Money Matters

Darius Soriano —  July 24, 2013

A casual look around the internet reveals a simple truth: more people care about what the Lakers will be doing a year from now than what occurs in the months leading up to that date in 12 months.

Yes, people wonder (and care) about how good the Lakers can be next year, whether or not they should be tanking for a top draft pick, when Kobe will return (and how good he will be when he does), and whether or not Nick Young will shoot a lot (no one actually wonders this, we all know he will). But, even though these are legitimate talking points, the real intrigue around the Lakers is what they will do next summer when they can potentially have a boatload of cap space to chase any free agent who is on the open market.

I say “potentially” because the Lakers’ cap situation isn’t as clean as many have led you to believe. Sure, it’s possible the Lakers can have as much as $50 million in cap space, but that number isn’t exactly real. Nor is it very likely to exist when July 1, 2014 rolls around on your calendar. I’ll let Kurt Helin of Pro Basketball Talk explain:

The Lakers go into next summer with two contracts on the books — Steve Nash with $9.7 million and Robert Sacre at $915,243. Also, Nick Young could stick around as he has a $1.2 million option, but it is more likely he opts out to try and find a longer deal. So we’ll leave Young out of this. But the Lakers don’t just have the difference between the $10.6 in guaranteed salary and the $62 million to spend. Meet the cap hold — a placeholder salary that counts against what you can spend based on the value of what you could pay your free agents to come back (also that could include holds for draft picks and minimum contract players yet to be named to get you to a dozen roster spots). In the Lakers case there are cap holds for Kobe Bryant (almost $32 million), Pau Gasol ($20 million), Steve Blake ($7.6 million) and on down the line. With all their cap holds in place the Lakers are at $86 million, way over the cap and luxury tax line, they couldn’t sign anybody.

Those pesky cap holds assigned to the Lakers entering free agency swallow up all of their potential cap space. And while that problem can be easily fixed by renouncing the rights to all their free agents, renouncing those rights dissolves those players’ Bird Rights which also means an inability to give them higher raises in any contract you do sign them to after renouncing, but, more important, also means that signing them to cheaper, one year deals with the hope of re-upping them the following summer with massive raises becomes nearly impossible because the Lakers would no longer have their Bird Rights to pay them amounts that push them well over the cap.

(Said another way, a good way to pacify a player who you’re asking to take a pay cut from, say, $30 million to $10 million is to have the ability to give him a 7.5% raise in years two and three of his contract rather than a 4% raise. That may not seem like it matters, but if you’re intent on giving a player a raise and the player is intent on receiving one, being able to give a higher one is important. But, even more important, is if you want to be able to tell a player “next year, would you mind taking a massive pay cut to, say, $3 million a year and then the year after we can talk about a contract more in line with your actual value. *wink* *nod*” and actually mean it, you need to have that player’s Bird Rights so you can go over the cap to keep your own free agent. Renouncing a player’s rights surrenders those Bird Rights and makes that latter scenario impossible due to the CBA.)

These are the types of cap gymnastics the Lakers are dealing with heading into next summer, so it’s not really as simple as saying “the Lakers can sign multiple players to the max next summer”. In fact, as Jared Dubin put it, it’s a pipe dream for that scenario to actually occur.

All of this thinking about money leads me to several random thoughts, some of which go in entirely different directions:

