The Lance Stephenson Contract FAQ

With Lance Stephenson out of the gate quickly – and the Pacers along with him – his future with the Pacers has become a subject of some interest. To the comfort and joy of Pacer fans, Lance recently told Mark Montieth of Pacers.com , “I’m staying with the Pacers.”

Still, as Jared noted the other day, a lot of days will pass between Stephenson’s statement of intent and actually signing on the dotted line.

With that in mind, it’s left up to me to address some of the boring CBA- and Dollar-related details that will factor where Lance plays for the foreseeable future.

What is Lance’s current contract?

Stephenson is in the final year of a 4-year contract that will pay him just over $1 million this season.

Why don’t the Pacers sign Lance to an extension now?

I’m sure Larry Bird would love to get this taken care of, but the CBA places strict limitations on the structure and amount of most extensions. Pacer fans saw the most notable exception – the rookie scale contract signed by 1st round picks – when Paul George was given a max contract extension this summer. Since Lance was a second round pick, his extension is governed by the rules for most contacts.

In Lance’s case, the biggest extension the Pacers could offer him would be four years, $4.8 million – an average of only $1.2 million per year.

Those rules limit the contract extension to four (4) years, with a starting salary of up to 107.5% of this year’s pay, with 7.5% annual raises. In Lance’s case, the biggest extension the Pacers could offer him would be four years, $4.8 million – an average of only $1.2 million per year.

I’m sure Indiana is game. Lance & his agent? Ehhhhh….not so much.

If Lance becomes a free agent next summer, will Indiana be able to match any offer?

No.

The right to match offers – “restricted” free agency – only exists for players coming off their rookie scale contract or for veteran free agents with three or fewer years of NBA experience.

Lance did not have a rookie scale contract, and he is currently in his fourth year. Therefore, he is open to all bidders, and if he signs a contract with another team, his days as a Pacer will be over.
Lance did not have a rookie scale contract, and he is currently in his fourth year. Therefore, he is open to all bidders, and if he signs a contract with another team, his days as a Pacer will be over.

Of course, provided the current happy relationship between the two parties continues, Indiana will likely have an informal opportunity to match any contract Lance is considering signing.

Do the Pacers have any advantages over other suitors?

Yes.

The Indiana Pacers hold Lance Stephenson’s full “Bird” Rights, a special set of advantages given to teams run by the Hoosier legend.

The Indiana Pacers hold Lance Stephenson’s full “Bird” Rights, which allow them to sign him for any amount up to a max deal, regardless of their cap situation. Other teams can only make offers based on their available cap space or available exceptions (with the Mid-Level Exception the most common and likely).

In addition to that, the Pacers can offer higher annual raises (7.5%) and more years (five, instead of four). The raises don’t move the needle a great deal, but an extra year can be enticing.

What is the biggest threat to the Pacers being able to re-sign Lance?

The luxury tax – and the repeated statements by both Larry Bird and Pacer owner Herb Simon that they will not pay it.

The amount that matters in this discussion is the luxury tax threshold for the 2014-15 season. These figures will not be finalized until next July, but projections made this past summer placed it at $75.7 million.

According to Shamsports, Indiana has approximately $65.9 million in committed contracts for next season. On the surface, that would leave the Pacers $9.8 million to play with next summer. However, there’s a lot going on beneath the surface. Consider:

  • That $65.9 million is for 11 players. The $9.8 million would have to be spread over Lance and at least one other player, in order to carry a 13- man roster. The least that the Pacers could spend on a player is $0.5 million, and it should probably be assumed they’ll have to set aside $1 to $2 million of this money for roster filler.
  • The $65.9 million includes a starting salary of $13.7 million for Paul George. There are two factors that make this number almost certainly understated.
    • First, it is an estimate/placeholder based on this year’s cap figure. George’s deal will be based on the 2014-15 cap. If that cap meets last summer’s projection of $62.1 million, then Paul George will earn just over $14.6 million in his first year – at a minimum.
      The safest assumption is that Paul’s 1st year will probably be closer to $16.0 million than the $13.7 million reported. If so, that leaves only $7.5 million, not $9.8 million.
    • Second, Paul was given some kind of accelerator based on qualifying for the Rose Rule exception. If PG makes any All NBA team – which feels awfully close to a lock, at this point – then his first year could jump to as high as $17.5 million (though probably not.) We don’t know the exact terms, but rumors indicate something a little less than the “ultimate max.”The safest assumption is that Paul’s 1st year will probably be closer to $16.0 million than the $13.7 million reported. If so, that leaves only $7.5 million, not $9.8 million.
  • There are some opportunities for the Pacers to create more space.
    • The contracts of Donald Sloan and Orlando Johnson unguaranteed for next season. Unfortunately, that’s only a $1.8 million combined, and would only save half of that or less, once their roster slots were re-filled. The savings isn’t worth it, in this context.
    • Luis Scola’s deal will likely only have $1.9 million guaranteed heading into 14-15, offering a savings of roughy $2.9 million – at the cost of a pretty good player.
    • The Pacers could elect to waive players like Ian Mahinmi or Chris Copeland, thus spreading out their salaries twice the number of years left on the contract, plus one. It’s a possibility, but again, you have to fill the roster spot, likely with worse players.
  • The $75.7 million luxury tax threshold is only an estimate, and it could go down. Over the past few years, these estimates have proven to have limited reliability. The projection for the 2013-14 luxury tax threshold made in the summer of 2012 ($72.7 million) was $1 million higher than the actual threshold established ($71.7 million). Next year’s projection represents the largest jump in several years. While it’s based on some sound reasons for growth (see: Lakers’ TV contract), there still remains the possibility that Indiana could have significantly less to work with after the final cap & threshold are fixed.
  • All of this assumes that Danny Granger’s contract is allowed to expire, and he no longer plays for the Pacers.

So, what’s gonna happen?

Get back to me next July. I should be close to an answer by then.

As always, thanks to @LarryCoon ‘s Salary Cap FAQ…without which, I would be clueless. 

 

Tags: Salary Central

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