Pacers Offseason, Part 1 - How Much Money Do They Have to Add Players?

With the season freshly concluded, it’s time to talk about how the Pacers can make next year even better. We’re going to start by outlining just how much “room” Indiana has to add players. Heading into next season, the Indiana Pacers have eight players under contract. (source: Shamsports)

(000’s $)

The Pacers are committed to paying those contracts in full – with one exception. The $870 thousand for Lance Stephenson is fully unguaranteed until July 15th. If he is waived before then, then that money goes away. You’ll also note that the salary for Dahntay Jones is in green. That indicates a player option. Jones could elect to terminate his contract and explore free agency, but that seems unlikely.

For reference, I have included the projected salary cap – $58.044 million. This is flat to this year. The revenue for the lockout-shortened season will probably be down, but the CBA guaranteed that the cap would not drop below this level. Based on this figure, the Pacers would have $21.767 million left between their contracts and the salary cap. That number would go to $22.637 million, should the Pacers waive Stephenson prior to July 15th.

However, while that’s the most money they’d have available, it is not what they actually have free to start the summer spending.

Cap Holds – The Hibbert and Hill Effect

Technically, the Pacers will open the summer with no available cap space.

In order to prevent teams from letting all of their contract expire, signing other free agents, then re-signing their own players with “Bird Rights” to go over the cap, the CBA places “cap holds” on a team’s free agents, draft picks, and retired players.

(000’s $)

The Pacers will enter July with over $32 million in cap holds, putting their total cap figure at close to $70 million. However, only a few of those holds really matter.

The biggest cap hold is on Leandro Barbosa’s contract, at $11.4 million (150% of his 2012 salary). As he helped late in the regular season and early in the playoffs, it was worth considering keeping him around. After the Miami series, that seems less appealing. Regardless, if you wanted to keep him, then the Pacers would need to sign him quickly for a figure much lower than his hold. However, the base expectation is that the Pacers will renounce their Bird Rights to Barbosa, thus removing all of the cap hold. (The decision to be made about Barbosa is likely low on the front office’s offseason priority list.)

I didn’t list all of the holds here, because the ones for Jeff Foster, A.J. Price, and Kyrylo Fesenko are probably moot. Indiana will renounce all of them for various reasons. However, I did include Lou Amundson. Amundson is a player that the Pacers would probably like to re-sign at the right price. However, his price probably won’t be materially different from his hold. As you’ll see later, how Indiana can or will deal with Lou will greatly depend on what direction they want to go with their other moves. (And as with Barbosa, it is not a primary concern.)

That leaves the three holds that matter – Roy Hibbert, George Hill, and the 1st Round Draft Pick. They total $11.217 million.

So what can the Pacers do? Well, a lot of things, but it’s probably easiest to look at it in two separate scenarios.

Keeping the Core Together

If you operate under the assumption that the Pacers will want to re-sign Roy Hibbert and George Hill, then that limits the money available pretty drastically. Both players are sure to command contracts greater than their cap holds, so the way to maximize the cap space would be to wait to re-sign these two until after the Pacers made their free agent acquisitions.

Under that approach, Indiana would most likely have the $10.550 million identified in red above available to sign free agents (this assumes renouncing Barbosa, Amundson, etc.). From there they would have three avenues to create more cap space – one entirely under their control, and two that would need trading partners.

Waive Lance Stephenson – This would add $870 thousand of cap space, bringing them to $11.420 million available. Making this move has the virtue of being entirely at the discretion of the Pacers. I think this is possible, but don’t consider it likely. Nor am I making a judgment on whether or not Lance should  be waived. However, it’s worth noting that Lance could be waived, then re-signed later to the minimum … which happens to be $854 thousand next year. It could be a painless option for both parties, but it also doesn’t move the needle very much.

Trade, Sell or Renounce the Draft Pick –  The Pacers hold the 26th pick in the NBA Draft this June, and it carries with it a cap hold of $894 thousand. The Pacers could elect to trade that pick without taking back salary, sell it for up to $3 million, or renounce their rights to the pick (probably after making the pick). The first two are possible, the third extremely unlikely. The last example of renouncing the rights to a draft pick I can recall is Chicago doing it with Travis Knight in 1996. The Pacers also lost the rights to Greg Minor — whose rights they’d acquired in the Mark Jackson trade — but that was for reasons surrounding failing to file the right paperwork in time that I can’t quite recall, and in any case, was four CBAs ago. The Pacers may trade or sell the pick, but the need would have to be very specific. This path also seems unlikely to me, simply because first round draft picks are cheap players with potential, and teams don’t like to give them away.

