The Money Side of Goran Dragic to the Pacers

What was shaping up as a quiet trade deadline got a great deal noisier last night, when the Goran Dragic trade rumors burst forth on Twitter.

With the Indiana Pacers reportedly being named as one of his destinations, it is worth looking at some of the financial issues that surround any potential deal.

What is Goran Dragic’s contract situation?

Goran Dragic is in the third year of a four-year contract. He is scheduled to make $7.5 million both this year and next. At the end of this season, Dragic has a player option, allowing him to opt out of next year and become an unrestricted free agent.

What CBA restrictions are there in the Pacers’ attempts to trade for Dragic?

Since both the Indiana Pacers and Phoenix Suns are non-taxpaying teams currently over the cap, any trade would have to follow the NBA’s salary matching rules.

Goran Dragic matching — Courtesy of Larry Coon’s CBA FAQ

Phoenix almost certainly wants a first-round draft pick, but since that has no salary cap impact, Indiana would have to send out players with salaries that would adhere to the restrictions above, which are defined by each team’s outgoing salaries.

If Phoenix were to only send out Goran Dragic and his $7.5 million salary, then the Pacers could send as little as $5.0 million and as much $11.25 million to make the deal work.

If Phoenix were to want to add other players — Gerald Green (on a $3.5 million expiring deal) has been rumored to be on the block — and their outgoing salary were to go above $10mm, then that would alter things slightly. A Dragic-Green deal would total $11.0 million, meaning the Pacers could send out as little as $7.3 million or as much as $16.0 million (salaries plus $5 million) to make this deal meet CBA requirements.

Are there any other financial restrictions for this season that would affect the machinations of a Goran Dragic trade?

Yes. Both Indiana and Phoenix will avoid paying the luxury tax, at nearly all possible costs. This will limit how much salary either team will want to add in this, or any other trade.

For Phoenix, this is something to keep in mind but probably won’t be a pressing issue. Their payroll appears to be about $8.2 million below the luxury tax threshold. That is more than enough room to absorb any legal matching trades without threatening the tax.

For Indiana, this issue is immediate. Their payroll stands at just under $75.3 million for this season, leaving approximately $1.6 million of room beneath $76.8 million luxury tax threshold. Simon and Bird have been consistently adamant about not paying the tax, so they will be looking to send out at least $6.0 million in any deal that brings back Dragic alone – and they’ll stay within $1.6 million on any deal. Period.

While this range provides nice flexibility, we should assume that both teams are among the more fiscally conscious in the NBA. Therefore, don’t expect either to be willing to add a great deal of salary to this year’s payroll.

Could the Pacers trade for Goran Dragic and extend his contract immediately?

No.

As a four-year deal, Goran Dragic’s contract isn’t eligible for extension until three years after signing, which would not be until this coming July.

Even if they could, it would be extremely unlikely Dragic would sign one. Any extension would be limited to a starting salary of 7.5% above his final year’s pay. In this case, the $8.1 million, with its commensurate raises, would be well below the expected market value for Dragic.

What about the future? Can they keep Goran Dragic past this summer?

The overriding question for the Indiana Pacers in any Goran Dragic deal will be, “Can we keep him?”

As noted above, Dragic has a player option at the end of this season. There is every indication that he intends to use that option to test what promises to be a lucrative free agent market. Rumors are already swirling that the Lakers intend to offer him a max deal this summer, and the New York Knicks will be in position to do the same. Both teams are among the teams listed by Adrian Wojnarowski as being targeted by Dragic and his people.

So, to keep Goran Dragic, the Pacers must be prepared to give him the max. This is where it gets expensive.

Dragic is finishing his 7th NBA season, meaning he will be eligible for the 30% max this summer. That will start somewhere around $18.8 million, based on a projected $66.5 million 2015-16 Salary Cap. A four-year free agent 30% max – which is what the Lakers or Knicks could offer – would pay a little over $80 million. A five-year Bird Rights 30% max would pay $108 million.

That’s a starting salary about $1.7 million higher than the Pacers will pay Paul George next season — roughly $17 million more over five years than Paul George’s extension from last year. These are daunting dollars for a very good — but not great — player.

The coming TV deal and its huge increase in revenue will alleviate some of the concern, but this is a lot of money for the Indiana Pacers franchise.

Even if they were comfortable with paying Goran Dragic those sums, there are some short-term logistical issues they’d have to overcome. The table above shows Indiana’s currently salary situation (Source: Shamsports) for this year and next.

At this time, the Pacers have about $64.1 million in committed salaries for next season on only nine player contracts. Assuming (as a starting point) that Indiana only sends out expiring deals in any Dragic trade, that would only leave them about $16.9 million left under next season’s luxury tax threshold.

Should the Pacers get Dragic — and have to pay him a max salary to keep him — they’d have to clear enough room not only to fit his $18.8 million starting salary, but also the four or five players needed to fill out the roster. That number could need to be as much as $25 million total — or about an $8 million reduction to the $64 million in currently committed contracts.

Some of that could be achieved by sending Solomon Hill ($1.4 million next year) or Ian Mahinmi ($4.0 million), or through other trades. The fastest way would probably be to make one of the Pacer core players — Roy Hibbert, David West, George Hill — a part of the deal.

However, it’s unclear as to whether that would be attractive to Phoenix, and it could potentially be a “Gift of the Magi” situation. Getting Goran Dragic is a “win now” move, but sending out any of those three players reduces the team’s ability to win now.

This isn’t necessarily a deal-breaker.

Bird might not be unwise to get the asset — Goran Dragic — now, and work out those details later. However, keeping Dragic for years beyond this summer is an absolute must, if the Pacers are to give up one or more draft picks to get the deal done. Rest assured this aspect of the deal is the most likely to dampen Indiana’s interest.

The chances of the Indiana Pacers acquiring Goran Dragic remain long, as emphasized by these tweets by Woj:

So far, Pacers giving indications that they want to hold roster together, reintegrate Paul George and keep going this season.
— Adrian Wojnarowski (@wojespn) February 18, 2015

The Dragic circumstance could challenge Larry Bird's thinking, but hard to imagine a Pacers package that inspires the Suns.
— Adrian Wojnarowski (@wojespn) February 18, 2015

But the Pacers have had interest in the Slovenian guard, reportedly offering Roy Hibbert for him this summer.

So until Goran Dragic is actually traded (or the trade deadline passes), Indiana will remain in the mix, and the dollars will matter.

As always, thanks to Larry Coon’s CBA FAQ and Mark Deeks’ Shamsports for supporting information.

Next: Pacers a Possible Trade Destination for Goran Dragic

What is Goran Dragic’s contract situation?

What CBA restrictions are there in the Pacers’ attempts to trade for Dragic?

Are there any other financial restrictions for this season that would affect the machinations of a Goran Dragic trade?

Could the Pacers trade for Goran Dragic and extend his contract immediately?

What about the future? Can they keep Goran Dragic past this summer?

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