The Knicks' summer spending
By Jared Zwerling | ESPNNewYork.com
If you thought dissecting the collective bargaining agreement and a team's spending cans and cannots were tricky, you're definitely not the only one. In fact, as one veteran NBA journalist put it, "It's a minefield. Even GMs call the league and say, 'Can I do this?'"
Now that the Knicks' season is in the books, what are their options when the free-agency period starts July 1? ESPN New York's Jared Zwerling consulted with NBA salary cap expert Larry Coon to get the answers you need and more.
For starters, the Knicks are currently $5.6 million above the league-mandated $58.044 million salary cap. (On July 1, if the cap stays the same, which it likely will, they will be $5.65 million over.) Currently, the main players under contract for next season include: Carmelo Anthony, Amare Stoudemire, Tyson Chandler, Iman Shumpert and Toney Douglas. In addition, J.R. Smith has a player option of $2.443 million, Josh Harrellson has a team option of $762,195, Jerome Jordan has a non-guaranteed salary of $762,195 and while Renaldo Balkman cleared waivers this past season, he's still owed some salary that counts against the cap. The team's restricted free agents are Jeremy Lin and Landry Fields, and the unrestricted pool includes: Steve Novak, Baron Davis, Jared Jeffries, Mike Bibby, Bill Walker and Dan Gadzuric.
Looking ahead to the offseason, the key moves for the team include Smith's opt in or out, potentially re-signing Fields, using their mid-level exception of about $3 million (taxpayer) or of about $5 million (non-taxpayer), potentially using their bi-annual exception of $1.98 million and then spending a couple of veteran's minimums of $1.4 million each. Their biggest hurdle will be deciding which amount of their mid-level exception to give to Lin.
Here's the full breakdown:
Smith has a player option of $2.443 million for next season, which he can opt out of. The Knicks will know by July 1 if he's going to do so. If he does, that means the team will still be above the cap ($3.157 million), and they won't gain anything. That $2.443 million is not extra money that actually exists in order for the team to sign someone else.
Even if Smith opts out, the Knicks could re-sign him for a 20 percent raise based on his $2.382 million salary from this past season. That's enabled by the Non-Bird Exception, which would put him at $3.097 million for 2012-13. A source told ESPN New York that Smith's father, Earl, is going to make a strong case for his son to stay in New York, but "it's very clear that the money is the biggest factor with him."
In fact, when Smith chose the Knicks over the Clippers in mid-February after coming back from China, a source said the Knicks' higher offer ($2.443 million to the Clippers' $1.4 million veteran's minimum) was the deciding factor because he was financially broke. Therefore, Smith will likely opt out and ask for the 20 percent raise. At that point, the ball will be in the Knicks' court to re-sign Smith, who's already said publicly that he wants to return next season.
During the lockout negotiations, the league wanted additional spending restrictions to be placed on all tax-paying teams. But the players' union managed to wrest one concession in the final labor settlement: those restrictions wouldn't be triggered once a team is above the tax line. As a result, the owners gave teams a little extra breathing room. They defined a point $4 million above the tax line, which they call the "apron," where those restrictions kicked in. With an anticipated $70 million tax level, the apron will come in around $74 million this summer.
One of the restrictions placed on teams above the apron was the smaller mid-level exception of about $3 million, while teams under the apron could have the larger mid-level exception of about $5 million. Since a team above the apron can't offer more than $3 million in a mid-level contract, the converse is also true: a team that offers more than $3 million in a mid-level contract can't subsequently exceed the apron.
The consequences are potentially devastating for teams with payrolls below the apron. If a team spends more than $3 million of its mid-level exception, then the apron becomes a hard cap for the remainder of the season. If you're a General Manager trying to assemble a winning roster, "hard cap" is an ugly, ugly phrase.
Keeping that in mind, the Knicks are in a unique situation regarding their mid-level exception -- and it's all because of Lin, a restricted free agent. While the Knicks can sign him to the non-taxpayer mid-level exception of about $3 million or below, anything above that would create a hard cap. Lin is likely going to demand his maximum of about $5 million for two main reasons: 1.) While he may not have that much basketball value right now, teams will be drawn to bringing Linsanity to their city; and 2.) Because other teams are going to know that the Knicks will be hard-capped if Lin re-signs for $3 million or more, they'll press them to match at about $5 million.
If the Knicks do, they'll still be able to re-sign him because he's a restricted free agent. In fact, because he has that status, the Knicks and Lin could agree to an offer sheet even before other teams bid for his services. And the Knicks can match any number because of the Gilbert Arenas provision, which prevents other teams from offering too much.
Currently, the Knicks are below the apron, so they'll be hoping and praying that Lin signs an offer sheet for $3 million or less. If the Knicks keep Lin at that amount (and they donít use their bi-annual exception), they won't be capped at $74 million, and they can later go above the apron. Therefore, they could make trades that take on lots of additional salary, but they will still have to pay tax if their team salary is above the tax line (no transactions exempt a team from potentially paying tax).
