April 24, 2014

The reality of the James Harden deal in Cleveland

“We want to win as much as the fans do. No matter how long it takes, and no matter what it takes, we’re just going to keep going until we get there.”  – Cavaliers majority owner Dan Gilbert, October 30, 2012

At least one of the four Cleveland Cavaliers’ recent first-round draft selections will likely have to be traded. It won’t be for a while — preferably at least three years — and it will likely involve the Cavaliers receiving a concoction of hope and flexibility in return, but it will likely happen.

This reality came to a front just a few nights ago when the Oklahoma City Thunder were forced to part ways with shooting guard James Harden1, receiving a veteran, a rookie and future draft selections in return. For a team that made the NBA Finals just four months earlier to deal one of their key players to a conference foe, all for the sake of the almighty dollar and long-term flexibility, speaks volumes to the heavy hand being placed on franchises by the collective bargaining agreement signed roughly one year ago — the luxury tax and the shortened contracts all aimed at increasing player movement, lessening the potential burden of a bad long-term contract.

Having extended forward Kevin Durant in the summer of 2010 and guard Russell Westbrook one year later, the Thunder tried to sign their star — still just 23 years of age, an Olympic gold medalist and the reigning Sixth Man of the Year – to a four-year contract worth $52 million. The maximum that the Thunder could offer Harden was four years for $60 as the lone five-year “designated” maximum deal afforded to NBA franchises within the new CBA went to Westbrook. The Houston Rockets, having not utilized theirs, had the capability to offer Harden considerably more2. Compounding issues a bit was the fact that the deal agreed to by Westbrook was less than the maximum he could have demanded due to the desired flexibility to sign Harden a year later.

Heading into this summer, the Thunder were the model franchise, the one who managed to acquire flexibility and talent and put it all together as a home-grown juggernaut, rivaling all of the store-bought and back-channeled teams that the common fan has grown to loathe. But in the same summer that saw Dwight Howard travel across the country to join forces with Kobe Bryant and Steve Nash, the small-market Thunder are forced to take a slight step back3.

Circle back north to the lakefront city of Cleveland and general manager Chris Grant has a roster rife with rookie deals – the team’s starting five has three players earning their first-deal wages. Kyrie Irving is undoubtedly every bit of a star at age 20, his on-court theatrics rivaling their on-screen brethren, what with the scoring at ease and opponent humbling spin-moves. That said, with each dash, dish and (occasional) dunk administered by Irving, he is that much closer to the five-year maximum extension worth anywhere between 25 and 30 percent of the Cavaliers’ overall salary cap space4

So where does this leave Tristan Thompson, Dion Waiters and Tyler Zeller? If they do not perform to the level of maximum players, we enter into a completely different discussion — one where the Cavaliers are not perenailly competing for an NBA title as Irving would essentially be surrounded by lottery picks who became role players. At that point, cutting bait is not necessarily a bad thing, re-loading for years to come. But in the event that at least one or two of the aforementioned start to become what the team had hoped they would on draft night, they will,  at some point — potentially within the next two seasons — will have to decide who, if any of these players will deserve extensions and to what level. (My thoughts of Waiters becoming the next James Harden are well-documented by this point).

If they opt to circumvent the stated maximum contract in both length and amount, they will have access to only one five-year extension, similar to the one given to Westrook. Assuming this goes to Irving, the other three rookies, plus whomever the team ends up drafting this coming spring, will have to either take less than the maximum or opt to enter into restricted free agency, where, at that point, the Cavs front office could merely match whatever offer another franchise tossed their respective players’ way.

If we take a step back, let’s realize that the current NBA salary cap is set at $58 million. The current Cavaliers roster, comprised of rookie deals and veteran filler, slots in just over $54 million. While the luxury tax level is at $70 million, it is at this point where teams pay substantial penalties, something the Thunder were not willing to do, hence the $6 million difference between the max and the team’s final offer. Now juice up the current rookie deals into extensions, and you’ll see where things could start to get sticky for the Cavaliers in the event that their draftees turn into what they had envisioned. While the added flexibility is good, fans of the NBA saw what happened this past summer in the restricted market as Houston was able to poison pill an offer for Jeremy Lin, one that even the financially limitless New York Knicks were not willing to swallow.

