When Andre Iguodala made his much anticipated post-trade appearance with the Nuggets brass at the Pepsi Center, he spoke in upbeat tones about the prospects of a long term tenure with his new team. On the question of his future in Denver, Iguodala explained that he and executive Masai Ujiri were both on the same page:
We aren’t coming in to this thinking this is just a one year deal we are looking to the future and definitely looking ahead looking to see how we can go forward so this isn’t a quick stop for me.
On the surface it seems simple enough. Iguodala has two years remaining on his contract at $14,968,250 and $16,154,750 respectively, with an Early Termination Option (ETO) for the final year. This allows at least one or two years for he and the Nuggets to work out a new deal which will keep him around long term.
But what, specifically, are are the possibilities for Iguodala and the Nuggets going forward, and which of these various scenarios is most likely to play out in reality?
Option 1: Sign an extension with the Nuggets before June 30, 2013, the deadline for exercising his ETO. In this case, his contract could run no later than the 2015-16 season, as there is a four season limit on extensions which includes the years remaining on the current contract. This type of contract can have up to 7.5 percent raises.
Option 2: Exercise his ETO to become an unrestricted free agent (UFA) and re-sign with the Nuggets. Here, Denver would use the Larry Bird exception, which allows for five year deals and could result in a contract that ends as late as the 2017-18 season. Like extensions, Bird rights contracts have raises of up to 7.5 percent.
Option 3: Exercise his ETO to test the market as a UFA and sign with a different team. Since only the Nuggets have Iguodala’s Bird rights, this would result in a “standard” contract. According to Coon, “the “standard” length is four seasons and the “standard” raise is 4.5 percent – for example, when a team signs another team’s free agent using cap room.” In this case Iguodala’s contract could continue through 2016-17 at longest, and note the smaller 4.5 percent raises. As an example of how different a Larry Bird exception versus a standard contract might be, consider if Iguodala were to sign for $12,000,000 in the first year of either type, with maximum years and raises:
Given that Iguodala will be 33 years old upon completing the 2016-17 season, and would likely not be able to command nearly as high a salary in free agency at that time, the opportunity for a fifth year could be appealing. I don’t believe this is Denver’s best option (fan complaints might reach Kenyon Martin contract level proportions), but the option for a longer deal could be a strong selling point in the Nuggets’ favor.
Option 4: Allow the June 30, 2013 deadline for exercising his ETO to pass, accepting the $16,154,750 remaining on the final 2013-14 season of his current contract. Then, in a similar fashion to the three options above, extend before free agency or become a UFA in 2014 to then either re-sign with Denver or sign with another team.
Ujiri will surely seek to continue the pattern he has established of locking down solid players for generous but not unreasonably excessive salaries. There is bound to be some inherent tension on this front, as Iguodala took a lot of heat in Philadelphia over the past few seasons for being “overpaid,” but has more recently bolstered his value with a trip to the All-Star game, a superlative defensive 2010-11 season, and his role on the gold medal winning Team USA in the London Olympics.
For the most part, Iguodala is in the driver’s seat of his own destiny, holding most of the cards in negotiating a new deal. The Nuggets will not have wanted to lose Arron Afflalo for nothing except cap relief, nor to be put through another torturous year of a star player holding the franchise hostage. What leverage they do have will come from being able to offer more attractive contractual options than other teams, and perhaps, if Iguodala genuinely feels good about his new start in Denver, his desire to stay with the team.
The elephant in the room will be that roughly $16.1 million he’ll be owed in 2013-14 if he doesn’t opt for early termination. That’s a massive incentive to complete his current deal, especially in light of the fact that Ujiri has established a relatively frugal Nuggets spending culture. It is simply far too much money to easily walk away from, and in my opinion renders the first option above, extending prior to next summer’s deadline, the most unlikely of the four. If the Nuggets could pull off extending him for four years in the $12 million range on a contract ending in 2016, it would be ideal, but don’t expect that to happen.
The scariest prospect for the Nuggets of course is watching Iguodala leave for nothing, and it should be a genuine concern. In a league where overpriced contracts have become the norm, and players such as Eric Gordon who clearly are not in the same tier as the league’s top superstars can get maximum salaries, accepting less can be a tough pill for players to swallow, and Iguodala’s agent now has some impressive credentials in his arsenal.
So much will ride on Iguodala’s experience of the upcoming season. If he’s happy in Denver, thriving in the fast-paced offense and leading the team to an improved defense, he may determine that opting out of his final year and re-signing on a Larry Bird extension may be his best big-picture option. It would most likely entail taking a pay cut in 2013-14, but doing so with an eye on making more over the long term, and locking into a more stable, secure situation.
But that last big $16 million payoff in 2013-14 is hard to ignore. I suspect that next summer, after he lets the ETO deadline pass, we’ll be asking all these same questions once again.