With Magic and Rob Pelinka taking over the front office, fans are understandably excited about where they can take the Lakers over the next few years. One huge component of this future will be whether the Lakers can (finally) lure first rate talent to join the young core, particularly given Magic’s potential gravitas as a recruiter, and Pelinka’s deep connections throughout the league. The news that Paul George is “hell bent” on coming to the Lakers during the 2018 offseason has only fueled this hope.
As a consequence, the Lakers’ immediate and future cap situation under the new CBA becomes critical. If the Lakers are going to sign George or acquire other leading players they will need to have the cap flexibility to make it happen, even in the face of the Mozgov/Deng disastrous deals and the pricey extensions coming to the young core.
Just how much flexibility will Magic and Pelinka have to work with the next few years? Is George a realistic target in 2018? And what can they do to clear out more room? I attempt to work through those questions below, and highlight potential issues and options for building the team under the new CBA. At the outset, I will set out my high level findings, and then work through them in more detail below.
- The Lakers only have a two-year window to add significant free agents, and then the young core’s extensions will eliminate our cap flexibility.
- The Lakers can easily create room for a max free agent during the 2017 offseason, or room for a max free agent (Paul George…) during the 2018 offseason, but will need to take a few aggressive moves to accomplish both.
- It is important that the team delays Randle’s extension until the 2018 offseason to protect as much cap room as possible.
- The team will need to waive + stretch Mozgov and likely move Clarkson to create enough cap room to sign impact free agents in 2017 and have a shot at George or others (Westbrook/Cousins/etc) in 2018.
- There are reasonable paths to building a contending roster around the young core, particularly if we keep the 2017 lottery pick, and can lure a young-ish impact free agent during the two-year window. But to make this happen, Magic and Pelinka cannot repeat the mistakes of the past and tie up cap room with underperforming players.
THE PRESENT PICTURE AND RELEVANT RULES
As a starting point, the Lakers three-year salary picture is shown below:
|Player||17-18 Salary||18-19 Salary||19-20 Salary|
|17 First (#3)||$4.70||$5.58||$6.53|
|17 First (HOU/#28)||$1.18||$1.40||$1.64|
|19 First (#15)||—||—||$2.74|
The salary cap for each year is based on the most recent estimates from the league, but this is subject to change. I’ll work through a few relevant salary/cap issues and rules, which we need to keep in mind as we consider our options going forward.
Two-Year Free Agent Window
First, and this is very important, the Lakers essentially have a two-year window to sign significant free agents. This is for two reasons: (1) the Mozgov and Deng signings are taking up $30M+ in cap room each year, and (2) other than Ingram, the young core’s cheap rookie deals will all expire by the 2019 offseason. Thus, we see that for the 2019-20 season the Lakers have $111M in salary committed against a $109M cap, and this assumes signing no free agents over a minimum salary the two prior summers. I do not see a reasonable path to securing significant cap room in the 2020 offseason, and it is therefore critical that the team finds ways to acquire talent over the next two summers. This factor was likely at the front of Jeanie’s mind when she expedited the transition from Mitch and Jim to Magic and Pelinka (who we all anticipate will shine as recruiters).
Draft Pick Issues
I assume here that the Lakers will keep their top 3 pick, mostly because the other scenario makes me want to break things. If the 2017 lottery pick is retained then the Lakers also keep their 2019 first round pick, and convey their 2017 and 2018 second round picks to Orlando pursuant to the Dwight deal. If the 2017 pick is lost, then the team also loses their 2019 first rounder, but keep the 2018 first round pick, and 2017 and 2018 second rounders.
Which of these scenarios unfolds will impact the team’s cap room each year by a few million dollars (e.g. not having our 2017 lottery pick saves about 5 million this summer, and likely a few million in 2018 given the probability the pick will be later in the draft than top 3, and the salary thus lower).
Note that I also do not list second rounders obtained from Chicago for the Calderon deal, but their cap holds are taken into account as necessary.
I have factored in cap holds when calculating potential cap room. The CBA requires that the team allocate salary to at least 12 roster spots, so I have added a minimum roster hold when necessary to satisfy the rule. The new CBA states that we use the Year 0 Minimum Annual Salary for these holds, which is set at $816k.
