Would a Big Cap Increase Help or Hurt the Pelicans?

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Published: April 19, 2014
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Yesterday, Larry Coon projected quite a massive increase in next years’ salary cap and the natural question to ask is: What does this mean for the Pelicans? Well, first let’s talk numbers. Coon projects the salary cap to go from $58.7 million to $63.2 million. That is a 7.7% increase, which is higher than the maximum allowed player raise on contracts from year to year (4.5%). Long story short, that means that numerous teams will have a good amount of cap room this summer if this increase does come to fruition.

As of right now, the Pelicans have seven guys locked into guaranteed contracts for next year – Anthony Davis, Ryan Anderson, Tyreke Evans, Eric Gordon, Jrue Holiday, Austin Rivers, and Alexis Ajinca. Combined, their contract count for $54.1 million. When you factor in cap holds, that means the Pelicans can start a free agent at a little over $7 million per year. The Pelicans would also have the ability to use the room exception, which would allow the Pelicans to give a player a maximum contract of two years and $5.7 million total.

So, is this good or bad? Sounds good on the surface, right? Having more money seems to be better for the team than having less money, but not so fast. Let’s dig a little deeper.

A Whole New World

Let’s imagine a world in which the cap barely goes up. This is the norm actually, as the cap usually increases two to three percent, at most. In that world, the Pelicans would not have had cap room but would have had access to the Mid-Level Exception and the Biannual Exception. They could have used cap holds to keep their own guys AND get two other players with exceptions while staying under the luxury tax. For instance, they could have re-signed Roberts, Smith, and Aminu, then gone after free agents with those two exceptions. Can’t do that now.

They can’t do that because you can only use those two exceptions if you don’t use cap room. Once you use cap room to sign or trade for players, you lose the right to use those exceptions. You can use the room exception, but that is a far less enticing exception to players and usually yields a lesser caliber of player. Put it this way – Greg Stiemsma was signed for about the same amount as the Pelicans will have with the room exception. The mid-level exception is twice as big and has been used to sign guys like: Martell Webster, Jamal Crawford, and JJ Hickson.

So that is the essential trade off – the Pelicans would get more cap room in this scenario to sign guys from other teams, but they would lose some powerful exceptions. In a world where there was a small increase, they could have signed Roberts, Smith, Aminu, Morrow (with the biannual), and a guy like PJ Tucker with the MLE. In this new world, they could theoretically still do that, but they would have to overpay those guys to get above the cap, only to have the exceptions. The more likely outcome would be that they use the cap room to sign a player and use the room exception on one of their own players.

Getting Deeper Into the Numbers

If Larry Coon is right above the cap increase, Jason Smith might be the casualty. It’s hard to imagine that the team would not pick up Jeff Withey’s option. If they do, that brings their cap room down to about $6.7 million. Bringing in Pierre Jackson and picking up Babbitt’s option would cut another 400K. Now, we are down to $6.3 million. If the plan is (and should be) to save the room exception for Anthony Morrow, then it would be very hard to get a good free agent AND keep Smith. Even if Smith only wants $2-2.5 million, then the Pelicans would have less than what the teams with the MLE could offer to free agents. That would put them at a huge disadvantage, and probably limit the type of guy they could sign.

But if they let Smith walk and can start free agents off at a million more than teams with the MLE can offer, that is quite an advantage. A guy like Trevor Ariza could have several teams offering him the MLE, but the Pelicans would be able to trump that offer by more than $5 million over four years. Same could go for a guy like Spencer Hawes. But we have to remember that the cap will increase for everyone. More money out there means that prices go up because there are now more buyers with more cash.

Waiting for 2015?

Earlier this month, I advocated for Dell to wait for 2015 because that free agent class is loaded at the 3 and 5 positions.  Coon states in his blog that the 2015-16 cap could climb all the way to $66 million. If that happens, the Pelicans could have nearly $25 million in cap room if they can unload Gordon before that summer. If the Pelicans can limit their spending this summer, and maybe just sign smaller contracts or guys to one year deals, then they can make their big splash in 2015, as the cap goes up more than $7 million between now and then.

Will This Make Gordon Easier To Trade?

Gordon is going to be a hard guy to move, but the more money that is out there and the more prices inflate due to that additional money, the less horrible Gordon’s contract looks. Fifteen teams will be in position to have up to $20 million or more in cap room  heading into this summer. Now, look at the guys hitting the market. Let’s assume Lebron and Melo aren’t going anywhere. Who’s the next best unrestricted guy on that list? Kyle Lowry? Lance Stephenson? Luol Deng? Marcin Gortat?

