The Cleveland Cavaliers Trade Options

The NBA trade deadline is tomorrow afternoon at 3:00 pm EST. As we get closer and closer to that deadline, we are going to be hearing more and more rumors swirling around. It’s obviously going to be the dominant topic of the next couple days, so we figured it would be beneficial for us to take an updated look at what the Cavaliers’ salary situation for the next couple years might look like, to give us a better understanding of what the Cavaliers’ options truly are.   

The first thing we need to understand is where the salary cap is going to be in the next couple years. This is the trickiest part of the equation because something is likely about to happen that has never happened before under the modern Collective Bargaining Agreement (CBA): the salary cap is likely to actually decrease rather than increase.

This is all speculation at this point, but the salary cap is defined as a percentage of the NBA’s Basketball Related Income (BRI). Under the current economic conditions we are living in, it’s not surprising that more and more franchises have been experiencing losses from a lack of revenue. This slowing of revenue, though, means a reduced BRI figure is expected by most of the people I’ve talked to.

There is a wide and varied opinion expressed out there over how big of a loss (if any at all) the NBA will actually experience. Some people will point out that because season tickets are sold as future revenue, the impact on individual teams may actually be a year away yet. What this means is that some people have already bought season tickets for this year, but are just now being impacted economically and thus won’t decline their tickets until next season. The Salary Cap is set as an estimate of the upcoming season’s revenues, so if people decide not to renew tickets in 2009, the cap won’t be impacted until 2010.

Still, other people seem less certain that any kind of major loss will be coming. Some think teams will adjust ticket prices accordingly and the true losses will be somewhat minimal in terms of cap impact.

No matter how serious or dire you think the NBA’s financial situation is, the consensus is that some degree of salary cap decline can be expected. But in order to do some future projections, we need to decide for ourselves where to put the level of decline at. For this, we will defer to ESPN’s John Hollinger, who wrote about this back in January already. He writes:

And if you think the summer of 2009 looks bad, just wait until the much-hyped summer of 2010. First, the league’s revenues are likely to be much lower in 2009-10 than they are this season, and that’s the number that’s the basis for setting the 2010-11 cap. The many season-ticket holders and sponsors who couldn’t get out of their commitments this fall instead will jump ship a year from now, creating a revenue shortfall league-wide.

That, in turn, will result in the make-up provision having a major effect in the summer of 2010. And since the cap in 2010 will have been set off a lowered revenue base, it will turn into a double-whammy.

To illustrate, I modeled a situation in which league revenues increase by 2 percent in 2008-09 but declined by 3 percent in 2009-10. I’m not saying this will happen, but just humor me for a second.

If that were the case, the cap would decrease by about 0.5 percent in 2008-09 … and then it would decrease by a whopping 5.6 percent in 2009-10. The cap would go all the way down to $55.2 million that year.

For his model, he ends up with an average annual decrease of close to 3%. I’m going to be slightly more optimistic than that for our model, though. I’ve seen most estimates fall somewhere between $54 million and $61 million for the 2010 cap projection, and I’m going to somewhat split the difference to go with a pretty moderate estimate. We’ll go ahead and base our numbers on an average annual decrease of 1.5% (this assumes a 0.5% decrease in 2009 and thus a 2.5% decrease in 2010). Doing this gives us a 2009 cap figure of $58.39 million and a 2010 cap figure of $56.93 million.

Now that we have some guesses at the cap numbers, lets look at how much salary the Cavaliers will have on the books in the next couple offseasons. Assuming Zydrunas Ilgauskas picks up his player option for next year and Anderson Varejao declines his, the offseason roster as of now will look like:

1. LeBron James – $15,779,912
2. Ben Wallace – $14,000,000
3. Zydrunas Ilgauskas – $11,541,074
4. Mo Williams – $8,860,000
5. Sasha Pavlovic – $4,950,000
6. Delonte West – $4,254,250
7. Daniel Gibson – $4,088,500
8. JJ Hickson – $1,429,200
9. Darnell Jackson – $736,420
10. 2009 1st round pick – ~$836,300
11. 2009 2nd round pick – ~$450,000

That gives the Cavaliers a total salary of $66,925,656. They will be $8,539,056 over the cap before they even fill in their last roster spot. If Anderson Varejao decides to pick up his option, then the Cavaliers’ salary will be approx. $73,138,616. No matter what happens between now and this offseason (whether they keep AV or not), the only money the Cavaliers will have to spend on other free agents is their Mid-Level Exception (MLE), approx. $5.7 million, which they will likely be used on a veteran role player (possibly guys like Antonio McDyess, Joe Smith, Wally Szczerbiak, etc).

