Tuesday November 3rd, 2015

The long-awaited re-signing of Tristan Thompson to a five-year, $82 million contract finally rounded out the Cleveland Cavaliers’ roster. It also rounded up the luxury tax bill for Cleveland owner Dan Gilbert to a projected $65 million on top of a $110 million team salary. Nevertheless, Gilbert is comfortable with that amount, noting that, “if you at the margins start pulling back, I think that may be foolish on a lot of fronts…” For the Cavaliers to maintain their current core, not to mention improve it, that attitude will need to continue.

After the Thompson signing, many of the key performers are under contract long-term. But two starters, LeBron James and Timofey Mozgov, are not, and both are well-positioned to take advantage of their rising market values next summer, when the salary cap will explode to a projected $89 million. 

James has a player option for next year that he almost certainly will decline, making him a free agent once again. It is expected he will re-sign for his projected maximum starting salary of $29.3 million. Depending on his preference, he could sign a third straight “1-plus-1” deal, which would allow him to become a free agent again in 2017, or he may decide to finally lock in for a long-term deal (up to four years) at age 31. If he waits to do that until the summer of 2017, though, his maximum salary is currently projected to be over $35 million to start. 

The latter option has some risks — namely injury and, more important, a potential change in the labor agreement that could shrink the cap. Nevertheless, James’ negotiations should be easy due to his artificially limited maximum salary; Gilbert will simply give him whatever he can legally ask for, and James has no reason to leave.

Mozgov, on the other hand, will be a tougher negotiation. He makes a mere $4.9 million this year in the last season of a three-year pact he signed when he was with the Denver Nuggets. The Russian center essentially is an average starter when healthy, and he will turn 30 in July. His negotiations should be fascinating. Average starters under the new cap regime likely will make about $15 million per year on the open market; perhaps Mozgov, given his age, could expect a small discount off that on a three-year deal under normal circumstances. But as we saw with Tristan Thompson’s above-market deal, the dynamics in Cleveland are anything but normal. The Cavaliers are trying to win championships, and as a tax-paying team, they have few (if any) realistic options to replace Mozgov’s production.

Data from Basketball Insiders

The Cavs desperately need Mozgov’s rim protection, which he and his representatives are well aware. With James’ enormous cap hold, Cleveland has no realistic path to salary cap room next summer, even if Mozgov were to walk. For now, let’s call it a three-year, $45 million deal for Mozgov to return to Cleveland, but he could easily get more than that. Unlike Thompson, he is not a restricted free agent, so offers from other teams are likely. Mozgov almost certainly will have the leverage to leave if his salary demands are not met.

If and when Mozgov returns to the fold, Cleveland will be almost as far into the tax as this year, without accounting for the use of its $3.5 million taxpayer mid-level exception (MMLE) and re-signing point guards Mo Williams and Matthew Dellavedova.

Cleveland will be able to match any offer for Delly as a restricted free agent, but Williams can opt out of his $2.2 million deal. Cleveland would be limited to re-signing Williams to a contract starting at $2.5 million via the non-Bird exception (120 percent of his prior salary since he will have only been a Cav for one year) unless they dip into the MMLE to bring him back.

So, say Williams returns using the non-Bird exception, Dellavedova re-signs for a reasonable $2.5 million per year on his own, and the Cavs use the MMLE on another wing. Fill out the roster with a minimum contract, and that’s a cool $27 million over the tax for Gilbert. The penalty: over a $70 million payment. On top of a $135.6 million payroll, that’s a total of over $200 million, which would be the largest one-season roster cost in NBA history.

Data from Basketball Insiders

Nor would relief be forthcoming in 2017–18. If James re-signs for his maximum that year, Cleveland would have $123 million committed to a projected eight players, with significant needs for backup smalls. And that year, the Cavs could face the repeater tax if their salary exceeds the estimated $131.6 million tax threshold, as they will have paid the tax in three of the four previous seasons.

Though capped out, Cleveland does have ways to improve the current roster. Twenty-year-old Turkish wing Cedi Osman might be the best future asset in Cleveland’s cupboard. Selected 31st overall by the Cavs in 2015, he wowed at Eurobasket as perhaps the Turks’ best player, combining fantastic energy with a terrific feel for angles in getting to the basket and an improving jumper. 

Osman’s contract with his club team, Anadolu Efes, should provide him with an NBA out for the 2017–18 season. As a second-rounder, he is not bound by the rookie wage scale. In the new cap environment, a contract similar to the Minnesota Timberwolves’ Nemanja Bjelica — about $3 million a year for three years — should be realistic. To do that, Cleveland would likely have to dip into its 2017–18 MMLE.

Cleveland also owes a top-10-protected first-round draft pick to Phoenix. After the 2016 draft, that obligation will be fulfilled, so Cleveland can then can trade any future first-rounders if it should desire. Pick(s) and/or the rights to Osman may be crucial to convince another team to part with an appropriate player.