The other option, natrually, is the one-year qualifying offer which leads to unrestricted free agency — that “un” having the potential to leave an empty feeling in the stomachs of many. On top of all of this, fans of the Cavaliers will have to take the latest words from team owner Dan Gilbert into heavy consideration. When discussing the handling of the LeBron James free agency, coupled with that of the Orlando Magic trading star center Dwight Howard, it appears that the business man’s philospohical beliefs have changed since the three-ring circus that culminated in The Decision.

“The big lesson was if a player is not willing to extend, no matter who they are, no matter where they are playing, no matter what kind of season you had, you can not risk going into a summer and having them leave in unrestricted free agency and get nothing back for it,” said Gilbert. “It’s not the player’s fault. That’s on ownership.”

So while the Thunder have played their cap space like a game of chess, drafting high-quality talent, quietly extending Durant, selling Westbrook on not taking the full maximum allowed, and allotting a four-year extension to the potential Defensive player of the Year in Serge Ibaka, even they have had to trade away two lottery selections — Jeff Green for Kendrick Perkins and, as noted, Harden — for pieces that, while not having as high of a short-term ceiling, allow the team to remain as financially flexible as possible. Otherwise, not only are we testing the Gilbert quote used in the header, but we wind up in a situation where a roster is increasingly more top-heavy, harkening back to the days where only additions can be made via whatever exemptions are available during a given summer.

Naturally, cycling maturing players into rookie deals is a great way to maintain flexibility and keeps teams from overpaying and over-committing to mid-level players. There will, however, come a point where Grant and his team have to start utilizing their basket full of future first-round draft selections to add players who will help sooner than later. Because if the team continues to plan for the distant future, some of the players obtained after years of hard-earned lottery selections will not even be in Cleveland to enjoy the scheduled  ride back to the top5.

Image: Amy Sancetta, AP

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Footnotes:

  1. He of the sixth-highest win share in all of the NBA last season, ahead of players like Blake Griffin, Dwight Howard, Dwyane Wade, Dirk Nowitzki and teammate Russel Westbrook []
  2. Which they did, to the tune of five years, $80 million []
  3. This isn’t to say that I don’t believe that Oklahoma City got the better end of this deal from a big-picture standpoint — Martin and his expiring $12.9 million contract will undoubtedly help the spacing issues that were exploited by the Miami Heat, Jeremy Lamb will join Perry Jones III as one hell of a rookie class for the reinging Western Conference champions, and the draft considerations will help keep the pipeline flowing []
  4. This depends on specific criteria which would have to be met in order to receive the larger sum — being a two-time All-Star, for instance []
  5. By no means do I claim to be a salary cap expert. The new CBA is increasingly convoluted, but the above is written as to how I understand the contractual obligations to exist. I welcome all feedback and professional discussions surrounding any inaccuracies []

  • Natedawg86

    One key thing to note is that 12-13 luxury tax is $1 for $1. in 13-14 it will be $1.5 for $1 up to 4,999,999 and escalates from there. Heat are about 16M over and Lakers almost 30M over. Team pays this amount. How is this going to shake out in the future? Hopefully our owner does well in his investments and is willing to pay some luxury taxes if needed in the future. Are luxury taxes deductable?

  • Roosevelt

    This deal is pretty depressing because juxtaposed with the Lakers and Heat offseasons, it shows that the new CBA did nothing to promote parity in the NBA. A team can do everything right and still lose their players to a team that did almost nothing right but has a bigger market and more money.
    If this problem is going to be solved, it’s going to have to be done more creatively. The owners who are motivated to create parity will have to introduce a plan that doesn’t just approach the numbers in a linear fashion, because as long as that’s how the cap works, the big market teams will have an exponential advantage over the small.
    Maybe it would work if instead of the dollar matching luxury taxes, the tax would be a percentage of revenue or something. This way, if the Lakers want to go over the cap by $1m, they would get taxed 1% of gross revenue, say about $1.5m, and if the Thunder were going to go over by the same amount, their tax would only be $750k.

  • mgbode

    remember, this is the path that OKC chose. they could have extended Harden and amnestied Perkins in July to stay under the luxury tax line. they could have traded Ibaka instead.

    yes, if every player we hit on (and what Presti has done in OKC is unprecedented IMO), then we’ll have to trade or lose some good players. I am fully willing to accept that fate over the other option (those players not being very good).

