If there’s no extension
If the two sides can’t come to an agreement on an extension, Siakam will become a restricted free agent in 2020. The Raptors will tender him a qualifying offer at that time, giving them the right to match any offer sheet he signs.
Siakam’s maximum contract with the Raptors in restricted free agency would be five years at 25 percent of the salary cap with an annual raise of eight percent of the first year salary. Like in the extension example above, that amount works out to $168.2 million based on current estimates. Siakam’s max offer sheet with another team would be four years and $124.7 million.
The Raptors could also submit a “maximum qualifying offer” for Siakam’s full five-year max right out of the gate, which limits the offer sheets he can receive. (Essentially, Siakam would still be free to seek out other deals, but his best deal would be with the Raptors and they could match anything he signs elsewhere, anyway.)
All of this is to say that the downside isn’t too extreme if an extension doesn’t get done. Siakam’s maximums are largely the same and the Raptors don’t run much risk of losing him if they’re committed to keeping him. Now, if Siakam is less than a max player, or at least the Raptors feel he is, restricted free agency does pose the risk of someone paying him more than the Raptors are willing to match. Whether they can avoid that depends on Siakam’s willingness to sign a sub-max extension.
The Raptors’ case for an extension
The biggest argument in favour of getting an extension done now is that it’s done and out of the way. Locking Siakam in now eliminates the what-if downside of his restricted free agency and some of the potentially uncomfortable negotiations that could arise at that time. (Non-max RFAs have fairly inconsistent markets, and while the Raptors would likely work swiftly to get a Siakam deal done, there are awkward examples every year of stalemates without an offer sheet.) A deal also assures both sides that the other is committed to a long-term future together.
Perhaps more notably, an extension can signal to the market and to other players and agents that the Raptors are a team that takes care of their guys, and it ensures that the organization’s relationship with Siakam remains in excellent standing moving forward. Considering he’s a big part of the present and future, that’s not nothing.
From a more tangible perspective, it also offers cost- and roster-certainty. Particularly if Leonard stays, the Raptors will be able to operate with Siakam on the books at a firm number, which can be helpful as they consider other trades and signings from both a cap-sheet perspective and an on-court perspective. There is value in certainty. (And in a pessimistic case, locking Siakam in means not losing an asset for nothing, and he becomes a tradeable commodity if the team ever decides to do a full-scale rebuild.)
The biggest argument in favour of an extension, though, would be the chance to get Siakam signed at a cheaper contract. We’ve talked about Siakam’s theoretical max, but if his camp is willing to sign below that amount, then the Raptors might be enticed to get an extension done now.
As a rough example, say the Raptors think there’s a 30-percent chance Siakam commands the full max (an average of $33.6 million) in the summer of 2020, a 50-percent chance he commands $22.5 million, and a 20-percent chance he tails off and only commands $17.5 million. Their expected salary for Siakam in 2020 based on those (very) loose estimates is $28.3 million per year over the life of a contract. If they could sign him to an extension that pays him less than that right now, it might be worth giving up some of the flexibility we’ll discuss in the next section to secure that discount.
The Raptors’ case against an extension
The case against an extension is much more tactical (and, admittedly, cold), whereas the case for an extension skews more positive. It gets a little more into thinking of players as assets on the cap sheet, which can at times be a little uncomfortable. These things require a pragmatic approach, though, and the case against a Siakam extension is rooted in some very strong logic.
Before looking at the numbers, there are a few other factors to consider here. For one, eschewing an extension means the Raptors aren’t betting on a certain level of continued development. High though they are on Siakam and his ceiling, waiting until 2020 affords them another year of information, and they’ll be making a decision based on a much more reliable data set. It’s certainly possible Siakam continues growing into a max-level player, but you might not want to pay for that on speculation, especially since you don’t have to. Because again, the downside here is just that Siakam enters restricted free agency and the Raptors can still match any offer for him. Basically, if they think he’ll become a max guy, they’ll always have the option to pay him as such. Waiting also insulates against market shifts (like when they extended Jonas Valanciunas right before the centre market cooled, although that was still a fair deal).
There’s also the small note that Siakam in his current form – at a $2.35-million salary heading into restricted free agency – would be a significant trade chip. The Raptors have him in their long-term plans, so this is a lesser consideration, but signing him to an extension this summer would make him very hard to trade in 2019-20 due to the “poison pill provision.” If Siakam signs an extension, his salary for the purposes of matching in trades would be different for the team acquiring him than it would be for the Raptors, making him very difficult to move. This would only be a consideration if a legitimate superstar became available to pair with Leonard and would mean the Raptors shifting from the 2020 pivot foot they’ve long maintained, but it’s worth keeping in mind.
