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What are the Atlanta Hawks doing with their two-way contracts?

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Let’s check out the cap ramifications.

NBA: Atlanta Hawks at San Antonio Spurs Soobum Im-USA TODAY Sports

The last time I provided an update to Atlanta’s salary cap standing was during the preseason when the team still had Tyler Cavanaugh, Quinn Cook, and Jeremy Evans on the roster and the team had yet to decide on the team options for DeAndré Bembry and Taurean Prince. Since then: the team options were picked up; Cavanaugh, Cook, and Evans were all waived; Isaiah Taylor was signed to a two year contract; and Cavanaugh was re-signed to a two-way contract with the team.

I haven’t touched on the G League implications with the team much, so let’s devote a bit of time to how these moves have affected the cap. I’ll also touch on an interesting suggestion for clearing cap space as it could relate to Miles Plumlee and close out with a cap sheet update.

The Two-Ways

Two-way contracts are a new concept in the NBA. They came about in the 2017 Collective Bargaining Agreement negotiations with the supposed intent to protect a team’s investment in certain G League players. Larry Coon colloquially deemed this the Yogi Ferrell Rule in that the new two-way contracts would have protected the Brooklyn Nets from losing out on Yogi Ferrell in their G League system. This occurs because, even if an NBA team owns a G League team, all G League players are technically NBA Free Agents with the exception of players who have not submitted to the NBA Draft (ie they are not playing in college but have not been out of High School for more than a year) and these new two-way players.

Two-way contracts allow for G League players to earn more compensation. Under a regular G League contract, a player can expect to earn somewhere between $19,500 and $26,000 in salary which is up from the 2015-16 salary range between $13,000 and $25,500. With a two-way contract, the salary is bumped up to $75,000 for the 2017-18 season. The players also have the opportunity to earn the prorated rookie minimum of $815,615 for days spent with the NBA club -- which works out to $4,608 per day.

Each team has the ability to sign up to two players to two-way contracts as long as a player has fewer than 4 years of NBA experience. These contracts do not count against the Salary Cap and act as a 16th and 17th roster spot. Players signed under two-way contracts at the beginning of the season have up to 45 days to spend with the NBA club -- that is days not games -- although days on the NBA roster do not count against this 45 day maximum if the G League has not started.

However, if a player signs a two-way contract after the start of a Season then the 45 day limit is prorated based on the number of days in the NBA Season (177 for 2017-18) and how many days have passed since the start of the season. Each two-way contract has the option to be converted up to a standard NBA contract, although the team needs to have a roster spot available in order to do such and a two-way cannot be signed after January 15th.

And in addition, upgrading a two-way contract to an NBA contract does not re-start the 45 day limit on a subsequently signed two-way signed that Season. In essence, an NBA team has 90 days they can have a two-way contract with their team with a maximum of 45 days for an individual player. That’s the basics, but the fine folks over at 2ways10days.com provide a more in-depth primer on two-way contracts.

As this related to the current roster for Atlanta, Josh Magette signed a two-way contract prior to the start of the 2016-17 season. He started the 2016-17 campaign with Atlanta and remained with the team until being transferred to Erie on October 30th. Since the G League didn’t start until October 24th, Atlanta only used 7 days in his first stint with the NBA team. He has since been recalled on November 22nd for his second stint and is on day 9 as of November 30th. That is 15 days used and 30 left for the rest of the season.

For Tyler Cavanaugh, Atlanta originally affiliated him to Erie after cutting him during training camp. It was not until November 5th that Atlanta signed Cavanaugh to a two-way contract. Because 19 days passed from the start of the NBA Season, Cavanaugh would have only 41 days available with Atlanta. It is unclear why Atlanta did not sign Cavanaugh to a two-way contract after cutting him in training camp as that option would have preserved 4 more days with Atlanta. Did they offer and Cavanaugh declined? Possibly. Did they not offer? Possibly. No one really knows. But the 23-year-old big man has been with the NBA team since November 5th and is already down to 15 days remaining as of November 30th.

