The current NBA Collective Bargaining Agreement (CBA) was signed in 2023 and it introduced a 2nd Tax Apron. The purpose of the 2nd Apron was to discourage teams from exceeding the salary cap by a huge amount. A few new rules regarding the 2nd Apron were in effect last season but starting this year all of the rules will apply and they will have an impact on how teams are built. I wanted to lay out the new rules and what they will mean to all of the teams as this will be the reason for some roster moves that wouldn't have been made in past seasons. The Lines Salary Cap - the '24-'25 cap is projected to be $141,000,000. It's based off of the leagues Basketball Related Income (BRI). Tax Line - This is the line where teams start incurring financial penalties for being this far over the cap. Next year's Tax line is projected to be $171,300,000. 1st Apron - Teams over the first apron will incur further financial penalties plus restrictions on their abilities to make roster moves. Next year's 1st Apron is projected at $178,655,000 2nd Apron - The 2nd apron builds further penalties on top of the ones from the 1st Apron. It also implements some severe restrictions on the transactions the teams can make. Next season's 2nd Apron is projected to be $189,486,000. Max Salaries Max salaries are set as a percentage of the Salary Cap and are different based on years of experience. For players with 0-6 years experience, the max is 25% of the cap. Next year that should be $35,250,000. For players with 7-9 years experience, the max is 30% of the cap. Next year that will be $42,300,000. For players with 10+ years experience, the max is 35% of the cap. Next year that is $49,350,000. *** There's some other rules for max salary such as Designated Player but I'm ignoring those here. Penalties for Exceeding the Aprons 1st Apron Penalties - - Can only use the Tax Payer MLE ( $5,183,000), NOT the Non-Tax Payer MLE ( $12,859,000) - Can't use the Bi-Annual Exception - Can't acquire players via a sign-and-trade. - Can't sign a buyout player who made more than the non-taxpayer MLE on their last contract. - For salary matching purposes in trades, they can only receive back 110% of the salary that they send out. - Cannot use a Traded Player Exception (TPE) from a prior year 2nd Apron Penalties - These are added to the 1st Apron Penalties and they will go into effect this coming season. - Cannot use the Tax Payer MLE - Cannot aggregate salaries in trades. i.e. You can't trade $4M + $6M players for a $10M player. They are allowed to receive aggregated salaries in a trade. So they can trade a $10M player for a $4M + $6M player -Can't send out cash in a trade -Acquire a player with a Traded Player Exception from a previous trade. The 1st Apron prevented using a TPE from a previous year, this extends it to previous trades in the same year. - Can only resign their own Free Agents, draft picks and players on a minimum salary. - Can only make trades with a single player going out and must receive the same salary or less in return. Can't use the 125% or 110% matching for trade purposes. -No sign and trades for your own players. 1st Apron penalties already prevents them from receiving players in a SnT. -Can't trade your 1st round pick 7 years in the future. One less first rounder available to be traded. -If a team exceeds the 2nd apron in 3 out of 5 years, then their first round pick is moved to the end of the 1st round regardless of record. As you can see, exceeding the 2nd Apron will make it extremely difficult to add to your team. Those are extremely harsh penalties if you exceed the 2nd Apron. Currently, Boston, Minnesota and Phoenix are over the 2nd Apron. Salary Cap Smoothing Back in 2016, the NBA signed a new TV deal that was substantially larger than the previous one. Since the NBA Salary Cap is based off of Basketball Related Income, the cap that year jumped by $24M and allowed the Warriors to sign Durant and for a guy like Chandler Parsons to get a massive deal. Everyone had money to spend and lots of bad contracts were given out with many teams regretting those moves after a couple of years. The NBA is about to sign another TV contract which will also be a big increase. To prevent a similar scenario to 2016, the current CBA introduced Salary Cap Smoothing. What that does is to limit the salary cap to a 10% increase in any single season. There will be some extra money for free agency but nothing like 2016. What does all this mean for teams? It means that unless a team thinks that they are setup to win a title, then they will likely make some roster moves that they wouldn't have made in past years. In the past, if a team has a free agent, even if they didn't think that they deserved a full max, they probably paid it rather than to lose them for nothing. Now, overpaying and signing a player to max deal can greatly impact a team's cap and also make it very difficult to trade the player. The flip-side is that since the cap will be going up 10%/season for the next few years, if you sign a true max player to a max deal, it can be a bargain in a couple of years because of the cap increase. What you won't be able to do is to just continue to spend and exceed that cap when you're willing to pay the tax. You might see teams do it for a season of two if they believe that they are currently constructed to win a title. Otherwise, it would be impossible to improve your team. The predictions are