There isn’t a ton of talent on the market and there figures to be 6-8 teams standing there at the end of musical chairs, holding a bag of money with nobody to give it to. Gordon still won’t look incredibly appetizing, but he would be more palatable, especially if you don’t have to give up anything to get him.

So is it Good or Bad?

An increase that is this big will make it hard for the Pelicans to get the mid-level exception. But that might not be such a bad thing. They can use cap room to outbid teams that only have access to the MLE. The increase in cap room probably forces the team to part ways with Roberts, Aminu, and maybe even Jason Smith. The increase also gives you more flexibility with trades, though. If the Nuggets want to dump Wilson Chandler, but don’t want to take anything back, New Orleans can now absorb his entire contract without sending anything away – something they couldn’t do without the massive increase.

The biggest problem with the large increase in both the salary cap number and the luxury tax number is that it will likely cause prices to go up this summer. A guy like Lance Stephenson is likely the big winner here, as teams will chase him and Indiana will be able to increase their offer to him, since the luxury tax will increase quite a bit as well. Six million dollar players will get 8 or 9 per year; 3-4 million dollar players will get the MLE, and so on and so on.

My solution, as it almost always is, would be to zig while others are zagging. If teams see this increase as a chance to spend more money, you try to use it as a chance to unload some money (Gordon) and wait out the market. Instead of calling some free agent at 12:01 am like they did with Tyreke, just wait teams out and try to identify the next Anthony Morrow. Find one or two guys who are sitting around at the end of the dance, looking for a partner, and lock them in to one year deals. Let others overpay this year, and wait until 2015 to spend big on a piece that will really make a difference.

 

26 comments
OzTheGreat
OzTheGreat

I saw something on a page that says the pelicans contract for those 7 players only add up to 47 million. Where are these numbers coming from?

504ever
504ever

Michael,  

Would you all consider updating now the "Salary Central" part of BSS to include Coon's approximate 2014-15 cap figure, all of the 2014-15 cap holds, and the 2013-15 salaries of recently acquired players?  

I assume Roberts' cap hold is his $3+M QO figure that no one will give him; Aminu's is around $3.7M which  seems high; Smith's is $2.5M; etc.  Knowing the cap holds will tell us how much more  above the $7M in cap space the Pelicans may have to spend this summer and during the season.  (Hopefully, any of these guys they bring back are on 'only 1 year guaranteed' deals to maximize FA flexibility in 2015.)

Ogden Park
Ogden Park

Mac,

Don't we have JSmith's Bird rights? Wouldn't that allow us to make our moves with the cap space and room exception, and then ink Smith over the cap for whatever (assuming he would wait)?

Didn't see it mentioned...so maybe I missed it. But just a thought.

PelicanSaints
PelicanSaints

I agree, that they should wait until next summer...Moving Gordon should be top priority,but perhaps if they could get P.J Tucker or get a guy like Jordan Hamilton or C.J Miles for cheap on a one year deal would be a upgrade considering what we have now......

xman20002000
xman20002000

No reason to move Gordon...  He is one of our more efficient players...  and injuries occur every year..  Gordon is one of whose who got paid...  so was Peja but on the $80M level and Andrew Bynum what's his value and D Rose hasn't played in how long..  With players returning we have a different team... When we talk about Guards its Holiday, Gordon, Evans, Rivers, and Roberts...  How does Holiday impact this group...Morrow is also a SG...

Blackajack22
Blackajack22

How would out cap space look if we stretched Gordon this offseason?

Pelican Poster
Pelican Poster

I truly enjoy coming here to read articles like this...just wish I felt "better" after reading this one? I was all ready to get excited about unexpected cap room!

Feels like she accepted the date, but then called back to say she "couldn't make it"...

504ever
504ever

I like this, Michael but it leads to another factor: roster spots.  If everyone returns but Ely and Southland, and Pierre Jackson is added, the Pelicans' roster is full.  If Gordon is traded for more than one player, the Pelicans have too many players.  Who are the casualties?  Cheapies like Babbitt or Miller?  Quality and durable back-ups like Roberts or Aminu?  Or the often injured 'dumb zone shooter' and energy guy Smith?

Say what you want about Roberts and Aminu, but they both have an elite skill that is useful.  Aminu's is rebounding (and, to a lesser extent, running the floor as a PF).  Robert's is free throw shooting (and, to a lesser extent, scoring in general).  When you have a lead at the end of the game and the other team is shooting 3s, what do you need? Rebounding and free throw shooting.

