Last year, the Cavaliers spent over $53 million in luxury tax. This year their tax payment might be less, but the overall cost of the roster will very likely be greater. Let's break down the current salary cap situation of the Cleveland Cavaliers.
Presently the Cavaliers have eight players under contract for next season:
- Kevin Love, $21.2 million
- Kyrie Irving, $17.6 million
- Tristan Thompson, $15.3 million
- Iman Shumpert, $9.7 million
- Channing Frye, $7.8 million
- Mo Williams, $2.2 million
- Sasha Kaun, $1.3 million
- Jordan McRae, $900,000
That's a total of $76 million committed for next season, which is technically $18 million under the projected salary cap of $94 million. However, that cap space is merely an illusion because when LeBron signs a new contract that total committed salary will jump to at least $103 million.
LeBron signed with the Cavaliers two years ago. It takes three years for a team to obtain full Bird rights to a player signed as a free agent. This means that LeBron's next contract will be signed using either the Non-Bird Exception or the Early Bird Exception. The limitations associated with these salary cap exceptions combined with the salary cap jump both this summer and next will prevent LeBron from earning his maximum salary in one of the next two seasons. He can either get his maximum salary this year with the Early Bird exception, but be locked in for two years, or take less than the maximum salary this season with the Non-Bird Exception so that he can sign a five year super-max worth over $200 million next summer. Why is this the case?
Explaining the Early Bird and Non-Bird Exceptions. The Larry Bird Exception (commonly referred to as 'Bird rights') allows teams to offer their own free agents five year contracts with 7.5 percent annual raises. This makes it much easier for teams to retain their key players, since other teams would only be able to offer four year contracts with 4.5 percent annual raises. Without this provision small markets would be hard-pressed to hold onto their star players.
However, when a player signs with another team in free agency it takes three years for his new team to acquire these Bird rights, allowing them to go over the salary cap to re-sign that player. That's where the Non-Bird and Early Bird exceptions come in. These allow teams to go over the cap to re-sign free agents that have only been with the team for one or two years, but they each have limitations.
The Non-Bird Exception allows a team to re-sign a free agent that has been with the team at least one year. The contract length can be anywhere from one to four years. The maximum salary under this exception is 120 percent of the player's previous salary, and the contract is limited to 4.5 percent annual raises.
The Early Bird Exception becomes usable after a player is with a team for two seasons. The maximum salary under this exception is 175 percent of the player's previous salary, and it allows for 7.5 percent annual raises. However, the length of the contract is required to be between two and four years, meaning that a one plus one deal is not possible while using this exception.
For more information on the various salary cap exceptions, take a look at Larry Coon's excellent web site.
So, applying this to LeBron, the Non-Bird Exception would allow him to sign a one plus one deal, but his salary would be limited to 120 percent of what he made last year. This works out to $27.6 million this year, and would enable him to sign a five-year contract worth approximately $205 million next summer. If LeBron signs using the Early Bird Exception he could make more money this year, as it allows him to earn his maximum of just under $31 million. However, he would be locked in for at least two seasons, and the cap is actually projected to drop from $108 million in 2017-18 to $100 million in 2018-19. So while that would earn him the most money next year, it would prevent him from maximizing his career earnings.
Fear the Sword projection: LeBron James will sign a two-year, $56.4 million contract with a player option on the second year and a 15 percent trade kicker.
After breaking the Cavalier record for three-pointers made in a season, J.R. projects to be one of the most sought after shooting guards on the market this season. While he has had some behavioral issues in the past and will be 31 years old next season, he's also probably the best shooting specialist that's an unrestricted free agent this summer, as Bradley Beal is restricted, and Ryan Anderson isn't as good of a shooter as Smith in my opinion.
Of course, Smith has enjoyed playing in Cleveland, and no doubt would like to return. The Cavaliers certainly will want their starting shooting guard back, and should try to work out an extension early in free agency before a bidding war starts. If that happens then the two sides might agree on a reasonable contract while other teams are chasing the top free agents like Kevin Durant, Mike Conley and Al Horford. But if a deal isn't worked out early in free agency then all the teams that missed out on stars will be left with a lot of money to spend and a bidding war might ensue.
Fear the Sword projection: Since re-signing LeBron James will really be a formality, Smith will be Cleveland's top priority this offseason. J.R. has made $45.5 million so far in his NBA career. I think a four year, $64 million deal with a player option on the final year and a 10 percent trade kicker would make sense for both sides in the first few days of free agency.
If the doesn't happen, however, I think he will receive offers around three years and $54 million on the open market.
Dellavedova is a restricted free agent this year. This means that the Cavaliers will have the opportunity to match any offer sheet he signs with another team, allowing the market to set his price if they want to.
