[ClutchFans] Houston Rockets Salary Cap Update: "Total Rebuild" Edition

That is correct.

That's why none of those guys has been waived yet. They can be used in trades and can bring back up to 150% + $100,000 under the salary-matching rules of the new CBA. The Rockets can either use those contracts in trades or just waive them to create additional cap room to take on more incoming salary.

Just another way in which the Rockets possess cap flexibility right now.

 

WARNING: LONG POST; MAY CAUSE DROWSINESS.

Skip to "Bottom Line:" if you want the quick answer.

Dwight Howard's 2012-13 salary is $19,536,360.

Howard's 2013-14 starting salary can be up to (but not more than) $20,513,178. This represents a 5% increase from his 2012-13 salary. Players who make above the league's designated maximum player's salary (depending on years of service) cannot receive a starting salary in excess of 105% of their prior year's salary.

THIS was one of the primary motivating (financial) factors in Dwight deciding to waive his Early Termination Option rather than be traded to a team for which he was unsure if he'd want to play the following season. Had he actually opted out, his maximum starting salary would have been $18,996,359; and it would have cost him several millions of dollars over the course of his next deal.

By my calculations, whichever team holds Howard's Bird rights at the end of the 2012-13 season can re-sign him for up to five years at a maximum contract value of about $117,950,770, broken down as follows:

Year 1 (2013-14): $20,513,178
Year 2 (2014-15): $22,051,666
Year 3 (2015-16): $23,590,154
Year 4 (2016-17): $25,128,642
Year 5 (2017-18): $26,667,130

(The annual raises are based on 7.5% of Dwight's starting salary, or about $1,538,488.)

Meanwhile, no other team could offer Howard more than four years at a maximum contract value of about $87,591,270, broken down as follows:

Year 1 (2013-14): $20,513,178
Year 2 (2014-15): $21,436,271
Year 3 (2015-16): $22,359,364
Year 4 (2016-17): $23,282,457

(The annual raises are based on 4.5% of Dwight's starting salary, or about $923,093.)


Hypothetically speaking, barring any changes to maximum player salaries in the next CBA, the impact of this difference would be felt in Howard's NEXT contract (AFTER the one described above) would be as follows:

Had Dwight signed a five-year deal in 2013 and does not opt out of that deal, then in 2018, Howard should be able to sign another contract paying him a starting salary in 2018-19 of $28,000,487 (or 105% of his 2017-18 salary). Ironically, by signing a five-year deal in 2013--making Dwight 32 years old when he comes up for his next contract, any five-year deal at his age would become subject to the league's "Over-36 Rule", which is a complicated rule designed to close a loophole in which teams sign players nearing retirement to ludicrous contracts, knowing that they will never play long enough to earn that money.

(If you REALLY want to know more about the "Over-36 Rule", you can find it here: http://www.cbafaq.com/salarycap.htm#Q56)

In order to avoid the consequences of the "Over-36 Rule" (and, believe me, they'll need to avoid them in a max contract situation), Dwight's next contract in THIS context (i.e., after completing a five-year deal in 2018) would be no longer than a FOUR-year deal (and assuming that he is re-signing with the team holding his Bird rights at that time) at a maximum contract value of about $124,602,170, broken down as follows:

Year 1 (2018-19): $28,000,487
Year 2 (2019-20): $30,100,524
Year 3 (2020-21): $32,200,561
Year 4 (2021-22): $34,300,598

(The annual raises are based on 7.5% of Dwight's starting salary, or about $2,100,037.)

Meanwhile, assuming that the "other team" that signs Dwight to a four-year deal in 2013 retains his Bird rights and then desires to re-sign him to a max contract again in 2017, they CAN sign Howard to a new five-year deal, without regards to the "Over-36 Rule", since Dwight (who would be 31 years old in 2017) would not be subject to the rule in this context. However, his starting salary on such a five-year deal would "only" be about $24,446,580 (or 105% of his 2016-17 salary), making for a maximum contract value of about $140,567,808, broken down as follows:

Year 1 (2017-18): $24,446,580
Year 2 (2018-19): $26,280,074
Year 3 (2019-20): $28,113,536
Year 4 (2020-21): $29,947,062
Year 5 (2021-22): $31,780,556

(The annual raises are based on 7.5% of Dwight's starting salary, or about $1,833,494.)


Bottom Line: For Dwight Howard to walk away from the team holding his Bird rights in 2013, he would be leaving on the table up to the following amounts:

Over the next five years: Up to $30,359,500 (if Dwight's career is cut short before the 2017-18 season) but at least $5,912,920 (assuming Dwight signs a super-max contract with another team and then re-ups in 2017 for another super-max contract).

Over the next nine years (essentially, the remainder of his productive playing career): At the very least, about $14,393,862 (again, assuming that Dwight signs two consecutive super-max contracts with the other team). THIS IS A BEST CASE SCENARIO for Dwight if he bolts as an unrestricted free agent in 2013. The likelihood is that Howard will lose far more than this amount over the course of his career if he doesn't re-sign with the team holding his Bird rights in 2013.

 

The numbers in my "Bottom Line" (i.e., $5.9 million through five years and $14.3 million through nine years) represent the ABSOLUTE BEST CASE SCENARIO for Howard, as far as how little he'll miss out on if he doesn't re-sign with the team holding his Bird rights in 2013. Those figures were not intended to be taken as any sort of justification for Dwight wanting to bolt to another team in 2013.

The fact is, it is highly questionable whether Dwight Howard will be worthy of--or if any NBA team would be willing to sign him to--a "super-DUPER-max" contract in 2017. By that time, the current CBA will have likely taken a drastic toll on player salaries as a whole. For a team to be willing to offer a 31-year-old Dwight Howard a five-year deal worth over $140 million is not an assumption that anyone should be making.

The only (relatively) safe assumption one can make is that Dwight would lose out on over $30 million in total contract value in 2013 by signing for the max with another team versus signing for the max with the team holding his Bird rights. Dwight could make SOME (but not all) of that money back based on the starting salary of his contract in 2017. His absolute best case scenario (signing a "super-DUPER-max" contract) would have him coming up about $5.9 million short through 2018 and $14.3 million through 2022.

However, I'm guessing that Howard will get no such deal in 2017. Hence, the ACTUAL amount of what he'll lose out on throughout his entire career will probably be more than either of those two amounts.

No, it's not. But don't worry. I'm with you on the general point that the Rockets would have a DECIDED advantage to re-sign Dwight Howard if they had his Bird rights.

 

You should use shamsports.com for your player salary information. It is far, far superior to hoopshype.

Also, I think you are getting a little confused by the 105% rule and Larry Coon's use of the phrase "never less than" in his FAQs. Larry is saying that the MAXIMUM salary is never less than 105% of a player's prior salary. It is still the MAXIMUM salary, though. The point of that sentence is that a player is eligible to exceed the league-mandated maximum player salary (based on years of experience) in order to hit that 105% amount.

As far as CH's player option idea, that's a distinct possibility. The downside for Dwight is that his 2017-18 salary would go down; but that would pail in comparison to being able to lock in a new five-year deal (through 2022) a year early and avoid being subjected to the Over-36 Rule.

That said, I'm not exactly sure that the Rockets (or any team, for that matter) would be willing to hand out a contract of that size to a 31-year-old Dwight Howard.