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Atlanta Hawks salary cap update post free agency

A final look at the order of moves and how the Atlanta Hawks were able to fit all of their player acquisitions into the salary cap.

By hawksfanatic
Ken Blaze-USA TODAY Sports

For the foreseeable future, the Atlanta Hawks will not have any interesting Salary Cap maneuvers. This will serve as a close-enough-to-final Salary Cap Update for this off-season. We no longer need to guess how the Hawks have structured their moves, we can go forth and explain their moves.

Start of the Off-Season

Before July 1st, we detailed a Salary Cap primer in preparation of free agency. This left us with the way the Hawks would enter free agency: the contracts of Horford, Teague, Korver, Sefolosha, Scott, Mack, Bazemore, Schröder, Hardaway, Daye and Muscala that totaled $42,714,125 for 11 contracts. If the Hawks decided to renounce all of the subsequent cap holds, then an incomplete roster charge of $525,093 would apply and the Hawks would be sitting at $43,239,218 in Team Salary.

The Hawks also had cap holds for Millsap, Carroll, Brand, Jenkins, Antić, and Ayón which came to be between $23,928,217 and $24,828,217 in cap holds. The Hawks also had cap holds for the Non-Taxpayer Mid-Level Exception (NTMLE) of $5,464,000 and the Bi-Annual Exception (BAE) of $2,139,000 for an additional $7,603,000 in cap holds. Although we did not know that the Salary Cap would be set at $70,000,000 at the time, the Hawks were technically sitting at $74,245,342 to $75,145,342 in Team Salary and did not have any cap space.

Before July 9th, there were various reports that indicated that the important moves for the Hawks were: DeMarre Carroll agrees to sign with Toronto, the Hawks acquire Tiago Splitter from San Antonio, Paul Millsap agrees to re-sign with Atlanta (rumored to be $60 million over 3 years with the final year a Player Option), sign Edy Tavares (terms unknown at the time), and sign Justin Holiday (fully guaranteed two-year contract).

I attempted to guess various ways the Hawks would fit said transactions under the Salary Cap. Due to the variable nature of a team's cap situation, it turns out that the actual path the Hawks chose was slightly different. So let's dive in to how the transactions did go down.

Hawks Begin Announcing Moves

The first mention of moves in the off-season came on July 9th from Chris Vivlamore:

These collective moves left the Hawks with 10 players under contract plus Paul Millsap's cap hold and an incomplete roster charge. Depending on how you want to interpret the Collective Bargaining Agreement (CBA), the Hawks either renounced the NTMLE and BAE or are now no longer entitled to them because their collective value is less than the Cap Space. This implied the Hawks had $54,403,434 on their Team Salary and had $15,596,566 in Cap Space.

A Note on Paul and Early Bird Rights

Of note, Paul Millsap was not renounced as I had previously alluded to the Early Bird Rights to Paul were effectively useless. This was actually an oversight on my part as I failed to think like a lawyer (or computer scientist) on this particular issue. So allow me to rectify this mistake and give some insight to the value of Early Bird Rights (literally called Early Qualifying Veteran Free Agent in the CBA).

A player becomes an Early Bird Free Agent when they play two seasons without clearing waivers or changing teams as a free agent. This could be from one two-year contract or through two one-year contracts with the same team and I'm oversimplifying things here for the sake of brevity. Once a player becomes an Early Bird Free Agent, the player inherits this status which allows a few rights to the player-team relationship.

The most well-known benefit for an Early Bird Free Agent is that the team may exceed the Salary Cap in order to sign the player to a contract starting at the greater of 175% of their previous Salary ($16,625,000 for Paul) or 104.5% of the Average Player Salary (turned out to be $5,739,000). The CBA literally terms this the "Veteran Free Agent Exception" and this is a completely worthless exception for the Hawks. Paul Millsap agreed to a contract well in excess of $16,625,000 and so the Hawks would need to re-sign Paul via Cap Space.

There is a second benefit to Early Bird Rights though, and this is where I failed to think logically and separate the Exception from its other benefits. This comes from Article VII - Section 5(c)(2) which discusses annual salary increases and decreases that are afforded to an Early Bird Free Agent:

(2) The following rules apply to all Player Contracts between Qualifying Veteran Free Agents or Early Qualifying Veteran Free Agents and their Prior Team (except any such Contracts signed pursuant to Section 6(d)(3), Section 6(e)(2), Section 6(f)(3), Section 6(g)(3) or Section 8(e)(1) below, which shall be governed by Section 5(c)(1) above):

(i) For each Salary Cap Year covered by a Player Contract after the first Salary Cap Year, the player’s Salary, excluding Incentive Compensation, may increase or decrease in relation to the previous Salary Cap Year’s Salary, excluding Incentive Compensation, by no more than seven and one-half percent (7.5%) of the Regular Salary for the first Salary Cap Year covered by the Contract.