It should be noted that while Dellavedova was originally signed as an undrafted free agent he does not fall under the Gilbert Arenas provision this year because the Cavaliers have full Bird rights now that Delly has played three seasons with the team. This prevents other teams from making wacky contract offers that are inexpensive in years one and two then jump up a huge amount in years three and four. You might recall that this is how Houston acquired Jeremy Lin and Omer Asik a few years ago.
So, the question is, how much money should we expect Dellavedova to get on the open market? While opinions vary wildly about his skill as a basketball player, let's consider some facts:
- 26 years old next year.
- 39.8 percent from beyond the arc in his career.
- 5.8 assists per 36 minutes in his career, against just 1.9 turnovers.
- Consistently high effort on defense, and generally a positive on that end of the floor.
- Cannot create efficient shots for himself.
- Struggles inside the arc in general, shooting just 39.2 percent in his career.
- Not very athletic compared to other NBA guards.
- Low usage player, which means he needs high usage perimeter players on the floor with him.
Dellavedova is not a good fit for any team that needs their point guard to carry a big offensive burden. However, he's a very accurate shooter and a skilled passer, ideal traits next to a high usage wing like LeBron, Gordon Hayward or James Harden. While this skill set limits how many teams will target him in free agency, there are still enough teams with the requisite wing scorers that his services will be in demand.
Fear the Sword projection: Dellavedova will sign an offer sheet for three years and $42 million in mid July. The Cavaliers will match.
Mozgov is coming off a disappointing year, and will be 30 years old next season. However, he's still a very large human being who is mobile and protects the rim. That being the case, teams with cap space to burn might be willing to offer him a lucrative short term deal hoping that he bounces back to the standard of play he's set over the course of his career.
I'd expect his free agency to last until mid July, as he is probably in third or fourth tier of free agents that teams will chase. Given that he dropped out of the Cavaliers' rotation during the playoffs, I'm not sure whether he wants to return, or if the team even wants him back. While I do think he's a good candidate for a bounce-back year, I expect that to happen in Dallas or Washington or New York, not in Cleveland.
Fear the Sword projection: Dallas signs Timofey Mozgov to a two-year, $26 million contract with a team option on the second season.
After playing a key role in the championship run this postseason, Jefferson could no doubt make some money on the open market if he wanted to do so. However, he seems to really enjoy playing with LeBron, Channing Frye and the rest of the Cavaliers. Besides, leaving Cleveland would mean abandoning the Lil Kev bit, and that just isn't going to happen.
Fear the Sword projection: With his career earnings in nine figures, a little extra money simply doesn't matter that much to Jefferson. He'll re-sign with the Cavaliers for the veteran minimum.
Always room for Champ on the roster. He's reached the Finals six years in a row, winning the title three times. I don't think he'll hang it up with that kind of streak still active or head somewhere else that isn't with LeBron.
Fear the Sword projection: Jones will re-sign with the Cavaliers for the veteran minimum.
Where would that leave the Cavaliers? 13 players under contract, with a total salary of $133.3 million. With the tax line projected to be at $113 million that would result in a tax bill around $46 million. But it's hard to see the Cavaliers breaking up the team that just won the title. In fact, they would still have a few assets that might help them improve the team with the last two roster spots:
- Taxpayer Mid-Level Exception ($3.5 million)
- Rights to Kay Felder
- Rights to Cedi Osman
- Anderson Varejao traded player exception ($9.6 million)
- Mike Miller traded player exception ($3 million)
- Brendan Hayward traded player exception ($2.4 million, set to expire at the end of July)
- 2020 first round draft pick
I'm not willing to make a guess as to how the Cavs will use these assets. In all likelihood none of them will have a big impact on the team next year. With so much cap space available around the league this summer they'll be hard-pressed to add a useful player with the taxpayer MLE. Felder likely will take up one of the remaining roster spots and will spend plenty of time in the D-League. Reports indicate that Osman would like to come over to the NBA next season, but it's very possible that he ends up somewhere other than Cleveland. The various trade exceptions could net a useful player in combination with the 2020 first round pick, but the tax implications of such a deal would be severe, so it seems unlikely unless the player in question would clearly crack the playoff rotation.
However, while none of these assets are particularly valuable on their own, collectively they do give the Cavaliers a reasonable amount of flexibility for a team so severely into the luxury tax. If they want to make some moves they do have the resources to facilitate that.
Welcome to the new NBA, where Kyrie Irving and Tristan Thompson will make slightly more than Smith and Dellavedova over the next few years. Things like this will happen all around the league. Harrison Barnes will make more than Stephen Curry, Klay Thompson or Draymond Green in 2016-17. Nic Batum is probably going to earn more than $26 million next year. It's a whole new financial landscape, and the Cavaliers will have to pay plenty in luxury tax to keep this team together. But in the end, it will be worth it.
Correction, 6/30/2016 at 9:54 a.m.: An earlier version of this post indicated that the Cavs weren't going to pay the repeater tax when they are going to have to pay the repeater tax. The article has been updated to fix that error. Fear the Sword regrets the error.