One thing that is clear with these two-way contracts is that Atlanta is effectively treating these contracts as four and a half 10-day contracts -- or four and a tenth in the case of Cavanaugh — even though 10-day contracts cannot be signed until after January 10th. This was immediately evident when Atlanta had the ability to apply for a Hardship Exception (ie an extra roster spot in the event that 4 players have missed more than 3 games in a row) and decided not to apply. Rather, the team utilized their second two-way contract to create an extra roster spot with the Cavanaugh signing.

Jeremy Evans

Atlanta signed Jeremy Evans to a contract with a $50,000 guarantee this Off-Season. The reason for this amount was that any amount above $50,000 would preclude the team from affiliating a player cut from training camp to the Erie Bayhawks. The process of affiliating a player is that -- if the player signs a G League contract -- the player bypasses the G League draft and/or waiver procedures to play for the affiliated team.

It’s a nice way for an NBA team to entice a player to play for their G League team. Atlanta did the same strategy with Jordan Mathews and Tyler Cavanaugh. And both Atlanta and Erie apparently believed that Jeremy Evans was going to be affiliated to the Bayhawks. From goerie.com on October 21st:

The BayHawks open camp Tuesday at Penn State-Behrend, and Rose will spend the weekend finalizing a training camp roster that is expected to include the team’s three affiliate players from the Hawks.

They are forward Jeremy Evans, 29, a former NBA All-Star Slam Dunk champion who has played with the Jazz and Mavericks; guard Jordan Matthews, 23, who averaged 10.6 points and 3.3 rebounds last season for a Gonzaga team that reached the NCAA final; and forward Tyler Cavanaugh, 23, who averaged 18.3 points and 8.4 rebounds for George Washington last season and was named Most Outstanding Player at the 2016 NIT.

But Jeremy Evans was never affiliated and did not show up on the Erie Bayhawks training camp roster on October 25th. In fact, Jeremy Evans never signed with the G League until around November 12th which was when he was claimed off of G League waivers by the Reno Bighorns:

If a player signs within the G League mid-season and a current G League team does not own his rights (from either being a returning player or an affiliated player) then the player is placed into waivers. No team owned Evans’ returning rights because he was never signed to a G League contract before. While he had previously played for the Utah Flash and Texas Legends, he did so as an assigned NBA player. And Evans apparently was not an affiliated player because...well, frankly, I’m not sure why. Because Erie thought he was. And I thought he was when I wrote my preseason cap update.

Did Erie fail to properly put in the paperwork to affiliate Evans? Doubtful, because Cavanaugh and Mathews were properly affiliated.

Did Evans’ lack of signing with the G League immediately have an impact? Was Evans not eligible to be affiliated because of this? Unclear because the G League does not provide their operations manual for us to investigate.

Whatever it was, it was a mistake and cost Erie their 2018 first round draft pick in acquiring Evans from Reno.

Creative Miles Plumlee Stretch Proposal

Eric Pincus recently wrote an article detailing a creative approach to freeing up cap space for the Lakers this summer as it relates to Luol Deng: to give him an extension and then stretch his salary. It’s an interesting idea and can also apply to Miles Plumlee if that is something Atlanta wants to pursue.

Plumlee is currently on a contract which pays him $12.5 million a year through the 2019-20 NBA season. He signed this contract on July 18th of 2016, which means he is eligible for an extension on July 18th of 2018 which can push his contract through the 2022-23 NBA season, thus making him under contract for 5 seasons.

When a contract is stretched, the total guaranteed compensation is applied equally across two times the remaining seasons under contract plus one. If the $25 million remaining on Plumlee’s contract is stretched during the 2018 off-season without an extension (thus two years remaining), then Atlanta would incur a $5 million cap hit for each of the 2018-19, 2019-20, 2020-21, 2021-22, and 2022-23 seasons.

The immediate impact would be that Atlanta would clear up $7.5 million in cap space for the 2018-19 Season but at the cost of adding on dead cap space until the 2022-23 season. But if Atlanta were to give Plumlee a contract extension with limited guaranteed money (say, $2.5 million extra), then they could stretch that remaining guaranteed money over 11 seasons. That would be $27.5 million in total compensation for $2.5 million in dead cap space. That would clear up $10 million in cap space for an additional $2.5 million in cash plus more dead cap space.