  • scott

    I “hope” that Cleveland has this problem in 4-5 years…whats not emphasized in this article is (in my opinion) what they received for Harden. Kevin Martin is the “throw-in” to the deal. Jeremy Lamb (a 2012 lottery pick) plus future draft picks (2 of them 1st rounders) are what the deal will be remembered for in OKC…and I believe one of those picks is (top-3 protected) 2013 Toronto pick.

    Regarding the Cavs, forget about 3+ years in the future…look at THIS year. I’d love to see it, but I don’t believe the Cavs will realistically contend for the 8th seed. Rumors are already picking up on if/when they’ll look to deal Andy. Suitors for Andy will be playoff teams, ala Sessions trade to the Lakers last year, with late 1st round draft slots. Chris Grant needs to set his sights significantly higher for Andy…and target a team like OKC who just happens to be holding (someone elses) lottery pick.

  • mgbode

    yes, the Lakers have more money. but, they setup their contracts to avoid the supertax by giving themselves a get-out clause in 2 years.

    the Heat just added Rashard on a minimum deal and Ray Allen turned down more money from Boston so he could stick it to Doc Rivers. a CBA is not going to be able to control players willing to accept less money to play where they want (nor should it):

    “Allen, 36, turned down a two-year, $12 million offer to return to the
    Celtics and accepted a three-year deal with the Heat, who were limited
    to only their mini-midlevel amount of just more than $3 million per
    season.”

  • http://www.waitingfornextyear.com/ Scott @ WFNY

    I mentioned this in the footnotes. I actually like the deal for OKC. The post, however, is mostly to depict the on-going roster manipulation that must take place after drafting said players.

  • Natedawg86

    Can we avoid the words Cavs and draft in the same sentence until at least the end of the year?

  • BenRM

    I can’t help but feel that if Harden didn’t disappear in the playoffs, this situation might have ended differently. Perhaps the Thunder see him as slightly more valuable and, as mgbode says, amnesty Perkins or trade Ibaka.

    Or, maybe Harden having played well, takes a shorter, more team-friendly deal to chase a championship, b/c he knows he’ll be worth a max deal whenever he enters free agency.

  • Clown Baby

    Are you saying we might not be able to re-sign Walton?

  • Vindictive_Pat

    I like it too. Bottom line, Presti had already made OKC’s bed by giving Westbrook his deal in January, before they saw the kind of season they would get from Harden. Presti had to get what he could for Harden, and I think the deal he made was a really good one. OKC still gets scoring punch off the bench in Kevin Martin, they get a good-looking rookie in Lamb, and they get future draft picks. I’m not sure why Bill Simmons created such a fuss about it… I thought it was an even swap and I don’t see it affecting the Thunder’s record or championship chances too much.

  • mgbode

    Harangody or Walton. He might have to actually choose next year.

  • mgbode

    disappear in the playoffs? perhaps you didn’t watch the first 3 rounds.

  • mgbode

    I personally think it hurts them “this” year. Kevin Martin is not James Harden (and J.Lamb is going to take some time). I like the deal long-term, but they were the 2nd best team in the NBA last year and their nucleus was young. They may have given away a chance at a championship this year.

  • Roosevelt

    It’s possible that they have done that some of the time, but it’s also true that they pay the lower tax without a blinking and that OKC had a much lower payroll right now and traded away an all-star level player to keep it that way.

    It’s hard to figure out off the top of my head how the expiring contracts and the escalating penalties will interact, but on the surface, it’s a classic problem that commodities are worth more dollars to people with more dollars, and my suggestion might counteract that. Although unequal penalties are a line that the large markets are not going to agree to easily.

  • mgbode

    they have always paid the lower tax without blinking, which is why the higher tax was introduced. whether or not they are willing to pay the higher tax is something we cannot know for several seasons ahead (they have to go over the luxury line 3 out of 5 years I believe).

    they have set themselves up though to avoid it if they wish.

  • Vindictive_Pat

    I’m in the vast minority who thinks that it won’t even hurt the Thunder this year. I think they’re still in line to get a top-2 seed in the west. I also wonder how good Kevin Martin will be in a situation where he doesn’t have to be the team’s top scorer night in and night out. He’s no longer the guy getting his percentages skewed by taking the tough shots at the end of the buzzer.

  • mgbode

    they very well could still get a top2 seed in the West. while the West is much deeper than the East, they have a bunch of similar teams (after the Lakers – if they get it together).

    i just think that this trade took them from being THE team in the West to “another” team in the West that could get to the Finals.