As the young guys come off their rookie contracts and become eligible for extensions, we have to consider the best way to preserve room under the cap. This process is a bit complicated and the team will need to navigate carefully to both keep their young core, while at the same time avoid unnecessarily eating up cap room.
The team has three basic options with their first round picks as they finish their rookie deals and come up on eligible extensions: (1) negotiate an early extension, (2) let them become restricted free agents and negotiate an extension when their rookie deal expires, and (3) make a qualifying offer and let them become unrestricted free agents following their 5th season. Each path carries different cap consequences. I won’t consider the third option here because I don’t believe it is a likely path for any of the team’s relevant players.
Randle will be the first of the core to reach this stage, and I’ll use him as an example to illustrate the team’s options and correlating cap issues. Randle’s four-year rookie deal expires after next season, and he will be eligible for an extension that would begin the 2018-2019 season. Under the CBA, first round picks are eligible to sign an extension during a specific window – from July 1 until the day before the 2017-2018 season begins (basically, during the offseason after the player’s third season).
The first option is to negotiate an early extension during the permissible negotiating window, and this is the path most teams take with high performing rookies that they want to keep around long term. Typically the rookie takes a bit less than full market value for the security of locking in the long term money (unless they are a sure max player and not open to any discount). For example, Victor Oladipo signed an early extension for 4 years and $84M over the summer, when he probably could have bargained for more if he had gone to market. For Randle, I could see him and the team agreeing to something similar (paying less than a max but giving him early security). The downside is that Randle’s new salary (likely over $20M per year) would count against the cap in full for the 2018 offseason, when the team may be anxious to add free agents.
Another option would be to wait to negotiate Randle’s extension until after his fourth season, which would make him a restricted free agent during the summer of 2018. The risks of this option are that other teams could potentially make Randle a large offer to try and scare LA away from matching, and that Randle could become disgruntled during his fourth season due to not having an extension in place. But this option also carries two significant benefits, and I hope the Lakers go down this path.
First, the team gets another year to evaluate Randle’s play and is able to determine his market value at the time the extension will actually begin. Second, and perhaps most critically, Randle’s cap hold would be much smaller, allowing the team more cap room to sign other free agents (cough, Paul George).
Under the CBA, a first round pick whose four year deal is expiring, and who makes less than the league average salary (as is the case with Randle), has a cap hold of 250% his prior salary, which would amount to approximately $10.4M, far below the extension salary Randle will command. Thus, the Lakers could assure Randle they will take care of him during the 2018 summer, go lock in other free agents with their cap room, and then go over the cap to extend Randle all the way up to his max salary (25% of the cap, so over $25M).
This is the path the Spurs took after Kawhi’s fourth season, using his lower hold number, signing Aldridge with the extra cap room, and then going over the cap to give Kawhi the full max. The Lakers cap situation is likely to be tight the summer of 2018, with George and other free agents as targets, so saving that $10M or so in cap room could be enormous. And there is no real risk that Randle would bolt as the team would have the right to match any other team’s offer given his restricted status.
In the salary chart above I assumed the Lakers wait with Randle, and slotted in a $10.4M salary for the 2018 offseason, and then assumed a $20M extension salary, which would count in full towards the cap the following year. I also used the smaller cap holds for Russell and Nance during the 2019 offseason, but at that point it likely won’t matter as the Lakers are probably going to be over the cap regardless of what they do with those extensions. (Note that Zubac as a second round pick carries a cap hold of 190% of his prior salary, not 250%). The critical decision will be to hold off on Randle’s extension until the 2018 offseason to preserve as much cap room as possible for free agents that summer.
THE FUTURE: PURSUING PAUL GEORGE AND OTHER BLESSINGS
Things get interesting as we start forecasting what the Lakers might do with their cap room the next two summers, with the team potentially pursuing free agents like Gordon Hayward this summer and Paul George in 2018. But with these stars commanding over $30M in starting salary under the new CBA, can the Lakers fit one or potentially multiple high level free agents into their cap over the next few years? And on this front, the massive investments in Mozgov and Deng at the outset of last summer’s spending frenzy loom large. The good news is that there are still reasonably possible paths to adding superstar talent under the cap, but it may take some creativity.
