Sergio Llull Effect and the Rockets Off-Season

By now we have all heard the rumors that Daryl Morey plans to offer Sergio Llull a 3-year contract worth about 17 million.

http://bbs.clutchfans.net/showthread.php?t=263873

So do the Rockets actually have to use the Mid Level Exception? Can they create enough salary cap room to sign him and how would that affect their ability to resign their own free agents?

2015/2016 NBA Salary Cap

There are no official numbers on what the salary cap for 2015/2016 season will be yet but 66.5 million is the projected cap. If the projection holds true then the cap structure for next season will look like this:

Salary Cap – $66.5 million dollars
Luxury Tax Threshold – approximately ~$80.465 million
Apron – ~ 84.465 million dollars (4 million past the threshold)

Summer 2015 Rockets Salary Cap Situation

The Rockets will go into the summer with $83,507,504 counting against their salary cap but could cut it down to $58,654,925 by renouncing all of their own free agents and cutting the non-guaranteed contract of Kostas Papanikolaou and then adding back in the incomplete roster charges for having less than 12 spots occupied on the roster. Here is a detail of what the Rockets cap obligations are starting in the summer.

$55,924,339 owed to 9 Players under contract:
Dwight Howard - $22,359,364.00
James Harden - $15,756,438.00
Trevor Ariza - $8,193,030.00
Pablo Prigioni - $1,734,572.00
Terrence Jones - $2,489,530.00
Donatas Motiejunas - $2,288,205.00
Joey Dorsey - $1,015,421.00
Nick Johnson - $845,059.00
Clint Capela - $1,242,720.00

$4,851,769 towards 1 Player with a Non-Guaranteed Contract
Kostas Papanikolaou - $4,851,769

$21,050,996 towards 5 Free Agent Cap Holds
Patrick Beverley - $2,725,000.00
Jason Terry - $8,775,470.00
K.J. McDaniels - $947,276.00
Josh Smith - $2,490,000.00
Corey Brewer - $6,113,250.00

$1,680,400 Drafted Player Cap Hold
14th Pick - $1,680,400

Add $1,050,186 back for 2 Incomplete Roster Charges if the Rockets renounce all free agents and cut their non-guaranteed contract
Roster Spot 11 - $525,093
Roster Spot 12 - $525,093

That would open up $7,845,075 million dollars in Salary Cap Space and leave the Rockets with 9 players under contract with a 10th roster spot hold for the draft pick. If the Pelicans manage to make the play-offs then you can replace the Drafted Player cap hold with an extra incomplete Roster Charge of $525,093 and free up an additional $1.1 million dollars, which would bring the Rockets cap space to about $8.9 million dollars.

So What Exactly are the Rockets Options for Signing Free Agents

1. As much as $7.9 to $8.9 million in cap space - by renouncing free agents & non-guaranteed contracts.
2. Room Mid-Level Exception $2.814 million – This exception is only available to teams below the Salary Cap to use the salary cap space.
3. Mid Level Exception – If they remain over the cap
.....a. There is $5.464 million of Mid Level Money for 15/16 season
.....b. How much a team spends and where that team is in relation to the apron determines if that team has used the Tax Payer or Non-Tax Payer MLE.
.....c. The Tax Payer MLE is worth $3.376 million, which is the max amount a team can spend if they are over the Apron.
.....d. Once a team spends $3.377 million or more then it is considered to be the Non-Tax Payer MLE and activates the Hard Cap which is at the Apron
4. Minimum Player Salary Exception - $525,093,000 to $1,499,187.00 depending on the number of years in the league.
5. Bird Exception – Can exceed salary cap for free agents that are not renounced
.....a. Pat Beverly
.....b. Rockets can offer up to 5 years max salary with 7.5% raises
6. Early Bird Exception – Can exceed salary cap for free agents that are not renounced
.....a. Jason Terry
.....b. Corey Brewer
.....c. Rockets can offer up to a 4 years at 175% of previous salary with 7.5% raises.
7. Non Bird Exception – Can exceed salary cap for free agents that are not renounced
.....a. Josh Smith
.....b. KJ McDaniels
.....c. Rockets can offer up to 4 years at 121% of previous salary with 4.5% rasises.