Moving forward, then, the 2010 offseason roster looks like this, assuming LeBron doesn’t pick up his $17.149 million option:

1. Mo Williams – $9,300,000
2. Delonte West – $4,658,500
3. Daniel Gibson – $4,015,334
4. JJ Hickson – $1,528,920
5. Darnell Jackson – $854,389
6. 2009 1st round pick – ~$899,000
7. 2009 2nd round pick – ~$650,000
8. 2010 1st round pick – ~$863,300
9. 2010 2nd round pick – ~$430,000

This gives the Cavaliers a total salary of just $22,300,443. Using our 2010 salary cap estimate of $56.93 million, the Cavaliers will be approx. $34,626,492 under the cap. They would also have an additional ~$5.8 million to spend using their MLE (along with their $2.08 million bi-annual exception, if needed). Using all exceptions and free space, that would be a total of $42,506,492 to spend (keeping in mind that exceptions cannot be combined, either with each other or with remaining cap space, to sign any player).

We’ll get to how all of this impacts the potential LeBron James signing in a moment, but first lets see what happens if the Cavaliers were to happen to trade for either Antawn Jamison, Marcus Camby, or Brad Miller in the next 24 hours.

Antawn Jamison

Jamison’s contract is definitely the heftiest of all the potential trade options the Cavaliers currently are rumored to have. Here is the breakdown on Jamison’s remaining contract:

• 2008-09: $9,923,285
• 2009-10: $11,641,095
• 2010-11: $13,358,905
• 2011-12: $15,076,715

The problem with this potential deal is that the Cavaliers would also have to take another player back (rumored to be Etan Thomas) to make the salaries matchup with Wally’s expiring deal. Granted, the Cavs could always send Eric Snow’s expiring contract and JJ Hickson to Washington in return for just Jamison, but we’re going to assume, according to the rumors, that the deal is Wally for Jamison and Thomas.   Here’s how Jamison’s and Thomas’s contracts impact the next two offseasons:

• 2009: Projected Cap – $58.39 million
  • Cavs salary without Jamison (and Thomas) or Varejao: $66.926 million
  • Cavs salary with Varejao, without Jamison (and Thomas): $73.129 million
  • Cavs salary with Jamison (and Thomas), without Varejao: $85.917 million
  • Cavs salary with Jamison (and Thomas) and Varejao: $92.130 million
• 2010: Projected Cap – $56.93 million
  • Cavs salary without Jamison: $22.300 million
  • Cavs salary with Jamison: $35.659 million
  • Etan Thomas would be off the books in 2010

Even with Jamison, the Cavaliers will still be around $20 million under the cap in the summer of 2010. If Varejao were to pick up his option, though, the 2009 salary for the Cavaliers would be simply outrageous, though. Even if he didn’t pick up his options, Dan Gilbert is still looking at paying a pretty steep luxury tax charge.

The biggest factor, however, will be whether the Cavaliers will be able to afford to sign LeBron James AND another younger player in that offseason. We’ll get to that in a minute, but first, here’s how the other guys would impact the Cavaliers.

Marcus Camby

Marcus Camby’s contract is nice in that it’s actually smaller next season than it is this year. Here’s how his contract breaks down:

• 2008-09: $8,000,000
• 2009-10: $7,650,000

Similar to the Jamison deal, the Cavs would need to bring back more salary to make the deal matchup with Wally’s expiring amount, but unlike the Wizards, the Clippers don’t have anyone on the books for next offseason that they would want to get rid of, so we’ll just assume the Clippers send another expiring (say, Brian Skinner) in this deal. So here’s how Camby’s contract impacts the next two offseasons:

• 2009: Projected Cap – $58.39 million
  • Cavs salary without Camby or Varejao: $66.926 million
  • Cavs salary with Varejao, without Camby: $73.129 million
  • Cavs salary with Camby, without Varejao: $74.576 million
  • Cavs salary with Camby and Varejao: $80.789 million
  • Brian Skinner would be off the books in 2009
• 2010: Projected Cap – $56.93 million
  • Cavs salary without Camby: $22.300 million
  • Camby would be off the books in 2010

So obviously Marcus Camby’s contract isn’t all that different from Jamison’s in terms of impact on the Cavaliers options in 2009 (other than luxury tax amount), but in 2010 the Cavaliers would still have all of their approx. $42.506 million to spend.