Atlanta might even wait to pursue this option until the 2019 off-season. At that time, Plumlee would be eligible for a contract extension through the 2023-24 NBA season. Again, that’s 5 seasons but Plumlee would have $12.5 million remaining on his current deal. If Atlanta gives him say $1.25 million in additional compensation, that puts Plumlee at $13.75 million total compensation. Stretching that amount over 11 Seasons would be a cap hit of $1.25 million for each season. That free ups $11.25 million in cap space for the 2019 Oof-season.

Should Atlanta make a move like this? Well, it depends on 1) if the NBA believes this is circumvention and 2) if Atlanta desperately needs the cap space in the 2018 or 2019 off-season. A move like this adds on a lot of dead cap space into the future that cannot be removed -- although it might be slightly reduced depending on how Atlanta handles the Right of Set-Off provision. At the same time, the Salary Cap will be increasing in the future and thus the cap hits become a fewer percentage of the Salary Cap in future years.

Cap Sheet

And finally, here’s the current cap sheet presented without much commentary and accurate as of November 30th 2017:

Cap Sheet - November 30th 2017

Player 2017-18 2018-19 2019-20 2020-21 Notes Cap Hold
Player 2017-18 2018-19 2019-20 2020-21 Notes Cap Hold
Kent Bazemore $16,910,113 $18,089,887 $19,269,662 - 19-20 PO $27,134,831
Dennis Schroder $15,500,000 $15,500,000 $15,500,000 $15,500,000 performance bonuses $23,250,000
Miles Plumlee $12,500,000 $12,500,000 $12,500,000 - performance bonuses $18,750,000
Marco Belinelli $6,606,060 - - - $12,551,514
Dewayne Dedmon $6,000,000 $6,300,000 - - 18-19 PO, performance bonuses $7,200,000
Ersan Ilyasova $6,000,000 - - - no trade clause $11,400,000
Mike Muscala $5,000,000 $5,000,000 - - 18-19 PO, no trade clause $9,500,000
Malcolm Delaney $2,500,000 - - - restricted $3,250,000
Taurean Prince $2,422,560 $2,526,840 $3,481,986 - 18-19 and 19-20 TO $10,445,958
John Collins $1,936,920 $2,299,080 $2,686,560 $4,137,302 19-20 and 20-21 TO $12,411,907
DeAndre' Bembry $1,567,200 $1,634,640 $2,603,982 - 18-19 and 19-20 TO $7,811,946
Luke Babbitt $1,471,382 - - - actually paid $1,974,159, 50% gtd ($987,080) $1,499,698
Nicolas Brussino $1,312,611 $1,544,951 - - 18-19 non-gtd, restricted $1,603,638
Isaiah Taylor $1,312,611 $1,544,951 - - 18-19 partial-gtd, restricted $1,603,638
Tyler Dorsey $815,615 $1,378,242 - - restricted $1,603,638
Tyler Cavanaugh - - - - Two-Way Player, 15 days left
Josh Magette - - - - Two-Way Player, 29 days left
- - - - -
Jamal Crawford (buyout) $10,942,762 $2,304,226 - -
Richard Jefferson (waived) $2,500,000 - - -
Mike Dunleavy (waived) $1,662,500 - - -
Diamond Stone (waived) $1,312,611 - - -
Quinn Cook (waived) $100,000 - - -
Tyler Cavanaugh (waived) $50,000 - - -
Jeremy Evans (waived) $50,000 - - -
Deandre Liggins (waived) $26,733 - - -
Total $98,499,678 $70,622,817 $56,042,190 $19,637,302 2017-18 Non-Tax MLE: $8,406,000
Total (Guaranteed) $98,015,376 $53,616,386 $28,000,000 $15,500,000 2017-18 Tax MLE: $5,192,000
Salary Cap $99,093,000 $101,000,000 $108,000,000 $113,400,000 2017-18 Room MLE: $4,328,000
Total (w/cap holds) $98,499,678 $99,324,029 $77,012,608 $73,022,187 2017-18 Bi-Annual: $3,290,000
Cap Space $593,322 $1,675,971 $30,987,392 $40,377,813 2017-18 Roster Charge: $815,615