  • Will Kobe get an extension before the summer of 2014? Ramona Shelburne has already reported that the team intended to discuss an extension with him this summer and will now push those talks back to when Kobe is further along in his rehab. There are benefits to this approach, even though it throws a monkey wrench into the “all in for 2014″ plan. Not only does an extension save the team from having to answer the question on what do about renouncing his rights, but it also brings more clarity to their cap situation heading into the summer and allows them to better know how much money they actually have to spend on free agents heading into the summer and who their targets will be with those available funds. What that extension amount will be is unknown, but a 3 year/$30 million dollar deal seems possible (though that may just be wishful thinking).
  • Building on this point, I don’t expect the Lakers to actually be in a position to sign two max level free agents next summer. While it’s easy to see that signing two elite players in one off-season is great from the standpoint of accelerating any rebuild, it also puts the team in a position where they’d be close to the luxury tax line after only one season being below it, and, thus, put them close to where the repeater tax is in play. Said another way, to get two max players while keeping Kobe the Lakers will likely need to sign Kobe to a cheap one year deal and then sign him to a massive deal in the summer of 2015 using his Bird Rights. If that were to happen, the team gets much closer to the tax line and would still likely need to fill out the roster with additional players. From everything I know, the Lakers will not pay the repeater tax, the financial penalties are just too severe.
  • I believe the Lakers’ dream scenario is signing the best free agent on the market next summer (in other words LeBron or, possibly, Carmelo) and then filling out the roster in a way that allows them to chase another max free agent in the summer of 2015. Remember, Steve Nash’s contract expires that summer and with it there’s roughly $9 million of salary shaved off the Lakers’ books. If the front office plays their hand correctly, they could be major players in free agency in back to back seasons and grab one player in 2014 who is in the middle of his prime and another in 2015 who is just starting his prime. If talking about the best case for long term success, this plan may even be better than signing two max free agents next summer who are in the middle/approaching the end of their respective primes.
  • Of course, forget those last two bullet points if the Lakers can get out from under the tax this season. As it stands today (which is before Ryan Kelly has been signed), the Lakers are approximately $4.75 million over the luxury tax line for the 2013-14 season. That number will go up once Kelly is signed and after the Lakers add one or two more players to fill out their roster. But since Kelly is a 2nd round pick and the Lakers can only sign free agents to minimum level contracts, the amount they end up over the tax line when the season begins will be roughly $7 million. There are several ways the Lakers could try to shave that amount of money off their payroll between the start of the season and the trade deadline. And, if they decided to go that route, they could put themselves in position to be over the tax line again as soon as the 2015 season without having to worry about the repeater tax because they’d be under the tax for two consecutive seasons (this upcoming one and the 2014 one). Just some food for thought.
  • Speaking of Ryan Kelly, I wouldn’t be surprised to see him signed to a contract similar to the one that Chandler Parsons signed after he was drafted in the 2nd round by the Rockets. Parsons was signed to a 4 year/$3.6 million contract, but with the final two of those years not guaranteed. Parsons, of course, has turned into a very good player for the Rockets and is now one of, if not the, best bargains in the entire league. I don’t expect Kelly to turn into a player the caliber of Parsons, but over the next several years the Lakers will need cheap, young talent on their roster and if Kelly develops, the Lakers won’t have to worry about him hitting free agency early and having to match contract offers after issuing qualifying offers. Sure, the Lakers could always treat Kelly the way they treated Darius Morris, Andrew Goudelock, and their other 2nd round picks from recent drafts. But, as the team just did with Robert Sacre, there’s also little harm in locking up a young player for multiple years with the option of cutting him down the line for no cost if he doesn’t pan out. Especially if he does end up exceeding expectation and you can then reap the rewards of having a contributing player locked into a very cheap contract. (UPDATE: Pretty much ignore what is written above about Ryan Kelly. I’ve been informed by the great Kevin Pelton that Kelly can only be signed to a 2 year deal by the Lakers. In my example, the Rockets signed Parsons to a 4 year deal using part of their mid-level exception. The Lakers no longer have a mid-level exception (used on Chris Kaman) and don’t have any other exceptions available to them to sign Kelly to a longer deal. That said, I wouldn’t be surprised to see Kelly signed to a 2 year deal rather than a 1 year deal, with the 2nd season not guaranteed. This would give the Lakers the most flexibility with him specifically.)

There’s really no way of knowing how all this plays out this early in the process and, ultimately, a year from now is a long ways off. A lot can change between now and then that makes much of what’s written above obsolete. That said, there’s a reason a year from now offers so much intrigue. There will be some hard decisions involved, but the Lakers can set themselves up for long term success while holding onto a franchise icon in the process.

Darius Soriano

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26 responses to Money Matters

  1. Clutch point there that I completely forgot about. I assumed we could renounce Kobe’s Bird rights since we definitely wouldn’t be offering him an immediate raise. But we’ll have to hold onto those rights if we want to re-sign him over the cap later.

    In other words, it seems like Kobe will have to be the first FA domino to fall. Only once he’s signed to a smaller contract can that $32 cap hold vanish.

    The Parsons-type deal seems ideal to me, if you have any confidence in your abilities to draft in the 2nd round (or pick up undrafted players). 2nd round picks don’t have a ton of negotiating power, and locking them up (without guaranteeing the last couple years) is the ideal way to take advantage of cheap contributors. Otherwise you end up like the Jazz, losing Wesley Matthews after only 1 year.

  2. Snoopy,
    I’ve updated the part about Kelly. Kevin Pelton corrected me on what’s possible with what’s possible under tue CBA.

  3. Darius,
    So when Pincus said he spoke to Coon about this Larry was wrong? Read article below…

    Everyone… Always remember as more and more reports come out always remember who told you first. When Wade continues to be broken down and LBJ leaves Mia and arrives with Melo and a third star in LA remember who broke the news first. I thought of it all on my own. Although I didn’t write it in the site until I got confirmation from a couple difference sources. I’m just saying I wasn’t the credit guys. Pretty please?

    http://www.latimes.com/sports/basketball/nba/lakers/la-sp-lakers-2014-20130724,0,5529055,full.story

  4. “I just know that they’re really really passionate, and I haven’t had an opportunity to play for a city that’s really going to stand up and really support the team,” Bynum said. “I’m super excited. I can’t wait to see what it’s like.”

