The state of the Knicks’ salary cap was summarized by Lennon & McCartney more than 40 years ago:
I‘ve got to admit it’s getting better (Better)
A little better all the time (It can’t get more worse)
I have to admit it’s getting better (Better)
It’s getting better since [Phil’s] been mine
Getting so much better all the time
It’s getting better all the time
Better, better, better
Sure, the Knicks are light years above the salary cap for this season but, for the first time since the Summer of 2010, they are looking ahead at a summer that will feature significant cap space at their disposal. And, with the new national television deal expected to add up to $30 million to the salary cap starting in the Summer of 2016, the Knicks have the prospect of tremendous cap room when LeBron, Durant and others seek their next long-term deals.
IT CAN’T GET MORE WORSE (CURRENT STATUS)
For 2014-15, the Knicks are still trapped in salary cap jail. The salary cap this year is $63 million. The Luxury Tax starts at $77 million. And the Apron is set at $81 million. The Knicks have $89 million in committed salary for this season. Being so far over the cap means:
1. No use of the full MLE – only the tax-payer mini-MLE was available this off-season.
2. The Knicks lost their Bi-Annual Exception.
3. The Knicks will pay Luxury Tax of approximately $24 million on the $12 million by which they exceed the Luxury Tax threshold. But given the recent skyrocketing value of MSG stock, don’t cry for the Dolan family.
4. In a trade, the Knicks cannot take back more than 125% of the outgoing salary for this season. Teams below the cap can take back up to 150% of the outgoing salary.
Here are the numbers, per the usually-up-to-date Hoopshype.com.
IT’S GETTING BETTER (FOR SUMMER 2015)
The Knicks can get below the Salary Cap in the Summer of 2015 without making any particularly painful sacrifices. The projected salary cap for Summer 2015 is $66 million, a number that could be revised upward (on which, more later). The expiring contracts of Amar’e Stoudemire ($23.4 million), Andrea Bargnani ($12 million), Sam Dalembert ($3.8 million) and Jason Smith ($3.2 million) could free over $42 million, presuming the Knicks renounce all of those players’ Bird Rights. Until Bird Rights are renounced, these players would stay on the books in the form of a salary cap hold valued at up to 150% of their previous salary. So expect the Knicks to act quickly on all four immediately after the Finals conclude.
Those contracts are largely albatrosses and stopgaps but the Knicks will have three tougher decisions to make. Their choices will go a long way to shape what their backcourt rotation looks like in the coming years.
Iman Shumpert: If Shumpert is not traded by season’s end, the Knicks almost certainly will make a qualifying offer to him so that he becomes a Restricted Free Agent. On the open market, a healthy Shumpert is likely to command a deal of at least the 4 year/$32 million deal that Avery Bradley got from the Celtics. Even if the Knicks do not want Shumpert to take up that much salary cap space, they should be able to get some assets (Draft picks) as part of a sign-and-trade given their right to match any offer for him.
Shane Larkin: The Knicks decided not to exercise their option to extend Larkin for a third-year rookie scale contract. So, he will become an unrestricted free agent this off-season. If he has a good year, he almost certainly will leave, because the Knicks will be limited to offering him the 3rd year Rookie scale for his draft position (around $2.5 million) while other teams will have no limit.
JR Smith: Earl holds the option to return for $6.8 million next year. He may elect to stay, given the huge increase in salary cap likely to occur during the Summer of 2016. But JR is just as unpredictable off-the-court as he is on-the-court.
If Shumpert and Larkin leave and JR Smith stays, for example, the Knicks are likely to have $26 million in open salary cap space next summer. Theoretically, Lebron James could be a free agent, but it is extremely unlikely that he will leave Cleveland. I expect that he will opt-out of his 2015 contract, take a max 20% raise (using non-Bird Rights) from the Cavs for a one year deal with a one-year player option, and put himself in place to take a MEGA-max 5 year deal from the Cavs in the Summer of 2016.
The other theoretically available free agents next summer include: Kevin Love, LaMarcus Aldridge and Rajon Rondo. The Knicks will have at least $20 million in salary cap space and those three players will have a Max first year salary of ~$16.5 million (25% of $66 million salary cap). The small amount of money Carmelo left on the table for 2015 may help the Knicks squeeze in some more talent next summer, but they may kick the space over to the Summer of 2016, when all hell will break loose.
SO MUCH BETTER (FOR SUMMER 2016)
The new national media package for the NBA kicks in for the 2016-17 season. The league will be making nearly $3 billion per year from ESPN/ABC and TNT, up from roughly $900 million under the old package. The $2 billion increase would lead to the salary cap jumping to $90 million in the summer of 2016, just in time for Lebron and Durant to become unrestricted free agents. Lebron’s MAX first year salary would be $31.5 million (35% of $90 million) and Durant’s MAX first year salary would be $27 million (30% of $90 million). Even with Carmelo’s salary on the books, the Knicks could have enough cap space to offer both MAX deals. I do not know if that is the plan, but the point is the Knicks will have COMPLETE SALARY CAP FREEDOM (something that has not existed since the Summer of 2010 and, before that, since Red Auerbach ruined the Knicks salary cap as revenge for signing Kevin McHale to an offer sheet).
BETTER, BETTER, BETTER (SMOOTHING)
The financial rumor around the NBA is that the league wants to “smooth” the impact of the new media package so that there is not a gold rush in the Summer of 2016. The proposal, which has not been publicly revealed, involves two components: (1) shifting some of the salary cap increase from 2016 to 2015 and (2) artificially reducing the 2016 salary cap from $90 million and putting the extra money into an escrow fund for the players that would be spread across all salaries. In her podcast with Zach Lowe, newly-minted NBPA executive director Michelle Roberts revealed that the NBA’s proposal would reduce the 2016 salary cap to something “slightly above” the publicly rumored figure of $78 million.
Because the salary cap is part of the CBA, the union’s permission must be obtained to change the mechanics and create smoothing. It is far from clear if that will be forthcoming. Roberts stated that she is studying the situation to determine whether it would benefit or harm the players in aggregate and, if it is net neutral, which constituencies would gain or lose.
If there is smoothing, it would help the Knicks in the Summer of 2015 by giving them more cap space to go after Love/Aldridge/Rondo(?). The reduction in 2016 would reduce the Knicks’ ability to make two super MAX offers, but that is a high quality problem to have.