Future contract options for Iguodala and the Nuggets

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?

Let’s take a look at his four main options. (The quoted passages and many details below come from Larry Coon’s NBA Salary Cap FAQ. Bookmark it, and follow him on twitter: @LarryCoon).

 

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.

 

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Joel is a long time Denver Nuggets (and Broncos) fan from Colorado who's been living in Japan since the mid-90s, and blogging about the Nuggets since 2008. You can contact and follow him on Twitter: @denbutsu.
  • Ricardo

    Option 2 seems like the best option for the nuggets. Iguodala could opt-out of his contract and become a free agent, then the nuggets could use his bird rights to sign him to a five-year contract extension, rather than a three-year one he could sign before June 30. And by the time this contract ends, Igoudala would be 34 years old and probably wouldn’t ask for much money by then.

  • nida

    I think Iggy will want to stay with the Nugs, as Iggy has said. As you mention, the Nugs concur. I predict option 1. Both parties have incentive to get something done sooner than later. Ideally, for the Nuggets, 4 year, 50 million starting around 12 million. 4 year and 50 million sounds a lot better than 1 year, 16 million.

    • lyrasmith

      I totally agree with you,and I want to see Iggy retire in Denver.However,it’s hard to predict what steps will our GM take next,and who knows.Let’s just wait someting amazing happen,and maybe Massa will bring us a big surprise soon.

  • CJP32

    According to the current contracts, in 2013/14 the Nuggets payroll will look like:

    Iggy – 16
    McGee – 11
    Gallo – 10
    Chandler – 6.3
    Miller – 5
    KK – 3
    Ty – 3.6
    Fournier – 1.4
    Faried – 1.4
    JHam – 1.2
    Stone – 1

    Total of 60 million = approximate salary cap with 4 roster spots left. If Masai can re-structure Iggy’s deal sooner rather than later, we will have a few extra million to use, which I’m assuming will go towards Ty’s new contract. I think its vital that Masai trade Gallo or Chandler to save some cash and get a cheaper SF, maybe Brewer will still be around as a backup to.

    • Ban

      Wilson Chandler has an exceptionally reasonable contract, given his size and skill-set (compare to Nicolas Batum’s new contract), and, if he can stay healthy, he should be a near-perfect piece for this Nuggets team. It would be a shame to lose him for anything short of the sort of 2 for 1 upgrade that got Iguodala. Those deals are not easy to make; why should any team ever trade away the best player in a deal for 2 guys who are equally or more expensive? Nuggets were exceptionally lucky to get the Iggy deal.

      Gallo is pretty crucial for the Nuggets right now — other than Lawson both the only real shooter in the starting lineup, and the only guy who can create offense in the half-court. + If he can finally stay healthy, he has star potential. +He and Iggy’s games should compliment each other really well. I doubt the FO has any plans to move him unless it’s a no-brainer sort of deal for an obvious star; I’m not sure even Josh Smith would be enough. Gallo just fits this team too well.

      Andre Miller’s 3-year contract is the one that will start looking pretty albatross-y, probably starting next season. He’ll probably still be useful, but he’ll be old and difficult to trade.

      Nuggets are probably hoping no other team has the space or the inclination to offer Lawson a crazy Eric Gordon-type deal next summer. If that happens…some hard, hard decisions on the horizon. If no deals are to be had, Mozgov and Brewer will be probably not be around anymore…and that’s the best-case scenario.

      Oh well, let’s enjoy this season…it might be the last time the Nuggets will ever be so stacked.

      • Ryan

        While having both Gallo and Chandler is a nice luxury, they’re a bit too complementary for my taste to keep both of them long-term. Other people have mentioned the need for a more-skilled PF/C that could increase low-post scoring, and I believe they’re on the right track. Trading one or the other (I would prefer they trade Gallo) to meet this need would make them a much more complete/dangerous team by my estimation.
        Unfortunately, some team IS going to make a huge offer for Lawson (barring a serious injury or terrible year), as the need for an elite/borderline elite PG is more important than ever in today’s NBA. By moving Gallo/Chandler, this would also give the Nuggets more flexibility in resigning Ty long-term, as I would consider Ty more valuable to the Nuggets currently than Gallo/Chandler, and thus, the higher priority to sign.

        • Ban

          Skilled low-post scorers are very expensive and hard to come by. The only scenario I can see is a massively paid one like Pau Gasol, David Lee, or Zach Randolph whose team wants to dump his salary… and that sort of defeats the whole purpose of getting rid of Gallo or Chandler to save money. Nuggets can’t pay a max PF and also pay Lawson…there’s not enough money to go around.

