The Myth of the Rockets and 2010 Free Agency

Sorry to bump this thread again (I know how people just look at the OP without checking for any updates and assume that it is completely outdated), but there was a VERY interesting article the other day from Marc Stein regarding the seven NBA teams expected to have at least $10M in cap room for next summer's free agency bonanza.

What was most interesting?

The Rockets were NOT on that list.

http://sports.espn.go.com/nba/dailydime?page=dime-091030-31

The sad thing is . . . as things currently stand, Marc Stein is absolutely right.

With that said, I think it's time to take another look and see what the Rockets' salary cap picture currently looks like (and this time, I will work from the "most guaranteed" salary commitments to the least guaranteed):

[IF CLUTCH OR ANOTHER ADMINISTRATOR COULD JUST ADD A NOTE AT THE TOP OF MY OP IN THIS THREAD THAT THIS UPDATE EXISTS (IN POST #X), I'D GREATLY APPRECIATE IT. THANKS.]

As it stands now, the Rockets have total guaranteed 2010-11 salary commitments of approximately $37.6M to seven players (Yao, Battier, Ariza, Andersen, Brooks, Taylor, Budinger). I am assuming that Joey Dorsey's "partially guaranteed" 2010-11 salary is guaranteed for $0, which may or may not be the case. Also, I am estimating on Taylor's and Budinger's salaries being about $850k next year. I don't know the exact figures, but it won't materially alter the bottom line.

With the Rockets expected to finish the 2009-10 season with a significantly worse regular season record than they did in 2008-09, it looks like the salary scale for the Rockets' eventual first round draft pick will be higher. For the sake of this illustration, let's say that the Rockets barely miss the playoffs and end up with the #13 overall pick. The scale salary for the #13 pick in the 2010 NBA Draft is $1,599,300. However, most first rounders end up signing for the maximum permitted salary of 120% of the scale amount. In this case, that amount would be $1.92M. This would bring the Rockets' total guaranteed salary commitments to approximately $39.5M. Yes, if the Rockets make the playoffs, the salary scale for their pick would go down; but since the Rockets don't expect to be seeded very high, this should not make a material difference. This pick would make eight players for the Rockets at this point.

Now, add in the team option on Carl Landry for only $3M. This decision should be VERY interesting in and of itself. With the underlying assumption that the team wants to retain Landry, if the Rockets truly value their 2010 cap room, they'll exercise his option; but they'll be letting Landry become an unrestricted free agent in 2011. If Landry blows up next year and looks to be emerging as a "Paul Millsap-type" building block, the Rockets might actually consider NOT picking up the option, letting Carl become a RESTRICTED free agent in 2010 (but with a cap hold of $4.5M), re-signing him on the cheap (albeit for more than $3M in 2010-11), and possibly saving several million dollars over the life of Carl's next contract. But, for simplicity's sake, let's just say the Rockets just exercise the team option for $3M. Since I think it's a no-brainer that Landry is back no matter what, this brings the minimum in guaranteed salary commitments now up to $42.5M. That's now nine players.

For purposes of this update, I will make the (ludicrous) assumptions that the Rockets (A) renounce their rights to ALL of Tracy McGrady (gigantic cap hold), Luis Scola ($6.77M cap hold) and Kyle Lowry ($6.1M cap hold); (B) fail to pick up the ~$2.3M team option on Chuck Hayes; and (C) waive Joey Dorsey and his partially guaranteed salary (~$947k, and I'm making the friendly assumption that it is guaranteed for $0). So all of these players are gone for the sake of maximizing the Rockets' cap room.

Since the above players/picks don't add up to twelve (12), their is a roster charge imposed on the Rockets' cap space equal to the 2010-11 rookie minimum of $473,604 for every open roster spot up to 12. Since the Rockets only have nine players at this point, the roster charges will total over $1.42M and will bring the Rockets' total MINIMUM cap figure to $43.92M.

According to the infamous league memo sent out to all 30 NBA teams last July (as further noted in the Marc Stein article referenced above), the salary cap is expected to drop next year from the current figure of $57.7M down to about $53.6M, or possibly as low as $50.4M. According to the article, even the most optimistic GMs expect the cap to be at around that $53.6M figure. Many others are expecting something closer to the $50.4M scenario. So, for purposes of figuring the Rockets' maximum cap room, we'll assume the "rosier" scenario of a $53.6M salary cap.

