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Atlanta Hawks Salary Cap Primer, Pre-Draft Edition

A deep dive into how the 2017 off-season could play out for the Atlanta Hawks.

The last update I provided for the Atlanta Hawks’ salary cap standing was post-trade deadline. Things have not changed much since then aside from swapping Lamar Patterson for Jose Calderon and solidifying the No. 19 pick in the NBA draft. Nevertheless, it is a good time to provide a bit of a primer for the off-season now that the season is over. There is a good chance I will have to provide another primer after the NBA draft and I’ll detail why that is the case. The goal here is to give an overview of the cap sheet, discuss a few wrinkles to the new Collective Bargaining Agreement (CBA) that may impact Atlanta in the next few months, and look at the types of moves they can make with respect to their current players and free agents.

I previously promised to have something related to the new CBA at some point in the next year. The version of the CBA that the NBPA released is a 598 page pdf. There’s no bookmarks or structure to the pages. That makes searching through the document for particular references extremely difficult and pissed me off. So I created a version of the CBA with each article and section outlined and the entire document easily searchable. You can view it as an html version but also at the top of that page you can download the CBA as a pdf or ebook. Promise fulfilled, although I might also provide a separate post focusing on CBA minutiae in the future. I am not sure yet.

Now back to the Hawks.

Cap Sheet

Pre-Draft Cap Sheet

Player 2016-17 2017-18 2018-19 2019-20 2020-21 Notes Cap Hold
Player 2016-17 2017-18 2018-19 2019-20 2020-21 Notes Cap Hold
Dwight Howard $23,180,275 $23,500,000 $23,819,725 - - $35,729,588
Paul Millsap $20,072,033 $21,472,407 - - - 17-18 PO $30,108,050
Kent Bazemore $15,730,338 $16,910,113 $18,089,887 $19,269,662 - 18-19 PO $27,134,831
Ersan Ilyasova $8,400,000 - - - - $12,600,000
Mike Dunleavy $4,837,500 $5,175,000 - - - 17-18 gt'd $1,662,500 $9,832,500
Kris Humphries $4,000,000 - - - - $5,200,000
Thabo Sefolosha $3,850,000 - - - - $7,315,000
Dennis Schroder $2,708,582 $15,500,000 $15,500,000 $15,500,000 $15,500,000 performance bonuses $23,250,000
Malcolm Delaney $2,500,000 $2,500,000 - - - restricted FA $3,250,000
Taurean Prince $2,318,280 $2,422,560 $2,526,840 $3,481,986 - 18-19 and 19-20 TO $10,445,958
Tim Hardaway Jr. $2,281,605 - - - - Qualifying Offer: $4,588,840 $5,704,013
#19 2017 Draft Pick - $1,936,920 $2,299,080 $2,686,560 $4,137,302 120%, 19-20 and 20-21 TO $8,059,680
DeAndre' Bembry $1,499,760 $1,567,200 $1,634,640 $2,603,982 - 18-19 and 19-20 TO $7,811,946
Mike Muscala $1,015,696 - - - - $1,471,382
Ryan Kelly $286,785 $1,577,230 - - - 17-18 nongt'd until 7/7/2017 $1,471,382
Jose Calderon $247,991 - - - - $1,471,382
Mike Scott (TPE) $3,333,334 $3,333,334 - - - expires 2018-02-23
Mo Williams (TPE) $2,194,500 $2,194,500 - - - expires 2018-01-18
Tiago Splitter (TPE) $150,000 $150,000 expires 2018-02-22
Walter Tavares (waived) $1,000,000 - - - -
Jarrett Jack (waived) $980,431 - - - - 2017-18 Non-Tax MLE: $8,406,000
Ryan Kelly (waived) $418,228 - - - - 2017-18 Tax MLE: $5,192,000
Lamar Patterson (waived) $128,625 - - - - 2017-18 Room MLE: $4,328,000
Gary Neal (10-day) $57,672 - - - - 2017-18 Bi-Annual: $3,290,000
Matt Costello (waived) $50,000 - - - - 2017-18 Roster Charge: $815,615
Total $101,241,635 $98,239,264 $63,870,172 $43,542,190 $19,637,302
Total (Guaranteed) $95,563,801 $69,511,793 $59,708,692 $15,500,000 $15,500,000
Total (w/cap holds) $152,332,683

You might be asking yourself, why are the 2016-17 salaries still shown here? Well it’s because the NBA does not officially turn the page to the 2017-18 season until July 1st. The NBA still allows the trading of players which cannot be free agents in the 2017 off-season. This implies that Howard, Bazemore, Dunleavy, Schroder,1 Delaney, Prince, Bembry, and Kelly (on May 24th) can all be traded.

