How the Pacers can create cap space and why it isn’t as easy as it sounds

The Indiana Pacers can create $43 million in cap space this summer, but that doesn’t mean they should clear out all of it, and likely why they won’t.

New is exciting. Change is exciting. That’s why the Indiana Pacers summer plans have many of us wondering exactly what they might do to improve the team.

Does Kevin Pritchard plan on being active in the trade market? Will they get crafty and use sign-and-trades to acquire assets? Who will they take with the 18th pick — or will they trade it? Or are they go big on free agents?

All of those require cap space in some way, but free agents are the most obvious way cap space comes into play.

So should the Pacers go ahead and clear up $43 million in cap space just in case they need it?

It isn’t as easy as it sounds for a number of reasons.

As of now, they are $33.8 over the cap despite having six players potentially leaving in free agency.

This is where cap holds come in. Go read Larry Coon’s CBA FAQ to learn more, but basically, in this case, it’s a way to keep teams from signing a bunch of free agents before their own using the player’s Bird rights to go over the cap to sign them.

So in the Pacers case, until they renounce the rights to their pending free agents, the NBA has a cap hold of 150%-190% of their previous salary in their place.

This adds up quickly as the holds are as follows for Indiana:

• Thaddeus Young $20.6M
• Tyreke Evans $14.9M
• Bojan Bogdanovic $13.7M
• Darren Collison $13.0M
• Cory Joseph $15.1M
• Kyle O’Quinn $5.3M
• Wesley Matthew $1.6M

So that’s a total of $84.2 million in cap holds just from their pending free agents. Obviously, they aren’t bringing all of them back nor at those exact prices, but should the Pacers go ahead and create roughly $43 million in cap space by renouncing them all?

Not so fast my friend.

While keeping all of them would make it impossible to sign anyone, keeping their Bird rights means they can go over the cap to sign them. The regardless of how much they might pay Young if they want to keep him, being able to sign him while going over the cap has value.

So even if the Pacers want to sign Kemba Walker (up to $35 million) or Tobias Harris (up to $32.25 million), they’ll have to think about what to do with their cap holds along the way.

The important thing to remember is that cap holds come off when a player signs a new deal or if a team renounces their Bird rights.

So let’s knock off Tyreke Evans’ hold (for obvious reasons) and then hypothetically sign Thaddeus Young for $10 million over the next 4 years, in a team-friendly deal. This takes off his $20.6 million cap hold and replaces it was his new hypothetical deal.

So how with that and Evans’ hold gone, the Pacers would be $8 million over the cap still. They aren’t to Harris or Kemba yet, once they got around to officially signing Young, they can go over the cap to do so. They get a solid player while still leaving open the chance of signing an All-Star.

To get to a Harris or Walker, though, they would have to keep renouncing players to create space. You can remove Wesley Matthews and Kyle O’Quinn, but you’re still $6 million over, close to the $8 million Indiana was over last season.

This is where you realize just how tough it is to create that cap space and still have a strong roster for your free agent to sign with.

With Darren Collison, Cory Joseph, and Bojan Bogdanovic’s rights still held (totaling over $31M), if you’re Pritchard, you really have to start thinking about how to both sign one of these big free agents while keeping continuity from last year’s team, too.

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To get enough for one of our two hypothetical free agents, you can cut Collison and Joseph (since they are likely more of mid-level exception level players now), and you have $22.5 million in cap room. Impressive, but not quite enough for the big names.

To really get to the $35 million roughly needed for a max-level deal, you’re going to have to send Bogdanovic packing, too.

You now have $1.1 million left in cap space, but you do have Tobias Harris or Kemba Walker.

As you can see, it isn’t easy to create the cap space needed, but not impossible. And in case you were wondering, you could have renounced Thaddeus instead of keeping him, and now you have $10.2 in cap space.

If Indiana goes for a free agent that’s worth near the max, they’ll have to be very smart about how they round out the roster. They could create enough space to sign one of those All-Star level players, but if they don’t use their Bird Rights correctly along the way, it would be that much harder.

Free agents aren’t the only way to build a team, of course, as the Pacers could get creative in trades and other methods to build their team. Having depth and big names is no easy task. It’s up to Pritchard and company to balance out those bigger names while still having depth.

There are more rules to the CBA than what we went over here, but hopefully, it’s a little more clear that building a team for the Pacers won’t be as simple as letting their pending free agents walk and then signing a big name.