As it stands now, the Lakers will begin the 2017 summer with around $26M in cap room, give or take a few million depending on what happens with the lottery pick. Hayward, for reference, can command 30% of the cap as a player with 7+ years of experience, which would result in a $30.6M starting salary. Other top 2017 FAs include Blake Griffin, Kyle Lowry, Paul Millsap, Jrue Holiday, Danilo Gallinari, Serge Ibaka, George Hill, Kentavious Caldwell-Pope, etc. While most will likely stay with their teams, Magic will assuredly be anxious to make a splash.
The Lakers should be able to fairly easily maneuver for cap room necessary to sign a max free agent through using desirable assets to move contracts. For example, the Lakers could attach a second or two with Brewer’s contract and create another $7M. Or, more aggressively, they could attach their Houston first rounder to Clarkson to try and both clear space and acquire a cheaper player or future pick they like, which would remove over $13M. The Lakers have several attractive assets that could be packaged with a contract they want to unload – Zubac, Nance, the Houston pick, etc. And Clarkson is a $12M contract that should be moveable on its own to a team wanting to bring him into cap space. Thus, the bottom line is that the Lakers will have the ability to bring on a max player this offseason if desired.
A second question beyond feasibility, is whether bringing in a significant 2017 free agent blocks their ability to bring in Paul George or other free agents the next summer. And the answer is yes, unless more aggressive cap moves are made. To illustrate, I have set forth a revised two-year salary chart below that assumes the team signs KCP to a max contract this summer. I understand he’s a restricted free agent, so this not really likely, but the point is to consider the long term impact of adding a max level player to a multiyear contract. This also assumes the aforementioned delay for Randle’s extension until the 2018 offseason to save as much cap room as possible.
|Player||17-18 Salary||18-19 Salary|
|17 First (#3)||$4.70||$5.58|
|17 First (HOU/#28)||$1.18||$1.40|
|17 FA (KCP)||$25.5||$26.78|
As you can see, the Lakers can just sneak in KCP’s full max contract during the 2017 offseason. If we were adding a 7+ year player (like Hayward), the team would need to clear out another $3-4M in room. The real problem is that the 2018 cap suddenly becomes too crowded, as adding George on top of the 2017 max free agent puts the Lakers $34M over the cap.
How then can Paul George be added? I think we have three main options:
- Keep the powder dry, don’t sign 2017 free agents to multiyear deals, protect the 2018 cap room, and focus instead on letting the young core develop for another year.
- Clear out significant cap room by using the stretch provision on Mozgov and moving Clarkson and/or Deng.
- Trade for George and send salary out in the process.
These options will be discussed in turn. Note that the paths are not mutually exclusive. The team could, and likely will, combine elements from the approaches as things unfold.
Option 1: Avoid Long Term 2017 Contracts
While I doubt that fans (or Magic) are keen on the first option, I think it warrants serious consideration if an impact free agent can’t be lured on the team’s current timeline. And, as we’ve seen the last few years, that is always the most the most likely outcome. Instead of spending 2017 cap room on second tier talent, the Lakers could instead look for opportunities to use the cap room to acquire smaller assets around the edges, along the lines of the deal to take on Jeremy Lin’s one-year salary and pick up the first round pick that became Nance. This path would preserve flexibility and allow the team to potentially replenish its draft pick and/or young prospect cupboard, which is sorely needed. Then the team could make a relatively small cap-cutting move or two before the 2018 offseason to clear out enough room for George.
Option 2: Create Additional Room Through Cap Clearing Moves
No matter what happens with 2017 star free agents and Paul George, I expect Magic and Pelinka to be aggressive in clearing out bad contracts to create more cap flexibility.
Step one in this process is almost assuredly to use the stretch provision on Mozgov, and the sooner the better. The stretch provision lets teams waive a player and stretch his contract over 2x the remaining contract years plus one. So, if the team decided to stretch Mozgov this summer, when he has 3 years and $48M left on his deal, they could stretch that money over 7 years, or $6.86M per year. This would generate over $10M in savings during the 2017-2019 offseasons, at the expense of adding cap money during 2020-2023.