Paul Millsap could be traded if he agrees to pick up his Player Option, but there would have to be precarious circumstances for this to make sense. Let’s not talk about it. I’ve already talked about Paul Millsap’s contract situation previously, so go there if you want to learn more about it. Paul has until June 29th to pick up his Player Option, but there is hardly a chance he does. And that will complete the contract he signed in the 2015 off-season.2

Draft Trade Activity

Of particular note to the trade market surrounding the NBA Draft is that Mike Dunleavy’s salary in 2017-18 is only guaranteed for $1,662,500 right now. There is potential that Dunleavy could be flipped to a team that wants to waive him to clear cap space. It is also possible that Atlanta wants to avoid Dunleavy’s $5,175,000 salary for next season and attaches some cash or a draft pick with Dunleavy to another team. Atlanta is permitted to send up to $2.35 million in cash for any trades prior to July 1st (they already sent $650K to Denver and $500K to Phoenix). Atlanta is also permitted to receive up to $2.75 million in cash before July 1st (they already received $750K from Cleveland). You can check the status of future draft picks for Atlanta over at RealGM but Atlanta will have the 19th, 31st, and 60th picks in the upcoming draft.

Dunleavy’s contract fully guarantees on July 1st, so he would need to be waived before then. His outgoing salary would count as $4,837,500 and Atlanta would be able to bring back $7,356,250 in contracts if they trade him away. It would be more if Atlanta packages Dunleavy with another tradeable player on the roster.

A team waiving Dunleavy prior to July 1st would have the option to stretch his remaining $1,662,500 salary over the next 3 seasons (so $554,167 each season) or absorbing the full $1,662,500 in the 2017-18 season. If one were to rank the likelihood of Atlanta players currently under contract being moved, Mike Dunleavy would be at the top of the list based on his contract status.

2017 Off-Season

Disclaimer: We will not know what the salary cap will be set at until early July. Any talk about cap space has to assume some value of the salary cap. I will assume the salary cap is set to $101 million based on the most recent NBA projections in April. Since this $101 million is an estimate, any reference to cap space is also an estimate. There is only so much precision in an estimate of $101 million and this should be reflected in cap space talk. This is why your high school science teacher discussed significant figures so much.

At the start of the 2017 off-season, Atlanta will have a total of $152,332,683 on their cap sheet. This would include the $69,152,103 in salaries of the eight players under contract, free agent cap holds totaling $63,869,826 for their seven players they hold rights to, $11,696,000 to account for their bi-annual exception (BAE) and mid-level exception (MLE), the three traded player exceptions (TPE) at $5,677,834, and $1,936,920 for the No. 19 draft pick. Only the salaries for the eight players under contract are cash based, the remaining are simply cap holds from the CBA as a way to restrict spending for teams. Monopoly money if you will.

Atlanta has two paths in the off-season: they can operate above the salary cap or below the salary cap. In operating above the salary cap, Atlanta would have their various exceptions to make moves. These would involve all the rights they hold over the seven free agents, the BAE and MLE, their TPEs, possible trades, and veteran minimum contracts for any remaining moves.

If Atlanta drops below the salary cap, this implies that they have renounced the rights to their BAE and MLE (Non-taxpayer and Taxpayer) and some of their free agents to remove their cap holds. They would be able to use whatever cap space they create, and then any remaining exceptions. The exceptions could possibly be some rights to free agents they did not renounce and then the Room MLE ($4,328,000) once they spend up close enough to the salary cap.

One thing to keep in mind with Atlanta falling below the salary cap is that incomplete roster charges come into play when the team has fewer than 12 players and free agent cap holds on their books. This amount is equal to the minimum salary for a player with 0 years of experience, which is now $815,615. This is about twice as much as what the previous charge was due to an increase in minimum salaries. If Atlanta were to renounce all their free agents, then Atlanta would have eight players under contract plus their draft pick. They would incur three roster charges totaling $2,446,845. (more on this at the very end)

Let me talk about a few of these exceptions as well as how sign and trades can come into play.

