The Toronto Raptors are NBA Champions.
Greatness carries a cost. The Raptors owned the third-highest payroll in basketball last year and spent deep into the luxury tax. That’s all worthwhile to secure that Larry O.B., but an all-in push has left the Raptors’ cap sheet for 2019-20 fairly inflexible.
Inflexible doesn’t mean bad, necessarily. If Kawhi Leonard returns, the Raptors will once again be deep into the luxury tax, an area they’ll be happy to live if it means another year of contention. They’ll try to trim that bill within reason, of course, but you don’t make win a title and see the type of surge in audience, gate and merchandise the Raptors saw and then pinch pennies at the more meaningful margins of the roster. If Leonard leaves, the focus may shift some, though the cap sheet won’t exactly open up.
Not even a projected seven-percent jump in the salary cap can help the Raptors here. No matter the scenario, they project as an above-cap team and Masai Ujiri, Bobby Webster and company will have to work some magic to improve the roster. They’ve been here before. The Raptors haven’t been a below-cap team in years and have found ways to keep trending upward. The work is just a little tougher here, and a little heavier to explain. That’s where this annual free agency primer comes in.
What follows is an explanation of the contract situations and cap rules that the Raptors face right now. This is the sixth year in a row I’ve done this post in the hopes of helping readers understand why certain moves can or can not happen, and how they may come to pass. We’re in year three of this collective bargaining agreement, so this year should be a little easier to navigate since it’s not Year One of a new document. Some of it will be in less detail than is necessary for a thorough understanding and some of it will be in more detail than is necessary for a cursory understanding (apologies if I haven’t correctly navigated that middle-ground) – if you have any questions, tweet them to me @BlakeMurphyODC or leave them in the comments and I’ll do a follow-up post explaining certain rules or scenarios Friday.
Note 1: All of the exact exception amounts and a lot of the assumptions within are based on the current projected percentage increase in the salary cap. We won’t know the real numbers until free agency actually begins and the league sets the official cap for 201-20. Right now, we’re working on an assumption of $109 million for the cap and $132 million for the tax.
Note 2: All salary data and cap info comes courtesy of Basketball Insiders, CBAFAQ.com, or my own calculations based on the CBA document. And a special shout out to Jeff Siegel of Early Bird Rightswho I confirmed some of the grayer areas with.
Note 3: As outlined last week, this is Part One of a five-part series this week. Tomorrow, we’ll look specifically at Leonard’s contract scenarios, then lay out three-year plans with and without him Wednesday. Thursday, we’ll look at the case for extending Pascal Siakam. On Friday, I’ll answer any outstanding questions.
Let’s get it.
That’s not a great start if you’re looking for summer flexibility. With only six players locked in, the Raptors are already out of cap space for a max-level free agent, since the salary cap is projected to be $109 million. That leaves them less than $27 million even before accounting for incomplete roster charges (a minimum salary for every roster spot up to 12 players so that teams can’t duck way below the cap with an empty roster). The estimated first-year salary for the smallest of the three max-salary tiers is $29 million and Leonard’s is $34.8 million.
This is usually the most confusing point of these pieces annually. Because the NBA utilizes a soft cap with exceptions and means of circumventing the theoretical limit, six players making $82.3 million isn’t nearly as defeating as it might seem on the surface. The Raptors also aren’t seeking cap flexibility on the open market because of the rights they hold on certain players, which allow them to exceed the cap. Instead, this is just the foundation of their roster construction.
As a note here, Kyle Lowry’s salary for 2019-20 is higher than we’ve had it pegged in previous iterations of our cap breakdowns. That’s because Lowry achieved several “unlikely incentives” in his contractlast season, and those, by definition, now get changed to “likely incentives.” That designation matters for theoretical luxury tax calculations and most importantly for the “tax apron” calculation we’ll get into, but from a purely financial standpoint, they will only matter to the Raptors if Lowry achieves them again. Considering most of them were tied into team success, the Raptors will gladly pay them out if it means the Raptors are repeating as champions.
Marc Gasol has until June 27 to decide on his player option. It seems likely right now that he’ll pick it up. $25.6 million just seems like too much to walk away from, even if there were a longer-term deal out there that would guarantee him more total money but less annually. The CBA does not allow Gasol to opt in and then re-negotiate a smaller cap hit, so if he wanted to stay on a different deal, he would have to opt out and negotiate a new contract. (The Raptors seem unlikely to want to tie up their 2020 and 2021 books in such a way, and Gasol simply opting out for a smaller salary on a shorter deal would be unexpected.) If Gasol opts out, the Raptors hold his full Bird rights and can exceed the cap to re-sign him.
Leonard has until June 29 to make up his mind on the option, but that was made up about the minute he signed this contract. He’ll opt out, and that won’t say anything about his destination for 2019-20. His maximum salary is much higher than $21.3 million, and there’s little sense in him picking up that option and taking less money (especially since the CBA rules regarding extensions would make it financially unfavourable for him to go that route). For our purposes, we will consider Leonard an unrestricted free agent. The Raptors hold full Bird rights on him, as well.
Let’s also start to make some assumptions for a more clear picture. For starters, let’s assume Gasol opts in and Leonard opts out, then remove the cap holds from our calculations. (Those holds still exist, but because the Raptors are an above-the-cap team as soon as Gasol opts in and minimum roster charges are considered, we don’t need to worry about them for our scenarios.)
