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Friday, October 24, 2014

J.R. Smith Salary Cap Possibilities

There is lots of speculation in the press about JR Smith’s future with the Knicks.  I have zero inside information, but I know how the salary cap works, and how it works with respect to Smith in particular.

Current  Situation:

JR Smith was paid $2.8 million this season, and holds a $2.93 million player option for next season.  If he exercises it (which is highly unlikely), he would be a free agent next season and the Knicks would hold Full Bird rights, which would allow them to offer up to the maximum salary.

 

If JR Smith opts out:

 

Knicks hold Early Bird rights.  Under Early Bird rights, the Knicks can exceed the salary cap to offer up to 104.5% of the League Average (which is basically the mid-level exception) for the first year (about $5.3 million) with potential raises of 4.5% per year for up to 4 years. The catch: the the contract must be for a minimum of two years. The New York Post story is speculating that JR Smith will take a four-year Early Bird Deal. The Knicks could give JR Smith an option on year 4 of the deal, so that he would only be locked in for three years.

 

Knicks also hold non-Bird rights on JR.  Using those, the Knicks could offer JR up to a 20% raise on $2.8 million, meaning they could offer him $3.36 million for next season.  They could also offer Smith an option on year two of the contract at a 4.5% raise ($3.51 million).  That $3.51 million would essentially be an insurance policy on JR blowing up or blowing out his knee.  If JR signed this deal, he could get a full Bird contract after next season.

 

Competing bids from other teams.  Other teams can offer JR Smith up to the league maximum (not saying they will or should — just a possibility).  Since JR Smith has nine years of service under his belt, his maximum salary for year one is roughly $16.4 million (new numbers will come out over the summer). Additionally, a new team could offer annual 4.5% raises.  Minimum length of the contract is one year, but the team must have the salary cap space to fit JR.

If JR Smith signs the non-Bird Knick Contract:

If JR Smith signs the non-Bird Knick contract ($3.36 million plus $3.51 million player option on year two), the Knicks would hold Full Bird Rights on JR Smith after next season.  Because he would be a 10 year veteran, the Knicks could sign him to a contract starting at $19.1 million (numbers will change slightly because of revenues). The maximum length of the contract would be 4 years, with a maximum 4.5% raise each year.

Conclusion:

If JR Smith signs for four years at the Early Bird price, he would receive a $2 million raise this year and forego the possibility of cashing in for up to 5x his current salary starting in 2014-15.  I would be shocked if he took that deal, but if we’ve all learned anything, it’s that Smith is one of the most unpredictable players in the league.  If he rolls the dice by signing the non-Bird Knick deal, he could cash in huge starting in 2014-15.  And if there is a competing bidder, they could make JR Smith an offer this year that the Knicks could not match.

I have no idea what he will do.  If you do, you either (1) work for CAA, (2) are related by blood to JR Smith, or (3) are fooling yourself.

41 comments on “J.R. Smith Salary Cap Possibilities

  1. ephus Post author

    All of the salary cap knowledge in this post comes from Larry Coon’s cbafaq.com. Only the mistakes are mine!

  2. nyk8806

    great post. reading between the lines (of coke) from his last press conference, i’m guessing that CAA has already got his deal, whatever it is, agreed in principle.

  3. ephus Post author

    The most conspiratorial way to think about it would be that the Knicks and CAA have a deal that JR Smith will take the non-Bird deal this year, and then sign for a Full Bird deal next year. That would shift money out of a heavily taxed year (2013-2014) with JR making up the money (plus a lot) from 2014-15 until 2017-18. Starting in 2015-16, the Knicks can be under the tax threshold, because the ‘Melo, Amar’e and Tyson Chandler contracts all expire.

    The way the NY Post has reported it, JR Smith would be giving up a lot of potential upside for a relatively small guarantee. I have no idea what he is actually going to do.

  4. nyk8806

    btw, what’s the burden of proof on circumvention? If Chris Smith sucks in summer league but nonetheless gets a roster spot, can Grunwald get away with it simply by saying he brought him in for “team chemistry” or was a good “fit” for the team, and not as part of an illegal side-compensation package for JR?

  5. Brian Cronin

    The way the NY Post has reported it, JR Smith would be giving up a lot of potential upside for a relatively small guarantee. I have no idea what he is actually going to do.

    Yeah, after the playoffs he had, it makes 100% sense for him to take a two-year deal with the second year be a player’s option so that he can re-sign for a big time deal next season. However, perhaps the league let them know that they wouldn’t allow it, which is why JR has to take a longer deal? Seems hard to believe, though. How could they prove it?