Free Agency

There are three different types of rights to free agents that the CBA permits. These rights are colloquially called Bird Rights, Early Bird Rights, and Non-Bird Rights which all allow for an exception to exceed the salary so long as a team has not renounced these rights. The cap holds exist as a way to proxy for roughly how much a team could/should spend on their free agent, which closes a loophole. These rights largely function the same in the new 2017 CBA versus the previous 2011 CBA, although there are some minor changes:

  • Bird Rights: Allow a team to exceed the salary cap in order to re-sign their free agent to a starting salary up to their maximum annual salary, for up to five seasons, and with annual raises/declines of up to 8% based on their first season’s salary. Atlanta holds Bird Rights on Paul Millsap, Ersan Ilyasova, Thabo Sefolosha, Tim Hardaway Jr., and Mike Muscala. Tim is also a restricted free agent, more on that below.
  • Early Bird Rights: Allow a team to exceed the salary cap in order to re-sign their free agent to a starting salary up to the greater of 175% of their previous salary or 105% of the average salary (won’t be known until the salary cap is calculated in early July), for a length of 2 to 4 seasons, and with annual raises/declines of up to 8% based on their first season’s salary. Atlanta has Early Bird Rights on Kris Humphries
  • Non-Bird Rights: Allow a team to exceed the salary cap in order to re-sign their free agent to a starting salary up to the greater of 120% of their previous salary or 120% of their minimum salary. Atlanta has Non-Bird Rights on Jose Calderon.

For all other players (and for any team which tries to sign any of Atlanta’s free agents), teams are constrained to signing a player based on their cap space or exception and a player’s maximum annual salary. The contract can be for 1 to 4 seasons and contain annual raises/declines of up to 5% of their first season’s salary. The maximum annual salary for a player is based on years of service: 0-6 is 25% of the cap, 7-9 is 30% of the cap, and 10+ is 35% of the cap. We will not know these values until July, but based on a $101 million cap the levels would be $25.3 million (Hardaway and Muscala), $30.3 million (none), and $35.4 million (Millsap, Ilyasova, Humphries, Sefolosha, and Calderon).

Restricted Free Agency

Restricted free agency can exist under two general situations in the NBA: 1) players drafted in the first round that complete the 4th year on their rookie contract and 2) non-first round draft picks which have fewer than four years of experience. If a free agent falls under either of these categories, then a team can make that player a restricted free agent by tendering a Qualifying Offer (QO). A QO is a standing 1-year contract at a specified salary based on the player’s previous salary and/or certain performance thresholds. Once a QO is tendered, that gives the incumbent team the right of first refusal which means the incumbent team has the option to match contract terms for their restricted free agent. As this relates to the 2017 off-season for Atlanta, only Tim Hardaway Jr. can be a restricted free agent and I have discussed this previously.

Atlanta has until June 30th to tender Tim a QO although the earliest they can tender him a QO is the day following the NBA Finals (the new CBA moves the deadline date up to June 29th). They could not offer Tim a QO in October, although they could have reached a contract extension prior to October 31st like they did with Dennis Schroder.

Tim’s QO was initially scheduled to be $3,335,707 but Tim exceeded 2,000 minutes played this season which means he met starter criteria. This bumps his QO up to $4,588,840. Practically speaking, discussing his QO is pointless. Atlanta will undoubtedly tender him a QO because it is less than his cap hold. But the chance that Tim signs his QO is slim. If he did sign his QO it would give him a 1-year contract, veto power for trades, and then allow him to reach unrestricted free agency in 2018 with Atlanta still holding his Bird Rights. Historically, very few QOs are signed and we shouldn’t expect Tim to sign his, although it is technically possible. Fun fact, the last Hawks player to sign their QO was Ivan Johnson in 2012.

But let’s touch on the new CBA wrinkles of restricted free agency.

