What about Houston and Dallas?

This week I wrote a piece for ESPN Insider (you need an Insider account to view it) looking at the cap situations for the entire league heading into this summer’s free agency. Teams naturally fell into categories:

  • The big spenders: Teams way over the luxury tax line.
  • The low-tax teams: Teams between the luxury tax threshold and the apron.
  • The teams just below the tax line: Teams that are capped-out, and which will likely want to stay out of the luxury tax.
  • The teams with big cap room: Teams able to offer at least $20.5 million to a free agent (i.e., enough for Dwight Howard).
  • The field: The remaining 15 teams that aren’t in one of the above categories.

Due to space constraints (yes, space constraints exist, even on a web site where a page is theoretically infinite in length) I had to gloss over the field, and only mentioned this category in passing.

Of course, this gave rise to many “what about _____?” questions, naming one of the 15 teams I had glossed over. The most frequently mentioned teams were the Rockets and Mavericks. These two teams will have a lot of cap room, to be sure — but not enough to make my “big cap room” category.

Let’s take a look at these two teams now, and assess their ability to sign Dwight Howard this summer. Due to the league’s max salary rules, Howard will be able to sign for up to $20,513,178 next season. Let’s assume he will want to sign for the full max if at all possible (which I think is a very reasonable assumption).

Let’s also assume the 2013-14 cap will be in the $58.5 million to $60 million range, which is the range in which the teams to which I have spoken are projecting. Note that the value of the cap is dependent on BRI, a lot of BRI comes from playoff revenue, and a lot of this playoff revenue is determined by which teams make the playoffs and how far they advance — so a $1.5 million range is about as accurate as we can be at this point.

The Rockets

Houston currently has $54,951,158 committed for 2013-14, which includes $100,000 remaining for Tyler Honeycutt, who cleared waivers. They have 15 players signed for next season. Adding Howard would take them to $75,464,336 — which is well above the projected cap. At first glance it appears there’s no way the Rockets can offer Howard a competitive deal.

But if you’ve studied the league you know that Rockets GM Daryl Morey likes to keep his options open. He has done exactly that heading into this summer, by utilizing team options as non-guaranteed salary as follows:

  • Francisco Garcia: Team option ($6.4 million)
  • James Anderson: Non-guaranteed
  • Patrick Beverley: Non-guaranteed
  • Aaron Brooks: Non-guaranteed
  • Carlos Delfino: Non-guaranteed
  • Tim Ohlbrecht: Non-guaranteed
  • Chandler Parsons: Partially guaranteed ($600,000)
  • Greg Smith: Non-guaranteed

Some of these players’ guarantee amounts change to full on July 1 or October 31, so let’s assume Morey declines Garcia’s team option, and waives the remaining players before July 1 in order to maximize his cap room.

The remaining seven players would then total $39,338,522, before accounting for cap holds for empty roster spots and first round draft picks. As a result of earlier trades the Rockets are slated to keep their first round pick if it’s in the top-14, and lose it otherwise. As of right now they’d wind up with the 19th pick, so let’s assume they lose it and that we don’t need to account for it. We only need to account for five empty roster spots at $490,180 each, bringing the team’s total to $41,789,422.

If we add Howard to this total their team salary would be $62,302,600. So even if Morey clears the team’s roster as much as possible he still won’t be able to offer Howard the max. The largest contract he could offer would start at $16.7 million to $18.2 million.

The Mavericks

Dallas is committed to $42,205,221 right now for seven players, before accounting for empty roster spots and draft picks. But unlike the Rockets, the Mavs don’t have many options. O.J. Mayo and Shawn Marion have a player option and an ETO, respectively, but since those are in favor of the player, they are out of the team’s control. (Their problems would be solved if Marion opted-out, but I don’t think that’s likely.) The only Maverick on non-guaranteed salary is Bernard James, and he will make the minimum salary for a one-year player.

Let’s do the same exercise we did with Houston and see how much cap room they can generate. If they waive James their total would be $41,416,349 for six players. Their first round pick is top-20 protected, and as of right now they’d get the 13th pick — so let’s assume they keep that, adding a cap hold for $1,655,300. We also need to add five roster charges for $490,180 each, bringing their total to $45,532,549.

This is higher than the total we got for the Rockets, so you know what the answer is going to be. Adding Howard at the max salary would bring their total to $66,045,727, which is above the upper limit of the projected cap. The largest contract the Mavs could offer would start at $13.0 million to $14.5 million.

So both the Rockets and Mavs can offer Howard a big contract, but not a max contract. But note the following:

  • The maximum salaries vary by player, and Howard will have the highest maximum of any free agent this summer (unless I’m forgetting someone). Other players will have maximum salaries as low as $15 million or so, so while neither team will be able to field a competitive offer to Howard, they potentially can be competitive for other free agents.
  • If a team is dead-set on signing Howard, it may be possible to entice the Lakers into participating in a sign-and-trade transaction. (The Lakers will be prohibited from receiving a player in a sign-and-trade, but nothing prevents them from trading a player away in such a transaction.)
  • Both teams can potentially clear additional salary by making a trade as a prelude to a Howard deal. For example, if the Mavs persuade a team to take Marion off their hands (with little or no salary coming back), they will be able to offer Howard a deal at the maximum.
  • A team can clear additional cap room by waiving a player whose salary is guaranteed and utilizing the stretch provision. For example, if the Mavs waived Mayo (with one year remaining at $4.2 million), his salary would be stretched over three seasons, and the Mavs’ 2013-14 team salary would be reduced by $2.8 million. This scenario is only feasible with players signed under the current CBA (December 2011 or later).

So as things stand right now, either the Rockets or the Mavericks could offer Dwight Howard a large contract, but neither team will be able to offer him the maximum. To do that would require some extra — and tricky — maneuvering.

Update 4/18/2013:

Tim MacMahon from ESPN Dallas tweeted that OJ Mayo has opted to be a free agent this summer. This potentially changes the equation.

Let’s assume Mayo opts-out and leaves the Mavs, and that the team tries to maximize cap space by waiving the non-guaranteed contracts of Josh Akognon (signed after this post was originally written) and Bernard James. Let’s also assume that Shawn Marion does not exercise his early termination option.

The Mavs would then have $37,215,449 committed to five players. They will officially keep their own first round pick now, but we still don’t know where it will land. On the basis of the final standings they’d pick #14, which would have a cap hold of $1,572,600.

That adds up to $38,788,049 for six players, so we’d need six empty roster charges totaling $2,941,080, for a total of $41,729,129.

If we stick with the cap projection of $58.5 million to $60 million, the Mavs would have about $16.7 million to $18.3 million in cap room. Still not enough for Dwight Howard, but a lot more than they would have had without Mayo opting out.

Of course, now they also have to replace Mayo.

 

One thought on “What about Houston and Dallas?

  1. Adam M.

    Larry, thanks for the additional write-up on the Rockets. Two semi-related questions.

    Why do max salaries vary by player? Is the new max salary a percentage increase from their previous salary?

    Also, I’m guessing the Rockets will dump Garcia regardless of their other off-season plans since $6.4M is more than he’s worth. Assuming Houston keeps some of those non-guaranteed players (Parsons, Delfino, Smith) that they don’t want to lose, would they be able to offer Josh Smith the max?

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