NBA PM: How Holds, Rights Affect the Cap

In July, the NBA’s salary cap is expected to jump from the current $70 million to $92 million, dramatically increasing spending power throughout the league.

Most teams will be armed with cap room, but to project how much exactly will take more than just looking at the salaries of players under contract for the 2016-17 season.

A variety of cap holds factor into a team’s salary.  Some can be removed via renouncement, others are set in stone.

Empty Roster Charges

In fact, a team with absolutely no players has 12 cap holds at next season’s rookie minimum of $543,471.  That’s a total of just under $6 million, which would give a team with no players $86 million in space under a $92 million cap.

The logic behind 12 empty roster charges has to do with the regular-season minimum of 13 players on the roster.  The idea is: what is the absolute most available to that 13th player, if everyone else on the roster is making the least a team can possibly spend?

Of course, no teams have zero players this summer, but they will have empty roster charges to reach 12.

Actual Salaries

A players’ salary counts against the cap, with any incentives earned in 2015-16 considered “likely” for 2016-17.  Unlikely incentives do not go against a team’s cap.

The Indiana Pacers have 11 players under contract for next season.  While both Glenn Robinson III and Shayne Whittington are non-guaranteed, their salaries go against the cap unless waived.

The Pacers have $59.3 million in salaries, and one empty roster charge, leaving $32.2 million in space.

Cutting Whittington would reduce the team’s salary by $980,431, less than an empty roster charge ($543,471) – giving the Pacers just an extra $436,960 in cap space.

First-Round Salary Scale

The Indiana example is not entirely complete.  The team also holds the No. 20 overall pick in the 2016 NBA Draft.

Until a first-rounder is signed, their base salary, as defined in the Collective Bargaining Agreement, is their cap hold for the team.

In most cases, first rounders will sign for the maximum of 120 percent of their scale salary.  Once they do sign, that becomes their cap number.

For the Pacers, their pick has a cap hold of $1.3 million, which takes the place of the aforementioned empty roster charge.

Instead, with 11 rostered players and the draft pick, Indiana has $61.1 million in salary with $31.4 million in cap space.

If a drafted player agrees not to sign for the entire season, in writing, that cap hold can be removed from the books.  The pick can also be renounced outright (an extremely rare occurrence in the first round).

Unsigned second-round picks do not take up any cap space.  In fact, they can be signed at the rookie minimum in place of empty roster charges, without reducing cap room.

Exceptions

Teams over the cap can use a variety of exceptions including the Mid-Level ($5.6 million for 2016-17), Bi-Annual ($2.2 million) and any Trade or Disabled Player Exceptions that may have been generated.

Teams can renounce their exceptions or elect to hold onto them to stay over the cap, although they automatically evaporate if the team is unable to reach the salary cap.

With the Pacers, if they would add the Mid-Level and Bi-Annual to their cap figure, it would take the place of any empty roster charges.

The revised total would be $68.4 million in salary.  Since the team would still be $23.6 million under the cap, the exceptions would automatically expire.

Before they do, free agent cap holds needs to be added to the puzzle.

Free Agents

Teams can spend up to the salary cap but they can also go over the to re-sign their own players.

To do so, the team must account for their own free agent with a cap hold – the number based on their previous year’s salary and the players’ rights.

Players with Non-Bird Rights, after one season with their team, have a cap hold of 120 percent of their previous salary – the maximum a team can pay without using either cap room or an additional exception.

Should Arron Afflalo opt out his contract with the New York Knicks, his cap hold will be $9.6 million – 120 percent of his $8 million salary.

For Early Bird Rights, after two seasons, the cap hold formula is 130 percent.  Players can sign up to 175 percent of their previous salary, or 104.5 percent of the league’s average salary (the exact figure won’t be computed until the end of the July moratorium).

Marvin Williams’ Early Bird cap hold with the Charlotte Hornets, based on his $7 million salary, is $9.1 million.

Full Bird Rights are more complex.  While players can be paid up to the maximum (with the amount determined by years of service), their cap hold is based on the “estimated” average salary, which is currently set at $5.7 million.

Additionally, first-round picks coming off their first contract are treated differently than other free agents.

For first-rounders, if they earned less than the estimated average salary, their cap hold is 250 percent of their previous salary.

