Free agency begins: Assessing the Nuggets’ salary and a potential Faried extension

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.

(All salary figures in this post from ShamSports.com and BasketballInsiders.com)

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.

(Salary cap and luxury tax projections from Larry Coon’s (@LarryCoon) NBA Salary Cap FAQ blog)

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]

You can follow me here on Twitter: @denbutsu

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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.
  • Aaron Durkin

    If Connelly could trade Hickson he might be sainted by the church for committing a miracle.

    • Heisenberg

      Maybe Miami for Cole and a pick? They could use a rebounding PF. Probably a longshot but I can’t think of many other teams that would be interested.

  • TomRMC

    There are a lot of options for avoiding the tax.

    Wilson Chandler is only partially guaranteed ($2 million) for 2015. That means it’s easy for the team to clear $5 million from the books, provided they’re willing to just walk away from him.

    There has also been some discussion of Afflalo opting out for next season, and taking less per-season money but on a longer deal. Right now that sounds like his preferred option.

    There’s also the potential to sign Faried to a Millsap-level contract (starting at $9.5 million). If I’m reading the table right, this would only add $6.25 million to the 2015 projection (it’s already counting $3.25 million for the QO.) That only leaves about $3 million for a first round pick and replacements for Robinson and Arthur — but that does make it possible to keep almost everybody and stay under the tax.

    Any one of these things would leave the team very close to the line. Two of them would leave a comfortable amount of space just like this season — not the full MLE, but enough to pick up a smallish contract during the season.

  • heykyleinsf

    wow does this ever make it obvious that Javale is costing us.
    I hope to see some progress this year.
    Is his health back to 100% yet?

    • Bryan

      The Javale contract makes me feel nervous about the Faried extension. If they resign him, I hope they’re getting a good deal.

  • Matt

    What am I missing here? If Faried signs an extension, it will not kick
    in until the 15/16 season — not this upcoming season. This is exactly
    what happened with Ty Lawson (Ty signed a year early under his rookie
    contract and his new contract kicked in the year after — i.e. the
    qualifying offer year). Thus, Faried and his contract is not a worry
    until the 15/16 season. Am I right or wrong?

    • Tom Darrow

      You are correct. The team’s salary is set for this year, barring a free agent signing or trades.

      However, it’s common for teams to be planning multiple seasons out. Moves could be made during this season in preparation for next season.

      The big positive I take out of all of this analysis is that “let Faried walk” is looking very unlikely. Even if some other team tries to overpay (starting at like $12 mil), the Nuggets can match and won’t have to go to great lengths to get back under the tax line.

    • http://www.roundballminingcompany.com/ Charlie

      You’re correct. DEN is under the luxury tax with Faried this season. They won’t go above it without using the entire MLE on a player or making a trade to bring on more money. Nuggets are negotiating a rookie extension with Faried, which would skip restricted free agency in 2015-2016 and lock in a new salary for that season and beyond. We’ll try to fix the post

  • Nugman

    I don’t think Faried should be paid more than Ty or Gallo. It could even be said he shouldn’t be paid much more than AAA, but the market might demand that he is. I think the FO needs to give some weight to how the other players are paid when determining what to pay Faried. His value to the team compared to other players is important and he probably falls 3rd or 4th. And before you say it, yes McGee is over paid and the point is the FO shouldn’t make a similar mistake now. I think Faried is important to the team, but the Spurs didn’t get to the by overpaying for anyone.

  • Nugman

    This is a little off subject, but this whole FA system in the NBA is ruining the game. When teams like the Heat can stack a team by manipulating the system while other teams like the Nuggets struggle to even compete, there is something seriously wrong. And when the players can meet and agree where they’re all going to play it’s even worse. On the radio it was referred to as the inmates running the insane asylum and I believe that’s an accurate description. Maybe RMC can start a campaign to end this crap and get back to having teams built the old fashion way.

    • Heisenberg

      I can’t blame LeBron for leaving Cleveland. That roster was littered with trash and, after 7 years, the best player he had to play with was Mo Williams. The fact that the Cavs went from first to worst the year after is further proof. Guys like Jordan, Magic, and Bird all had very solid surrounding talent. LeBron did not.