Offer Sheet

An offer sheet is what a team will submit to the NBA when they sign another team’s restricted free agent. This is a conditional contract which has been agreed to (ie it is not an offer but a literal contract). The condition is that Atlanta has the right to match certain terms of the contract or not. If Atlanta matches, then they retain the restricted free agent with an added caveat that Atlanta cannot trade the restricted free agent without their consent for one year.3 If not, then the restricted free agent is under contract with the team that the restricted free agent signed the offer sheet with.

An offer sheet must be for at least two seasons. The first two seasons cannot be option years.4 For a team to sign a restricted free agent to an offer sheet, they need to have the requisite cap space or salary cap exception. This has the effect of freezing cap space on the team trying to sign the restricted free agent.

In the previous CBA, the incumbent team had three days to match an offer sheet. The new CBA has reduced the matching deadline to two days. Previously, an offer sheet could not be signed until after the July Moratorium (July 1st until noon on the 6th). A restricted free agent can now sign an offer sheet during the July Moratorium, although the two day waiting period does not start until the Moratorium ends. That would give Atlanta until midnight on July 8th to make a decision on matching.

A misnomer with restricted free agency is that an offer sheet will eat into Atlanta’s cap space. This is not true. If Tim signs an offer sheet in the July Moratorium that starts at say $15 million, then Atlanta’s cap space is unaffected until they make a decision on their right of first refusal. Tim will have a $5,704,013 cap hold while the team that signed Tim to the offer sheet will need to have $15 million in cap space throughout the entire process. If Atlanta declines to match, then this will free up $5,704,013 for Atlanta. If Atlanta decides to match, then Tim’s $15 million goes onto their cap when Atlanta notifies the NBA of their intention to match.

This implies an offer sheet is a ticking time-bomb. Atlanta would have two days after receiving the offer sheet to use up any cap space they may have, because once Atlanta agrees to match they would see their cap sheet rise.

That would be exciting.

Sign And Trades

As far as Atlanta’s options this off-season are concerned, sign and trades of their free agents could be an option for them. This would only make sense in an off-season scenario where Atlanta stays above the salary cap the entire time, which is also where sign and trades become most confusing.

A team can sign and trade their own free agents to another team with a few caveats. One is that the contract must be for at least three seasons, although only the first needs to be fully guaranteed. Next is that, regardless of what rights a team may have over their free agent, the contract cannot be for more than four years with annual raises/declines up to 5% of their first season’s salary. Effectively, this makes the contract terms the same as if a team with cap space were signing said free agent.

But this does not imply that a sign and trade does not make sense. A team may engage in a sign and trade transaction with an Atlanta free agent if the team cannot clear the required cap space but can send out existing contracts (or use a TPE) for the free agent. From Atlanta’s perspective, they may engage in this trade if they value the contracts being offered. Or if the other team adds in draft picks or cash. Or if Atlanta realizes there is no chance in re-signing the free agent but wish to carve out a TPE. These are all legitimate reasons for a sign and trade.

One pesky CBA restriction with sign and trades is what has generally been referenced as base year compensation. Base year compensation refers to any scenario where a free agent is given a raise greater than 20% from their previous salary through the use of the Bird or Early Bird exception.5 In the 1999 CBA, base year compensation was a status which lasted for an entire year (two years if the contract was signed prior to 2001). But since the 2011 CBA, base year compensation only exists in sign and trade transactions.

When a player receives a raise in excess of 20% through the Bird or Early Bird exception, their outgoing salary for trade matching purposes is the greater of: 1) their previous salary or 2) half of their new starting salary. This would directly affect how much salary Atlanta could take back. If the outgoing salary is less than $6,533,334 then Atlanta could take back 175% + $100,000 of the outgoing value. If it’s between $6,533,334 and $19.6 million outgoing, then Atlanta can take back up to the outgoing amount plus $5 million. If the outgoing salary is more than $19.6 million, then Atlanta can only take back 125% + $100,000 of that amount.

But at the same time, the team which receives the free agent uses the actual starting salary for trade matching purposes. That team also becomes hard capped at $6 million above the luxury tax.

