Atlanta Hawks Salary Cap Update: Odds and Ends

The NBA Season is in full swing and I feel like this is a great time to update the Hawks Salary Cap standing for this Season, the next, and point out Salary Cap minutiae involved in between. One piece of minutiae that passed by without a peep by anyone was that Mike Muscala, previously of completely non-guaranteed salary for this season, now has a 50% guarantee on his contract. (Correction on 12/18, Mike's contract status did not change) I will break this down a bit more, but first let's look at a quick sketch of the current contracts on the Hawks' books:

(Contract data from ShamSports.com and BasketballInsiders.com)

The current Salary Cap is set at $70,000,000 and the current Luxury Tax is at $84,740,000. The Hawks have no recourse to dip below the Salary Cap or rise above the Luxury Tax without making trades, and in the case of going above the Luxury Tax this would involve a substantial number of trades.

While there are 16 names listed, there are only 15 players on the Hawks roster because the Terran Peteway entry is only a reference to dead cap space. Atlanta does not have any rights associated with Terran outside of whatever relationship and goodwill they built up with him through training camp. But the Hawks did guarantee $75,000 of the 2-year minimum salaried contract that Terran signed this off-season and this will count against the current cap this season.

During the Regular Season and while a Team is playing in the Playoffs, a Team can only have 15 players on their roster (which implies under contract) unless they have an extreme injury situation. Only two current players have non-guaranteed contracts: Mike Muscala and Lamar Patterson. If the Hawks decided to waive either of those players, their associated cap hit would be at most the pro-rated share of their minimum player salary.¹ The Hawks are already above the Salary Cap and waiving either player would not clear up any space, so there is no Salary Cap reason for waiving either player. Pretty much only roster concerns would dictate the unlikely move of waiving either player.

Current Season Issues

There are only a few odds and ends related to this Season's Salary Cap issues. Most of the interesting Salary Cap scenarios happen in the off-season anyway. But a few things to be on the look-out for during the NBA Regular Season:

• Paul Millsap and Justin Holiday are currently not eligible to be traded, but this distinction goes away on December 15th. This is because these players were non-drafted free agents that signed in the off-season, which requires a team to wait the later of 3 months from signing or until December 15th. Although Lamar Patterson was signed in the off-season, he is currently trade-able because he was a draft pick of the Hawks with no prior NBA contract. Draft picks only need to wait 1 month after signing a contract to be eligible to be traded (see: Andrew Wiggins in 2014 off-season). I am not suggesting that any of the players mentioned should be traded, I am only pointing out the restrictions.
• On January 5th, NBA teams can start signing 10-day contracts. The Hawks will either need a hardship exception or have waived a player in order for this to matter as they currently have 15 players under contract.
• Although Mike Muscala and Lamar Patterson do not have guaranteed contracts, their contracts will become fully guaranteed if they are not waived on or before January 7th. This is because on January 10th, all contracts become guaranteed and there is the 2 day wait period related to waivers.

Trades still potentially loom in the background and are a source of potential Salary Cap issues. Seeing that I cannot anticipate trades, I do not have any sort of insight for how a potential trade might impact the Hawks Salary Cap standing outside of pointing to the current salaries of the players.

Upcoming Off-Season

Current projections for the 2016--17 NBA Salary Cap have it around $89 million, but this value can change based upon actual NBA revenues and the Salaries & Benefits of the NBA players in the 2015--16 Season. So instead of bickering over what this number should be in talking about the 2016--17 off-season, we will take the $89 million as given and move on. At the moment and accounting for cap holds, the Hawks would be looking at $9 million in cap space with the noted ability to renounce all their free agents, waive Mack, Muscala, Patterson, and Scott to have around $34 million in cap space. With that said, here are a few highlights of decisions that the Hawks will have to eventually make:

Al Horford and His Max

I don't think it is too controversial to claim that Al Horford will have a maximum contract offer (either through Atlanta or one of the other 29 teams in the league). He will enter the 2016 off-season with 9 years of experience and eligible to have a starting salary roughly equivalent to 30% of the Salary Cap (not exactly because of how the CBA defines the Salary Cap used to determine Max salary). The value is currently projected around $25 million. If Al Horford decides to re-sign with Atlanta, he is best served to wait until after the Hawks use up all of their Cap Space because his current cap hold is $18 million and the Hawks retain his Bird Rights which allow them to exceed the Salary Cap by any amount to re-sign him.