    Nice cheap shot at L.A. there. Classy, Drew, classy.

  5. Robert Nalbandyan July 24, 2013 at 1:20 pm

    I really hope the Lakers don’t end up with Carmelo Anthony. I don’t understand why that seems to be on everyone’s wish list. Signing Carmelo, who will be 30, and is not only redundant to Kobe’s game, but doesn’t even compliment him any shape or form, doesn’t not sound like a sound investment to me. Not worth the max slot. I would much rather be looking at Rudy Gay, depending on if he can bring his numbers back to where they were in 10-11, otherwise I would pass on him as well. I’m hoping the Lakers don’t end up signing some flashy name just because they’re available, but rather take the route of a slow rebuild in the next three years to ensure we have a core group of players that can compete for a championship for the next 3-5 years ideally. If Lebron signs elsewhere, and Indiana retains Paul George (which they will), and Rudy Gay’s efficiency continues to drop, I’m holding on to my max slot if I’m the Lakers, and looking towards 2015, which will have players like Kevin Love, Rajon Rondo, and Marc Gasol available.

  6. The key is what Kobe’s salary will be…..If Kobe and Gasol can take “less” and give the Lakers more money to spend…all the better…..

  7. Aaron,
    I’ve read all the articles. I know what’s possible and what’s not at every level of pay that Kobe could take.

  8. Per my source…

    “Lakers can pay Kobe the min next season – retain his bird rights and pay him the max the following season.

    Never in that process do they renounce his rights”

  9. Aaron,
    That’s common knowledge, not sure why you’d need a source for that. The question is the ability to actually make that happen.

  10. Aaron, isn’t it a little intellectually dishonest to quote yourself as a source?

    Darius, if the Lakers sign Kobe to a 1 year extension at the min (regardless of it being unprecedented/unlikely), would they retain his bird rights?

  11. Kareem,
    Yes. The key to retaining Kobe’s Bird Rights is not renouncing his rights when he becomes a FA or signing him to an extension before he enters free agency and thus not having to deal with his rights as a FA at all.

    As an aside, one of the key factors in all this is timing. A scenario that is *possible* is Kobe (and Pau, for that matter) becoming a FA and the Lakers holding onto his rights while talking to FA’s on July 1st. During this time, the team can have conversations with Kobe about various contract options should certain scenarios play out and then moving to sign all the relevant FA’s at one time with Kobe’s contract coming first because his cap hold is so enormous. If the Lakers actually do swing multiple top tier FA’s, it would need to be understood that Kobe would be taking a massive pay cut. If the team can’t sign any elite FA’s that may mean Kobe plays at a higher $ amount when he re-signs.

  12. In Darius’ thread he thought the idea of getting one key free-agent next year and another the following year was more likely than trying to sign two players next year. He gave the well thought out reasons for this.

    The major issue then is the people who want us to be one of the favorites competing for the championship the year after next. This is typical fan impatience. If something drops into our laps I am sure the front office won’t reject the opportunity, but the financial reasons – read repeater tax – for spreading out the spending are certainly valid and compelling.

    As for getting under the luxury tax line this coming year, that decision doesn’t have to be made until the trade deadline in February. We will see where the club is then. However, even this choice does not change the fact that we need two years under the luxury line in the next three years, not one.

  13. Per my source (sounds better than “from” my source)…

    If they want max cap room in 2014 – and they don’t sign Kobe or renounce
    Kobe – he counts as $32 mil against their cap.

    Renounce he’s $0 but no Bird Rights

    Pay him $1.5 mil – Bird Rights – no longer a $32 mil cap hold – opens up
    $30.5 mil in cap that wasn’t there.

  14. Darius,
    I just never take credit for any information that isn’t formulated and founded in my big genius brain. And because my friend doesn’t want his/her name mentioned anywhere on this site…

  15. Craig,
    Again… From what I’ve heard the Lakers feel they have a less likely chance of just getting one top tier FA. They don’t consider that to be a likely outcome. Nobody will come to the Lakers alone. The precedent has been set. The model is the Miami model for players. They have former allegiances and want to win multiple championships. They will only go to teams where they can partner up with multiple other All Stars. The Lakers feel they aren’t able to just get Melo. Or just get LeBron. Those guys aren’t coming alone. They don’t want to come alone. It won’t happen. They will go to a place where they can all play together. It’s really that simple. So although its nice to think of just getting Melo or just getting LeBron as a contingency plan it isn’t going to happen. If the Lakers can’t get (Melo,LBJ, Cousins) they are planning to wait till 2015 to go for another trinity of stars.

