2012 NBA Free Agency: The $10 Million Club

By this point in an NBA season, there are two distinct groups: the haves and have-nots. While a few teams still teeter on the edge between first-round playoff fodder and a trip to the lottery, a great deal of focus turns towards free agency. When the discussion turns to free agency, it almost always has to do with the top players available, the ones who stand to get the biggest contracts, and which teams have the money to pay them.

Let’s call them 2012’s $10 million club.

One of the most common questions we get is how much money will a given team have to spend come July? There is a quick answer (see this link), but it doesn’t tell the whole story. Assuming a cap that remains unchanged at $58.044 million (it will not be lower than that but the possibility remains it could go up – that will be calculated at the beginning of July), it’s easy to see 12 teams sit above that number as of today, four more are less than $5 million away, and the remaining 14 seem to have cap space. Those four teams in the middle don’t really have cap space because the price of the Mid-Level Exception is greater than the cap space. Also, the waiving of non-guaranteed or partially guaranteed contracts could change these numbers.

Of those 14 teams with more than $5 million in space, 10 of them (Charlotte, Toronto, New Jersey, Houston, New Orleans, Indiana, Boston, Portland, Phoenix and Cleveland, in order from least space to most) at first glance have $10 million or more in cap space they can offer a free agent.

However, if the idea here is to figure out how many teams have the ability to offer a player a $10 million contract come July– and it is – we still aren’t finished. Cap holds have to be taken into account (detailed on each team salary page). First we have to account for draft picks. Of those teams only Houston, Indian and Boston seem to have a real chance at not making the lottery, though Phoenix and Portland aren’t completely out of it yet. Of those 10 teams, six of them may have multiple first-round picks in the 2012 NBA Draft: Portland (New Jersey), Boston (L.A. Clippers), Cleveland (L.A. Lakers), Golden State (San Antonio), Houston (New York, Dallas), and New Orleans (Minnesota). (See the draft pick debt page for details on where the picks came from and any applicable protections.)

Depending on where those picks fall, the team will have a cap hold placed on them related to the 2012-13 rookie scale. That means a team like the Blazers, who on the surface seem to have over $32 million in cap space this summer, could have that reduced significantly should they end up with two top-ten picks come June. Second-round picks also come with cap holds, though they are equal to the same cap hold as any empty roster spot under 13.

Say Portland gets the sixth and 10th picks in the draft. They currently have nine players (let’s assume Jamal Crawford invokes his Player Option and Shawne Williams is not bought out and also invokes his Player Option for this exercise) for a total of $35.5 million. Those two picks would add $4.4 million to that number, even before they are signed, raising Portland’s cap figure to $39.9 million.

That’s not all though. Portland will also have cap holds from their own free agents totaling a whopping $40.5 million (Raymond Felton, Hasheem Thabeet, Jonny Flynn, J.J. Hickson, Nicolas Batum and Joel Przybilla). All of that counts, so suddenly Portland has no cap space whatsoever. Those cap holds can be cleared in one of three ways: the player re-signs with Portland, the player signs with another team or Portland renounces their rights to the player. The nice thing here for a team is they don’t need to actually make that decision on renouncing until they want to offer a contract to another player. Even if they renounced their rights to all but Batum, he still will add $6.5 million to their cap figure to push their total to $46.4 million.

Just like that, boom, the perceived cap space all but disappears.

There are plenty of possible permutations to each team’s situation, but that’s just an example of how the idea of cap space doesn’t always meet the reality. Each team will make decisions based on their own criteria; for some of them creating maximum cap space may not be a goal.

What is realistic? There are going to be plenty of players this summer who are looking for large contracts. Going over the list of possible free agents, here’s an estimate of the players who will be in the mix for the $10 million club (they may not end up with that much, but the possibility exists):

Deron Williams, PG, New Jersey Nets
Steve Nash, PG, Phoenix Suns
Eric Gordon, SG, New Orleans Hornets*
Nicolas Batum, SF, Portland Trail Blazers*
Ryan Anderson, PF, Orlando Magic*
Tim Duncan, F/C, San Antonio Spurs
Roy Hibbert, C, Indiana Pacers*
Brook Lopez, C, New Jersey Nets*
Chris Kaman, C, New Orleans Hornets
JaVale McGee, C, Denver Nuggets*

(* denotes restricted if Qualifying Offer issued by June 30th)

The names on the list can be debated, but it’s also fairly easy to see how each of these players could end up with a large contract this offseason. Each of these players – and any other free agent with Bird Rights (three years or longer with the same team or on the same contract) – could re-sign with their own team and avoid taking some of that cap space from the 10 teams mentioned above who could clear space to sign them. Duncan falls into that category, as could Nash, Anderson and McGee. Sign-and-trade deals with other teams over the cap could further reduce the pool of top talent available. (For reference there were seven deals averaging $10 million or more, including extensions, in 2011 and 16 in 2010.)

What does all of that mean? In the end, most of the teams with possible space mentioned above will likely look to clear it all because, for the most part, they are trying to rebuild their teams. Some of them want to do it on the fly like Boston and Portland, but others are in the process of trying to build a solid base. It seems like there will be more teams with cap space to spend than there will be top quality free agents, which could mean one of two things. It could mean some free agents get paid more than their generally perceived value because some teams feel they need to spend all their cap space at once or it could mean these teams with space will break it up into smaller contracts.

It will be very interesting to see how teams spend their money this summer since the talent pool doesn’t seem to have the same depth as the total possible cap space available.