Recapping the 2016 Off-Season for the Atlanta Hawks

When the 2015-16 NBA Season ended for the Atlanta Hawks, they had some creative options heading into the off-season. For example, they had the ability to clear a few free agent cap holds and waive some non-guaranteed contracts to clear enough cap space to re-sign Al Horford, Kent Bazemore, and still have space left over; they could use their cap space to renegotiate and extend Jeff Teague, Kyle Korver, and/or Tiago Splitter; they could operate over the salary cap the entire off-season, utilizing trades and leveraging the relatively small cap hold of Horford ($18,000,000 compared to his maximum salary of $26,540,100).

I described most of these options by May 17th (and before), but alas, the Atlanta Hawks threw us all for a curveball when it was reported on June 22nd that they would trade Jeff Teague for the No. 12 draft pick (Taurean Prince). Suddenly, the Hawks cleared an additional $6,068,100 in cap space for the off-season and things started to get interesting as it appeared the team would never be the same as it ever was.

As we ultimately know, the team made drastic moves that changed the make-up of the team and its cap sheet. I am going to give a refresher on Atlanta's options starting this off-season, explain the timing of transactions, the actual contract values, and describe a few cap related issues for the upcoming. So let me explain: how did we get here?

Refresher

We knew entering the 2016 off-season that the Atlanta Hawks would have Al Horford, Kirk Hinrich, Kent Bazemore, and Kris Humphries as free agents. There was also a the slim possibility that Atlanta would make Mike Muscala a free agent by not picking up his team option (they picked it up by the deadline of June 29th). Once it became clear that Atlanta would not expand the Teague trade¹, we knew that the team's cap sheet looks as follows:

(Contract data from BasketballInsiders.com)

Prior to July 2nd, most people operated under the assumption that the Salary Cap would be $94 million although this was only an estimate. On July 2nd, we knew that the Salary Cap would be at $94.143 million. So for the most part, we had an accurate read on the salary cap.

Reported Order of Transactions

Once July 1st hit, things started to go crazy. We know that the order of reports turned out to roughly be:

• Afternoon on July 1st, Dwight Howard agrees to a 3-year $70.5 million contract. Dwight's contract could start as low as $22,488,039 and as high as $24,607,330 because he is constrained to raises/declines of 4.5% of starting salary.
• Late night July 1st, Bazemore agreed to a 4-year $70 million contract with the last season a player option (that's very valuable to Kent!). We know that Kent has to be signed with cap space. We also know his starting salary has more flexibility than Dwight's because Atlanta holds Early Bird Rights on Kent and can offer raises/declines of 7.5%. This means his salary could start as high as $19,718,310 or as low as $15,730,338. Because Kent requires signing with cap space, it's most likely he signed at the lowest starting salary in order to maximize current cap space.
• Dinnertime on July 2nd, Al Horford announces he will sign with the Celtics and with it Atlanta does not necessarily have to account for his $18,000,000 cap hold. There's no reason for them to as, even if Atlanta and Boston negotiate a sign-and-trade, Al Horford has BYC issues which would reduce how much Atlanta could take back for him. This was discussed in more detail back in February.
• Midday on July 3rd, Atlanta agrees to a 2-year deal with Malcolm Delaney per Shams Charania. There were no details on how much the deal was worth, but a 2-year deal could be signed via either the minimum player exception or the Room Mid-Level Exception -- both of which indicate that Malcolm would not be officially signed until all of Atlanta's cap space was utilized. This was also a good time to note why it is so difficult to talk about cap space because... well... there were lots of reports that missed on Malcolm's contract value and claimed him to be a minimum salaried player. Turns out, this wasn't the case and must be why patience is a virtue.
• At 12:01 am eastern standard time on July 7th, the July Moratorium is officially over and teams can start officially making transactions.
• Around noon of July 7th, Atlanta makes the Teague trade official which gives us the official cap sheet shown above. Out goes $8,000,000 and in comes $1,931,900 as a placeholder for Taurean Prince. Taurean can sign for up to 120% of this value, but once he does that then his caphold increases by 120% and that takes away from cap space.
• As the calendar turns from July 9th to July 10th, Mike Scott's contract guarantees. This eliminates the $3,333,334 in cap space that Atlanta might have been able to obtain by waiving Scott (who undoubtedly would have been claimed by someone because he's on a valuable contract).
• Around dinnertime of July 10th, Jarrett Jack and Atlanta agree to a one-year minimum deal, which is a signing they would push off until they utilize all their cap space. Teams can always use the minimum player exception for these types of contracts if they have enough roster space.
• Late on July 11th, Kris Humphries agrees to re-sign with Atlanta for a one-year $4,000,000 contract, which was the same salary as his previous season. There's a bit of a problem here because the team doesn't actually have $4,000,000 available by our counts.
• The afternoon of July 12th, Atlanta waives Lamar Patterson and his non-guaranteed minimum contract of $874,636 which would then clear up the required room for Kris. Apologies to training camp invites, but this pretty much ended the whirlwind of free agency. There's an additional $50,000 in guaranteed money to Matt Costello that adds onto the cap sheet, but the rest don't matter.