Brad Miller

With all the swirling rumors about the Kings possibly being moved from Sacramento, you kind of get the feeling they’d love to shed Miller’s contract for next season. Here’s what Miller’s situation looks like:

• 2008-09: $11,375,000
• 2009-10: $12,250,000

Unlike the previous two trade scenarios, in the Kings’ trade, Wally could be traded straight up, 1-for-1, for Brad Miller. The Kings might also be the team most likely to buy out Wally’s contract, leaving a scenario for him to re-sign with the Cavaliers after 30 days. But here’s how Miller’s contract impacts the next two offseasons:

• 2009: Projected Cap – $58.39 million
  • Cavs salary without Miller or Varejao: $66.926 million
  • Cavs salary with Varejao, without Miller: $73.129 million
  • Cavs salary with Miller, without Varejao: $78.301 million
  • Cavs salary with Miller and Varejao: $84.514 million
• 2010: Projected Cap – $56.93 million
  • Cavs salary without Miller: $22.300 million
  • Miller would be off the books in 2010

So again, in the case of Brad Miller, the Cavaliers would still have all of their options open to them in the summer of 2010.

In order to now determine which trade scenario is the best for the Cavaliers, we need to examine how Jamison would impact the Cavaliers’ roster with LeBron James in 2010.

Re-Signing LeBron James (and a sidekick to go with him)

In a perfect world scenario, let’s assume LeBron wants to re-sign in Cleveland for the max contract amount in 2010. If Antawn Jamison is still under contract, we have pointed out that the Cavaliers’ salary in that offseason will be $35.659 million. Under our cap estimations, that would leave the Cavaliers with $21,267,935 million to spend. The first year of LeBron’s max deal would then be $16,073,488 (I won’t explain the math here….if you want to know where that number comes from, email me and I’ll let you know).

Here’s why that’s important. Even though the Cavaliers would have LeBron’s bird rights and would be free to exceed the cap to sign him, they can’t use up $16 million of their $21.267 million cap space to sign, say, Chris Bosh, and then sign LeBron to his max deal above the cap. Unfortunately (for the Cavaliers), there’s a rule that says when you hold the rights to a free agent, his contract counts against the cap until you release him or he signs somewhere. So that $16.073 million will already be on Cleveland’s books, leaving them with just $5,194,447 to offer another free agent. At that point, the Cavaliers’ hands will be tied.

If we take Jamison off the books, though, the Cavaliers’ salary (without LeBron) will be just $22.3 million. Under the cap figure of $56.93 million, that would leave them with $34,629,557 in free space. Subtract out the $16.073 million for LeBron’s max deal, and you still have $18,556,069 left to spend. Now, the Cavaliers will have the needed cap space to sign another major free agent. In this scenario, the Cavs’ roster in 2010 could potentially look like this:

1. LeBron James – $16,073,488
2. Chris Bosh (or Dwyane Wade) – $16,000,000
3. Mo Williams – $9,300,000
4. Delonte West – $4,658,500
5. Daniel Gibson – $4,015,334
6. JJ Hickson – $1,528,920
7. Darnell Jackson – 854,389
8. 2009 1st round pick – ~$899,000
9. 2009 2nd round pick – ~$650,000
10. 2010 1st round pick – ~$863,300
11. 2010 2nd round pick – ~$430,000
12. Veteran Role Player Signed Using MLE – ~$5,000,000

Perhaps there’s not a lot of depth to that team, and perhaps the MLE would be split to sign 2 veterans, but this gives you a general idea of what the Cavaliers’ financial situation over the next couple of seasons is looking like as of right now.

Summary

So which trade is the best option for the Cavaliers? Well, it’s interesting that each one has something different to offer. The Brad Miller trade would net the Cavaliers 0 additional wins over staying the course, according to John Hollinger. In that trade, though, the Cavaliers would not have to take on additional salary and Miller would be on the roster for the 2009-10 season.

In the Jamison trade, the Cavaliers would pick up 6 additional wins, according to Hollinger. However, not only would the Cavs have to take back another expensive contract for a season, but they’d also lose the ability to sign another player in 2010.

Therefore, the Camby trade seems to be the best bet for the Cavaliers. According to Hollinger’s analysis, that trade would net the Cavaliers 7 additional wins, wouldn’t cost them anyone else other than Camby in 2009-10, and would give them full cap flexibility in 2010.

If we assume the Brad Miller trade is the least desirable trade for Ferry, and the Clippers stick to their guns and will not trade Camby, Ferry may be left with the very tough decision of whether or not to pull the trigger for Jamison. If Ferry isn’t that confident LeBron is going to sign in 2010 as things stand, then he might as well go for it, try to win the Championship now and in 2010, and then cross your fingers that LeBron will stay without adding anyone else that year.

If Ferry thinks LeBron will stay in 2010 if the Cavaliers can sign someone else, then Ferry will have to think twice about doing this deal. Who knows how willing the Wizards are to trade Jamison regardless, but perhaps the degree to which Ferry pursues that trade will offer us the slightest of glimpses into his mindset regarding 2010. How confident is he that LeBron will stay? Is he confident enough to leave the Cavaliers with options for that summer, or does he feel the Cavaliers should go for the title now and worry about 2010 when it gets here.

No matter what, either way, the next 24 hours are going to be fun to watch.