Pelicans May be Ready to Trigger NBA Hard Cap of $125 Million

By:
Published: July 18, 2017

Over the past week or so, Jason and I have published multiple articles on how Jrue Holiday’s contract impacts the Pelicans’ salary cap situation, even suggesting a possible player to target given the inherent restrictions. The Pelicans’ planned course of action for the rest of the off-season became clearer today due to an unexpected finding. According to NBA insider Bobby Marks’ article published today on ESPN detailing all 30 NBA teams’ summer signings, Darius Miller’s 2017-18 contract will pay him $2.1 million. Now, this deal may not become guaranteed until a later date, but that point is moot in the context of the bigger picture.

At present, the Pelicans reportedly have added three players this summer – Miller, second round pick Frank Jackson, and Rajon Rondo. Combined, Jackson and Miller’s contracts are worth about $2.9 million for the upcoming season. Given the fact that the Pelicans are over the cap after re-signing Jrue Holiday, the team must use a salary cap exception to sign each of these players. In order for New Orleans to avoid the hard cap, the amount that they pay those three players in total for 2017-18 must not exceed $5.2 million.

If you’re doing the math at home along with me, you now realize that unless Rondo’s salary is $2.3 million or less, the Pelicans are going to hard-cap themselves. Furthermore, the veteran’s minimum for a player with 10+ years of NBA experience is, ironically enough, $2.3 million. If Rondo were going to accept that salary, the Pelicans would be able to sign him to a minimum contract and not use any cap exceptions to do so. While it would be great for New Orleans if he would agree to that amount, the most likely scenario is that the team is signing him for more than the minimum and is therefore hard-capped at $125 million ($6 million above the luxury tax threshold). Scott Kushner’s comments to Jake Madison during today’s Locked on Pelicans podcast support this belief.

Final judgment should be reserved until the roster for next season is finalized, but for now, this string of decisions is rather curious. Darius Miller’s 3 years of NBA experience means that his minimum salary would be just over $1.5 million. This bit of information combined with Kushner’s report that “several teams wanted to bring Miller in” show how determined the Pelicans were to sign him – enough so that they were reportedly willing to use $2 million of their cap exception space to add $600K to their offer.

Given all available info, the most logical explanation for this string of moves is that the Pelicans decided the hard cap is worth enduring in order to bring Rondo to New Orleans. This decision is a remarkably questionable one, as it will require some shedding of salary to add any additional talent to the roster. After testing the market, Dell Demps chose to sacrifice flexibility in trades that would add salary in favor of more flexibility now provided by increased salary cap exception space.

Based on the Pelicans’ current roster, the most that the Pelicans can offer Rondo right now appears to be about $5.3 million, shown in the hypothetical cap sheet below (the second salary column contains all contract incentives in addition to guaranteed salary that would apply to the hard cap):

The logical next step from here is to shed enough salary to both 1) sign Rondo at whatever price the two sides have verbally agreed upon and 2) re-sign Dante Cunningham. Taking care of #1 should be manageable, but #2 will probably cost the team an asset (unless Asik is waived and his contract is stretched).

The Pelicans’ recent additions have put them in an unenviable position from an asset management perspective. Time will tell whether adding Rondo is worth the lack of roster flexibility that comes with it.

0 comments