We’re also going to assume Miller and Boucher are locked in. All minimum contracts count as the two-year minimum amount for luxury tax purposes (to prevent veterans from being priced out), so there will be no tax savings to replacing them with other players. (Even if they end up being cut and other players are signed at the minimum, our calculations won’t change. Swapping them out for rookie minimums would only help if the Raptors were going to operate below the cap, which they aren’t.)
Here’s what that looks like:
The luxury tax apron
There is also something called the luxury tax “apron” to consider. The tax apron is like a sort-of third line of salary demarcation after the salary cap and luxury tax lines. If a team crosses the apron – which is projected to be $138.2 million for 2019-20 – then they lose some roster-building options that other teams have.
Passing the $138.2-million marker in salary does the following:
You can’t acquire a player in a sign-and-tradeYou can’t use the Bi-Annual ExceptionYou can only use the smaller, Taxpayer Mid-Level ExceptionYou lose some of the protection of the Gilbert Arenas Provision
Conversely, if a team acquires a player in a sign-and-trade, uses the bi-annual exception or uses the full mid-level, the apron becomes a “hard cap” that they can’t cross at any point during the year.
As noted in the Leonard-stays example above, the Raptors don’t have to worry about this because they’ll almost surely be blowing past the apron. (And, as discussed, if Leonard walks they’ll likely try to avoid the tax altogether.) So if Leonard stays, we can pretty safely assume the Raptors won’t be able to acquire players in a sign-and-trade or use their bi-annual exception, and they’ll be operating with the smaller mid-level exception (more on that shortly).
If Leonard and Gasol walked and the Raptors renounced all of their free agents, they could open up an estimated $22.1 million in cap space.
There are sometimes scenarios in which it makes sense for a team to stay above the cap, not that the Raptors will have a choice here. By doing so, teams open themselves up to the non-taxpayer or taxpayer mid-level exception and potentially the bi-annual exception if they’re below the tax apron. Here’s a quick look at the salary cap exceptions available to the Raptors.
Note: All of the exact exception amounts are based on the projected percentage increase in the salary cap. We won’t know the real numbers until the weekend.
Get under cap
If the Raptors go under the cap by renouncing multiple free agents and trading away a ton of salary, they’ll have the following:
Cap space: Depends on how many free agents they lose/renounce; the theoretical max is $22.1 million, but Gasol opting in would make this a practical impossibility
Room mid-level exception: $4.76 million (one- or two-year deals with a 5-percent raise; can be split between players)
Stay above cap, below tax apron
If the Raptors stay over the cap as outlined but below the tax apron (after using the exception in question), they’ll have the following:
Cap space: $0
Non-taxpayer mid-level exception: $9.2 million (up to a four-year deal, with raises of 5 percent of the first-year salary; can be split between players)
Bi-annual exception: $3.6 million (one- or two-year deals with a 5-percent raise; can’t be used two years in a row; can be split between players)
Stay above cap, reach tax apron (this is likely how the Raptors will operate)
If the Raptors stay over the cap as outlined and an exception would push them above the tax apron, they’ll have the following:
Cap space: $0
Taxpayer mid-level exception: $5.7 million (up to a three-year deal, with raises of 5 percent of the first-year salary; can be split between players)
The Raptors would also have the minimum player salary exception, which allows you to exceed the cap to sign players on veteran minimum deals, in any of these cases.
The Raptors have the following trade exceptions:
$2.95 million – Jakob Poeltl trade exception, expires July 18$2.54 million – Delon Wright trade exception, expires Feb. 7$1.57 million – Malachi Richardson trade exception, expires Feb. 6$1.51 million – Greg Monroe trade exception, expires Feb. 7
Trade exceptions allow a team to take back salary without sending any out in return, for up to the amount of the exception plus $100,000. They can not be combined together or combined with players to add extra salary; they’re stand-alone tools. The Raptors aren’t in a position to take on much salary, but the two larger ones could still be helpful for structuring trades so they’re effectively multi-part deals.
One small note with the Raptors figuring to be a tax team, or at least operate as one early in the offseason, is that teams above the luxury tax operate under different trade rules. Luckily for us, they’re simplified: A tax team can only take on up to 125 percent of their outgoing salary in a trade, plus $100,000. This is less flexibility than non-tax teams have.
The key points you need to know:
The Raptors will likely be operating as an above-cap team.If Leonard stays, the Raptors will be operating as an above-tax and above-apron team, limiting their flexibility in trade and on the free agent market.If Leonard leaves, the Raptors will probably operate as an above-cap, below-tax team, giving them a bit more flexibility but not the sort that could make up for Leonard’s departure.The market this summer has a ton of projected cap space and a handful of marquee free agents. There will be teams who miss out on top free agents and overspend on the lower tiers like in 2016. The Raptors will be shopping more in the mini-mid-level and ring-chaser bins, depending how things go.The Raptors can get creative by trading players away, and the value of “expiring contracts” may be trending upward. At the same time, their books are incredibly clean for 2020 and 2021, and they’ll be judicious about taking on longer-term salary for marginal upgrades (or just to dump salary).There is one enormous domino in Leonard that, once it falls, a lot of this gets simplified because we know the path the Raptors are headed down and don’t have to do as many “if this, then that, but if that, then this” analysis.