that teams won't be able to afford more than 2 max players, but that's really only true for 10+ year vets. If your max deals are used on players with less experience you would have a little more flexibility. How's this impact the Rockets The Rockets have 7 1st round picks ( I'm not counting Griffin) who will be eligible for new deals over the next few years. How those players perform and improve in the next few years will obviously impact their next contract. What is virtually guaranteed is that the Rockets won't be able to pay all of those guys if they perform well. They will have to be very cautious about how much they pay on the new deals so that they retain the ability to pay some of the other players. Some hard decision will need to be made and most likely, some consolidating trades will need to be made. The general thinking is that to win a title, you need a superstar. In the best case, the Rockets would have their superstar and then they could make decisions on how to best put players around them. Who fits best with the superstar and who all they can afford. Unfortunately, we don't have a superstar yet and our rookie deal players start becoming free agents in the next year. You don't want to lose your players for nothing but signing them to too large of a contract can now be disastrous. We may see some of our core youngsters traded or other veterans sent packing. FVV's $40M contract is going to be hard to swallow once we start resigning our rookie-deal players. That's the reason that his contract is written to allow the Rockets to get out of it after next season. It's going to be interesting to see how these new rules effect team's roster moves. Phoenix will be the poster child for the new 2nd Apron rules. Their salary is over $200M and they have holes in their roster and will lose the ability to add anyone for anything other than the minimum. In general, teams will be much more cautious about giving out huge contracts and that may lead to teams having to get rid of star players much earlier than they would have in the past year's. There's lots of ways that it can go for the Rockets. Hopefully, they'll be cautious when making decisions on new contracts. One thing that is virtually assured though is that the Rockets core-7 won't be together in a few years.
Gun to my head, need to keep Sengun, Amen, Tari, and Cam together. have a feeling Bari about to break out too. Reed hasn’t played a min in the nba so he doesn’t count
Good summary. I think most of us hardcore fans who have been following are familiar with the 2nd apron penalties, but it's good to see it simply spelled out in one place. Regarding how it impacts the rockets: I agree with your final sentence - the 7 1st rd picks won't play their careers out as rockets. But, i don't think the 2nd Apron will be the main reason why. If all 7 guys reached their potential then we would be title favorites really soon. That's unlikely. Many other teams have gone through rebuilds with multiple promising 1st rd picks. The truth is most of them just don't pan out. Sometimes they're retained for cheap, sometimes they're traded, sometimes they're out of the league. Other teams are watching your young players as well. You may find a sucker here or there but you're not going to easily dump all the guys that don't pan out as some pupu platter for a star.
Awesome post! Great to have all this info easily laid out. From the looks of it, that 1st extension isn't really that much of an issue at 25%. It's that veteran max at 35% that's a real killer. If our core grows organically and they all become max worth (wishful thinking, I know) it won't really even be an issue to give them all max contracts till we get to Amen and Cam in 2027-2028. We have to make sure the money from the Brooks and FVV contracts are utilized well and rolled over so that we can operate over the cap and close to the apron before that year to maximize the talent on the team in that window.
It wouldn't be an issue to give max contracts right now. But if we do and it turns out that we gave max deals to players who don't deserve max deals, then it will be hard to trade those contracts and that may make it impossible to give max deals to younger guys who are deserving. That's the worst case. Obviously, we don't know how all of our rookie contract guys will develop.
I'm really excited for this. I was getting tired of teams basically buying wins. As long as we don't do anything stupid, we should be in a really good position going forward because this system benefits teams with consist flows of RFPs. By the way, everyone talks about the second apron, but the first apron can be pretty limiting, too. Especially the limited exceptions.
Very true. The Rockets have their first test in this regard coming up at the end of the season. Alpi has obviously earned a max contract unless he regresses this coming year. Jalen on the other hand has been way too Jekyll and Hyde to earn a max up to this point. They could easily screw up our future if they offer Jalen the max and he continues the drastic inconsistency. To me he would have to be truly outstanding this entire season before I would offer him the max.
It seems low and mid market teams realistically have a title shot once every ten years. Sucks to be in the minors.
Here's a great idea... let's create a cap for all teams and then make the max for a single player to be over a third of that cap. That'll be fun!