Does It Make Sense to Use Cap Space to Sign Sergio Llull?

By renouncing all free agents and non-guaranteed contracts the Rockets could generate enough money to Llull what is essentially a contract starting at $5.6 million a season and have $2.3 million in cap space, $2.8 million Room Exception and minimum salary player exceptions to use. This would almost certainly ruin any chance the Rockets would have at keeping Corey Brewer he is sure to get an offer that exceeds $2.8 million. The Rockets would almost certainly be saying goodbye to Beverly & Papanikolaou as well.

The advantage is that by using Cap Space to sign Llull the Rockets would not be in any danger of activating the Hard Cap unless they completed a sign and trade deal. Using cap space would probably not affect the Rockets chances to resign Josh Smith or even KJ McDaniels since you could use cap space on Josh and the Room Exception on KJ. Since I have difficulty imagining a scenario where Jason Terry would get more than the $1.499 million minimum player contract, I would guess the Rockets would still be able to resign him if both parties were interested.

Does It Make Sense to Sign Llull Using the Mid Level Exception?

In my opinion this is the best way for the Rockets to sign Llull. By using the full Mid Level Exception to sign Llull they retain all Bird or Non-Bird rights on their free agents and can exceed the salary cap to resign them as allowed by that players exception. However by using the full Mid Level Exception to sign Llull the Rockets activate the Hard Cap. So what exactly is the Hard Cap?

The Hard Cap
The Hard Cap exists at the Apron and when activated, a team’s salary may not cross that point for any reason. The Hard Cap is activated when a team spends more of the Mid Level Exception than is allowed per the Tax Payer MLE, which is $3.376 million for this summer. So spending $3.377 million in MLE money activates the Hard Cap. Receiving a player that was signed and traded or using the Bi-Annual Exception will also trigger the Hard Cap. Since the Rockets used their Bi-Annual Exception this season on Josh Smith they do not have that option this season.

If the Rockets use the full MLE to sign Sergio Llull they must be below the Apron after the contract is signed. Since the Rockets are currently sitting at $83,507,504 in salary they would have to make a move to clear cap space. They could just cut Kostas Papanikolaou creating an additional $4,851,769 which would probably get them far enough below the apron to use the full MLE but Kostas is a good defensive player with a lot of promise and a $4.9 million dollar non-guaranteed contract is a valuable thing to just let go of.

As a free agent, Jason Terry represents $8,775,470.00 worth of Salary Cap space. If the Rockets want Jason Terry back next season (and that probably depends on how he does in the play offs) it would probably be for a Dikembe Mutombo type of deal at the player’s minimum of $1.499 million. Maybe the Rockets give him a little extra so he signs quickly but he is the most logical place to go to cut salary.

Has Patrick Beverley Played His Last Game as a Rocket?

At $915,243.00 Patrick is a terrific bargain for a 3 and D point guard that made the 2nd NBA All Defensive Team last season. But per Adrian Wojnorowski, Pat is looking to get a sizable pay increase this summer.

http://sports.yahoo.com/news/source...n-wrist--status-remains-cloudy-195143870.html

I don’t know how that plays out with his wrist injury but if the Rockets sign Sergio Llull and if they draft a point guard with the 14th pick, they may be inclined to let Pat walk instead of over paying for him. Nick Johnson could also factor into that decision. If nothing else, Nick has shown that he is an athletic and defensive freak of nature. If he learns to shoot the 3 ball with any consistency then the Rockets have zero need for Patrick Beverly. With an eye on the summer of 2016, Nick’s salary of $980,431 works a lot better than what Pat is certain to be making by then.

It may seem a bit risky to go into next season with a 2nd year point guard that spent most of this past season in the D-League and a rookie from Europe. But considering that James Harden runs the offense while he is on the floor and the Rockets would still have Pablo Prigioni, I think we may have seen Patrick Beverly’s last game as a Rocket.