This is the chronological order of events that were leaked in some fashion to us, the public. But in terms of how things shook out salary cap-wise, these moves can be shifted around so as to fit within the parameters of the collective bargaining agreement (CBA). And they were put in order to fully utilize every cent of cap space that Atlanta had, which shows some savvy knowledge of the Salary Cap on Wes Wilcox's part. So let me start on July 7th:

Actual Order of Moves

As a point of order, whenever the Hawks.com announce a move is when we know that the move is "official" by NBA terms. So that's one of the sources I'll use. Another helpful one is the RealGM Transaction History. It appears that teams must announce signings, trades, and waiver requests but they are not required to announce when they renounce a free agent or an exception. So we have to make educated guesses for when renouncing occurred.

• On July 7th, Teague traded for Prince. Keeping the capholds of Al, Kirk, Kent, and Kris puts the Hawks at $79,599,439 in salaries for possibly $14,543,561 in cap space. But they now have an $8,000,000 (Teague) and a $947,276 (Holiday) trade exception plus need to account for the Non-Taxpayer MLE ($5,628,000) and Bi-Annual Exception ($2,203,000). So Atlanta is actually above the Salary Cap by $2,234,715.
• Later on July 7th (but prior to the next event), Atlanta renounced Al Horford ($18,000,000) and the Teague ($8,000,000) trade exception. This automatically implies that they've renounced the Holiday ($947,276) trade exception and, depending on your CBA interpretation, the Non-Taxpayer MLE plus Bi-Annual Exception. That's $34,778,276 in capholds cleared, so now Atlanta is sitting on $32,543,561 in cap space. So they have $61,599,439 in salaries and cap holds.
• With the newfound cap space, Atlanta also announces on July 7th they have re-signed Kent Bazemore. His contract starts at $15,730,338 as all of us expected. Because Kent had a $2,600,000 cap hold, this pushes the salaries and cap holds for Atlanta up to $74,729,777 for $19,413,223 in cap space.
• On July 12th, Lamar Patterson is officially put on waivers which will clear $874,636 in cap space. Around this time, Atlanta must have renounced Kirk Hinrich and his $5,692,416 caphold for a total savings of $6,567,052. The team now has $25,980,275 in cap space -- or $68,162,725 in committed salaries and cap holds (these holds are the two draft picks and Kris Humphries).
• In the afternoon of July 12th, Atlanta announces they have signed Dwight Howard and it turns out his contract starts at $23,180,275, which is above the minimum that I detailed above. This would leave Atlanta with exactly $2,800,000 in cap space ...
• After a few days, Atlanta announces on July 15th that they have re-signed Kris Humphries and signed Malcolm Delaney and Jarrett Jack. At this time we know that Humphries is signed with the last dollar of cap space (recall his cap hold was $1,200,000 and Atlanta never renounced him). We also learn that, surprise, Malcolm Delaney did not sign for the minimum. He actually signed a 2-year $5 million contract at $2,500,000 each season via the Room Mid-Level Exception. Since the Room MLE is $2,898,000, the team only has $398,000 remaining. Jarrett Jack signs at his one-year minimum, which is for $1,551,659 but Atlanta is only responsible for paying $980,431 and that is what goes on their cap sheet. The rest of the Jack contract is paid for through the NBA. Atlanta is now over the cap by $3,480,431.
• The same day, Atlanta announces they have signed Bembry and Prince. It turns out they sign for 120% of their rookie scale, which adds on an additional $386,380 for Prince and $249,960 for Bembry. Atlanta is now over the cap by $4,116,771 and has $98,216,771 in committed salaries.
• On July 26th, Atlanta signed Matt Costello a two-year minimum contract. He has a $50,000 guarantee in the first year, but the rest is non-guaranteed. But this guarantee is tossed onto Atlanta's cap sheet to total $98,266,771 in committed salaries.