I was LITERALLY doing an Excel sheet of Rockets salaries for the next few years when I saw your post. (Using Spotrac #'s) I think we're good this year and the next (even if we add a player like Jonathan Isaac for Brooks and then double Isaac's salary). Next year, I was assuming that Fred walks or gets traded. I think that may be a crucial piece. If Stone is able to flip FVV for a low priced player on a cheap deal (doesn't everybody want that?) that could buy us another 2 years. It looked like 2026 - 2027 we may have to start off-loading some of those big deals - if we signed players to big extensions (Thrilla, Sengawd, Bari, Tari, Isaac). Thanks for posting this!
interesting one missing in your list. I hope Mr Missing Link becomes the missing link by proving a supersized performance over 82 games + and then + some more.
@aelliott thanks for laying this out and adding the "so what" for us as well. When I look at our players, we've assembled a pretty good roster. This year turns into the pivotal year to evaluate our organic/draft acquisitions, with Alpi and Jalen being the 1st up in whether we should invest in them long-term or trade them. How quickly guys like Jabari, Amen, and Cam progress will also play a role. If any one of those three breaks out that could be pivotal to our rebuild's next stage. This will also be the season to answer questions like... - Can Tari stay healthy and can he be more than a 6th-7th man? Love Tari and losing him last year really impacted our ability to win. He does the little things that can make a big difference. If he develops into a starter quality player at either the 3-4, that gives us a luxury and makes him or DB into a key piece in a trade for a star. - Can Shep b/u FVV this year and takeover as a starting PG in year 2? If he can't do that, can he be a competent back-up to Amen? If not, then retaining Fred will be considered and a longer/restructured contract may be in play. FVV could also be a key part of a swing for the fences acquisition. - Is Adams the back-up center/enforcer we need or do we need a younger rim protector? We've got a year to look at that and give Dante some time to gain experience in the G-League/test his health as well. - Does Griffin have anything left and if so how much can he contribute? - Keeping guys like Jeff Green, Landale, and Tate as end of the bench contributors in case of injuries, mentors, and practice warriors is smart. They also give us salaries to aggregate in a trade this year and Landale's contract he could be a sneaky asset to keep around after this year. Do we keep them all going into the season? Despite not having an anointed star, we're in a great position and have an exciting team to watch going into the season. This is truly the "year of development and assessment" to hopefully see what we have and get a glimpse into what we might become.
People are certainly saying this. It is a concern. But this question was asked of Stone at the end-of-season presser. He seemed confident he can do it. Based upon that comment and some research, I’ve come around to believing him. The key to paying all 7 for “performing well” to the point you want to keep them all is this: 10% growth in the Cap each year. This is compounded each year Sports business experts are so impressed with the new NBA TV deal they are predicting the BRI will hit the cap smoothing threshold each year for the duration of the deal. (And if you notice, Spotrac is also using 10% growth predictions.) Player raises are not compounded each year. This means the Cap will grow faster than salaries. Example: Jalen and Sengun Max contracts would start off at 25% of cap, but end at 22%, by the time we have to pay Reed. We are already seeing precedence for players coming off rookie scale not getting customary 8% raises, and actually some are getting decreases each year. (See Vassell’s $135m contract.) These customary raises are being replaced with Incentive Bonuses, to prevent contacts from becoming toxic. (ie, if a player stops performing once paid, his percentage of cap goes down significantly.) I tried this out and was able to pay everyone, to include 3 max contracts. And I’m confident in the other 4 contracts being acceptable, given recent precedence for elite role players. So, I’m leaning to believing Stone. Contracts and agent/player relations is his wheelhouse. This task of managing a scenario where all 7 players “perform well” to the point of cfnet wanting to keep everyone will be a hallmark moment in his tenure, if it comes to that.
Seems like you need to be winning a title before players hit their 10th year and more ideally before their restricted free agent contract signing contract finishes. It is a hard pill to swallow paying a player 35% of the salary cap when they aren't winning you titles. So it is probably best to trade them for assets.
Extremely valuable thread. At first I was like trading Jalen is obvious. Then I was like if Jalen pops, Bari pops, and Sheppard looks like he can handle well enough to split point with Amen, maybe we cut FVV after this year and try to maximize the value of rookie max extensions. Seems like the best contract in the game other than star output on rookie deal will be star output on a rookie extension. Really a shame that we still don’t know what we have from 2021 and 2022 drafts. The months before the trade deadline might be more important than the outcome of the whole season for the direction of this team.