The bolded parts are the important pieces. These describe that the Early Bird Rights also allows a team to give a player 7.5% annual raises so long as they sign the player to a contract that does not involve a Mid-Level Exception or the Bi-Annual Exception (the mentioned Sections in the above quote). This necessarily implies that the player can be signed either via the Veteran Free Agent Exception or Cap Space. We just discussed that the Veteran Free Agent Exception is worthless, so Paul must be signed via Cap Space. And in the event that Paul is signed via Cap Space, he can have annual raises of 7.5% of his first season's salary if the Hawks retain his Early Bird Rights. And this is why Paul was never renounced and why his Early Bird Rights were actually valuable.

First Move, Paul Signs His Contract

The Hawks announced the signing of Paul Millsap and it appears this move was the first move for the Hawks. Per Eric Pincus, his contract starts at $18,671,659 and then has raises of 7.5% ($1,400,374) so that his second season is $20,072,033 and Paul has the option of exercising the third season at $21,472,407. The contract could potentially total $60,216,099 if Paul exercises his Player Option. This contract is $6,321,659 more than his cap hold which means that the Hawks would be sitting at $60,725,093 in Team Salary and have $9,274,907 in Cap Space.

It should be noted that Paul did not sign for his Max. Paul's Max was a deal that starts at $19,689,000 and increased at 7.5% each season. This would have been a contract of $19,689,000 in 2015--16, to $21,165,675 in 2016--17, to a player option of $22,642,350 in 2017--18. This hypothetical Max could have totaled $63,497,025 over three years. Instead, Paul took $1,017,341 less this off-season and potentially $3,280,926 less over the life of his contract in order for the Hawks to fit in their remaining moves. To be fair though, the Orlando Magic would have only been able to offer Paul 4.5% raises which would have entailed a total contract value of $61,725,015 over the three years. That is still a potential pay cut of $1,508,916.

So buy Paul a beer if you see him around town. It won't make up the difference, but it will show some gratitude towards an Atlanta Hawk who literally took less money in order to stay with the team.

Second Move, Hawks Acquire Tiago via Cap Space

The San Antonio Spurs were in need to clearing salary off of their books if they wanted to sign LaMarcus Aldridge with Cap Space, keep Danny Green, and give Tim Duncan a salary of around $5 million. To do this, they traded the contract of Tiago Splitter to the Hawks to clear up $8,500,000 in Cap Space. Tiago's contract called for $8,500,000 in 2015--16 and $8,250,000 in 2016--17 but also included a Trade Kicker. There was a bit of confusion over the Trade Kicker, but Eric Pincus cleared everything up by mentioning that the Trade Kicker is for the lesser of 15% or $600,000 (which is the amount).

A Trade Kicker is a bonus which is paid upfront by the team trading away a player (San Antonio) and the value is added equally to the remaining seasons on a contract. For the Hawks perspective, Tiago has cap hits of $8,800,000 and $8,550,000 for the next two seasons although they will only pay $8,500,000 and $8,250,000. At this point, Tiago clears the incomplete roster charge and leaves the Hawks at $69,000,000 in Team Salary.1 The Hawks have $1,000,000 in Cap Space at this point.

Third Move, Atlanta Signs Edy

With the remaining Cap Space, the Hawks did the right thing and signed Edy Tavares to a three year contract. The reported terms are for $1,000,000 this season, $1,000,000 for the 2016--17 season, and $1,014,746 in the 2017--18 season. The last season my seem odd since it is slightly higher than $1,000,000 but the reason for this is that $1,014,746 is the minimum salary for a player with 2 years experience in the 2017--18 season.

At this time, no one has reported whether or not there was a buyout involved with Edy and Gran Caneria or how the Hawks may have used the Excluded International Player Payment Amount of $625,000 in order to bring Edy to Atlanta.2 We will have to wait for later details, but the biggest benefit to signing Edy with the remaining Cap Space is that Edy was able to sign a 3 year contract where he will have Bird Rights if he completes his full contract. The Hawks will also have the option of tendering Edy a Qualifying Offer of $1,250,262 to make him a Restricted Free Agent3 in the 2018 off-season. So the Hawks have avoided the potential pitfall of Edy becoming a free agent in the 2017 off-season with another team being able to offer Edy an exploding offer sheet (like Omer Asik or Jeremy Lin).

