Thinking About Dwight Howard’s Next Contract

Darius Soriano —  May 20, 2013

To be completely honest, I can’t find the strength to get worked up over any report regarding what Dwight Howard will or won’t do when it comes to his impending free agency. I just can’t do it. We’re still only in the middle of May and free agency doesn’t begin until July 1st…there’s simply too much time left in the process to get worked up over this stuff.

That said, the very well regarded Ken Berger of CBS Sports is reporting that Dwight Howard will explore his options in free agency and that teams like the Rockets and Mavericks “intrigue” him. These are teams with good players, cap space, and other desirable traits that should intrigue Dwight. I can’t blame him, I’d be intrigued too. Again, though, I can’t get too caught up in this stuff. Not only is it early, but this is Dwight’s call to make and he can do so on his timeline. He’s earned that right.

So, rather than focus on where Dwight may (or may not) go, let’s look at a different aspect of Berger’s report. One interesting thing he mentioned was the point about compensation and Dwight’s next contract. Here’s the relevant passage:

The clear advantage for the Lakers in their effort to re-sign Howard is the 2011 collective bargaining agreement, which allows LA to give Howard a five-year deal with annual increases based on 7.5 percent of his first-year salary in a new deal — which will be in excess of $20 million. Another team with cap room to sign Howard could only give him a four-year deal with 4.5 percent annual increases — the same arrangement Howard would be limited to if he agreed to leave via a sign-and-trade.

But Howard is only 27, and barring a career-ending injury, he’ll clearly get one more max deal after this one. A four-year deal with an opt-out after three years, for example, would in some ways be preferable to Howard because he’d hit the open market again at age 30 and could then secure his five-year max deal.

The mechanics that Berger mentions are 100% spot on. The Lakers can offer a longer and richer contract. The annual raises would be larger and that 5th year in the contract the Lakers offer would be around $30 million dollars. That’s nothing to sneeze at.

However, Berger is also correct in stating that Dwight Howard is in his prime. In 4 seasons, barring any serious injuries, he will still be in his prime (though maybe nearing the tail end of it) and should still command a max salary. So, as Berger implies, if Dwight were to leave the Lakers he’d likely recoup that lost 5th year represented in the Lakers’ deal he turned down in the 1st year of his next contract (whether that’s with the same team he signs with or another when he tests free agency again). I don’t really disagree with what Berger is saying here at all. If Dwight is performing up to his normal standard, he’s a max player and someone will likely pay him as such.

However, my question is: should they?

The new CBA is only two regular seasons old but it’s already showing us the influence it has on team’s mindsets about roster construction. The penalties against tax paying teams are real and maneuverability under the cap via flexibility in the contracts teams have on their books is looking more important than ever. We’ve already seen the Thunder trade their 3rd best player (and a legitimate star) with an eye on the future payroll implications. The Miami Heat may only have one more full season together before the prospect of being a repeater tax team chokes out their ability to field a roster with 3 max players.

You can also zoom in and examine the circumstances the Lakers are facing this summer as a tax paying team. They can’t accept players in sign and trade deals. They can’t spend the full mid-level exception to acquire free agents. The bi-annual exception isn’t available to them either. Instead, when trying to add talent, they have the veteran’s minimum and a mini-mid level exception. And for their trouble, when including revenue sharing and the luxury tax, will face a prospective payout that equals the GDP of Ireland (that’s not a joke, by the way) is upwards of $220 million in the 2013-14 season.

Getting back to Howard, the 5th year of the contract the Lakers will offer him is roughly the same value of contract they’re paying out to Kobe Bryant in the final year of his contract. Next season, Kobe’s contract will be around half the salary cap; that’s 50% of the cap tied up in one player. Things may not be that severe with Dwight’s new deal because over the next 5 years the the cap will only continue to go up (and it will be influenced by the new TV contract that will be negotiated). But even if his deal is only 35% or 40% of the cap, that’s still a lot of money to tie up into any player. It’s the type of contract that drastically affects your salary cap and, thus, your ability to build a team that can remain competitive.

This isn’t only true for the Lakers, of course. Any team that takes on Howard will likely be looking at this same dilemma in 5 years when it’s time to re-sign him. If you’re the Rockets or the Mavericks or the Hawks (or any other team that has his Bird Rights) when his next contract expires, you’ll be looking at a player who commands the type of “super” max contract that is difficult to build around and that almost guarantees you’ll be a tax paying team.

Will teams want to commit that to him (or any player, for that matter) as they learn more and get smarter in how to navigate the new CBA?

I’m all for re-signing Dwight Howard to the Lakers. And if I were one of these teams with max cap space I’d be shoving all my chips to the center of the table to try and acquire him as building block for today and the future. I always say you get the talent you can first and then worry about the rest of the details later. However, when we’re 5 years down the line and his contract is eating up a large portion of the cap and helping to contribute to what are likely to be large luxury tax payments, just remember that we saw this coming. The new CBA made it so.

Darius Soriano

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