  6. flossy

    nyk8806:
    btw, what’s the burden of proof on circumvention?If Chris Smith sucks in summer league but nonetheless gets a roster spot, can Grunwald get away with it simply by saying he brought him in for “team chemistry” or was a good “fit” for the team, and not as part of an illegal side-compensation package for JR?

    Hey, someone’s gotta carry the blow.

  7. BigBlueAL

    Why does JR deserve anymore than the most the Knicks can offer this off-season?? 4 years starting at 5.5mil is pretty damn generous to me. No chance in hell any team will give him anything approaching 8 figures per year. That month-long hot streak he had is most likely forgotten by almost every team and his disastrous postseason plus all these clubbing/drug rumors are probably what most teams first think about when evaluating JR. Not to mention his general history of being tough to coach and a hothead.

  8. Z

    Ephus– great piece, as always.

    CBA question, re:JR Smith:

    I’m not sure what the state of drug testing is in the NBA right now, but let’s say a player tests positive for an illegal substance (let’s say, theoretically, it is cocaine). Under previous CBAs, the league gave lifetime suspensions for + drug tests. Even if it’s been relaxed a bit since the 80s, I’d imagine there is still a lengthy suspension involved. If the suspension exceeds the life of the contract, does the full contract remain on the team’s salary cap? Should this be (theoretically!) something the organization should consider, or is that a “we can worry about that should the time come” matter?

  9. nyk8806

    Z:
    Ephus– great piece, as always.

    CBA question, re:JR Smith:

    I’m not sure what the state of drug testing is in the NBA right now, but let’s say a player tests positive for an illegal substance (let’s say, theoretically, it is cocaine). Under previous CBAs, the league gave lifetime suspensions for + drug tests. Even if it’s been relaxed a bit since the 80s, I’d imagine there is still a lengthy suspension involved. If the suspension exceeds the life of the contract, does the full contract remain on the team’s salary cap? Should this be (theoretically!) something the organization should consider, or is that a “we can worry about that should the time come” matter?

    According to coon’s faq: “If a player tests positive for a drug of abuse, whether through reasonable cause testing or random testing, he is dismissed from the league …. When a player is dismissed from the league his contract is voided, and he is disqualified from playing in the NBA for at least two years. The exception is in the case of a first-year player who was caught through random testing, in which case the dismissal lasts for one year, and the player must enter the Drugs of Abuse program. An application for reinstatement is subject to the approval of the league and players association. Once reinstated, any subsequent dismissal from the league is final.”

    I think a 2-year suspension for JR will effectively end his NBA career because of what he will be doing to/with himself in his time off.

  10. ephus Post author

    Signing JR to a non-Bird extension for two years with second year being a voidable player option is NOT circumvention.

    Doing it with a tacit deal to sign JR to a more lucrative Full Bird deal no matter what would be circumvention, but really hard to prove.

    But signing Chris Smith while signing JR to an Early Bird deal would be the epitome of circumvention. League could void both deals, penalize the Knicks with draft picks and bar JR dorm signing a kosher deal with the Knicks.

    I really hope that no one at CAA is dumb enough to think they could pull off the Smith brothers trick. I have zero confidence in JD and the Straight Shot.

  11. ephus Post author

    BigBlueAL:
    Why does JR deserve anymore than the most the Knicks can offer this off-season??4 years starting at 5.5mil is pretty damn generous to me.No chance in hell any team will give him anything approaching 8 figures per year.That month-long hot streak he had is most likely forgotten by almost every team and his disastrous postseason plus all these clubbing/drug rumors are probably what most teams first think about when evaluating JR.Not to mention his general history of being tough to coach and a hothead.

    I can imagine the Cavs thinking that JR would be perfect next to Kyrie. Same with Dallas and Dirk. If a team threw $9 million for one season at JR, they might think he would behave for his next contract. And they could use non-Bird rights to keep him.

  12. ephus Post author

    I have not given Hansbrough a moment’s thought. I would feel really foolish if I had.

  13. ephus Post author

    To be clear, the reason I would feel foolish is that there is no way that the Pacers are getting one Hansbrough at a discount to keep a non-NBA caliber player on the roster. Nets could sign Lopez twins, also not a problem. When the Clippers sign Cliff Paul at the same time as they resign Chris Paul, you have circumvention.

  14. Z

    ephus:
    To be clear, the reason I would feel foolish is that there is no way that the Pacers are getting one Hansbrough at a discount to keep a non-NBA caliber player on the roster. Nets could sign Lopez twins, also not a problem.When the Clippers sign Cliff Paul at the same time as they resign Chris Paul, you have circumvention.

    What about when Jack Haley was given a roster spot just to babysit Dennis Rodman? Can’t there be a legitimate claim to wanting to protect your investment by having a stabilizing influence for your erratic employee?

