The Power of Nothing

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Published: July 3, 2017

The New Orleans Pelicans have made just one significant move this offseason, and that is signing Jrue Holiday to a 5-year deal. There needs to be more to help to shore up the playoff chances for the team, and to make a good show to help keep the stars they have and potentially entice another star to come to New Orleans. As it turns out there are some hidden gems on the Pelicans’ books, and I’m here to point them out.

We know Dell is out there working, not just on Free Agents, which is not where his comparative advantage lies, but also on trades, where he does pretty well. Say what you want about his targets, he gets the job done, and that is the point.

One consistent weakness of the Pelicans in trades is their lack of assets with which they’re willing to part. The most commonly mentioned asset is their first round picks. Some of this is just draft-lovers or negativity-spewers who just feel like trading draft picks is uniformly bad, but I’ve not seen a solid analysis from them that says otherwise. To be fair, that is because it can’t be produced because the data does not support the claim. Even if it could, most of them couldn’t produce it anyway.

When a team lacks good players on fair deals, then cap space is perhaps an asset, but the Pelicans don’t really have this. They can conjure up some, but not unilaterally unless they incur costs in later years, too (likely).

Nonguaranteed Salary

The Pelicans, however, have some nonguaranteed salary on the roster. It was not so true recently, but the NBA may end up in a place where the Pelicans’ nonguaranteed salary contracts have some extra value. In recent years, the cap was rising and rising more than initially planned. This gave teams extra wiggle room. The most recent cap increase was less than expected. Also, last offseason’s spending bonanza may have overshot the expectations, too, and now cap space is a little tighter. This is one reason teams are a little slower with their signings this offseason. The slower pace allows clearer heads and changes the negotiations, since few teams bidding for a player’s services lowers the public value of the player, which lowers the team’s private value of each player to a degree in some cases. This cashes out as some bargains for teams out there. To cash in on those bargains, they need a mechanism to sign those players.

Future salary also matters. When a team can sign a player this season, but future salary puts a team at risk of going into the tax for a future season, and team may want to make moves now to protect themselves against that eventuality.

For these reasons, nonguaranteed salary is useful, because it can just be removed the books by waiving a player. Sometimes a partially guaranteed amount remains, but it is still an improvement.

In addition to all that, the CBA that kicked in July 1 changed the way nonguaranteed salary works in trades. With contracts signed under the prior CBA, the nonguaranteed portion of salary was counted as part of outgoing salary in trades. This allowed a team with, say, a contract with $4m of $5m nonguaranteed to trade to receive a player back that would be compatible with a $5m salary, say, $7m, but the trading team could waive the player with the nonguaranteed portion, leaving just $1m on the cap in some fashion. This is a $6m savings. This could be used to go from a taxpayer to a nontaxpayer (which is a tax receiver, actually) or to add or create cap room a follow-on move. With new contracts, the outgoing salary for this player is only the guaranteed portion, so the player could not be used to wipe out as much salary from the trade partner. This makes nonguaranteed contracts less valuable going forward.

The Pelicans’ Nonguaranteed Salary

Big deal . . . where’s the good news?

The good news is that the Pelicans actually have some decent nonguaranteed salary on the books in prior CBA contracts. This means the “old way” of doing things is in place for those contracts. Moreover, the Traded Player Exception, which governs trades going forward, has changed in a way that will benefit the Pelicans in that it will allow even more salary in return.

The Pelicans have 3 players under contract who salary is nonguaranteed. Thanks to Basketball Insiders and Eric Pincus for the data that follows and the digest of the CBA Changes, along with Larry Coon and his FAQ and personal communications over the years, of course.

  • Jordan Crawford: $1,709,538 (unguaranteed, then fully guarantees on August 1)
  • Axel Toupane: $1,471,382 (unguaranteed, then $25,000 guaranteed on July 5, $100,000 on July 25, then fully guarantees on January 10, 2018)
  • Quinn Cook: $1,312,611 (unguaranteed, then $25,000 guaranteed on July 5, $100,000 on July 25, then fully guarantees on January 10, 2018)

Cook and Toupane can not be traded until July 8, but that is just a detail about the execution of a trade; it will not impede the agreement to a trade. Even in a restricted free agent situation, there should be time to get the deal done, but that may be the only real issue.

So, July 5 is an important date, but any teams receiving Toupane or Cook in trade would not have to pay a significant amount to waive them. This amount is nearly CBA-undetectable.

Here is a rundown of what the Pelicans can get back in trade, maximum (with the rule being “maximum in return salary is $100,000 more than 175% of outgoing salary”):

  • Cook: $2,397,069
  • Toupane: $2,674,918
  • Crawford: $3,091,691
  • Toupane and Cook: $4,971,987
  • Crawford and Cook: $5,388,760
  • Crawford and Toupane: $5,666,610
  • Crawford and Toupane and Cook: $7,963,679

Something for Nothing

The Pelicans can tailor the outgoing players to minimize loss, or just send those players as assets to other teams to use similarly. But, they can add close to an MLE contract via trade without touching the exception. This also does not trigger the hardcap that spending over the taxpayer MLE would. Of course, these contracts can only be used in this manner to acquire player in trade. Sign-and-trades will work here, but the hardcap will apply. Adding the max salary will also thin the roster and necessitate some signings to backfill. All of this may make the hardcap a consideration, depending on these and other moves.

Also, and this should be considered carefully, there is another deal on the books with a partial guarantee: Omer Asik. He is due $10,595,505 this season, $11,286,518 next season, and $11,977,527 the following season. That last season is only partially guaranteed for $3,000,001, however. It guarantees on July 1, 2019, the first day of that last season. So, he would need to be waived next season to trigger the benefit. This is a massive savings, however, nearly $9m. Some team may want this, just as Rashard Lewis’ contract was traded as that nonguarantee date in his contract got closer. In other words, his contract at the end of the 2018-2019 season could be very valuable, and that possibly high value will make his contract on the approach potentially more valuable than has been given credit for to this point. Each day the contract is held, the value accrues. How valuable? We’ll see. It’s a risk, but while the team should do what it takes to get better, they should hold onto Asik while it is possible to “move around him” as the value builds rather than dumping him just because. This won’t make him valuable to everyone, mind you, but in situations that could arise that clause could have value far above the simple value of his play or the expiring nature of the contract.

At any rate, those are some hidden gems. Combine them, maybe you let a team offload a contract in steps. Asik, pick, nonguaranteeds can bring back over $20m, yielding $10m in savings this season, then when a nearly-effectively-expiring Asik on the books for the following season as a potential contract asset. A team looking to reset and doesn’t mind paying wins now for wins later . . . ahem . . . could very well see appeal in this in itself or as the starting point for a significant deal . . . multiple players, multiple picks, take some “bad contracts” back that can play, us the trade exceptions to swallow more salary from a third team, fire off empty rights to a player or cash or a protected second . . . in part replace Asik who is stuck behind Davis and Cousins regardless of what you think of him, and maybe you get that star for all that trouble.

And for nothing.

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