While Lin's agent, Roger Montgomery, will have a fiduciary responsibility to his client to get him the best deal possible, he'll know the eventual suitor will be the Knicks. Therefore, Montgomery could ask Lin to do the Knicks a favor and take $2 million less and sign for about $3 million, in order to give the team salary-cap flexibility. By staying in New York, Lin would be make up the difference off the court by being a hot name in the No. 1 media market. What Montgomery will have to watch out for is the Knicks saying, "Sign with us for $3 million and we'll promise to take care of you later." It's that promise to take care of a player later that gets teams into trouble.
Now, keep this in mind: While the Knicks need to use their mid-level exception to re-sign Lin, they don't have to use it on Lin. They can spend it on anyone. For example, they could let him walk in order to sign unrestricted free agent Steve Nash, who's reportedly going to demand $3 to $5 million per year, or Goran Dragic, who will likely be in the same ballpark.
But, again, anything more than $3 million will set a hard cap on the Knicks. If that happens, they won't have any flexibility to make any offseason or in-season moves (signs, trades, replacing an injured player, etc.) that leaves them above the $74 million threshold. For example, letís say they have a team salary of $68 million after signing Lin, or about $6 million below the hard cap. They could make a trade (provided all other trade rules are satisfied) that adds up to $6 million to their payroll. But they couldnít make a trade that adds $7 million.
Whatever the case, all signs point to Lin being a Knick. As one source familiar with his situation put it, "He's going to be in New York next year regardless, unless they decide they're not going to match him because Nash is going to come in at $5 million or something like that. But Nash is a pipe dream. I think that they keep Lin, just because of his popularity."
As for the length of Lin's contract, the Knicks have the option of making it one to four years. (It could actually be three years with a player option on the fourth.) Teams tend to lock up players who are fairly cheap, but are still a big part of their future and have the potential to progress quickly in only half of that four-year window.
If the Knicks re-sign Lin to the full mid-level exception of about $5 million, that means they'll be hard-capped and only have about $9 million left to spend, which begs the question: Do they want to spend $5 million of that remaining amount on Fields? Even if another team matches the Knicks' offer sheet, they have Early Bird Rights on him, which sets the $5 million ceiling. (In comparison, Lin has Non-Bird Rights rights, which is why the Knicks need to use the mid-level exception to keep him.)
However, if Lin and Fields re-sign for $3 and $5 million, respectively, the Knicks won't be constrained by the hard cap (based on the lower mid-level exception). They can re-sign Fields, secure veteran free agents and make trades to bring in someone who's more expensive. In other words, they can go above the apron.
But, again, it all comes back to that $5 million for Fields, and some insiders just don't see the value there. One source familiar with Fields' situation said, "I doubt Landry's worth $5 million, but you never know. When teams try to sign restricted free agents, they sometimes have to over-pay just in order to make the other team let him go. So I could see Landry getting a bigger deal because of that -- not so much because he's worth that much right now as a basketball player, but because he can walk."
As for the length of Fields' contract, it could be the same as Lin's. Also like Lin, because Fields is a restricted free agent, he and the Knicks could agree to an offer sheet even before other teams bid for his services. In addition, the Knicks can match any salary number because of the Gilbert Arenas provision.
By the way, if you're wondering if the $5 million maximum for Fields can be used for anyone else (like Nash), it can't because of the Early Bird Rights provision. So, again, only the mid-level exception can be used for Lin, Nash or Dragic -- the three most popular picks at starting point guard heading into the summer.
If Shumpert was going to be out until June 30 of next year (based on a doctor's certification), the Knicks could apply for a disabled player exception, which would mean they could sign someone to replace the rookie at his salary. But Shumpert will likely be back on the court in December or January. Keep in mind, however, that if the Knicks were hard-capped (based on the apron), they couldn't use that kind of exception.
The Knicks have a bi-annual exception of $1.98 million, which could be used for Novak, who's an unrestricted free agent. (However, he'll likely demand more because he emerged as the league's best 3-point shooter.) Even if the team re-signs Lin to $3 million or higher, and the $74 million apron becomes a hard cap for them, they'd still have the bi-annual exception. But then they definitely can't go above the apron. Keep in mind that if they spend their bi-annual exception first, they would be capped at the apron -- just like they would if they spent $3 million or more with their mid-level exception.
Currently, the Knicks are about $6 million above the salary cap, which means they're about $9 million under the apron. If Smith opts out and the Knicks don't re-sign him, they'll be about $11.5 million under the apron. If they re-sign Lin for about $5 million, they'll be about $7.5 million under the apron, which would then create the hard cap.
Then, if Fields re-signs for about $5 million as well, the team will only have about $3 million under the apron to spend on three players. Think about that. About $3 million, three players. Veteran minimum's deals could suck that right up.
That mid-level exception is more critical than you ever thought. From the season to the offseason, Lin still remains right at the top of the Knicks' discussion. If you're a fan of the team, you should be rooting for him to sign for $3 million or less.