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The Heat And The Salary Cap

July 18th 2014 at 5:23pm CST by Chuck Myron

No news shook the NBA universe quite like last week’s announcement from LeBron James that he would be returning to the Cavs. Heat president Pat Riley, who heard from James shortly before the news became public, surely felt the effects of the move as much as anyone. Still, it was just one of many pivot points for the Heat this month, one to which Riley and his staff responded swiftly with a five-year max deal for Chris Bosh, agreements with Dwyane Wade, Mario Chalmers and Chris Andersen, and a discount free agent signing of Luol Deng.

NBA: Playoffs-Charlotte Bobcats at Miami HeatIt was a combination of the use of Bird rights and cap space that appeared to be similar to the team’s original plan, sans LeBron. A report from Brian Windhorst of ESPN.com on the second day of free agency indicated that the Heat were telling free agents from other teams that they had more than $12MM to spend on starting salaries for them. Other dispatches cast doubt on that figure, but it was nonetheless an indication that the team planned on dipping beneath the cap.

The idea at the time appeared to involve James re-signing at the maximum salary, as he made it clear he wanted to do so no matter where he ended up, and Bosh and Wade accepting discounts. The Heat could have gone under the cap and split as much as $35,932,559 on starting salaries for Bosh and Wade in that scenario, though that would leave room to add only a player for the $2.732MM room exception and minimum-salary contracts. That figure is remarkably similar to the $35,644,400 in combined starting salaries that Bosh and Wade wound up with, assuming Bosh is indeed getting the maximum salary as has been reported. Yet if it was true that the Heat envisioned spending $12MM on outside free agents, it sounds like Bosh and Wade would have had to take less under the original plan, assuming the Heat intended to re-sign LeBron for the max.

Six days after Windhorst’s report that the Heat were telling free agents they had $12MM to spend, and four days before James announced that he would sign with the Cavs, the Heat came to agreements with Josh McRoberts and Danny Granger. The deals were equal to the full values of the non-taxpayer’s mid-level and biannual exceptions, respectively. It was a clear signal that Riley’s plan had changed, and the Heat were going to pursue a strategy of remaining over the cap. That meant the notion of adding Deng or any other free agent likely to command eight-figure salaries was out, if the team was to retain its core of James, Wade and Bosh. Staying over the cap would allow the Heat to pay up to the max to retain all three of its stars, providing that it did so and stayed under the $80.829MM hard cap that the use of the non-taxpayer’s midlevel and biannual exceptions triggered. It also meant that McRoberts and Granger would be the team’s most significant offseason additions, since the Heat would be limited to no more than minimum-salary deals for all but their own free agents.

That was what the Heat were signaling, anyway. They still could have gone under the cap, with Bosh and Wade splitting a pool of less than $24,260,231 to allow the team to sign another team’s free agent for more than the mid-level amount it gave to McRoberts. In that case, presuming James came back at the maximum salary, Bosh and Wade would each have to accept about only half of their maximum salaries, or one of them would have to take even less. Such a path never seemed likely, but the possibility of dipping beneath the cap remained, and it foretold the strategy that the Heat, if not entirely by choice, would eventually pursue.

The James decision was a game-changer for many in the league, and it spun Riley into a U-turn. He offered Bosh the five-year max to keep him from jumping to the Rockets or another suitor, trumping the four-year maximum offers that opposing teams were limited to making. He re-signed Wade at a starting salary of $15MM, roughly 75% of his max. He found a replacement at small forward in Deng, agreeing to pay him a $9.7MM salary for the coming season, and with the Deng deal, he turned the mid-level and biannual deals for McRoberts and Granger into contracts that relied on cap space instead. Riley renounced the rights to Udonis Haslem as part of clearing that room, but he used the team’s new position as an under-the-cap team to reward the sacrifice Haslem made when he turned down his player option and gave up $4.62MM. Haslem signed for the $2.732MM room exception, and, as Windhorst reveals, it’s a two-year deal. That means Haslem will see slightly more over two years than he would have made last season alone. It still may go down as a sacrifice for the Miami native, but given his declining play, there were no guarantees that he would have found a new deal next summer, when his old contract would have run out. Presuming his new contract is fully guaranteed, it locks in more money than he had previously been in line for.

Ultimately, it’s a lesson in the difference between agreements and official contracts, and the importance of timing in NBA free agency. When Riley made deals with McRoberts and Granger, there was nothing binding that stipulated that they were for the mid-level or biannual exceptions. They were simply good-faith agreements that the pair would be paid those amounts, whether it required cap space or exceptions. In fact, those deals couldn’t have been more than merely agreements at the time they were struck, since they took place during the July moratorium. Miami could have made those deals official on July 10th, the first day after the moratorium and the day before LeBron made his announcement, and in so doing the team could have informed the league that it was using those exceptions on McRoberts and Granger. That would have prevented the team from clearing the cap room it wanted after LeBron left, and the maneuver almost certainly would have forestalled any agreement with Deng.

Riley didn’t get what he was after this summer, but by remaining flexible, he’s put together a near-certain playoff team from the ashes of LeBron’s departure. The Cavs, by contrast, have yet to return to the postseason since the last time LeBron played for them.

Photo courtesy of USA Today Sports Images.

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