Daryl Morey Will Be Handing Out One Year Contracts Like Candy

Daryl Morey is looking for one more mega free agent. That man is Kevin Durant. In order for Daryl to have any chance at steeling Durant the Rockets have to have enough to offer a Max Salary. If the Rockets sign Sergio Llull to a 3 year 17 million contract and including this years number 14 draft pick, the team will have ~$57,660,000.00 in obligated salary. When you factor in the Free Agent Salary Cap Holds for DMo and TJones as well as 3 incomplete roster spot charges the Rockets will have a salary of about $69 million dollars. If the Salary Cap is at $90 million as most suggest, that will leave the Rockets with about $21 million dollars in cap space. That is probably a few million dollars shy of what a max salary for Kevin Durant will be so the Rockets definitely do not want to have additional salary obligations in the summer of 2016.

With that in mind, I would expect Daryl to try to convince players like Brewer, Smith and even KJ McDaniels that this is not the summer they want to be a free agent. Sign a one year contract, compete for a championship and cash out during the summer of 2016 when virtually every team will have big wallets.

For Corey Brewer, the Rockets can renounce his Bird Rights to Non-Bird rights and give him a 120% raise from his current salary on a 1-year contract. That is still equivalent to a full MLE contract, which is very likely as big as any other offer he will get from any other team with out signing a long term deal. He can get a raise and still be an unrestricted free agent in the summer of 2016.

Josh Smith is a little more complicated. By using the full MLE on Sergio Llull, the most the Rockets can spend on Josh is the Non-Bird Exemption or 120% of his current salary. I would be shocked if Josh was not a major target for Mark Cuban this off season who would easily be able to outspend the Rockets for Josh. But what would be the real benefit of Josh signing a bigger contract with another team. Ill just post this explanation from another thread:

Thanks to aelliott who posted this explanation in another thread:

So maybe signing Josh at a 120% raise isn’t all so far fetched. Josh generally seems happy hear which might mean a lot after the time he spent in Detroit. And if Daryl can sell him on the 1-year contract offer for a chance at a much bigger pay-day in the summer of 2016 then he is hooked.

Conclusion

I’m excited about the possibility of finally getting Sergio Llull on the Rockets. I hope it happens, but more importantly I like the way the summer of 2015 and just as importantly the summer of 2016 look to be playing out.

With that being said, the one thing I did not touch on was the fact that Dwight has a player option for 2016. If Dwight ops out, that could end any plans for the Rockets to sign Kevin Durant and retain Dwight. Dwight’s cap hold would be the less of 150% of his salary (about 35 million) or the maximum salary player contract, which I’m guessing for Dwight, would be around 26 million or maybe more. The cap hold can never be more than the max he can make on a new contract.

Like many others, I suspect that one of either Terrence Jones or Donatas Motiejunas will be gone be the trade deadline in February 2016. They both have a lot of value and Daryl is not going to want to lose either one for nothing but in order to offer Durant a max contract he will have to shed at least one of their contracts.

 

What you don't think a rookie from Europe would be worth 17 million a season!!!! Thanks for pointing it out. LOL.

 

List of things to do... proof read. Thanks pbthunder, that does seem like a lot. :grin:

 

Thanks, but there will only ever be one Bima!

 

I think cap flexibility is just an excercise during this off-season. By creating cap room the Rockets could only offer Smith a few hundred thoushan dollars more as season. They would reduce what they could offer just about everyone else except KJ McDaniels.

there is just no way IMO that they would bring JET back for anything close to what he is making this season and he counts almost 8 million against the cap this summer. The Rockets should have plenty of room under the Apron to give everyone fair market value except for possibly Josh Smith. But as was outlined by in the OP, Josh does not get a huge advantage by taking a bigger contract then what Houston can give him due to the off-set. But if he can get a few dollars more a season that may be enough for him to jump, who knows.

IMO the Rockets are sitting pretty well to make a significant addition (Sergio Llull) this summer without hitting the apron and have enough cap space for 2016 to chase Kevin Durant. The only two players the Rockets should be worried about are Smith & McDaniels.

 

The Rockets don't have to choose between Brewer and Llull. If they value Brewer high enough to keep him, even if he gets a rediculous offer, they have plenty of ways to create enough room under the apron to sign him and still offer Sergio Llull the full MLE.

 

The contract is for 1 million a season for an emergency big that can play defense and rebound. Dorsey has been a steal for that so I'm not getting what the complaint is. He is on a minimum player contract, Dorsey has no affect on the Rockets ability to do anything this off season.