. But they could have, and this would have made Ivan Johnson a RFA for two offseasons in a row.

Although this is unlikely to be of concern, Mike Scott would fall under the "Gilbert Arenas" provision if he is extended a QO. This implies that Mike Scott's starting salary cannot exceed the Non-Taxpayer Mid-Level Exception. This scenario is only for players with less than 3 years of experience (Shelvin does not count) and was recently famous for creating the complicated contracts of Jeremy Lin and Omer Asik.

We shall find out the likelihood of Mike Scott returning to the Hawks by June 30th.

Cartier Martin

Last, but hopefully not least is Cartier Martin. Like Shelvin Mack, Cartier had an interesting audition with the NBA this past season involving multiple 10-Day Contracts. Four to be exact. But unlike Shelvin, Cartier did not sign a multi-year deal with the Hawks. Instead, Cartier signed a rest-of-season contract which makes for an interesting offseason between Cartier and Atlanta.

If Cartier resigns with the Hawks, do not expect this to be for a one year deal. Even though Cartier played with multiple teams this season, he ended the season with the Hawks. If he completes a full season with the Hawks for the 2014-15 season and becomes a free agent, then he will have Early-Bird Rights. This creates another de facto no-trade clause. I doubt that the Hawks would want to give that much power to a bench player.

Cartier has a small Cap Hold of $915,243, but the Hawks only have non-Bird Rights to Cartier. These rights allow the Hawks to exceed the Salary Cap to sign Cartier to a deal starting at 120% of the 6-year veteran minimum salary ($1,374,822). However, this 120% increase is actually quite the cost to the Hawks. If Cartier signs a minimum salary, then the Hawks are only responsible for salary up to the 2-year veteran minimum (next season at $915,243). So using non-Bird Rights would give Cartier an extra $229,137 while costing the Hawks $459,579. In other words, do not expect the Hawks to offer slightly above the veteran minimum salary. If the Hawks exceed that in an offer, then they will greatly exceed that amount. This would only happen if there is a strong market for Cartier and the Hawks value him.

It is difficult to judge the market for Cartier, he has been in the league for 5 seasons now and has only garnered minimum salaried contracts. However, he was quickly able to find a 10-Day contract last season when the Hawks waived him in January. NBA teams clearly value Cartier as a player, but it will be interesting to see if a team values him more than a minimum salaried player.

^{1. Previously, I reported that the Cap Hold was $2,850,000. This would be correct if the Hawks held Bird Rights on Gustavo, but because of a settlement between the NBA and NBPA it was agreed that player's claimed off of waivers do not retain full Bird Rights.↩}

^{2. For the most part this is true, but in the event that the Hawks think a one-year contract at $1,8750,000 is too much for Gustavo then this may preclude them from offering. This would be a case where the Hawks still value Gustavo for more than the minimum but not more than $1,875,000. In this scenario, it makes sense for the Hawks to not tender a QO but also to not renounce Gustavo.↩}

^{3. Early Bird Rights are kind of tricky, but in the first year of establishing Early Bird Rights a player can play for multiple teams. The last team they play with that season is what matters. So the Hawks will have Early Bird Rights for Cartier if they sign him to a one-year deal (and Bird Rights if signing to a multi-year deal).To quote the official CBA:}

"Early Qualifying Veteran Free Agent" means a Veteran Free Agent who, prior to becoming a Veteran Free Agent, played under one or more Player Contracts covering some or all of each of the two (2) preceding Seasons, and who either played exclusively with his Prior Team during such two Seasons, or, if he played for more than one Team during such period, changed Teams only (i) by means of trade, or (ii) by signing with his Prior Team during the first of the two (2) Seasons.

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