Whew.

Implications

So heading into the 2016-17 Season, what are the interesting salary cap issues? Well, roughly speaking they are:

• Atlanta can only sign players via the minimum player exception. Their Room MLE right now is worthless because $398,000 is less than the minimum player exception. What makes the Room MLE even more worthless is that its value begins to decline each day by $2,341 starting on January 10th. On the last day of the regular season, April 12th, the Room MLE will be worth $180,271.
• Bazemore, Howard, Humphries, and Delaney cannot be traded until December 15th. Further, because Kris signed a one-year contract and will have Early Bird Rights at the end of his contract, Kris has the right to veto any trade. So Kris has an implicit no-trade clause.
• Atlanta can sign an extension with Dennis or Tim anytime before November 1st. An extension will not affect the current season's salary cap, but whatever amount they agree on would go on the cap sheet by the start of the 2017 off-season. Dennis has a cap hold of only $6,771,455 and Tim's cap hold is $5,704,013. An extension starting above either of these values will eat away at potential cap space for Atlanta next off-season. Since Atlanta will be able to make either of these players restricted free agents and hold Bird Rights over each, it will be tough to see Atlanta complete an extension with either. The main advantage for Atlanta to sign an extension with either is if they think retaining them now will save them more money in the future. The downside for Atlanta is that 1) they take away from cap space and 2) the potential risk that they overpay for Dennis or Tim. But possibly more important, you might ask yourself if you think that Dennis or Tim are willing to accept an extension that Atlanta thinks they will save money on?

And that's all I've got to say about that.

^{1. It’s always difficult to discuss when an NBA team makes a mistake, but I think Atlanta, Brooklyn, Indiana, and Utah all erred in the Teague-Hill-Pick trade and Young-Pick trade. This all has to do with the trade kickers for Jeff Teague and Thaddeus Young. I discussed how Jeff Teague’s Trade Kicker works and the crux of the issue is that Jeff’s trade bonus would be $800,000 whether he was traded before or after July 1st, the start of the 2016--17 NBA fiscal year. However, if Jeff was traded before July 1st then the cap hit for his trade bonus would be spread over 2 years ($400,000 each) instead of 1. This would reduce the 2016--17 cap hit of Jeff from $8,800,000 to $8,400,000 which Jeff could then earn more money in a renegotiation-and-extension. The same is said for Thaddeus Young who had a $3,750,000 bonus and 3 years remaining on the fiscal calendar before July 1st. Thad’s cap hit could have been $13,328,652 for the 2016--17 Season instead of the current $14,153,652.}

^{The teams would have needed to shift around the order of the trades to be 1) Teague + Patterson (for salary purposes) swapped for Young before July 1st, then 2) after July 1st a 4-way trade where Atlanta sends out Young and receives the #12, Brooklyn sends out Teague for the #20, Indiana sends out Hill and #20 for Teague and Young, and Utah sends out #12 for Hill. This 4-way could also be expanded to a 5-way trade if need be ….}

^{So why would Atlanta want to do this? Well, with their previously constructed trade Atlanta received only an $8,000,000 traded player exception. Receiving Thad’s $13,328,652 contract would have pushed their traded player exception upwards by $5,328,652. Now Atlanta ultimately renounced the Teague traded player exception, so maybe they would have also renounced the Thad one. However, the traded player exception had option value as well.}

^{Oh and as another option value for holding onto the Thad Young contract, Atlanta could have expanded the 4-way to a 5-way so that trading away Thad’s contract could net them a player worth up to $18,328,652. And if they tossed in Mike Scott? It’d be $21,661,986. Adding on Muscala or Tavares would push this value north of the minimum starting contract value that Dwight Howard commanded of $22,488,039 and it’d require Houston to be OK with acquiring Muscala or Tavares. Effectively, Atlanta would have had an option to retain Al, Kent, and Paul plus add on Dwight for the cost of Lamar Patterson, Mike Scott, and Muscala/Tavares.}

^{We will never know why Atlanta, Brooklyn, Indiana, and Utah did not expand their trade in such a way. Maybe they tried and the NBA told them no? Who knows, but it’s a legal move. Indiana would have saved $1,025,000 in cap space this season plus $625,000 the following. Brooklyn would have gained Patterson, who could be waived for nothing. Utah would have been greasing the wheels for future transactions, which is always attractive to other teams and free agents.↩}