The stretch provision in the new CBA is fairly complicated, but as I understand it the team would not be able to stretch both Deng and Mozgov. The basic restriction is that (1) for any year that salary will be stretched, (2) the total stretched salary, (3) cannot exceed more than 15% of the salary cap for the year the players were waived. This should definitely restrict the team’s ability to stretch both Mozgov and Deng, and it might make it a close call to stretch Mozgov, depending on the year they choose to waive him. But we will assume for now that this option is available.
Step two in any cap clearing plan would be to move Clarkson. I believe that Clarkson has value under his contract, and another team would likely agree to take him into a trade exception or cap room. I also still believe in Clarkson as a long term piece, but if the team is going to become a serious player for 2017 free agents plus George, then Clarkson is likely a necessary sacrifice. It just becomes too difficult to create the room with his $12M+ on the books.
Even after stretching Mozgov and moving Clarkson, the team still would be about $13M short for George’s max salary if it uses its full 2017 cap room. One possibility is to plan ahead and not use the full 2017 cap room, which makes sense if the top players pass. But if we have a chance to add a max free agent this summer plus George, we will likely need to take a more painful step three, and either use a valuable asset to move Deng or consider moving Randle.
I don’t know what the cost would be to move Deng’s contract, but given his rapid decline this year and the length plus amount of his deal, the cost would surely be high – probably one or two of the 2017 Houston pick, Nance, Zubac (gulp), or the 2018 first rounder (if the 2017 lottery pick is lost). If we know that the team can obtain an elite free agent who fits in 2017 and have a real shot at George, then it would be a no-brainer to move Deng at that cost. But the team would need to be sure before sacrificing one of these important assets.
I will assume here that we execute this full plan as follows: (1) sign KCP or a similar 2017 max free agent, (2) stretch Mozgov during the 2017 offseason, (3) move Clarkson before the 2018 offseason, and (4) move Deng plus Nance and the 2017 Houston pick at the February 2018 trade deadline. The resulting the cap situation follows:
|Player||17-18 Salary||18-19 Salary|
|17 First (#3)||$4.70||$5.58|
|17 First (HOU/#28)||$1.18||—|
|17 FA (KCP)||$25.5||$26.78|
The math works nicely, and the team has just under $10M left over each summer to add another solid rotation player. This, to me, is the dream scenario, with the team protecting its top 3 pick, keeping the young core together, and adding two major free agents the next two summers. The team would be saturated with dynamic young talent:
Lead Guards: Russell/Ball
This is the Lakers path to contending for a championship in this window. Keeping Ingram/Russell/Zubac, landing someone like Lonzo or Josh Jackson, using the LA recruiting advantage to bring in an impact player this summer, and George as the final superstar piece in 2018.
Another clear benefit of gathering so many assets is that it opens up endless trade possibilities. The team could package the 2017 lottery pick with other pieces (Randle/Zubac) and go after whatever stars become disgruntled with their current situations. The team could move Russell and/or Ingram for more ready-to-contend pieces if the sense is that George plus other free agent additions are ready to go for it. The Lakers would become a desired free agent destination, and have the flexibility to create cap room to land them, through using desirable assets to move contracts. The options are endless and fun to imagine. Let’s go Magic…
But, of course, this is a dream scenario, and you need a perfect storm of good luck for dreams to come true… The team may lose the 2017 pick, 2017 free agents may pass (again), and George may get traded to Boston, or somewhere he decides he’d rather commit long term. In that case we are left hoping that Russell, Ingram, Randle, etc. can become good enough on their own, which is probably unlikely.
Option 3: Trade for George a Year Early
A compromise path, which carries a lower ultimate ceiling, but also less risk, would be to trade for George a year early. This option would result in the team losing a few prized assets, but also potentially make the cap situation a bit less difficult because the team would be sending out salary to Indiana.
For example, assume that Bird sees the writing on the wall after this season and decides to cash in George before he walks for nothing, and assume that Magic doesn’t want to risk waiting for the 2018 offseason (particularly with the all star game in LA earlier that year). At that point, Indiana is unlikely to get a full superstar return (no team does), but LA would still have to send out significant pieces. The key here may be whether LA keeps its 2017 lottery pick, as that would provide a third blue chip asset beyond Russell/Ingram to entice Indiana without leaving LA barren.