Atlanta has no more Cap Space after this signing.

Fourth Move, Justin Holiday Signs

With the Hawks now capped out, the Hawks could sign Justin Holiday with either the Minimum Player Exception (depends on years of experience) or with the Room Mid-Level Exception ($2,814,000). Both of these exceptions are limited to be at most two years.

According to Eric Pincus, the Hawks chose to offer Justin Holiday a two-year minimum contract and he accepted. Holiday will be paid $947,276 this season and $1,015,696 in 2016--17. This move pushes the Hawks officially over the Salary Cap with a Team Salary of $70,947,276 and leaves the team with only three ways to increase their Team Salary: Minimum Player Exception, Room Mid-Level Exception, and Traded Player Exception (i.e. trades).

Current Cap Sheet

At the moment, the Hawks current contracts look as follows:

Player 2015--2016 2016--2017 2017--2018 Total
Paul Millsap $18,671,659 $20,072,033 $21,472,407PO $60,216,099
Al Horford $12,000,000 $18,000,000 --- $12,000,000
Tiago Splitter $8,800,000 $8,550,000 $12,825,000 $17,350,000
Jeff Teague $8,000,000 $8,000,000 $12,000,000 $16,000,000
Kyle Korver $5,746,479 $5,239,437 $9,954,931 $10,985,916
Thabo Sefolosha $4,000,000 $3,850,000 $7,315,000 $7,850,000
Mike Scott $3,333,333 $3,333,334NG $6,333,335 $6,666,667
Shelvin Mack $2,433,333 $2,433,334NG $4,623,335 $4,866,667
Kent Bazemore $2,000,000 $2,600,000 --- $2,000,000
Dennis Schröder $1,763,400 $2,708,582TO $6,771,455 $4,471,982
Tim Hardaway Jr. $1,304,520 $2,281,605TO $5,704,013 $3,586,125
Walter Tavares $1,000,000 $1,000,000 $1,014,746NG $3,014,746
Mike Muscala $947,276NG $1,015,696NG,TO $1,014,746 $1,962,972
Justin Holiday $947,276 $1,015,696 $1,014,746 $1,962,972
Total (only guaranteed) $70,000,000 $46,727,166 $0 ---
Total $70,947,276 $58,499,717 $21,472,407 ---

Notes: Red denotes cap hold; PO-Player Option; TO-Team Option; NG-Nonguaranteed.

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

There's not much to say here except that the Hawks appear very conscious about the future. At this time, only Paul and Edy have a contract that could possibly be in place for the 2017--18. This is clearly showing that the organization has some concerns about how the National TV Deal could affect operations either through an influx of the Salary Cap or through a potential Strike or Lockout.

Final Remarks

The timing of the Hawks moves is slightly puzzling to me, although this could be all part of the negotiations process and the intended payroll. I can tell you for certain that had the Hawks restructured order of their moves, Paul Millsap could have an extra $100,000 in his bank account this season (which would be worth $322,500 if his current contract lasts 3 seasons).

The extra $100,000 would come from Atlanta acquiring Tiago after signing Edy and Paul with Cap Space. When acquiring a contract via Cap Space, a team is permitted to exceed the Salary Cap by $100,000. If the Hawks signed Edy to a $1,000,000 contract and then signed Paul to a contract starting at $18,771,659, then Atlanta would have $61,300,000 in Team Salary. This would be $8,700,000 in Cap Space and the Hawks could acquire the Splitter contract because of the extra $100,000 buffer that the CBA affords teams for trades.

Paul might have even been able to strong-arm the Hawks into an additional $300,000 this season. This comes from the same process as above except squeezing out the Hawks their Cap Space so that Tiago Splitter would have to waive his entire Trade Kicker. Tiago is only permitted to waive his Trade Kicker in order to facilitate a trade, so Tiago would need to be the second to last transaction (Holiday as last because he was signed through an Exception).

1. Nice. ↩

2. Do not forget about my finder's fee. ↩

3. There is a possibility that Edy's Qualifying Offer could be for more if Edy meets Starter Criteria. If Edy starts 41 games or plays over 2,000 minutes in the 2017--18 season (or on average between the 2016--17 and 2017--18 seasons), then Edy will meet this criteria and have a Qualifying Offer of $2,919,204. This amount is equal to what the 21st pick in the 2014--15 draft class would receive for a rookie scale contract. ↩

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