If we assume that Al re-signs in Atlanta at the max, then he does have a financial decision to make. Atlanta would be able to offer him a 5-year contract with 7.5% raises ($1,875,000 a year) at $25 million, so a deal totaling $143.75 million. But Al Horford could also be persuaded to capitalize on gaining one more year of experience and having his maximum starting salary begin at 35% as opposed to 30% because he would become a 10-year vet. If this is the case, then Al may want to sign a 1+1 contract where the second year is a player option. This second option also capitalizes on the increasing Salary Cap, although the percentage increases are likely to still be around the 7.5% increase raises that Bird Rights afford him. There is also potentially an added advantage of a higher maximum salary due to the looming CBA re-negotiations in the 2017 off-season, but Al would need to make his decision to exercise the player option before negotiations began.

The decision that Al will face is effectively one of uncertainty, will Al go for the more uncertain route of a 1+1 (or maybe even a Millsap-like 2+1) to potentially receive more money? Or would Al value the security of a longer term deal and eschew the potentially more lucrative offer? Only Al, and maybe his new agency, know the answer to this.

Bazemore and Early Bird Rights

Kent Bazemore will be a free agent in the 2016 off-season and the Hawks will have his Early Bird Rights. After this past off-season with Paul and DeMarre, I can only imagine some people are thinking "oh no, not this again." But this will be slightly different if only because the Hawks will have more money to play around with this off-season and they are only scheduled to have 2 free agents, one of which they have full Bird Rights over.

Kent's Early Bird Rights will allow the Hawks to exceed the salary cap in order to re-sign him to a contract starting at 104.5% of the 2015--16 Average Salary. We won't know what this value is until after the season, but a good guess is that the NBA will spend around $2.34 billion in Salaries for the 2015--16 Season and that equates to an average salary of around $5.9 million. So Kent should ballpark his Early Bird starting salary in the $6 million to $6.25 million range versus his cap hold of $2.6 million. If the Hawks end up re-signing Kent using his Early Bird Rights, then they should use up all of their cap space before re-signing Kent.

If Kent decides that he will not accept a contract for less than $6.25 million, then the Hawks will have to use cap space in order to re-sign him. One advantage the Hawks retain over any other team is that they are the only team that can offer Kent 7.5% raises, all else are limited to 4.5% raises. Atlanta does appear to offer a bit more in non-pecuniary benefits that Kent has taken note of:

"As of today, I see myself here for a very long time," Bazemore told SheridanHoops. "For me it makes sense. I love Atlanta. I grew up in North Carolina. For me personally, for my brand and any endeavors (with my foundation) I choose to do off the court, it’s an ideal place because it’s not too far from home. Financially, it’s much cheaper here; the taxes are great. All that stuff matters. The cost of living is great, it’s an up-and-coming area and the real estate is really good. Those are all factors that I look at."

From: Sheridan Hoops

Outside of that, the Hawks would be able to keep substantially the same roster and go up to $9 million in starting salary to keep Bazemore. Anything above that would require the Hawks to make other moves...

Mack and Scott, No Guarantee

Shelvin Mack and Mike Scott signed extremely similar deals in the 2014 off-season, both are on 3 year contracts where the 3rd year is not guaranteed. The nature of these non-guaranteed years clearly lead to speculation that the Hawks may waive either player, although in no way am I suggesting this will occur. For Shelvin, the guarantee date is if he is not waived before July 7th and it is July 10th for Mike Scott. Both of these dates are during the July moratorium, which is the period of time where negotiations can happen but no deals can be officially signed with free agents. This can pose a bit of a problem as the Hawks may need to clear cap space for a potential signing, which may necessitate officially waiving Mack and/or Scott to clear up cap space to potentially sign a player (which cannot become official until July 12th).

That said, the negotiated guarantee date in a contract can be amended to later (or earlier). This actually happened a few years ago with the Hawks as it related to John Salmons where his initial guarantee date of June 30th was pushed back to July 10th, after moratorium. The Hawks still ended up waiving Salmons, but it is possible a scenario like this could play out for Mack and/or Scott if the Hawks are intent on freeing up cap space.

With Cap Space, Hawks Have Renegotiate and Extend Potentials

I previously wrote about the potential for the Hawks to use their cap space in order to give current players under contract more money and potential more years on their contracts. This all depends on the third anniversary of a player signing a 4 or more year contract. This means that Kyle Korver becomes eligible on 7-12 while Tiago Splitter and Jeff Teague become eligible on 7-13 (dates found through searching NBA transactions on Pro Sports Transactions). These come into play right after the July Moratorium.