Bradley Beal of the Washington Wizards had a salary of $5.69 million for 2015-16.  His cap hold this summer is $14.2 million.

If a first-rounder earned the estimated average salary or higher, their cap hold is 200 percent of their previous salary.  No one in the 2012 draft class fits this criterion this past summer. Had Beal earned an additional $44,326 last season, he would have reached the estimated average salary, and his cap hold would have shrunk to roughly $11.5 million.

For players with Bird Rights, who are not first-round picks coming off their first contracts, the percentages are 190 percent for those below the estimated average salary and 150 percent for those above.

Al Horford’s cap hold, with the Atlanta Hawks, will be $18 million – 150 percent of his $12 million earned last season.

Courtney Lee’s cap hold, with the Charlotte Hornets, will be $10.8 million – 190 percent of his $5.7 million earned last season.

Rights transfer via trade, in most cases.  A player’s cap hold will not be more than the maximum salary for the coming season.

A player on a minimum contract works differently; their cap hold is the minimum whether they have Non-Bird, Early Bird or Full Bird rights.

Once that player re-inks, their actual salary is their cap hold; if they are renounced, or leave for another team, their hold comes off completely.

As if it wasn’t already complex, there are other caveats, like declined first-round options, non-first round restricted free agents, and starter criteria that add further wrinkles to computing a players’ cap hold.

Pacers forward Solomon Hill’s option was declined, making his cap hold the $2.3 million he would have made had the team taken the option.

Undrafted Miami HEAT guard Tyler Johnson has a cap hold of $1.2 million, provided Miami makes him restricted with a qualifying offer before July.

Los Angeles Lakers guard Jordan Clarkson will have a $2.7 million cap hold once he receives a qualifying offer – based on the number of games he started, and minutes played, last season.

Until a team renounces a players’ rights, they have a cap hold.  The Oklahoma City Thunder still have a cap hold for Derek Fisher at a minimum salary of $980,431 for next season.  Renouncing is strictly a clerical task, but by and large, teams don’t take that step until necessary.

Waived Players

The Los Angeles Clippers previously waived and stretched out the salaries of Carlos Delfino, Jordan Farmar and Miroslav Raduljica.

Combined, the team’s trio of former players will take up $1.4 million in cap space.

Example: Pacers’ Cap Position

At the last tally, the Pacers had $68.4 million in salary, including the Mid-Level and Bi-Annual Exceptions.

Indiana also has Non-Bird rights on Jordan Hill, who earned $4 million last season, yielding a cap hold of $4.8 million.

Ian Mahinmi also made $4 million, but with Bird Rights, his cap hold is $7.6 million.

Ty Lawson’s hold is just the minimum at $980,431.  Solomon Hill’s cap hold was previously listed as $2.3 million.

All-inclusive, the Pacers reach just $84.1 million in team salary, which is $7.9 million below the cap.  Since the team is under, they will lose their Mid-Level and Bi-Annual Exceptions, reducing their total to $76.2 million with $15.8 million in spending power.

Indiana can max out their space by waving Robinson and Whittington, while also renouncing their free agents.  The team can also look to draft a player who agrees to stay overseas for a year.

If so, the Pacers would have nine players with three empty roster charges of $543,471 each, $58.9 million in team salary and $33.1 million in cap room.

Perhaps more realistically, the team might keep Robinson, Whittington, along with Mahinmi’s cap hold and will draft a player at No. 20 to join the team immediately.

That combination would give the Pacers $23.8 million in cap space, slightly under the projected maximum ($25.9 million) for players with seven-to-nine years of NBA experience (like guard Memphis Grizzlies guard Mike Conley).

Waiving Robinson and Whittington pushes that space up to $25.3 million, but the Pacers wouldn’t have to make those decisions until they actually have a free agent commitment that requires additional space.

The Pacers can also look to make trades to open up more spending power.  Player buyouts can also be an option.

Should Indiana find a taker for what could be roughly $25 million in spending power, they would then have the ability to go over the cap to re-sign Mahinmi to a contract starting above his $7.6 million cap hold.

Finally, once teams like the Pacers go over the cap, they gain the $2.9 million Room Exception to sign player(s) for a maximum of two seasons.