Roth: Money matters mucking things up for Cavs

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Leading into the 2018-19 season, the Cleveland Cavaliers have a total of $106,287,158 committed to player salaries. As I’ve mentioned in other articles, the salary cap for the upcoming NBA season is expected to be around $101 million, which means the Cavaliers will be over the cap.

The Cavaliers are in this situation, because they have five players that will earn well more than $10 million in the 2018-19 season, including Kevin Love, who will bank $24,119,025, George Hill, who will rake in $19,000,000, and Tristan Thompson, who will collect $17,469,565. Whether or not Cavs fans think those players or J.R. Smith (2018-19 salary of $14,720,000) or Jordan Clarkson ($12,500,000) are actually worth as much as they will earn is another issue all together.

Nevertheless, given that the Cavaliers will be over the cap, the organization will only be able to sign players using exceptions and minimum salaries. In other words, the Cavs won’t be able to sign any unrestricted free agents, meaning that if they want to add some NBA superstars to the roster to try to get LeBron James to stay in Cleveland, they’re going to have to do it using trades.

The good news for Cleveland fans is that in addition to the standard exceptions granted to teams over the cap, the team also has four trade exceptions left over from the 2017-18 season that can be used to help acquire players through trades ($5,811,114 trade exception from Kyrie Irving, $2,500,000 trade exception from Richard Jefferson, $1,312,611 trade exception from Kay Felder, and a $1,471,382 trade exception from Dwyane Wade).

For the reasons previously discussed, the Cavaliers ability to add an NBA superstar (i.e. Kawhi Leonard, Paul George and/or Chris Paul) is somewhat limited from the start. Unfortunately, the situation with LeBron handcuffs them even more. Since LeBron has declined his player option, if LeBron decides to stay in Cleveland now and signs a max deal, his salary for the 2018-19 season ($35,350,000) will raise the total salaries the Cavs have committed to the upcoming season to $141,637,158.

The reason that is an issue is because, at that point, not only will the Cavs be over the luxury-tax level, but they will also be well over another threshold that subjects them to additional restrictions (if the salary cap is set at $101,000,000, the threshold I am talking about will likely be around $126,531,313).

Specifically, unless a transaction/trade would leave the team below the aforementioned threshold, among other restrictions, the Cavs would lose their bi-annual exception, their mid-level exception would be reduced, and perhaps most importantly, they wouldn’t be able to receive any player via a sign-and-trade.

If that happens, any hopes, however slim, of seeing Paul and/or George in a Cavaliers uniform next season is out the window, since both of them are unrestricted free agents and the Cavs won’t have the ability to sign free agents unless they use exceptions (none of which will work to sign George or Paul).

Since Paul and George aren’t options, the next best move the Cavaliers could make to try to convince LeBron to stay would be to acquire Leonard.

On the upside for the Cavs, Leonard wants out of San Antonio as soon as possible, and the team would not have any issues making a trade for Leonard work legally within the salary cap rules. The fact that the Cavs are in the Eastern Conference would certainly be a positive from San Antonio’s viewpoint as well.

With that being said, however, since Leonard is set to make $20,099,188 in the 2018-19 season, the Cavs can’t use any of their trade exceptions, which means they would have to move some players to make a trade work. Love in exchange for Leonard or Hill in exchange for Leonard would both work, although San Antonio would also probably want some cash and/or draft picks in those scenarios as well.

It’s also important to note that Leonard has a 15-percent trade kicker in his contract, which complicates things a little bit, because San Antonio would have to pay Leonard $3,014,878.20 extra upon trading him, unless he either waives the kicker or agrees to take a lesser amount.

Since Leonard is the one asking for the trade, however, it is very possible he would waive it, unless San Antonio trades him to a team he has no desire to play for in the upcoming season. Assuming Leonard doesn’t waive the trade kicker, the most San Antonio will be able to take back in any trade for him (with any team), will either be $25,223,985 or $20,199,188, depending on whether or not the Spurs want to acquire a trade exception out of the deal.

If San Antonio decides it wants a trade exception, the only player that the Cavs could trade in order to make the deal legal for both sides would be Hill (San Antonio would get Hill and a $1,199,188 trade exception (and possibly a draft pick), and the Cavs would get Leonard).

If the Spurs don’t care about taking back a trade exception, the Cavs will have way more options to make a deal for Leonard work. To that end, Leonard could be traded for Love or Hill, or Leonard could be traded for any combination of players from the Cavs, provided the aggregate amount of player salaries going out is at least $18,411,252.96 and does not exceed $25,223,985 (there are a number of possibilities in this scenario). Given how little the trade exception would be in the former option, I doubt the Spurs would choose it, but it is certainly possible.

The downside for the Cavs is that even if they can work out a deal with San Antonio in which they acquire Leonard, he will likely only be a one-year rental. Leonard has a player option for the 2019-20 season, and he has made it known that he would like to play for the Los Angeles Lakers.

Thus, unless the Cavs win an NBA championship in the year that they have him, there is a high probability that he will bolt to Hollywood once he has the ability to become a free agent. At the same time, it’s also unlikely Leonard alone would make the type of difference the Cavaliers need at this point.

Without a doubt, adding Leonard to the Cavaliers alongside James would instantly make them better, but it would still be extremely difficult, and fairly unlikely, that the team would be able to knock off the defending NBA champs. Golden State’s arsenal is just too deep, and it’s likely going to take a team equally as stacked to beat it.

Needless to say, the Cavaliers are in a very tough spot. Yes, they can certainly make some moves and get some new faces in the locker room, but they’re almost undoubtedly not going to be the faces James would really like to see, or needs to see in order to allow the organization to have a chance against the Warriors, or any Western Conference team in the NBA Finals, for that matter.

For that reason, if James wants to win more NBA titles now, his best bet is joining Paul and James Harden in Houston. As I explained in my previous profile on Houston, making that happen is going to be difficult, but it is possible.

Outside of the Rockets, James’ next best option, because of the cap space they can create, is the Los Angeles Lakers.

Ultimately, only time will tell how this all plays out, but regardless of what happens, it is going to be fun to see the drama unfold in the coming days and weeks. Stay tuned for more NBA salary cap and legal analysis over the course of the free-agency period and throughout the year.

ABOUT THE AUTHOR —Steven Howard Roth is an attorney in Cleveland, representing clients in mergers and acquisitions, commercial real estate transactions, banking and finance matters, and business start-ups. Steven holds a JD and an MBA from Case Western Reserve University, and has extensive experience in the area of sports, media and entertainment law, having worked for multiple professional sports teams, governing bodies and sports agencies, and representing athletes, artists, media personalities and Grammy-winning recording artists.