With the New Orleans Pelicans’ 2014-15 season now officially at an end, it is time to start thinking about the summer and where the team stands within the rules of the salary cap. Our resident expert, Jason Calmes, will likely go into more detail later in the offseason, I thought it would be a good idea to take you through a high level approach of how much money the Pelicans can expect to have to spend this summer. (For the “tldr” version, just scroll down to the “Key Takeaways” section.)

First things first – if Dell Demps executes some sort of major trade, then this entire column must be revised. Given the fact that upon season’s end, only seven Pelicans players (Gordon, Evans, Holiday, Anderson, Davis, Pondexter, and a non-guaranteed deal for Douglas) are under contract, a trade can’t be viewed as an overwhelmingly likely outcome (though certainly still possible).

Next, we have to focus on the only real occurrence apart from a trade that could make this offseason much more active than expected, and that would be Eric Gordon deciding to opt out of the final year of his contract worth $15.5 million. With that being said, let’s look at a few of the different possibilities based on the decision Gordon makes (keep in mind that these are approximate numbers):

Gordon Opts Out (total cap space/max cap space for a single free agent)

• Pelicans renounce all free agents = $26.8 million/$23.7 million
• Pelicans keep Omer Asik’s bird rights & renounce all other free agents = $14.3 million/$11.6 million
• Pelicans extend $3 MM qualifying offer to Norris Cole & renounce all other free agents = $23.8 million/$21.1 million
• Pelicans re-sign Alexis Ajinca at $4.5 MM & renounce all other free agents= $22.3 million/$19.7 million
• Pelicans keep only Asik’s bird rights, extend QO to Cole, & re-sign Ajinca = $6.7 million/$5.1 million

Gordon Opts In (total cap space/max cap space for a single free agent)

• Pelicans renounce all free agents = $11.3 million/$8.7 million
• Pelicans keep only Omer Asik’s bird rights & renounce all other free agents = -$1.3 million/-$3.4 million
• Pelicans only extend qualifying offer to Norris Cole & renounce all other free agents = $8.3 million/$6.2 million
• Pelicans re-sign Alexis Ajinca at $4.5 million & renounce all other free agents= $6.8 million/$4.7 million
• Pelicans keep only Asik’s bird rights, extend QO to Cole, & re-sign Ajinca = -$8.8 million/-$9.8 million

Under the assumption that Gordon exercises his player option, there are additional considerations that must be made to account for the available salary cap exceptions. Before outlining those, take a look at some relevant cap-related numbers:

Gordon Opts In, Pelicans use full non-taxpayer Mid-Level & Bi-Annual cap exceptions (lowest possible total team salary)

• Pelicans keep only Omer Asik’s bird rights & renounce all other free agents =$77.5 million (over cap, under tax)
• Pelicans keep only Asik’s bird rights, extend QO to Cole, & re-sign Ajinca = $84.0 million (over cap, over tax)

For more detail, check out the chart below or go straight to the source.

Key Takeaways

1. Eric Gordon opting out is highly unlikely. That $15.5 dollar amount is one that he would not be able to recoup on the free agent market in year 1 of a new contract. Despite finishing near the top of the league in 3-point percentage last season, Gordon still finished with a PER of only 12.7; while I think PER undervalues Gordon’s contributions, it still goes to show how little else he provided for this Pelicans team apart from great perimeter shooting. With the cap set to jump next offseason, the more likely scenario is that Gordon plays out the last year of his current contract at a higher salary than he is worth, and then takes aim at cashing in on the new salary cap level.
2. If Gordon DOES opt out, there is no way to know how the Pelicans will adjust their plans. If this event occurs, then all of a sudden, the Pelicans can create enough cap space to go after pretty much any free agent they want by renouncing Asik. New Orleans may still decide to re-sign Asik depending on his cost and choose to retain some of that cap flexibility for the following offseason, but there is little doubt that freeing up that cap space a year early would be a net positive for the Pels.
3. If Gordon opts in and the Pelicans do not re-sign Asik, the opening night 2015-16 Pelicans roster will be inferior to the final 2014-15 roster. If Asik (& every other free agent) is renounced, New Orleans will have about $11.5 million in cap space; after factoring in cap holds, they would be left with about $8.5 million as the maximum they could pay one free agent (and that assumes they fill out every remaining roster slot with minimum salary players). The likelihood of the Pelicans upgrading from Asik with a max of $8.5 million to play with, especially with the cap expected to balloon from $67 million to $89 million in 2016, is close to non-existent. Assuming Gordon opts in, there are only two reasons NOT to bring back Asik – if his cost exceeds the value that the front office places on him, or if they don’t see him as a long-term roster piece. If the latter is true, it may make sense for the Pels to find a stopgap replacement for next season, & then make a more permanent decision when they have the cap space to do so in 2016.
4. If Gordon opts in and Asik is not renounced, the Pelicans will be operating as a team over the salary cap and will therefore have more immediate flexibility. This may sound counter-intuitive at first, but New Orleans being over the salary cap will give them more options this offseason due to cap exceptions (the non-taxpayer mid-level exception and the bi-annual exception) and because the Pelicans can go over the cap to re-sign their players from last season. Of course, signing players to multi-year deals will hurt the Pelicans’ cap room next summer, when they could have a significant amount of space depending on the decisions the team makes on Asik this off-season and Anderson next off-season. This flexibility does have an upward limit, though, which is outlined next.
5. If Gordon opts in and the Pelicans want to use their non-taxpayer mid-level and bi-annual exceptions on top of keeping Asik, Ajinca, & Cole, they will get dangerously close to the luxury tax apron. Keeping Asik, Cole, Ajinca, while using both cap exceptions would almost certainly put the Pelicans over the luxury tax threshold. This could be problematic for two reasons: first, we don’t even know if ownership would be comfortable being a tax-paying team. Second, even if Tom Benson signs off on it, the Pelicans would be hard-capped at the tax “apron”, ($4 million over the luxury tax), which could make it difficult for the Pelicans to make in-season transactions.
6. Based on the projected 2016-17 salary cap of $89 million, the Pelicans can enter the 2016 offseason with up to $39 million in cap space… or more. At present, the Pelicans have just 4 players under contract beyond next season: Evans, Holiday, Davis, and Pondexter. Though Davis’ max contract is not yet solidified, under the assumption that year one of that extension will be about $25 million, that would bring the team’s total commitments to roughly $50 million. In case you were wondering, a max contract for someone like Durant or Horford would start at exactly the same amount as Davis’ extension. This fact does not mean that the Pelicans should completely avoid spending money before next summer; after all, cap space is useless unless you can find players worth occupying it. Furthermore, the team could easily move a guy like Tyreke next summer, as he will be making only about 11% of the cap in the final year of his contract in 2016-17. The Pelicans just need to make sure to put themselves in a financial position that will provide them with the cap space to attract top talent. See the chart below for the current outlook on the 2016 offseason:

Hopefully, this column has given you a better idea of what the Pelicans can and cannot do this offseason, and expectations can be managed accordingly. If you were Dell Demps, what you would do this summer?

Special thanks to both BasketballInsiders.com and Larry Coon’s CBA FAQ for the data necessary to put this column together.

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