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2-Year Contracts and the NBA Salary Cap

A small bit of cloud-yelling as it relates to Hawks contracts.

Brett Davis-USA TODAY Sports

I typically do not interject an opinion when I write on Peachtree Hoops, I would rather give the readers some insight into the complexities of the CBA and how it relates to the Atlanta Hawks. I will still do that here, but also interject my opinion on the complaints of the Hawks utilizing the practice of 2-year contracts for recent free agents Paul Millsap, DeMarre Carroll, and Kent Bazemore.

It's been well documented that each of these players only had Early Bird Rights instead of Bird Rights for their free agency. The difference in rights is that Bird Rights allows a team to exceed the Salary Cap for any starting salary while the Early Bird Rights only allow a team to exceed the Salary Cap by the greater amount of 175% of their previous salary or the average player salary. There's a further complication that the cap hold for Bird Rights are for a higher percentage than Early Bird Rights, but this doesn't matter too much for my complaint. I have two gripes with these complaints, one related to human interaction and the other a CBA point that others may not understand. Oh, and a small bit of musings about Paul Millsap's first contract.

Human Interaction

For one, a contract is an agreement between two parties and both need to agree in order to sign a contract. If one party does not like certain terms of the agreement, then it's simply not possible to have a contract form. In May of 2015, Zach Lowe reported that both Paul Millsap and DeMarre Carroll were initially offered longer term contracts at the time. So on this bit of information alone, this seems to rebuke the "Hawks should have..." group because Atlanta did attempt to sign both players for longer contracts. Paul and DeMarre were unwilling to forgo the opportunity for a new contract in the 2015 off-season. While no one has reported this for Kent Bazemore, I think it is a reasonable assumption that Kent values being a free agent in 2016 instead of in 2017.

This is perfectly reasonable for a player to desire, but this does imply that no team had the option to sign Paul, DeMarre, or Kent to a 3-year contract simply because of their desired outcome.

Room Mid-Level Exception (Room MLE)

My second point here is really only related to DeMarre and Kent, which is that both players were obviously intended to sign via the Room MLE. The parameters for the Room MLE is that it is an exception that is only available to a team if they 1) use cap space that off-season and 2) only available after the team has reached the Salary Cap. The Exception allows a team to sign a free agent to a contract that starts at slightly less than $3 million but, and this is the important piece, it cannot be for more than 2 seasons. This is different from the other Mid-Level Exceptions, which are only available to teams which start the off-season over the cap. The Non-Taxpayer MLE allows a team to sign a player to a contract for up to 4 seasons while the Taxpayer MLE is limited to 3 seasons. This is one benefit to starting an off-season over the cap.

DeMarre's starting salary in 2013--14 was $2,557,545 while that season's Room MLE was valued at $2,652,000. While it was announced on July 5th that DeMarre had agree to sign with the Hawks, it was not until August that the Hawks officially signed DeMarre while simultaneously waiving the unguaranteed contract ($2,240,450) of DeShawn Stevenson. Clearly, the Hawks were attempting to position themselves to make use of DeShawn's contract and their remaining cap space to then sign DeMarre with their Room MLE. It never turned out that this would happen, and thus the team actually signed DeMarre with cap space.

Kent had a starting salary of $2,000,000 for the 2014--15 Season. Reports surfaced on July 11th that Kent agreed to sign with the Hawks, although the Hawks did not officially sign Kent until September 23rd. This was, again, clearly an off-season where the Hawks intended to sign Kent Bazemore after having used up all of their cap space via the Room MLE. But alas, the Hawks were not able to fully utilize said cap space and actually ended the season well under the Salary Cap.

The parameters of the Room MLE are actually what did the Hawks in, from a CBA perspective, to prevent them from offering a 3rd year. But I don't think this oddity in the CBA contributed much towards the Hawks not offering Paul, DeMarre, and Kent a 3rd year. That human interaction aspect is clearly the most important aspect.

A Side-Conversation About Paul

When Paul Millsap signed his first 2-year contract with the Hawks, reports surfaced that it was for $19 million. In most situations in the NBA, contracts contain raises and I assumed Paul would have a 4.5% raise in his second year. This would have implied a first year salary of $9,290,954 and a second year salary of $9,709,047. But as it turned out, Paul had a flat salary of $9,500,000 for each year. I thought this was odd, but at the time the NBA had a projection of $62.5 million for the 2014--15 Season which would lead others to think of a Salary Cap around $65 million for the 2015 off-season. The very off-season that Paul would be a free agent again and Atlanta knew they'd be able to use the Early Bird Exception to sign Paul to a starting salary of up to $16,625,000. This is because Early Bird Rights allow a team to exceed the Salary Cap for 175% of their previous salary. His max was probably thought to be around $17 million or $18 million, which is why I thought the flat salary was a bit strange, if his second year salary was $9,709,047 then Atlanta could offer $16,990,833.

His max turned out to be $19,689,000 and Paul signed for about a million less in starting salary, which was used to sign Edy Tavares to a 3-year contract. The Hawks could have used Early Bird Rights to sign Paul to his maximum contract if his salary in 2014--15 was $11,250,858 or more. The downside here is that the Hawks would have had to pay Paul more money and also Paul's cap hold would rise by $2,276,116, from $12,350,000 to $14,626,116. And Atlanta held enough cap space throughout those years that this is all technically possible and would represent the best possible contract offer to Paul if the team knew exactly what his maximum starting salary would be in 2015--16. Looking back at the cap sheet for last year, this would imply the Hawks entered the off-season with $60,515,433 in cap holds and could have offered DeMarre Carroll a contract starting at $12,659,759. This is still less than the $13,600,000 that DeMarre signed with Toronto, although Atlanta would have had the ability to give DeMarre 7.5% raises to create a $56 million contract over 4 years. Toronto offered $60 million over 4.

Everything I said above has the benefit of hindsight. And even with this extreme amount of hindsight, this likely does not change the player outcomes. DeMarre still goes to Toronto, as that $4 million gap is too much to assume DeMarre would give a discount (although Toronto might have upped their offer). The Hawks would then still have the cap space to facilitate a Tiago Splitter acquisition. Paul would at least receive the same contract that facilitated Edy's arrival, although it's possible Paul might demand more and force Atlanta's hand to sign Edy with the Room MLE.

Anyway, this entire mental exercise is here to demonstrate that even with the ridiculous notion of knowing the future in 2013, the Hawks 2015 off-season would have played out largely the same. And if that is the case, what is there to complain about?