  16. I’m with Robert N. No to Melo (alone) for me, and no to Gay too. Locking yourself into poor efficiency (and in Melo’s case, aging) scorers is not a recipe for championship success, especially when Melo’s max will come around $23 million.

    While it’s not fun to remain in Dallas’s 1-year deal purgatory, the potential prizes available in 2015 seem worth the gamble to me. If 2014 doesn’t pan out, I do my best to re-sign Pau at a reasonable price and hope his recruitment might tempt Marc Gasol out of Memphis.

  17. aaron has the hardest working finger puppet! is pat riley still homeless since he sold his house in 2012?

    if there’s a greater-than-normal amount of media interest in the lakers, it’s probably because a lot of people are rooting for the lakers to fail. (Not the reporters, but I’m sure the lakers stories get a lot of eyeballs.)

    You have to appreciate the effort to get quality players for limited deals, but the bigger is still the FO – specifically Jim Buss. Even if he knows what he is doing (and that is a big if) can he do it?

    It’s not a great situation, especially for someone whose limited experience has included coaching issues, multiple injuries to players, the phil jackson screw up and the loss of dwight. That’s a lot of drama.

    As an aside, I seriously question the wisdom of the owner announcing to the world that kobe will be ready by game day. Whether he’s right or not, I don’t see how that helps the lakers – unless you’re stressed about ticket sales, tv revenues, etc.

  18. My source just told me that the Aaron doenst have a source…

  19. Since two FA need to “Come Together”…..Peace and Love in 2015….. (World and Kevin) !!!!

  20. Renato Afonso July 24, 2013 at 3:34 pm

    What if we aim at the summer of 2015? Is it possible to frontload gasol and kobe’s contracts?

    If they both take a discount, 12m and 10m per each in the first year, we could make a serious run at marc gasol and kevinn love. I don’t think we will get lebron and, honestly, i would rather wait for marc gasol and kevin love than settle for rudy gay or carmelo…

  21. The major issue then is the people who want us to be one of the favorites competing for the championship the year after next.This is typical fan impatience.

    ____

    No. In addition to what Aaron said, the reason for the focus on next year is simple: James is available. It has little to do with fan behavior.

  22. I think the Kings intentionally didn’t match Tyreke Evans offer sheet because they chose Cousins over him. So I don’t think he’s going anywhere. Melo’s not leaving a team that’s his be a third option. Don’t see it. I don’t think any team wants LeBron unless he gets to be LeBron. Kobe’s recovery will have a lot of say in that. He comes back at an elite level, still able to score with ease he’s less likely to become what Wade is now. So many hurdles to even sign one of them: only able to offer them 4 years, Cousins is restricted and their the number one guy on their teams. And let’s not forget Melo wanted D’Antoni fired and he’s the Lakers coach. So finding a head coach that all guys want to play for is another hurdle. Sorry, Aaron I don’t see this happening, but will give credit if it does.

  23. Kevin,
    Have you read any of my posts? Melo and LBJ want to play together somewhere where they can also play with another max contract. Melo would rather play more off the ball like on the USMNT where he has played his best basketball next to LBJ (and Kobe). Being the second or third best player is a dream scenerio for supreme basketball talents just like Wade and Bosh decided in 2010 or Allen and KG decided in 08.

    MDA isn’t going to be the coach next year. LBJ has already asked for Phil Jackson.

    The Kings didn’t match Evans because they are a small market team that doesmt have a lot of money. Cousins isn’t a max player. Would Sac pay max dollars for a crazy Center who threatens more crazy if they match a bloated Lakers offer? Furthermore Cousins is the third star. LBJ just happens to want him. Bosh, Gay, and Granger are also available.

    The Lakers can also not offer four years? Years aren’t a big deal to big time players. As you can see with Dwight who is coming off major back surgery.

    I have given all those answers before. Please don’t make me repeat myself yet again.

  24. Aaron: It’s a lot of moving pieces so I have to make sure I understand. Since D’Antoni won’t be the coach and LeBron is coming to LA. There’s no way he downgrades from a superior coach like Spoelstra unless it’s somebody he has a relationship with, Coach K maybe? Just make sure you give me credit if your sources tell you about a Coach K rumor.

  25. Kevin,
    Are you messing with me? How many times have I quoted my source that LBJ has requested Phil Jackson as his coach? And nobody has said LBJ is coming to LA for sure. If Wade continues to struggle there is a “99 percent chance he comes with Melo and another star to the Lakers. If wade is healthy there is a 99 percent chance he stays in Mia.”

  26. PJ is 67 and practically immobile, it appears.

    Several years ago he wanted to coach part time because the rigors of the road were getting to be too much for him.

    Hard to imagine he’s going to get more spry over the next 1-5 years, regardless of what LBJ is said to have “requested.”

    That’s usually not the way it works.