  15. nyk8806

    ephus:
    Signing JR to a non-Bird extension for two years with second year being a voidable player option is NOT circumvention.

    Doing it with a tacit deal to sign JR to a more lucrative Full Bird deal no matter what would be circumvention, but really hard to prove.

    But signing Chris Smith while signing JR to an Early Bird deal would be the epitome of circumvention.League could void both deals, penalize the Knicks with draft picks and bar JR dorm signing a kosher deal with the Knicks.

    I really hope that no one at CAA is dumb enough to think they could pull off the Smith brothers trick. I have zero confidence in JD and the Straight Shot.

    So I’m a bit confused re: the burden of proof and the definition of circumvention. Your comment re: a tacit deal to sign JR to a more lucrative Full Bird Deal after a non-bird extension suggests that the league office has to meet some burden of proof (e.g. JR sucked next year). But why couldn’t a Chris Smith signing be legit? I mean if he played really well over the summer and in training camp, I assume that the Knicks would be within their rights to sign him. The question is how badly does he have to suck before Stern meets the burden of proof on circumvention. The rules on circumvention only require:

    the team, player, and player’s agent [to] certify, under penalty of perjury, that there are no side agreements or understandings of any kind relating to:

    Any future contract, or future extension, renegotiation or amendment of the player’s current contract.
    Any outside compensation, investment, business opportunity or anything else of value furnished to the player or any other person or entity controlled by, related to, or acting on behalf of the player.

    That doesn’t seem to forbid a team signing a player for team chemistry/intangibles, but maybe I’m reading it too…

  16. nyk8806

    Nevermind.

    The CBA also has a general prohibition on circumvention which states that the rules exist to preserve the benefit derived by the teams and players, and that nobody shall do anything to defeat or circumvent the intent of the agreement. The league can use this prohibition to disallow a trade that they feel circumvents the CBA, even though that trade is not specifically prohibited by the agreement.

    I assume this trump card also applies to non-trade signings.

  17. ephus Post author

    Yes, it would be decided by an arbitration brought by the NBPA. And exhibit 1 for the NBA that this was circumvention would be today’s NY Post article laying out the entire plan long before Chris Smith could “impress” anyone at summer league.

    The Timberwolves tried this road with Joe Smith. It cost them Smith, a boatload of first round picks and, ultimately, Garnett when he was traded to rebuild.

    I have no idea why the Knicks would run that risk. It would be beyond Marbury + Francis stupid. It would be beyond Jerome James + Eddy Curry stupid.

    Please don’t do this.

  18. flossy

    Jack Haley was at least an established (if bad) pro player already. Based on his college and summer league performance, would any NBA team aside from the Knicks even consider inviting him Chris Smith to camp, let alone giving him a roster spot?

    Z: Jack Haley

  19. flossy

    ephus: The Timberwolves tried this road with Joe Smith. It cost them Smith, a boatload of first round picks and, ultimately, Garnett when he was traded to rebuild.

    Ha HA! We’ve already traded away all our first round picks. Chew on that, Stern!

  20. flossy

    ephus: And exhibit 1 for the NBA that this was circumvention would be today’s NY Post article laying out the entire plan long before Chris Smith could “impress” anyone at summer league.

    Exhibit 1B would be Chris Smith tweeting that he and his brother couldn’t wait to play for the Knicks next season, let’s see here… like within 24 hours of being eliminated from the playoffs?

  21. nyk8806

    IIRC the TWolves got busted because they were dumb enough to put the deal in writing and somehow the league got a copy of it. I would hope that an arbitrator would be fair enough not to consider a purely speculative “journalism” piece as damning proof.

    In any event, hopefully 5 years from now you won’t be doing an analysis of the Knicks salary cap implications for signing __________ and saying “it would be beyond JR Smith + Chris Smith stupid.”

  22. nyk8806

    The Chris Smith tweet is really face palm material, regardless of whether it’s just baseless overconfidence (runs in the family). If I was the CAA, I would assign these guys a social media minder who has to approve every tweet before it goes out.

  23. maxwell_3g

    i don’t know. I think we would be fine with signing chris smith to a minimum deal. its not like he cant play basketball. would relacing james white with chris smith be that crazy in the league’s eyes? the joe smith situation was completely different. that was signing one guy to a deal with a promise for future deals. THAT, we should not do. Hell, do we have any future draft picks that the league could take anyways?

  24. flossy

    nyk8806:
    The Chris Smith tweet is really face palm material, regardless of whether it’s just baseless overconfidence (runs in the family).If I was the CAA, I would assign these guys a social media minder who has to approve every tweet before it goes out.

