Hard cap. Luxury taxes. Stretch provision. There’s all sorts of fun stuff swirling around Oklahoma City this month. Sure beats the old days of re-signing Derek Fisher in late July and calling it a summer.
Rudy Gay and the Hard Cap
The Thunder pursued Rudy Gay hard. No official offer terms were announced, but it’s likely Oklahoma City offered a contract starting at $5.2 million using the taxpayer Mid-Level Exception (MLE for short, TMLE if you want to get all nerdy).
Gay eventually passed on the Thunder’s offer and signed with San Antonio instead. The Spurs offered more money by using the non-taxpayer version of the MLE, which starts at $8.4 million. So why didn’t the Thunder just offer what the Spurs did?
It could have, but then its payroll would have been limited to $125.3 million this season —$6 million above the luxury tax line. That would have been an issue for a Thunder squad whose payroll was already approaching that number. The Spurs payroll figures to wind up well below that when all is said and done.
Working a sign-and-trade for Gay would have enabled the same hard salary cap. And unlike the summer of 2016 where a massive salary cap spike created beaucoup cap room for just about every NBA team, space wasn’t as abundant this summer. The cost to unload contracts across the league may have been too high.
Granted, some of this situation was self-inflicted. Ronnie Price has a $2.4 million cap hit this year after Oklahoma City generously rewarded him last season. Kyle Singler’s contract was one of those “good in theory deals” when it was signed in 2015 but awful in reality. And it’s fair to wonder if Steven Adams’ price tag would have been less had the Thunder punted extension talks with him last summer.
Regardless, it may not have been wise for the Thunder to pin itself in a corner in July for Gay. Different story if Blake Griffin wanted to come back to his old stomping grounds. But not for a soon-to-be 31-year-old coming off a potentially career-altering injury.
Oklahoma City retains flexibility to spend above the $125.3 million limit. The Thunder won’t have self-imposed shackles if it needs to make more moves during the season.
In almost all of my analysis prior to June 30, I assumed the Thunder would dodge the luxury tax this coming season. It just didn’t make much sense to pay a penalty to keep a developing team together.
Obviously, the Paul George trade changes things.
Oklahoma City will likely join the taxpaying party this season, although the final tab won’t be known until the final day of the regular season. The Thunder paid nearly $2.8 million in taxes for the 2014-15 season that had more casualties than the Red Wedding. It paid over $14.5 million in taxes the following season for a Western Conference Finalist. Assuming it pays luxury tax this season, it would be subject to harsher repeater tax penalties in 2018-19.
As an example, let’s say the Thunder end up $8 million over the tax line this season. That would cost an additional $12.75 million in tax. Under the repeater calculations, that same $8 million would incur a charge of $20.75 million.
The repeater tax was a big concern during the Thunder’s rise, forcing it to carefully plan its taxpaying future. That was before the team made several deep playoff runs and racked up additional revenue. All of this was done in anticipation of paying the luxury tax when it did. Durant’s departure put a dent in those plans, but adding George should put it back on track.
Indications are that the repeater tax is no longer a fear factor.
The Singler Singularity
Hey, have you heard that the Thunder could waive Kyle Singler?
I ask because if you haven’t, you haven’t seen my Twitter timeline.
Singler has three seasons remaining on his contract, though the last season is fully non-guaranteed if he’s waived before 8/15/2019 —a virtual lock at this point. That means Oklahoma City could take the remaining guaranteed $9.6 million left on his deal and stretch that out over seven years, lowering his cap his this season from $4.7 million to $1.38 million. The Thunder has until August 31 to take advantage of this.
Trading Singler’s contract is a possibility as well, but that might carry a price that Oklahoma City isn’t comfortable with. Unlike last summer, cap space is scarce across the league. Teams aren’t going to just absorb nearly $10 million without some kind of incentive to do so.
The Thunder could also choose to wait and keep Singler. Yes, he occupies a roster spot but the 14th and 15th spots are rarely difference makers. It would cost the team more, but his contract could come in handy to make a large trade work down the road.