If LA keeps its 2017 lottery pick, then perhaps it could put a package together around that pick, Randle, Clarkson, and two seconds. LA would probably have to take on Ellis and add Brewer’s expiring deal. Note that the Lakers wouldn’t be able to also send the 2017 Houston pick or their 2019 first due to the Stepien rule. The goal would be to keep two of Ingram/Russell/the 2017 pick, and Indiana’s goal would be to grab two of the three. I ultimately don’t think Indiana has enough leverage to demand the farm, as LA can simply pull out and wait for George to become a free agent if Indiana asks for too much. I hope that Magic would see it this way too.
If LA makes that George trade this summer (George and Ellis for the 2017 lottery pick, Randle, Clarkson, 2nd round picks, Brewer and filler), stretches Mozgov, and extends George after the season, then the cap picture looks as follows.
|Player||17-18 Salary||18-19 Salary|
|17 First (#3)||(traded)||(traded)|
|17 First (HOU/#28)||$1.18||$1.40|
(cap hold – 150% prior salary)
A few interesting notes here. First, note the cap cushion that comes from sending out Clarkson and Randle in this scenario. For 2018 that saves over $22M alone. Second, the Lakers shave a few million by holding George’s Bird rights.
Third, even with keeping Deng on the books, and adding George and Ellis, the Lakers would have over $30M in cap room to add players the 2017 offseason. Having George in hand could be an attractive selling point for Magic and Pelinka. Note that if the Lakers use more than $18.28M in cap space in 2017, they will use up their 2018 space and only be able to resign George using Bird rights. If the team wanted to carve out even more room, they could try to unload Deng and/or Ellis by attaching assets, as discussed above.
While this roster falls short of the “dream” scenario, given the need to ship out the 2017 lottery pick and Randle, it would still result in an enticing core of young players, over $30M in cap room, and potentially the 2019 pick to play with:
Lead Guards: Russell/Ellis
If you added a nice 2017 free agent or two with that group (KCP, Blake, Hill, Gallo, etc.), the team could suddenly be in great shape, especially when Ingram and Russell come of age. And if the team is patient and maneuvers to maximize its 2018 cap room, it could be in position to land Russell Westbrook on top of George, which would probably result in a dramatic Lakers-rapture.
If, on the other hand, the Lakers do not keep their 2017 lottery pick, then the path becomes more difficult. Under the Stepien rule, the team would not be able to deal their 2017 Houston pick or their own 2018 pick, and they would have to dip further into their young core to entice Indiana. We don’t know at this point what Indiana’s line in the sand will be, or how desperate they will be to move George, but I wonder if the path to trading for George is only feasible if the Lakers protect their upcoming lottery pick. Otherwise, there just may not be enough collective assets to justify the deal.
Option 4: Happiness Without Paul
The Lakers future does not, of course, turn on whether they can land Paul George. He has certainly gotten the lion’s share of the attention lately, but the Lakers have a deep young core and paths to obtaining significant cap room the next two summers. Even Beyond George, there are several impact players available in 2018 – Westbrook, Cousins, Isaiah Thomas, Avery Bradley, Rodney Hood, Zach LaVine, LOU (kidding… kind of…), Derrick Favors, Brook Lopez, etc.
Waiting to make a splash in 2018, whether it is George or others from that list, may ultimately make the most sense for two reasons. First, the team would not deplete its assets unnecessarily paying Indiana for someone who could come for free a year later. Second, the Lakers core players are all 19-22 (Ingram, Russell, Zubac, Randle), and may not be ready for high stakes playoff basketball for a few years. Being patient gives them more time to develop and grow, whereas short-circuiting the rebuild next summer could potentially limit their development.
However the next two years unfold, the Lakers are well-positioned to build a fascinating team. They have two potential all star prospects (Russell and Ingram), two young bigs with diverse skills and high ceilings, a coin flips chance at adding another franchise talent this summer, young rotation players on good contracts (Clarkson, Nance), and, despite the Mozgov-Deng abominations, reasonable pathways to cap flexibility. I am grateful that Jeanie made the move when she did (as messy as it was) and inserted two decision makers who appear to have real recruiting gravitas and connections. If Pelinka and his staff can navigate the new CBA to maximize the team’s cap room, then they might just Make the Lakers Great Again.