      As far as the Nuggets are concerned, they really don’t have anyone but themselves to blame. The McGee contract is awful and the Hickson one isn’t much better. Clear those two out, and the Nuggets have around $7 Million to spend (plus whatever exceptions they have for a sign and trade). I don’t think Denver is that bad of a place to play (no, it doesn’t have the appeal of LA, NYC, or Miami, but I’d rather play in Denver than most cities). If Denver is going to improve on that, they need to acquire a star player who can recruit other players to come here. Either that, or overpay for free agents. As a side note, the NBA has lacked parity for most of its history. It sucks, but the only way to fix it would be to shorten playoff series. And that will never happen.

  • Furious_Stylez

    This article is just a reminder of how awful Masai Ujiri really was as GM.

    He gave McGee $40m+ because of 2 good playoff games and his stupid idea that “Well, he’s the only C on the market right now, so we might as well sign him”. Karl clearly disliked McGee as a player and wouldn’t start him, making the deal completely moronic to begin with. Ujiri literally outbid himself and allowed McGee’s agent to drive the negotiations.

    That contract is killing the cap right now and McGee has been a total nonfactor for the last 2 seasons. The worst part is the second the deal was signed, we all knew no other team would trade for it until it was expiring.

    • Ckwizard

      Does the blame fall on Uriji or Karl? In my opinion while I agree that McGee is overpaid now at the time it wasn’t that bad and to talk about a Faried extension you have to realize Faried is not the player he is today with out Uriji and McGee.

      IMO the blame for a lot of the issues with this situation fall on GK and his “favorites” and refusal to play “young” players. Faried only received playing time because Uriji forced Karls hand and traded Nene for McGee and it is that trade that allowed Faried to grow as a member of this team. Good move by Uriji because he understood how is coach operated.

      As for McGee contract… I have heard and read nothing that suggest McGee isn’t a man with good Character even if I have heard he is a “goofball”. We have all whitnessed his awesome athletic talent. So if McGee was able to grow into the player Uriji was banking on then this Nuggets team is a Title contender and maybe the best team in the west. In other words if McGee was a dominate center in this league (which at the time and still does have the talent to be) then it transforms this team from a 6 seed to a one or two seed. That was something Nene was never to bring to this team. Uriji gambled and as of now it looks like a loss. But McGee was hurt almost all of last year and George Karl isn’t known for developing players like him. McGee can still justify that contract and if he does then we very good Nuggets team. If he doesn’t then Uriji was an idiot and we will be just ok. But hey at least he was swinging for the fences

      • Furious_Stylez

        Ujiri was trying to force a square peg into a round hole. Normally, GMs discuss with their head coach before signing a player to a large deal, especially a HC as seasoned as Karl. If the HC is a rookie or a second year coach, I understand not giving them info, but Karl was a 20+ year vet and ran a very specific system (also, firing him was not in the cards at the time of the deal). McGee was not a good fit. He’s a rim protector in a half court offense (i.e. doesn’t run the floor well).

        I don’t know McGee personally, so I wouldn’t attack his character, but as a player, he didn’t fit the scheme. If character won games, Adam Morrison would be a Superstar. The run and gun moves too fast for a player of McGee’s skill set, which is why GK favored Koufos (whose only task was to clear out the lane on offense).

        That being said, I hope McGee comes out this year and proves me wrong by averaging a double-double. I agree he has the potential, he just has to tap into it (but I wouldn’t have paid $40m to find out if he could).

        • Ckwizard

          Which leaves one to wonder how much involvement Josh Kroenke was/is involved in personnel decisions.

          As you say Square peg Round hole. This trade at the time looked like a force of Karl’s hand and even with you argument only strengthens the idea that Management and probably ownership were looking to go in a different direction, with that direction being Half Court offense improvement and Defense… Both thing being vital to playoff basketball and being things GK lacked in evaluation. So maybe it was GK that became the Square peg and the Nuggets entity the “Round Hole” ultimately leading to the parting of ways after such a successful season. Because the idea of what McGee represents suits where this team is now way more than where it was.