As we all know the NBA, as are all professional sports, are in a state of suspension right now. When, even if, the NBA returns is a question no one can answer. While the league, its teams, its players and the union are in agreement of trying to salvage what they can of the 2019-20 season, what that will look like is unknown.
What we do know is that there is likely to be an impact for the 2020-21 season in terms of where the salary cap and luxury tax are set. After the NBA’s snafu in China, the league sent out a new cap projection for the 2020-21 season of $115 million. That was surprisingly only $1 million lower than the previous projection of $116 million.
With the league having been shutdown since mid-March, and no sense of just how many games will be lost, estimates for further lowering of the cap vary greatly. Some suggest the league could lose as much as $1 billion in revenue if the remainder of the season is wiped out.
It’s highly recommended to read this article by Albert Nahmad. Few are better at understanding and explaining the business side of the NBA than Albert. He takes the time to explain what could happen and that the NBA and NBPA can do to work around revenue loss as much as possible as it pertains to the salary cap and luxury tax. It’s a complicated subject broken down into relative layman’s terms that I highly recommend checking out.
Since this is CelticsBlog, we won’t spend a lot of time on the league-wide impacts, but will focus on Boston specifically. However, to set the stage even with a cap of $115M, only six NBA teams projected to be cap space teams this summer:
1. Atlanta Hawks – $48.5 million
2. New York Knicks – $46.7 million
3. Detroit Pistons – $33.5 million
4. Charlotte Hornets – $28.0 million
5. Miami Heat – $26.5 million
6. Phoenix Suns – $24.4 million
This is important for laying out who could be competitive with Boston, as far as the Celtics retaining their own free agents.
One suggestion making the rounds is putting a lower bound on the salary cap for 2020-21 of only allowing it to go as low as this season’s mark of $109 million. The same six teams will still have cap space, just less of it. If the cap goes even lower, down to the most-pessimistic levels, the landscape could change entirely.
Boston has the following breakdown roster-wise heading into the summer of 2020:
· Potential Free Agents (6 players) – Tacko Fall (Restricted – Two-Way), Gordon Hayward (Unrestricted – Player Option), Enes Kanter (Unrestricted – Player Option), Semi Ojeleye (Restricted – Team Option, becomes Non-Guaranteed if TO exercised), Brad Wanamaker (Restricted), Tremont Waters (Restricted – Two-Way)
No matter what, the Celtics aren’t going to be a cap space team. They’re at over $95 million in guaranteed salary alone. And that’s before adding in any of the three first round picks, and also projecting to let walk all eight of the players who are non-guaranteed or potential free agents. That’s not going to happen. Thus, no cap space for Boston this summer.
What the Celtics are like to be is a luxury tax team. Just how high that tax bill goes will depend on what happens with those free agents. Here’s a projection on how those decisions play out:
· Hayward and Kanter both exercise their player options. Given the relative uncertainty of where things might be this offseason, both Hayward and Kanter are likely to opt in at $34.2 million and $5 million respectively for 2020-21.
· Boston issues qualifying offers for Tacko Fall and Tremont Waters. The qualifying offer for a Two-Way player is ridiculously low. The Celtics will retain rights to match any offer either signs for now.
· Celtics issue a qualifying offer for Brad Wanamaker. This one is tough, but it’s only $1.9 million for the QO for Wanamaker. He’s been a rotation player all season. There is also no guarantee Wanamaker would re-sign for that amount either.
As you can see, that means most of the team lines up to return next season. That’s probably not very realistic, considering the team could have as many as three first round picks in the 2020 NBA Draft. How Boston works around that will be worked out in an article next week here on CelticsBlog.
Decision points obviously exist with a few players, but the only ones that are big enough to really matter are with Hayward and Kanter. Let’s break down where the Celtics are at in that situation.
Let’s start with the cap of $115 million and a tax line of approximately $139 million.
If Hayward and Kanter opt in, which seems the most prudent path for both, Boston will be about $4.8 million over the tax. That’s a low enough figure that you can work around it easily enough. Danny Ainge could select a couple of “draft and stash” players and remove their rookie scale salaries from the 2020-21 cap sheet. It’s also a small enough number that a couple of small trades put Boston in range of avoiding the tax.
There’s also the idea that Hayward could opt out of his $34.2 million salary for 2020-21 and sign a long-term deal with Boston. That’s the approach the Celtics were hoping for with Al Horford entering the 2019 offseason. The idea is that Hayward would lessen his salary for 2020-21, while adding future years of guaranteed money.
Let’s say Hayward agrees to sign a new 4-year, $89.6 million salary. That lowers his salary for 2020-21 to $20 million (saving over $14 million), but adds over $50 million salary overall.
Boston could also structure the deal to be for the same amount of overall money, but front-load it. That gives Hayward more money up front, but the deal would decline as he ages. And the Celtics could position that 2020-21 salary at an amount that still keeps them out of the luxury tax for next season.
Now is a good time to remind everyone that Celtics ownership has said they’re happy to pay the luxury tax for a contender. Boston is poised to be a title contender behind Jaylen Brown (already locked up to a contract extension starting in 2020-21) and Jayson Tatum (due a new deal as soon as this summer). What is also important to remember is that every ownership group has limits to just how much tax they’ll pay.
The Celtics are carrying big salaries for Kemba Walker, Gordon Hayward (pending his option amount or a new contract) and Jaylen Brown for next season already. Jayson Tatum will undoubtedly join them with a max extension that starts with the 2021-22 season. That’s already an expensive team that is up near the tax for just four players.
That tax expense only gets greater if you trigger the repeater tax. Boston paid the luxury tax in 2018-19, which means they’ve started the repeater clock. Once you have paid the tax in at least three of the previous four seasons, you’re a repeater team. The Celtics won’t pay the tax in 2019-20, but are very likely to in 2020-21 and moving forward.
That should help explain why the Celtics would love to see Hayward opt out and re-sign for a lower salary in 2020-21. That would help delay that repeater tax from kicking in for a while.
What if this season can’t be saved and the tax is set where it is this year at $132.6 million? Everything gets a lot more difficult. Hayward has to accept a starting salary of around $25 million at the top-end. Even then, it gets messy trying to build the roster and still dodge the tax. If the cap/tax lines are set even lower than this year’s marks? Forget it. Boston is paying the tax for sure in that scenario.
Danny Ainge and Mike Zarren had likely put together a multi-year approach to building the Celtics roster. That approach surely included doing what they could to avoid paying the luxury tax for as long as possible, and maybe even avoiding it entirely. Now, like they are for everyone around the NBA, those plans are being adjusted on the fly. Making things even tougher is game-planning against unknown cap/tax lines.
Every NBA team has their cap teams working on multiple scenarios, ranging from optimistic to apocalyptic. For the Celtics, this summer was always going to make or break things for the next few years in terms of roster building. Now, for reasons completely out of their control, Boston could be forced into making already tough decisions even tougher.