It’s time to take stock of the state of Denver’s salary structure, as the NBA free agency period has officially begun, and with it the annual ritual of Nuggets fans speculating which players – if any – the team will target this summer.
With just one roster spot currently open, it seems unlikely that Denver will be overly active in free agency unless they make a trade or two to trim down the payroll and free up roster space. And while GM Tim Connelly will have the full $5.3 million mid-level exception at his disposal, using it would likely propel Denver over the luxury tax threshold, territory where the Kroenkes have generally been loathe to tread.
This may not only be an issue this season, but could be in 2015-16 considering that a Kenneth Faried extension may be in the works. Zach Lowe of Grantland.com recently tweeted:
Just off phone with DEN GM Tim Connelly. Nuggets are meeting with Kenneth Faried’s agent next week, hope to sign him to an extension.
It’s unknown as of yet exactly how much Faried’s agent will be asking for, but if he signs with Denver for something in the $10-12 million range and Afflalo exercises his player option in 2015-16, the Nuggets are unlikely to have much financial wiggle room over the next two seasons unless they make some trades which clear salary.
But before looking at the big picture, let’s take a more detailed look at how Denver came out financially in their two recent trades.
As you can see, the Nuggets added just over $6 million to their 2014-15 payroll in trading Fournier for Afflalo. Balancing the salaries in the trade was made possible by using the traded player exception from last year’s Andre Iguodala sign-and-trade. If Denver doesn’t use the MLE to sign a free agent of note this summer, the Afflalo acquisition could in a way be seen as their primary “free agent signing.” Either way, as we will see below, the financial impact of the trade is to push the Nuggets even further over the salary cap, and uncomfortably close to the luxury tax line.
The inclusion of Anthony Randolph in Denver’s draft day trade with the Bulls was a real coup for Tim Connelly. Not only did he move free up the aforementioned roster spot, it enabled Denver to essentially come out even on guaranteed salary overall, and save just under $1 million in 2014-15, thus slightly offsetting the salary increase from the Afflalo trade.
Additionally, trading down to draft picks 16 and 19 from 11 allows the Nuggets to sign their two first round selections to smaller rookie scale contracts than the $1.9 million owed to the 11th pick. In the spectrum of NBA salaries, it may not seem like a huge difference, but given how little room Denver has to maneuver as they venture over the salary cap and near the luxury tax, the importance of even minor savings is magnified.
After their opening offseason moves, the Nuggets are now over $9 million over the projected salary cap and about $4.5 million under the projected luxury threshold. (We won’t have to say “projected” much longer. The NBA performs an audit during the trade moratorium from July 1 to 9 which is used to calculate the salary cap and luxury tax, so we’ll have the actual figures soon.)
In April I wrote a post speculating that the Nuggets’ lack of financial flexibility might constrain Connelly’s ability to make many big moves this offseason. Through the adroit use of the TPE and the shrewd draft day trade, Denver’s GM has already managed to utilize two different ways to skirt those constraints.
A Faried extension kicking in in 2015-16 could hamper Denver’s financial flexibility in the following season as well. Looking at some of last year’s big man signings, Al Jefferson signed on with the (then) Bobcats for $13.5 million a year, David West landed $12 by extending with the Pacers, Tiago Splitter got $10 million from the Spurs, and the Hawks signed Paul Millsap for $9.5 million.
Based on these asking prices, it’s reasonable to assume that the Faried camp will be pushing for a salary in the $12 million range, but will end up with something closer to $10-11 million. Assuming for now (being charitable to the Nuggets) that Faried agrees to extend for around $10 million a year, his salary would largely cancel out the savings Denver would see if Afflalo opted out and they only paid they paid only the $2 million guaranteed to Chandler in 2015-16.
Irrespective of what unfolds for the Nuggets this offseason, or how it all happens, it should be very interesting to keep an eye on their salary constraints and how they play into the moves Connelly attempts to make.
[CORRECTION: My original post contained incorrect information regarding Faried's contract. I mistakenly was treating his potential extension as that of a regular contract rather than a rookie contract. He will only be guaranteed $2,249,768 in 2014-15 even if the Nuggets extend his contract, and his raise won't come until the following season. Many thanks to RMC reader Matt for the correction, and I apologize for any confusion or misinformation this has caused. -Joel]
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