Another “asset” also arose from obtaining Brendan Haywood and his non-guaranteed 2015–16 salary in the summer of 2014. Unable to find a trading partner for Haywood this past summer, the Cavs parted with two second-round picks (obtaining a whole $75,000 in cash back from Portland, per Basketball Insiders) as the price of trading Haywood and Mike Miller to Portland. The deal enabled Cleveland to obtain traded player exceptions (TPEs) worth $10,522,500 for Haywood and $2,854,940 for Miller, both of whom were subsequently waived by the Blazers. Those exceptions expire on July 30, 2016, so the Cavaliers were able to essentially roll over the ability to take on additional salary until as late as next summer, despite being over the cap.

Notwithstanding the tax considerations, this team really doesn’t need that much more at full strength. Cleveland could potentially use a better backup three, but with James, Iman Shumpert and J.R. Smith, with veteran Richard Jefferson as a fourth wing, it is fairly covered there. Point guard will go three-deep with Kyrie Irving, Williams and Dellavedova, and the bigs go four-deep, although Anderson Varejao (returning from a torn Achilles) and Sasha Kaun might be question marks. 

Unless the Cavs suffer a season-ending injury, it is unlikely that using the Haywood trade exception before the trade deadline would net enough of an upgrade to justify spending another $50 million or so of Gilbert’s money. (The damage: estimated about $3 million in actual remaining salary at the trade deadline, plus over $40 million in luxury taxes — calculated off team salary on the last day of the regular season — depending upon the player obtained.) The more likely use of the TPEs is next summer.

One thing Cleveland will not be able to do, though, is obtain a player in free agency via a sign-and-trade. With James's and Mozgov’s cap holds on the books, at no time will they be able to drop below the tax line. Even if they did, they would then be hard-capped at the Apron ($4 million above the tax line) for the duration of the season, which is an untenable situation.

So, Cleveland likely will be limited to targeting players under contract with other teams who are making $10.5 million or less. The potential needs: Another wing, a backup point guard if Williams were to leave, or a fourth big if Kaun or Varejao disappoint this year. 

What players fall into those categories who might be obtained with the assets on hand? There are no game-changers. In the new cap environment, most players who would really help a championship team are either on rookie contracts (and thus cheap enough to hold onto) or are making more than $10.6 million (the amount of the TPE plus $100,000) per year. Still, there could be some options:

· Depending on the type of year it has, Portland might decide to sell on Ed Davis, Mason Plumlee (who doesn’t make a ton of sense there with Meyers Leonard) or Al-Farouq Aminu.

· Marco Belinelli or Kosta Koufos from Sacramento could be available, with younger players Ben McLemore and Willie Cauley-Stein at their positions. Koufos could even be a backup plan if Mozgov were to leave via free agency.

· Channing Frye from Orlando could add a shooting element at backup center, although he is currently on the fringes of the rotation there and may be about done as a solid contributor.

· Kyle Singler has played little in Oklahoma City so far on his new $5 million-per-year contract, and could fill a need for shooting on the wing.

· Brandon Bass from the Lakers could provide some athleticism and switchability for the second unit if he opts into the second year of his deal at $3.1 million, though he struggles in more complex defensive systems.

· Houston may be trying to move salary next summer, which could include Corey Brewer or Patrick Beverley.

· Jodie Meeks makes $6.5 million in the last year of his deal in Detroit.

· Atlanta would likely be loath to assist an Eastern Conference rival, but if it disappoints this year and/or Al Horford leaves, Tiago Splitter ($8.6 million) could be available in the last year of his deal. Thabo Sefolosha ($3.9 million) might also help the Cavs.

These are not luminaries. Assuming Mozgov re-signs, are any of these players worth giving up a first-rounder, not to mention Osman? Cleveland is out all of its own second-rounders through 2020, with only the less favorable of Minnesota’s or the L.A. Lakers’ 2019 pick in the credits column, so giving up less than a first-rounder isn’t really an option. Perhaps a few of the players might be available as pure salary dumps (Brewer or Meeks come to mind), but that is where the Cavs’ tax payment comes in. Projected to be at least $25 million over the tax line before adding additional salary via the trade exceptions, every dollar added will basically cost Dan Gilbert five dollars extra. Using the full Haywood trade exception is likely a $50 million proposition in 2016–17, just as it would be this year.

One other potential construct would be a trade involving Varejao and his $10.4 million salary, along with a first-rounder, for one of the above players. That would likely be more palatable to Gilbert’s wallet, although the receiving team may balk at taking on salary as the price for the first-rounder.

With Kevin Love playing well and the Cavs big favorites for another Finals appearance, we’ll eschew discussing the nuclear option of trading him at this point. Any such deal would be unlikely to obtain equivalent talent, and Cleveland would have no desire to load up on future assets from a team like Boston or Phoenix.

The bottom line is that Cleveland projects to have a great and expensive team for the foreseeable future. In the absence of major injuries or unexpected performance declines, any realistic efforts to improve the team by adding salary likely would make it a lot more expensive for an incremental on-court improvement. Trading a first-rounder or Osman for a reserve might appeal in the short term, but those assets are the Cavs’ best hope for infusing the team with young and cheap talent as James moves into the decline phase of his career. While the Haywood contract and resultant trade exception have been hyped, it may ultimately behoove Cleveland to eschew a big score.

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