Now, the numbers. So, remember the other day when we discussed cap holds? This is where the biggest argument against a Siakam extension comes in.
If Siakam signs an extension this summer, he immediately goes on the books for 2020-21 at whatever his salary is in the first year of that extension. The way the collective bargaining agreement works, the Raptors have a huge opportunity in the summer of 2020 to further build up their roster by delaying a Siakam extension. That’s because if Siakam doesn’t sign an extension, he’ll only count on the cap for his cap hold of $7.06 million when free agency opens in 2020. Basically, because Siakam’s salary has outstripped his cap hold, the Raptors can gain additional cap room by putting off increasing Siakam’s salary.
The offseason in 2020 would play out like this: Let Siakam become an RFA, use all the cap space available, then re-sign Siakam at his higher salary.
Let’s look at how the cap sheet for 2020 would look in four scenarios to illustrate. We’ll ignore Fred VanVleet’s free agency for simplicity, since we only want to see the Siakam impact. We’ll also assume the team picks up their fourth-year option on OG Anunoby. So they’ll have either two, three or four players locked in for the summer of 2020, plus minimum roster charges. Look how waiting on Siakam changes the cap picture:
If the Raptors were trying to maximize cap space to chase free agents in 2020, holding off on Siakam’s deal helps a great deal. And while cap space itself is sometimes overrated since it depends on the free agent class, how much cap space is chasing how many players, players’ willingness to sign with you and so on, that flexibility is important. It could mean being able to chase a max-level star to add to a Siakam-Leonard core in 2020. Any extension for Siakam greater than $7.1 million eats into potential cap space.
(The counter to this would be that the 2021 free agent class is stronger and, if the Raptors can work out a discounted extension with Siakam now rather than waiting, they could have max space to chase a star with Leonard, Siakam and VanVleet all still in the mix that summer. The thinking could also change if the Raptors make offseason moves that add salary for 2020, thus negating the relative importance of that extra space.)
There is a real opportunity cost to extending Siakam now in terms of the 2020 market thanks to how cap holds work. There are still good reasons to extend Siakam, as laid out earlier, but Toronto’s main hesitation in any negotiation will be the lost flexibility in the summer of 2020 that getting a deal done now would mean.
Siakam’s side is a little more straightforward
Siakam’s side should be more financially motivated to get an extension done than the Raptors. Security is an important factor, and money guaranteed today is often valued more than hypothetical money later. There is an interesting wrinkle with Siakam being 26 next summer, in that his camp may view this as his lone chance at a major payday (thus wanting to get every dollar possible) or preferring a shorter-term extension (say, three years) so he can re-enter the market at a more prime age.
There is also the element of betting on oneself, something that’s defined most of the Raptors roster at one time or another. Getting a four-year, $80-million extension would be life-changing – and given Siakam’s philanthropic goals, legacy-changing – money. But might a player who has improved so much so fast want to see what he can do with one more year and shoot for the max? That’s something only his camp really knows at this point.
Let’s make some broad assumptions about the willingness of both sides to make deals at different starting salaries (it’s unlikely these curves are actually linear, given the marginal impact at certain price points). If Siakam is only willing to come so far on a potential discount and the Raptors are only willing to go so far into their 2020 cap space, the negotiating zone isn’t the minimum to the maximum, it’s Siakam’s minimum to the Raptors’ maximum. As dire as it might seem, there are some points along the way where you could squint and see parameters of a deal.
(Yes, I modelled that so that the Raptors and Siakam intersect at exactly the point where the Raptors could still get to a max salary space that summer with Siakam and Leonard in the mix. Again, broad assumptions for the sake of illustration.)
There is a middle ground somewhere. It might be narrow.
Through all of this, the biggest consideration may be Siakam’s relationship with Masai Ujiri, which has been a big part of his growth. Not getting an extension done now runs some risk of discomfort, but the Raptors could likely lean on Siakam’s trust in Ujiri to lay out the scenario and maintain his faith that he’ll be taken care of eventually. Because really, not doing an extension isn’t so much about Siakam’s salary as it is about timing and about surrounding Siakam with the best possible roster. If he has trust the Raptors will do right by him after they spend in 2020, maybe the risk of leaving money on the table for the time being is worthwhile. That’s the hardest part in all of this. The financial risks and opportunity costs are fairly clear for both sides, but it’s tougher to account for the psychological impact of negotiating with (or against) a player you want to be a key piece of your team long term.