By way of example, if Atlanta were to sign and trade away Paul Millsap at a starting salary of $35 million, then Atlanta would use $20,072,033 as his outgoing salary since half of $35 million is only $17.5 million. Atlanta could bring back up to $25,190,042 in salaries. But a team receiving Paul would need to send out at least $27,920,000 in salary in order to receive a $35 million player...which is too much for Atlanta to be allowed to take back. This makes a direct two-team trade complicated, although not impossible. A third team with cap space could allow the team receiving Paul to salary dump their required $27.92 million to make the math work. Another option would be to have Atlanta include more salary to raise the amount of money that Atlanta could take back. And another alternative would be for Paul to have a lower starting salary.

This issue also arises for Ersan, Kris, Thabo, Tim, and Muscala. But at the same time, this is only an issue if the team receiving one of these players needs to send salary back. While base year compensation was not an issue, when Atlanta acquired Thabo Sefolosha in 2014 they did so via a sign and trade transaction with OKC. This was done because OKC wanted to create a TPE and they actually paid Atlanta in order to generate the TPE (later used to acquire Dion Waiters). All Atlanta did in return was send the rights to an international player while OKC did the same in order to make the trade legal.

I bring up the sign and trade issues mainly because of the TPEs that could be generated. If Atlanta aims to stay above the cap, then TPEs could be useful later on in the 2017-18 season.

No-Trade Clause

As a bit of miscellany, there are a few notable free agents this upcoming off-season that Atlanta could offer a no-trade clause to. In order for a player to be eligible for a no-trade clause, they must have played at least eight seasons in the NBA and at least four with the team offering the no-trade clause. By my count, the list of notable free agents that this entails is:

  • Kyle Korver (Philly can offer too)
  • Paul Millsap (Utah can offer too)
  • Zaza Pachulia
  • Josh Smith
  • Jeff Teague
  • Jason Terry (Dallas can offer too)

That is certainly an interesting list. And I’m not suggesting that Atlanta will pursue these free agents. The list is here to be thorough with the CBA minutiae that arises from prepping for an off-season.

Finishing Thoughts

Hopefully I have laid out enough information for you to draw your own conclusions with what Atlanta could, should, or will do this off-season. But I also understand some of this stuff is difficult to grasp. Let me try and break things down in general terms.

Atlanta will have $68,969,035 on their cap sheet if they renounce all their exceptions, all their free agents, waive non-guaranteed contracts, stretch Dunleavy’s contract, and account for their five incomplete roster charges. If the salary cap is at $101 million, the team is looking at about $32 million in cap space. That is not enough cap space for a max level player of 10+ years of experience. The team would need to move other contracts to create cap space.

Now, you can start taking the above value and start adding back in free agents. Want to assume the team keeps Millsap? Well toss his cap hold back in ($30,108,050), take away one of the roster charges (-$815,615), and you’ll see that the team would be looking at $98,261,470 on their cap sheet. You might think that this would be about $3 million in cap space but it’s not. Because under this scenario, the team would not have renounced their MLE or BAE. So in other words, there is absolutely no chance the team can have cap space and resign Millsap with the currently constructed roster.

OK, but maybe you only want Hardaway back from the free agent crop. Then toss his cap hold back in ($5,704,013), take away a roster charge (-$815,615), and the team is sitting at $73,857,433 on their cap sheet. That would be about $27 million in cap space to throw around. Is that going to be enough to add other free agents? And are you prepared to take the risk of only having two days to use your cap space if an offer sheet comes Tim’s way early? Although keep in mind the Room MLE would come back into play.

You can start to toss back the cap holds to more of the current free agents in the above scenario, but it’s at the cost of cap space.

All in all, if Millsap is going to return to Atlanta then there is no option for cap space with the currently constructed team. There would need to be a trade for cap space and Millsap to be a legitimate option.

1. He’s poison pilled right now, which I talked about a year ago.

2. Do not say Paul will void the contract because void has a particular meaning and that is not what Paul Millsap will do as he enters free agency this off-season.

3. There’s another caveat that Atlanta cannot trade to the team which tendered the offer sheet for one year, regardless of the restricted free agent’s consent.

4. There are some added caveats for non-first round draft picks and players which receive a maximum QO, but Tim isn’t one of those so I’ll ignore it.

5. Base year compensation issues do not arise if Atlanta uses cap space to give the player a 20% raise. This would defeat the purpose of a sign and trade in most situations, although it is possible Atlanta could time it exactly right so that the TPE formed in a sign and trade keeps them at the salary cap.