Make an unbalanced trade, where they send out more salary than they take backThis seems unlikely to me, because Indiana would need a trading partner with either cap space or a Traded Player Exception (TPE) who would also be interested in taking a player that the Pacers didn’t want. However, since Danny Granger has the only contract on the Pacers that is guaranteed beyond the 2012-13 season, there are candidates. Seems to me that the most likely scenario of a collection of long shots would be to get some team to take back the final year of either Dahntay Jones ($2.900 million) or Tyler Hansbrough ($3.055 million), in exchange for some future considerations — second round picks, highly protected firsts. This, along with waiving Lance Stephenson, could create just under $15.400 million in cap room, while retaining the holds for Hibbert and Hill. This is close to, but not quite, big enough to make a 30% max offer. However, there’s a lot of risk in that. The Pacers would have to make that deal, before they had an agreement – or even spoken to — a free agent. Very good chance that they could come out of the exchange with more money to spend, but not be able to spend it on who they want.

Those are opportunities to get clever. However, if the Pacers prioritize re-signing Hibbert and Hill, it likely indicates a more conservative approach. Therefore, the best assumption to follow is that they’ll have just a little over $10 million available to add talent.

In this scenario, there are two players that I would put at the top of the shopping list.

First, Steve Nash. Nash would do wonders for the Pacer offense, and — I have to believe — Roy Hibbert. He reportedly has winning as a high priority, and perhaps he could be brought in on a David West-type deal…maybe even less in the right circumstances. I’m not great at predicting what his actual price tag will be, but I have to believe it would within the Pacer budget. I think it would just be a question of mutual interest.

Second, Irsan Elyasova. Again, not entirely sure of his price, but a very good, active upgrade on the Pacer reserve bigs who also could provide some sorely needed shooting ability.

In my more delusional moments, I think of getting both, but one or the other would be fine.

Other factors could derail this plan pretty quickly, though. Both Hibbert and Hill are restricted free agents, which is both a blessing and a curse for the Pacers. The blessing comes in the fact that the Pacers can match any offer made. The curse comes in that the new CBA only allows three days to match, instead of seven.

If Roy Hibbert and/or George Hill sign offer sheets very early in the process, it significantly alters the math here. In fact, if both sign on July 1st (or whenever the first day), the Pacers will be forced to make all of their major offseason decisions in a three-day time frame. This is especially concerning when you consider that the Pacers’ normal M.O. is to allow things to unfold.

In any case, I expect the Pacers to seek to keep the core together, so I think they will prioritize re-signing their two restricted free agents. Then look to add more talent. Nash and Ilyasova may or may not be on their wish list.

However, they could go another way.

Go Big Game Hunting

Really, what this amounts to is going after Deron Williams. However, the first thing I need to do here is address Eric Gordon. The Pacers have been linked repeatedly to Eric Gordon, and while the match is perfect in theory, it is fraught with practical problems.

First is the very real concern over whether Gordon will be worth the amount of money it will take to sign him. The most damning argument against is the fact that he’s missed 20, 26, and 57 games over the last three seasons. That’s not a warning sign. That’s somebody walking beside you 24 hours a day, slapping you upside the head, and saying, “He’s injury prone. He’s injury prone. He’s injury prone.”

Also, Gordon went from being considered a promising, possible All-Star one day to the future best shooting guard in the league, all without ever actually showing any sustained reason for that jump. He has played at a very high level for relatively short periods of time in the context of a career and a contract worth upwards of $60 million.

But the biggest practical obstacle is his restricted free agent status.

Though I wouldn’t do it, New Orleans seems committed to matching any offer, up to and including a max deal. This fact closes the window on this opportunity for all but the tiniest sliver. So, I don’t consider Gordon a practical option, but the good news for those who do is: the steps needed to put the Pacers in a position to make a run at Williams will also allow them to make a run at Gordon.

Now, the math.