    That sounds like the job from hell.

  25. nyk8806

    flossy: That sounds like the job from hell.

    If you believe all the conspiracy stories, the CAA is in fact run by the devil, so naturally.

  26. ephus Post author

    On Jack Haley, one major difference is that Rodman had no financial responsibility for Haley and hence did not derive an indirect payment by his signing. JR is not only Chris’ big brother, but he paid Chris’ way through school to free up an extra scholarship for Louisville. Every dollar the Knicks would pay Chris Smith is a dollarbthat JR would not have to shell out.

  27. Brian Cronin

    Yeah, the Hansbrough thing is different because Tyler was under contract already. Plus, the lesser Hansbrough had a much better college career than Chris Smith. Plus, as noted earlier, it was not blatantly spelled out before hand by both the media and Chris Smith himself that the Pacers were going to be signing the lesser Hansbrough at the same time they signed the better Hansbrough.

    Honestly, though, I think the league looks the other way with this. And I think they’ll also look the other way on the under-the-table agreement for Smith to take a 2 year deal and then opt out next season and re-sign for big money.

    The Joe Smith thing is the precedent to say that they won’t, obviously, but they had a literal written contract there! You can’t beat a literal written contract stipulating that they are circumnavigating the cap (I love the idea of having a written contract noting that you are going around the cap).

  28. max fisher-cohen

    See my thoughts on CAA here: http://knickerblogger.net/superstar-power-play/

    TL;DR They have a ton of power and like all people with power, I’m sure are not hesitant to use it. Whether the net is positive or negative for NY is an open question. My take is that if CAA is what Henry Abbott claims, they wouldn’t send their players to an organization as poorly run as NY, leaving the Knicks scraps like Smith so as to keep them feeling like they should accomodate CAA.

  29. MeloDrama

    max fisher-cohen:
    See my thoughts on CAA here: http://knickerblogger.net/superstar-power-play/

    TL;DR They have a ton of power and like all people with power, I’m sure are not hesitant to use it. Whether the net is positive or negative for NY is an open question. My take is that if CAA is what Henry Abbott claims, they wouldn’t send their players to an organization as poorly run as NY, leaving the Knicks scraps like Smith so as to keep them feeling like they should accomodate CAA.

    Smith for the price they got him is ridiculous and more than a “scrap”. They’d get guys of a higher caliber to NY if they could I’m sure, but you’re not convincing Chris Paul to take the 5 mil exception anytime soon.

    CAA is probably even money to have jumped at the chance to help clear Lin out (so Melo remains the face). NY is poorly run by its owner, but that’s why they’re all the more valuable to CAA – it essentially can control one of the biggest markets in the NBA.

  30. johnno

    If the Knicks were to sign Chris Smith to a minimum deal, I think that there is absolutely zero chance that the league or anyone else could credibly argue that the Knicks were circumventing the rules. If, on the other hand, they signed him for several million dollars, there is absolutely zero chance that the league wouldn’t come down hard on the Knicks.
    Here’s another way of looking at life — if JR Smith is really willing to forego millions of dollars just to give his brother a chance to play in the NBA on a minimum salary deal, isn’t that an incredibly noble and admirable thing for him to do? How many professional athletes would be willing to do that? There is not a whole lot about JR that I would want my kids to emulate, but I am serious when I say that I truly hope that my kids care that much about each other when they are adults.

  31. ephus Post author

    Johnno, if the Knicks sign Chris Smith to ANY contract while JR Smith signs a multi-year Early Bird or non-Bird contract I will bet you $18 to the charity of your choice (mine is the MS Society) that the NBA immediately moves to void it. This is circumvention that they will not tolerate. About $500k plus a roster spot is huge additional comp to JR.

  32. ephus Post author

    bidiong:
    As long as there isn’t a paper trail the Knicks will be fine.

    I can’t tell if that is sarcastic or serious.

    David Stern is one of the sharpest attorneys in New York. He has surrounded himself even a legion of super-smart and tough attorneys. The joke around the league office is that NBA stands for “Nothing But Attorneys”. If you think that they will be flumoxed by the most transparent scheme in the history of transparent schemes (h/t George Clooney in Out Of Sight), you are wrong.

  33. JK47

    You know you’re grasping at straws when your big offseason concern is whether or not you can bring back the guy who put up a .432 TS% in the playoffs.

  34. ephus Post author

    I plan to do a full overview of the Knicks’ cap situation, with a particular focus on Prigioni, Copeland, Shumpert (the one piece of good news) and Kidd/Camby. JR Smith was getting all of the early ink, so I wanted to get knowledge into the hands of those who seek it.

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