The Value Of Mo Williams’ Contract

It has been a bizarre few months for Mo Williams, who was expected to serve as the Cavaliers’ backup point guard behind Kyrie Irving this season. Before training camp got underway, however, Williams’ agent informed Cavs GM David Griffin that his client was retiring. The news came just five days after Williams himself had tweeted about playing the 2016/17 season.

Williams later underwent surgery on a troublesome knee injury, having received a third opinion after two doctors advised the veteran point guard that he didn’t require surgery. At the time of his procedure, Williams appeared to take a veiled shot at the Cavs, writing on Instagram that no one cared about his health except him. Months later, there has been no indication that Williams plans on coming out of retirement anytime soon — he’s no longer represented by an agent, according to Jake Fischer of Liberty Ballers (Twitter link).

A funny thing happened to Williams during his absence from the NBA though. Despite the fact that Williams hasn’t appeared in a single game and likely won’t return to the court this season, his contract has become a hot commodity. The Cavaliers traded it to the Hawks, who in turn sent it to the Nuggets. Denver waived Williams, but Philadelphia claimed him off waivers. The Sixers cut him immediately, only to see the Nuggets claim Williams again.

So what exactly is going on here? Let’s start with the motivation for the Cavs and Hawks to use Williams’ contract in trades…

Creating a trade exception and opening up a roster spot:

When the Cavs sent Williams to the Hawks as part of this month’s Kyle Korver trade, he didn’t necessarily need to be included in the deal. Cleveland could have just sent Mike Dunleavy to Atlanta to adequately match Korver’s salary. In fact, the team didn’t even have to trade any salary to the Hawks, since a trade exception was used to absorb Korver’s salary.

We’ve written an in-depth glossary entry on how traded player exceptions work, but the simple explanation is this: Trade exceptions are created when a team sends out a player and doesn’t take back any salary in return. Even in a deal like the Korver swap, where players are being sent both ways, trade exceptions can be created — the Cavs used a previous TPE to absorb Korver’s salary, meaning they essentially traded Dunleavy and Williams for “nothing,” allowing them to create new TPEs worth Dunleavy’s and Williams’ salary.

The Cavs now have five trade exceptions, including two of greater value than the one created by moving Williams, so they may never use that Williams TPE. But it’s possible it could come in handy, in spite of its modest size ($2.2MM). As Cleveland monitors the trade market for backcourt players, guys like Tim Frazier, Cameron Payne, and Terry Rozier all earn less than $2.2MM and could fit that into that TPE.

In addition to creating a trade exception, dumping Williams’ contract allowed the Cavs to clear a roster spot, and a roster opening is always a valuable asset down the stretch. So that explains why Cleveland wanted to move him. But why would Atlanta agree to acquire him? Well, if the Hawks hadn’t taken on Williams, the Cavs likely wouldn’t have been so willing to give up a 2019 first-round pick for Korver, a somewhat one-dimensional 35-year-old on an expiring contract.

Additionally, after acquiring Williams, the Hawks were able to turn around and flip him to Denver, creating a trade exception of their own. Atlanta reportedly sent some cash to the Nuggets in the deal, but that’s a modest price to pay for the role Williams played in landing the team a first-round pick and a trade exception.

So why would the Nuggets – and, subsequently, the Sixers – want Williams? Another issue is motivating those teams…

Getting to the salary floor:

NBA teams are required to spend at least 90% of the salary cap in each league year. More commonly, this is known as the “salary floor,” and it’s set at $84.729MM for the 2016/17 season. The Nuggets are well below that number, sitting at just under $75MM before their initial acquisition of Williams. The Sixers are in that neighborhood as well, hovering around $77MM before claiming Williams.

The penalty for not reaching the salary floor isn’t punitive — a team simply must get to the floor by paying the difference to the players on its roster. However, by adding and waiving a player like Williams, a team below the floor can potentially save some money.

Here’s why: Williams’ cap hit for this season is $2,194,500. If a team were to waive Williams, who has a guaranteed contract, and he goes unclaimed, his $2,194,500 cap hit would count toward that team’s salary floor. However, the Cavs and Hawks have already paid about half of Williams’ salary for the season. Any team adding him to its roster now would only be on the hook for the remaining portion of his $2,194,500 salary. We’re over halfway through the season, so that prorated number would be about $1MM.

In other words, for a team like the Nuggets, getting (and keeping) Williams’ cap hit on their books moves the team approximately $2.2MM closer to the salary floor, but only adds about $1MM in actual salary commitments, saving the team more than $1MM if it doesn’t reach the floor by season’s end.

Does the Mo Williams transaction carousel seem like a lot of trouble to determine which team saves $1MM? Well, yes. When the Nuggets acquired and waived Williams, they likely didn’t expect another team to swoop in to try to steal their savings. They surely weren’t happy about the Sixers’ claim, which is why they returned the favor to Philadelphia on Monday.

Now that they’ve shown that they’re willing to claim Williams right back, the Nuggets might have an easier time getting him through waivers this week without another team interfering, in which case we’ll be able to put the matter to rest. No matter where Williams ends up, this should be one of the last times we see a situation like this play out — the league’s new Collective Bargaining Agreement calls for actual salary paid by a team to go toward the salary floor, rather than a player’s cap hit, which should eliminate this sort of maneuver starting in 2017/18. Until then, teams figure to take advantage of the loophole for a few more months.