I agree, Smith is the first to go.  I always liked Smith.  One of my early posts here was to defend him.  But the game has changed and his skill set, in my opinion, is a luxury the 2014-15 Pelicans can not afford.

champsworld504
champsworld504

Just when I thought it'd be a slow off season, here comes BSS with some more positive articles. I wonder if Dell reads this site? We should be better next season naturally if the NBA gods bless us with some health. Ridding ourselves of Gordon's contract would lift a huge cloud off of the team. My only fear is that they'll give Roberts a long contract.

Michael McNamara
Michael McNamara moderator

@OzTheGreat  Where are the wrong numbers coming from? No idea. 

You will get the right numbers here. No clue what you say, but if you post the link I can either show you where you misread or they are wrong. 

The Big 5 alone count for about 50 next year. 

Jason Calmes
Jason Calmes moderator

It will be updated, but not this week.

Michael McNamara
Michael McNamara moderator

@Ogden Park  But to keep a guys Bird Rights, you have to keep his cap hold on the books, which effectively eats away your cap space. So long story short, no that scenario would not be possible. 

Cadenza94
Cadenza94

@xman20002000 I think roberts gets moved for a 2nd. Gordon is the definition of meh. He's really not that effcient.

Morrow can also play the 3.

Holiday/Rivers

Evans/Gordon

FA 3+D SF/Morrow/Babbit

Davis/Ryno

Ajinca(unless we upgrade)/Withey

Michael McNamara
Michael McNamara moderator

@Blackajack22  It would depend on two things:

1. If he took a buyout before we stretched him

2. How much another team signed him for, thereby determining the off-set savings.

But, it would be at least an $9 mil increase in cap room and could climb as high as $11-12 mil in saving this year to add to the $7 mil we already have. So, if that was done, this team would have a ton of cap room, but really there arent great FA's in this class. Compared to the 2015 class, which has:

Marc Gasol, Tyson Chandler, Nikola Vucevic, Deandre Jordan, Omer Asik, Robin Lopez, Roy Hibbert, Kawhi Leonard, Chandler Parsons, Jeff Green, Thaddeus Young, Wilson Chandler, Tobias Harris, and Jimmy Butler

Cadenza94
Cadenza94

@504ever  Aminu is awful in every facet but rebunding. Roberts is outclassed by rivers and can be moved for a late pick.


Miller might not be back either because babbit is just better at this juncture.

Michael McNamara
Michael McNamara moderator

@504ever  Oh, the "but" is confusing. Read as, "But we add those three"

Either way, you are not going to ever see a roster with Rivers, Roberts, and Pierre IMO. Heck, Rivers and Roberts are too much if everyone is healthy, let adding Pierre to that too. So that is one spot. 

And Aminu is not coming back unless he takes a drastic paycut, which wont happen. That is two roster spots. 

Michael McNamara
Michael McNamara moderator

Why in the world would Ely or Southerland come back in any situation? Ever?

That should not be an issue

xman20002000
xman20002000

@Cadenza94 @xman20002000  Well Roberts and Miller are restricted..  I am not familiar with the tender system and how that works  He will have a job whether with us or not..  Morrow we need to pay..  Gordon works well with everyone.. distributes, perimeter shooter, creates his won shot.goes to the rim.  etc..  Good for the playoffs..  What about Aminu.. We can keep Ajica and Withey but what about Jason Smith.. 

DavidLeBoeuf
DavidLeBoeuf

@Cadenza94 @504ever  Aminu should be played as a small ball PF.  He's an elite rebounder and can finish near the basket.  Problem is we always have him sitting out on the perimeter trying to force him into being a 3

DavidLeBoeuf
DavidLeBoeuf

@Michael McNamara @504ever  I understand the premise of the article, but I really think that this will be a moot point.  I believe Dell will make a few deals that will change up the situation significantly before free agency gets into full swing.

504ever
504ever

@Michael McNamara  

Of course that is not an issue.   When you cut them and add Jackson we have a full roster.  That's the issue: other current players have to go to make room for acquired players.  Look again at what I wrote.

xman20002000
xman20002000

@Michael McNamara @DavidLeBoeuf@504ever Before Holiday went down we were flush at the PG position...  and it looks like everyone grew except Holiday for obvious reasons...  By default we have at least an on the surface answer considering Roberts is a restricted FA..  and he will play somewhere...  

But on the other hand you think you are flush at a position then toward the end we would have had to bring someone in had we gotten in the playoffs...  but agreeing we don't know how next season's team will look...  This one is in the history books and looking at this roster we have tradable contracts attached to younger players unlike the former structure..