          Also, from a basketball standpoint, I’d like to see this swiss-army-knife running/trapping super-athlete team given a chance. Nuggets have no shortage of size; they just lack low-post scoring. And it’s possible Faried+McGee, as they develop, will provide enough of it that it will become a non-issue.

        • Ricardo

          The nuggets should trade Chandler, Brewer, Mosgov, and a future 1st round pick for Josh Smith. They would have an elite perimeter defender in Iguodala and an elite post defender in Smith. Having both of them in the same line-up, the nuggets would be able to challenge the lakers and the thunder in the playoffs. At the end of the season, the nuggets could, then, try resigning Iguodala and Smith for less money.

      • Mike

        I think with lawson you are hoping 11-12 million per year. Honestly if he won’t take that, which is a fair price, let him go to free agency and match the 14.5 million per year max another team can make if it develops. If you aren’t saving more than a million a year what is the point given you are taking the risk of injury/development stagnation for this year. You shouldn’t offer max contracts to non-all-stars unless you are matching the offer.

        Iggy I think you hope he opts out/signs at 5 years 65 million or so. Probably end up trading him after year 3 of contract (4th year in Denver) as he will be on downside of value by then since his game is highly contingent on his athleticism. Assuming health and increased scoring with nugs Im sure he will be tradeable if not bring back a few assets. Worst comes to worst they can probably trade him to ORL for an all-star in a 3-4 team trade. :-)

        It will be interesting to see what this team is willing to spend. Obviously it isn’t my money, but if the team does develop into a title contender the owner probably has the financial backing to take on some extra money. I don’t think it is fair to ask this team to be the knicks, lakers or nets because potential earnings are just not that vast. Still If they are willing to go 5-10 million into the tax for 2-3 year run that would make things work much better. If not they may have some decisions unless Iggy and Lawson are willing to take about 12 miillion per season… They have faried/Hamilton relatively cheap for 3 more seasons and Kosta with some of their other rookie contract guys they should have a 2-3 year run in them and then you make decisions after that.

  • dynamo.joe

    So disappointed, I misread that as “Future Combat Options”.

    Well, I’ll just assume that by the time he gets his $16M he will have 2 rings and will take less to ride out the physical primes of Ty/Faried/Koufos/McGee.

  • GK4Prez

    I am not sure, but I think the 3rd year of the Dre Miller contract is a team option.

    As for Iguodala, is losing him via FA really a big loss if Hamilton or Fournier take a big step forward on the potential ladder? Also, Iguodala’s next contract will likely be the last big contract of his career, so he will probably get paid big money from some team.

    • Ryan

      I believe you’re correct, it is a team option, but the 3rd year is partially guaranteed, so the Nuggets would have to give Dre a couple million if they don’t want him…

  • Renato

    The problem with any resigning option before the end of the 13/14 season is that for Iggy the US$ 16M is a given, and it will be factored in the pricing off any contract. So let´s say that you offer US$ 50M 4 years at the end off 12/13, for Iggy what you are really offering is US$ 34M for 3 years starting in 14/15. So, considering that, i think the Nuggets will have a more clear pricing enviroment at the last year off this contract, without the “problem” off the US$16M, and less risk off ending with a KMar contract type in the long run. At the worst case scenario you´ll have a US$16M expiring contract to Massai work with to get a “difference maker, can create his own shot in the half court set, big man”.

  • Evan Woodruff

    I’ll be happy if one day I end u making 1% what he makes per year. -not including endorsements.

  • Evan Woodruff

    I’d be happy if one day I end u making 1% what he makes per year. -Not including endorsements.

  • Roundball Bill

    I really don’t feel like he’s worth all that money. I hope he has a great season, but unless he proves to be a full blown superstar the Nuggets should just let him walk if it would take that kind of money to keep him.

  • Poz_303

    I think the Nuggets can afford all these players cause if you re-sign your won players you can go above the soft cap and still be below the luxury tax bracket. I think its around 70 million this year. So they have some money to pay beyond the 60 million to retain some bench players. Iggy is a perfect fit in Denver and I hope he does stick around. They way the Nuggets approach it would be to offer him some 50 -60 million over 5 years as opposed to him getting 16 million one year. Like Denbutsu said, over the long term it guarantees more money and all players look for stability.

  • Drew

    Maybe you guys could do a post involving the ESPN Picks of ROY, MVP, Worst / Best Newcomer etc. and tell us each who you voted for and why?