As a bit of a refresher, the Hawks would be able to use cap space in order to give one of the three mentioned players a raise and/or up to 3 additional years on their contract. Only Jeff, Kyle, and Tiago are eligible for this and if the Hawks have excess cap space this may be a potential use as opposed to attempting to sign other free agents. One of downsides to this is that a renegotiation/extension may only occur once every 3 years. And as it turns out, this also applies to any instance where a player waives a trade kicker.

In analyzing last off-season, I mentioned that it was potentially an option for the Hawks to give Paul Millsap an additional $300,000 in salary by structuring their moves in a specific order and coaxing Tiago Splitter to waive his trade kicker. This never happened and one potential reason for this could be foreshadowing a Tiago renegotiation and/or extension in the 2016 off-season.

The Hawks may also begin engaging in talks for an extension with Dennis Schroder and Tim Hardaway.Jr in the off-season, but because they are coming off of Rookie Scale Contracts this has a much larger impact on the 2017--18 Season and beyond.

Mike Muscala as Chandler Parsons 2.0?

Mike Muscala has an interesting twist to his contract because he has a Team Option for the 2016--17 Season, which needs to be exercised by June 29th of 2016. There are advantages and disadvantages to exercising this for both the Hawks and Mike. This parallels the situation that the Houston Rockets found themselves in 2014 with Chandler Parsons. The entire reason for this hinges upon Restricted Free Agency and Mike not having been a first round draft pick.

Restricted Free Agency can apply to any free agent, that was not selected in the first round, with fewer than 4 years of experience. Mike Muscala would fall in this category for the 2016 off-season, but not for the 2017 off-season as he will have 4 years of experience and not subject to restricted free agency. His Team Option effectively decides whether he will enter Restricted or Unrestricted Free Agency with the added caveat that Mike is eligible for an extension on March 13th of 2017. An extension is highly unlikely due to Mike's minimum salaried contract.

If Atlanta declines Mike's Team Option, then they would be doing so in order to tender him a Qualifying Offer and make him a Restricted Free Agent. Mike's Qualifying Offer would be a standing offer for a one-year guaranteed contract for either $1,215,696 or $2,725,004 if Mike plays 2,000 minutes this regular season (almost 25 minutes per game, so not likely at this point). The Hawks would have three-day window for the right to match any contract offer (called an offer sheet) that Mike signs that off-season, which has the general effect of suppressing a free agent's salary by limiting the number of teams that are willing to use their cap space for a contract offer.

To correct a bit of a misconception about restricted free agency in this setting, the team offering Muscala a contract would need to maintain the requisite cap space throughout the 3-day window of attempting to sign Muscala. However, if Mike signed an offer sheet then this does not eat up the Hawks cap space unless the Hawks decide to match. This does create a bit of a ticking time bomb for three days, but the earliest that Mike would be able to sign is July 12th which would still give the Hawks enough time to potentially work out any renegotiate-and-extend with Jeff, Kyle, and/or Tiago.

For the Hawks, do they fear losing Mike Muscala in free agency if they exercise his Team Option? This could be either because Muskie does not want to be in Atlanta (I think this is highly unlikely) or that he prices himself out of the Hawks range as he continues to improve. For the Hawks, this decision effectively boils down to an evaluation of player development. Do you bet you can lock in Muskie at a lower salary relative to his play by paying him in 2016? Or do you want to utilize the minimum salary of Muskie in the 2016--17 Season, likely because they are spending cap space somewhere else, and then re-evaluate in the 2017 off-season? The 2017 off-season does come with the added benefit that Muskie's cap hold will be extremely low and the Hawks will still retain his Bird Rights. So it is not as if the Hawks lose the ability to pay him from a cap perspective, but it is a financial decision.

I think it is safe to say that Mike has outplayed a minimum-salaried contract at this point and he would prefer to be paid more. Declining his Team Option would undoubtedly give Mike more money in both the immediate and long-term. And this will be an interesting development after the 2015--16 NBA Season, but there is a whole lot of basketball left to be played.

So while it is fun to speculate about the Hawks future, let's not forget about all this fun basketball right now.

^{1. This involves the waiver process. If either player is claimed off of waivers, then the Hawks would not have any cap hit for the player. But if either player clears waivers, then the Hawks cap hit is the amount paid to the player. The amount paid to the player is based off of the total number of days in the NBA Regular Season, which is 170 days. When a player is formally waived, they are placed "on waivers" for two days and the team is still obligated to pay the player while they are on waivers. Once cleared, a team is no longer required to pay a player if their contract was not guaranteed. Lamar has $75,000 guaranteed, which would be the equivalent of 25 days on an NBA roster which he has surpassed. Muscala has half of his salary guaranteed and this is the equivalent of 85 days on an NBA roster, or until January 20th.↩}