The supermax is a trap for small-market teams like the Indiana Pacers

As ESPN’s Tim Bontemps points out, the NBA’s supermax contract hasn’t worked out the way it was expected to, and even if it did, it could be a trap for small-market teams like the Indiana Pacers.

Building a basketball team isn’t easy, but the NBA and the NBA Players’ Association has tried to make this a little easier for smaller teams by introducing the Designated Player Exception — a supermax contract for players that stay with teams for over 7 years.

But it hasn’t been a perfect remedy to keep the best players from leaving. As Tim Bontemps of ESPN wrote — and quoted Paul George — there are more factors than just money, especially when a great player gets to that point in their career.

"“Everybody has their own agenda, and their own motive,” George told ESPN. “For me, I just wanted to play and have a chance to win a championship. I didn’t care about the money. For me, it was about where can I get a good opportunity to win, and I just felt that window was closing in Indiana, and I moved on.”"

Maybe if the Pacers made better moves in the final years of George’s time with the team, he might have stayed. If Paul George qualified for the Designated Player Exception in his final year with the Pacers, perhaps that would have mattered, but it also would have made building around him harder.

The Pacers would have been paying him between $35 and $45 million during the 5-years of that contract. That’s nearly half of the cap space next season, which is around $109 million. Can you still build a winning team around that? Sure, but it gets tricky unless you’re willing to pay the luxury tax.

And that’s where there is a catch for teams like the Pacers and other small market or lower revenue teams. When it comes to the money side of things, the Pacers are in the middle to lower part of the spectrum.

If the Pacers or any small market team don’t offer a player the DPE that is eligible for it, then good luck convincing free agents you’re willing to spend enough to compete.

Paul George’s productivity would make him worth the so-called supermax, but a middle-market team like the Washington Wizards are in a much different situation once they hit a bump in the road after signing such a deal.

Their supermax player, John Wall, is hurt and might have already been in decline beforehand. They pay out an absurd amount of money to a player that isn’t playing again this upcoming season after another injury.

The Wizards in a rough spot over the last few years and for the next few years to come because they rewarded a loyal player with a DPE contact.

Even though currently the Oklahoma City Thunder are willing to pay out to keep George around with Russell Westbrook and Steven Adams, that willingness may fade as title hopes slip away as well. The Thunder won’t be in the exact same situation the Wizards are in, but the owner might not want to pay a luxury tax bill for much longer, either.

If this is the case, them trading their supermax contract while trying to re-tool or rebuild will be the hardest part.

Money talks

A team like the New York Knicks or Los Angeles Lakers have billions more in value than these teams in smaller markets, and likely in their ownerships’ mind, less risk in paying the luxury tax. After all, if you aren’t an offender, you’re getting money from the teams that do. Just look at the Knicks, who get nearly half of their value from the market they are in, whereas that’s less than a quarter of the Pacers’ worth.

While I’m not here to do PR for Herb Simon and how he spends his money, it’s clear he isn’t the type that wants to throw money away. A team like the Pacers doesn’t have the same sort of income, value, or cash on hand as a larger market team like the Knicks or Lakers do.

Regardless of the specific numbers involved, smaller market teams make less money and have smaller budgets. According to Forbes, the Pacers were losing money in 2012 — we can talk about whether that’s bookkeeping or an absolute fact at a later date.

We can complain about how Simon does or doesn’t spend on the Pacers but from a purely financial view, there’s a lot more risk involved for a team like Indiana to spend that much on their payroll and then the luxury tax.

If you look at a list of the teams that have paid the luxury tax, you see the NBA’s biggest markets near the top. Indiana has paid it three times, but that was back near the end of Reggie Miller’s career when they had a title contender on their hands.

The bottom line for the Pacers and everyone else

While I’d love to tell Simon to throw some more money out there when the right time comes, it doesn’t change the math. Bigger market teams can afford to spend more. Signing a player to a supermax deal is less of a hurdle if you’re willing to pay the luxury tax to build around them.

Even if the Pacers kept Paul George, they would have needed to put the right players around him to compete, and then perhaps make it worthwhile as far as the tax. If they end up with an injury or a playing starting to decline quicker than expected — and are paying a huge chunk of their salary cap to do so — they aren’t going to be willing to send money to the team’s non-tax offending teams.

That doesn’t mean small market teams shouldn’t. Going into the tax for a year isn’t a big deal as much a being a perennial offender is. If you’re the Portland Trail Blazers, paying the tax on a team that went to the conference finals — without one of their best players — is worth it.

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• Handing out early-season grades for Pacers’ Bruce Brown, Obi Toppin
• 3 positives, 2 negatives in Pacers In-Season Tournament win vs. Cavaliers
• 2 positives, 3 negatives from first week of Indiana Pacers basketball
• Should Isaiah Jackson’s days with Indiana Pacers be numbered?

With them still being able to contend over the next few seasons, paying Damian Lillard a supermax doesn’t sound like a bad idea. But if they didn’t also have players like C.J. McCollum, and
Jusuf Nurkic under contract, that’s a lot dicer proposition. Even then, when those supermax years kick in down the road, their cap management will be critical.

The DPE and the luxury tax aren’t things small-market teams should avoid, but the supermax, in particular, doesn’t fix one problem: Smaller teams are understandably less willing to spend as much as their larger-market brethren.

Unless the CBA would go further to subsidize their costs — find a way to allow them to keep more revenue while paying less of their own money — then it won’t fix the fact they are risking more of their own profit to compete.

While I don’t care about the Pacers bottom line or any small market team’s actual money, they, in fact, do. They do care about how much profit they bring in, and rightly so.

And as long as that’s the case, the supermax can be as much of an anchor as it is a bargaining chip.