With all that said, with the Rockets essentially making EVERY possible decision with an eye towards maximizing their cap room, given the drop in next year's salary cap, they will not have more than about $9.68M. That's it. And that's with no T-Mac, no Scola, no Lowry, no Hayes. Not even $10M. I suppose that the Rockets could possibly decline their option on Landry and let him go as well. They could also trade away a late lottery pick for "future draft considerations". Those moves would be terrible, anti-competitive maneuvers that don't strike me as something Morey would consider, especially for just the CHANCE at a major free agent. But even with these moves made, the maximum cap room for the Rockets would be about $14.6M. That's not even enough for one max free agent. And that's after saying goodbye to half the freakin' rotation just to try to maximize cap room.

Bottom line: For all those who were thinking about the Rockets being an attractive destination for major free agents, you may need to reconsider your position carefully. Yes, the Rockets still could open up cap room by trading Shane Battier (a move that I'm starting to come around to, as much as I love Shane, although I see that move bringing in better value is made around the 2010 NBA Draft). No, the team CANNOT create more cap room just by trading Tracy McGrady, since he's an expiring contract himself anyway; although T-Mac could possibly be traded for a valuable player with a longer term deal. But it's looking like the Rockets would be well-advised to re-sign Scola and Lowry (possibly even T-Mac) and to pursue free agents using their MLE and LLE.

 

#1: With all of those salaries/cap holds added back in, the Rockets would be over the salary cap. Hence, the Rockets could then take advantage of their salary cap exceptions, such as the Mid-Level Exception and the Bi-Annual Exception. T-Mac can be re-signed to any amount, since the Rockets have his Bird rights. Pretty much what worzel already said in answer to this question.

#2: While I think Battier could net the Rockets better value if traded at next year's draft (when he'll then be a defensive ace AND an expiring contract), if he is traded at any point next year for an expiring contract, it would give the Rockets total cap room of about $17.03M, almost enough to offer a max deal to a guy like Chris Bosh. However, this again assumes no T-Mac, no Scola, no Lowry, no Hayes. Also, this assumes that Battier is traded for some scrub who would not be re-signed. Personally, I'd rather have half of our rotation plus an MLE free agent over just the CHANCE at Chris Bosh and a bunch of league minimum fillers.

worzel, take another look at that chart. Scola is a Larry Bird free agent who is not on a rookie scale contract and makes BELOW the league average salary. That makes his cap hold equal to 200% of his 2009-10 salary, or $6.77M.

1. Good question. It all depends on how well he plays when he comes back. Remember, this is a guy who, when he played his last relatively healthy game, dropped 40 points on the Utah Jazz in the playoffs. But if he's a shell of his former self and incapable of taking over games, then perhaps he's better as an expiring contract, capable of bringing in a quality player or two and perhaps a draft pick.

2. I say they are better off MAKING the playoffs. Regardless, I don't see this team (even without a healthy T-Mac for 60 games) being a bottom-dweller in the standings in the Western Conference. They will probably end up finishing 10th or 11th in the West, at worst. With an expected draft slot of around 12 or 13, the chances of winning a top 3 pick in the draft lottery is pretty slim. Something like 1% or less. Better to make the playoffs, get the recognition of being the scrappy, overachieving team that is just 1-2 pieces away from contending, and attract their pick of the top MLE free agent candidates. Frankly, if I'm a second- or third-tier free agent and I have my choice of taking the MLE (or perhaps a similar amount of cap room from an under-the-cap team) from several different clubs, I'd have to strongly consider the Rockets as my destination. Sort of like how Ariza shunned the Cavs (and a better chance at a return to the NBA Finals) in favor of the Rockets based on his playoff experience against them.

The 2011 cap situation is definitely one that intrigues me. If Morey were able to trade T-Mac this season for a quality player whose contract expires in 2011, then the Rockets could potentially be MAJOR players in free agency that summer. We'll see how big a factor that is in Morey's moves over the next few months.