(000’s $)

The table above outlines the max contracts. While the overall cap will not change, the CBA has guaranteed that the cap used for establishing player max salaries will increase, driving up the max salaries available.

The two columns of importance to the Pacers are the 25% column and the 30% column. Eric Gordon (and Roy Hibbert) can be paid up to the amount in the 25% column, with a starting salary of $13.669 million. Deron Williams’ maximum is in the 30% column, with a starting salary of $16.403 million.

If the Pacers are willing to make some hard choices, they would have enough space to offer a 25% max, and they could come close to a 30% max. But, those choices would be hard, and they’d begin with renouncing the Bird Rights to George Hill.  That alone would create enough space to offer Eric Gordon the max.

From there, if the Pacers were to waive Lance Stephenson and unload their first round pick, they could offer a starting salary of just over $16.1 million to Deron Williams. This would be just below the max, and cost Williams about $1.1 million over the course of a four-year contract that any team besides the Nets could offer. Of course, the Nets max offer is worth over $20 million more due to the extra year.

Sidebar – What does renouncing a player mean?
You’re basically giving up your ability to go over the salary cap to sign that player. If the Pacers were to renounce George Hill, then they would only be able to sign him with available cap space, or to a minimum level contract. While there are scenarios where Indiana could renounce Hill (or Hibbert), then still find a way to keep him, their chances are very remote. One should assume renouncing a player would end the team’s relationship with that player. There is only one instance in which a player can be “un-renounced.” That is if he was renounced in order to make an offer on another team’s restricted free agent, and that team matched the offer. However, there are still limitations even then, so it’s safest to consider renunciation final, and be surprised if it isn’t. (As always, Larry Coon’s NBA CBA FAQ is the best source for information like this.)


Correction – Roster Charges

As wintermute notes below, there is something called a roster charge. Per Larry Coon:

“A roster charge if the team has fewer than 12 players (players under contract, free agents included in team salary, players given offer sheets, and first round draft picks). The roster charge is equal to the rookie minimum salary for each player fewer than 12.”

This changes the math enough to change a couple conclusions:

In the “Keep the core together” section, a roster charge ($0.474 million) should be added, lowering the beginning available to just over $10 million. Then both Lance and the pick would be replaced w/ roster charges, meaning those two moves would only create about $0.4 million additional space, each.

It has a bigger effect on the “Big Game” calculations, as the Pacers would not be able to get to $16.1mm. At that point, they’d have four roster charges. That would take away $1.9 million of available space. As wintermute notes, to chase Deron Williams, the Pacers will have to find someone to take on salary – probably Dahntay Jones or Tyler Hansbrough – in order to create room to make a max offer to Williams.

If that wasn’t enough, the Pacers would either have to decide to renounce Roy Hibbert’s Bird Rights (won’t happen), or try to find a team willing to take on some salary. In that case, they’d love for it to be Dahntay or Tyler, but they might have to dangle Darren Collison and his remaining $2.3 million.

No question, this is a risky, risky path, but there are ways to get there. Again, this is just about the math of creating the space to sign Deron Williams. It’s not a discussion of whether or not he would come to Indiana.

Which Way?

It’s tough to tell. I’d say it depends on whether or not Bird returns. If Bird returns, then I’d bet heavily on the Pacers re-signing Hibbert and Hill, while trying to make another David West-level acquisition. This could come in free agency, or they could look to make a trade. If Bird leaves, then it depends on his replacement, and I don’t know who that might be. I will say this, however. If it ends up being Kevin Pritchard, then I’d expect the Pacers to make a run at Deron Williams.

To me, if you can get Williams, you have to get him. However, while I think he’d come to Indy, I don’t think Indy will be his first choice. New Jersey and – reportedly – Dallas, will likely look more attractive to Williams. So, while I’d explore the Williams opportunity, I’d plan on moves in the vein of Nash/Ilyasova, or other opportunities that may not be readily apparent to the casual observer. Of course, there is always the possibility of trading any of the players on the roster – Danny, Roy, David, DC. While that makes it hard on us prognosticators, the amount of flexibility the Pacers have leaves them in a position to be envied by pretty much everybody else in the NBA.

Plenty of questions about what will happen this summer, but this post should provide the framework for the financial options and limitations the Pacers face. Stay tuned.

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Tags: Salary Central

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