  • Yup

    Guys, the new rules have not akrn effect competent yet, if n remember correctly. So don’t judge the Lakers moves until you see what they have to pay in tax next year. This post is pre-mature as well cuz basically the whole landscape of th NBA changes next year. And it benefits the Cavs, I think…I hope…

  • Vindictive_Pat

    But I mean, how important is the team’s 3rd option, really? The shots in the playoffs are still primarily going to Durant and Westbrook (even if Harden would have been a better option to take them than Westbrook… Westbrook is the point guard and often decides who gets to shoot, and he is going to call his own number a ton). For example, against the Heat in the playoffs this year, Durant averaged 20.8 shots per game. Westbrook was at 24 shots per game. Harden was at 9.6 shots per game. These numbers were pretty consistent with the Spurs series as well, just from a quick check. So what are we talking about here? Martin and Harden are comparable defenders (opponent PER is slightly lower when facing Martin versus Harden)… so offensively maybe Harden averages making one more shot per game? The Thunder live and die in the playoffs with Durant and Westbrook… I don’t think that changes now with a swap of Harden for Martin.

  • mgbode

    one of the reasons the Thunder destroyed the Spurs was that the Spurs vaunted bench unit couldn’t cut into leads as well against the Thunder. also, the threat of Harden in the crunchtime minutes helps Westbrook and Durant get more open.

    it may be that their odds of a NBA championship went from 25% downto 10% or something like that, but I do think he makes a difference and watching them in the playoffs last year I think that is justifiable.

    maybe you are correct. maybe they just lean on Westbrook and Durant more and this just doesn’t matter in the end. and, like I said, I will not be that surprised to see them get out of the West. just that I think they would have had a much easier time with that 3rd weapon.

  • mgbode

    it won’t change yet. the effects start “this” year but to get the repeat offender status, you have to offend 3 times. so, effectively, that means it doesn’t really hit teams for 2 more seasons after this one (for those that exceed the luxury line)

  • StaceyQ331

    I know this, the Grizzlies are going to have to part ways with at least one of their three guys making big bucks from deals under the old CBA. So they have to choose between Rudy Gay, Gasol, and Randolph. They’ll likely dump 2 of those guys, actually, and go about a rebuilding process. So it’s just something to consider, because the Cavs could very well be in the position to help Memphis (and themselves) out. Then again though, the same applies to the Miami Heat, so maybe the Cavs want to wait for 2014.

  • Steve

    It’s a good haul for getting a star player. But in the NBA, you want to concentrate your talent more than spread it around. Teams looking to contend should be wanting to get the best player in a deal. And when that star is still so young, it’s a tough pill to swallow.

    And Simmons. Ugh.

  • Vindictive_Pat

    I definitely agree… unfortunately for the Thunder, they already paid Durant and Westbrook before they knew what they had in Harden. I guess the question then is did they extend the wrong guy in Ibaka instead of Harden? I’d have to see some stats on just how much Ibaka gives you defensively, but it seems to make a little sense to me… pay your top defensive player over your third option on offense. Still hurts to have to lose a player like Harden though… I wonder if Presti has remorse over paying Westbrook first.

  • Ray

    The only team I’d be willing to trade Andy to is OKC. They seem to be the only team that would fit the criteria. They have multiple first round draft picks in 2013, a desirable young asset in PJ3, and best of all Andy would go to a title contending team.

  • http://twitter.com/AndyPok1 Andy Pokrivnak

    No idea where you are getting the 54 million number from. (Unless that includes Semih and AP’s cap holds, which will be renounced whenever the space is needed). In actuality, it is under 48mil, and half of Gibson’s deal isn’t guaranteed. As far as cap room goes, the Cavs have the most in the league by a significant amount, and will have even more next year. (The four draft picks, Varejao, and Gee are the only ones under contract.). While there’s no obvious path to a championship right now, Chris Grant has positioned the Cavs to have the most possible paths towards improvement over the next 2 years.

    Additionally, Gilbert paid upwards of $15mil in luxury tax both of LBJ’s final seasons. If I recall, as long as they got 5 playoff home games, they still would break even. While the fifth-year provision could be an issue if Waiters or Thompson develop into max players, I can’t imagine a scenario where ownership isn’t willing to pay virtually any tax bill necessary to keep a core together and win a championship.

  • NoVA Buckeye

    Unless we’re talking “Late 1st round draft pick”, then I’d want to stray away from that, too.