While a significant part of the league is in disarray trying to figure out their rosters, the Spurs are sitting pretty with 13 players already under contract, almost $11 million below the luxury tax line and have the mid-level exception and bi-annual exception at their disposal to add reinforcements. But the strange way this free agency period is developing in terms of player salaries and demand could have an impact on the front office's decision to actually use those resources to add players.
The year of inflated salaries
I covered this before but it's worth mentioning again: the new CBA is having an unintended consequence; it's inflating the salaries of mid-tier players.
The way the CBA was structured (almost exclusively by the owners) made sense for everyone as long as the league didn't see basketball-related income (BRI) increase substantially or rapidly. Under those circumstances, the salary cap would remain static at around $60 million. The NBA's middle class wouldn't have disappeared -- rookie scale contracts and caps in max salaries deflating star salaries would have made sure of it. But the price to pay for those mid-sized deals in terms of money were shorter contracts that reduced the job security for mid-level players, which was supposed result in a lot of movement of non-star payers in free agency.
But the league's basketball-related income grew more than expected, and with it, the salary cap, the luxury tax line and the millions the players are to receive from their pro-rated share of the BRI. So a lot of teams have cap space, and only some of them a legitimate chance of signing players that are worth what they have to spend. Fringe playoff teams want that one last piece of the puzzle, and rebuilding teams with young stars on rookie deals know that the max those players can be paid after the rookie contracts expire is 25% of the cap. So they have some money to spend.
That's how we end up with the Magic spending a combined $13 million on Ben Gordon and Channing Frye, the Pistons throwing $6 million a year at Jodie Meeks, and Darren Collison getting a three year contract for $16 million from the Kings. Those contracts make sense, to varying degrees, for those teams, because they are not going to find better players than those to sign and they might as well use their cap space. But they have the effect of inflating other salaries. That's why Josh McRoberts gets the full MLE, Sefolosha and Chris Kaman get $4 and 5 million respectively after wretched seasons and it's also the reason why Trevor Ariza is reportedly looking for $9 million a year.
To MLE or not to MLE?
The steady inflation of salaries affects the Spurs by pricing free agents that were supposed to be available with the MLE or BAE out of their range. Frye, who looked like a prime candidate to get the mid-level exception from a playoff team, got $8 million. Other players that were rumored to be on that level will not settle so easily for the $5 million that over-the-cap teams can offer, when there are still a handful of under-the-cap teams that could throw more money their way. And players who would have settled for the minimum or the BAE only a year ago will look for at least part of the MLE.
Here's an example: the Spurs were rumored to be interested in Marvin Williams, as were the Heat. Now, this is complete speculation on my part, but I'm assuming both teams were targeting him with their bi-annual exception. The Heat ended up signing Danny Granger instead. That could suggest Williams considers himself to be worth more than the $4.2 million over two years the BAE represents. If the Spurs really want him, they have the MLE, so signing him shouldn't be a problem, right? And salaries are on the rise anyway, along with the cap. So $5 million is not that much. But wasting resources and reducing cap flexibility just for the hell of it is never a good idea.
PTR's own Fred Silva recently pointed out to me that the Spurs need to consider the possibility, however remote it might seem right now, that both Duncan and Ginobili will come back for one more season after the 2014-2015. If that happens, the Spurs will remain in championship or bust mode and would have to bring back not only Parker but also Green (or a replacement), extend Leonard and fill out their roster. Assuming Parker, Green and Leonard are all back at a combined $32 million, which is a conservative sum, the Spurs will have $53 million tied up to just seven players (Mills, Parker, Green, Leonard, Diaw, Anderson and Splitter).
Let's say Duncan and Manu give the team a hometown discount and sign for a combined $10 million. That's $63 million on nine players. The salary cap for 2015/16 is projected to be set at $66.5 million. If they use the MLE now, the Spurs would be over the cap level the season after next with nine players under contract. That's not a bad place to be, especially considering they could go over the cap to re-sign their own free agents (Belinelli, Joseph, Ayres and Daye) and could have the MLE and potentially the BAE if they don't use it this year.
But unless there is significant internal development, the aging Spurs will probably need to bring in a free agent that can lift their ceiling. If salaries keep rising, the MLE won't be enough to attract someone of that caliber. There is a way for the Spurs to be in place to do that, cap-wise, without compromising their chances this season by trading someone: by not signing anyone to the MLE now and letting Green go when his contract expires instead of re-signing him to a larger sum.
Now, this scenario involves a lot of assumptions. First, Duncan and Manu would have to decide to return. Then Parker would have to take a salary around $9-11 million instead of going for one last big paycheck. Kawhi Leonard has to be willing to take only the max. And no trades need to happen in between now and the 2015 off-season. I can't stress this enough: with so much speculation involved, it's clear that if the Spurs feel there is someone they can get for the MLE that moves the needle this year or can be a part of the core going forward, they have to go for it and figure things out later. The window is open now and they can always trade someone (Splitter?) to gain flexibility later if push comes to shove. But if no one like that is available for the MLE - and the inflated salaries suggest that might be the case - the best course of action might be to just sit on the exception and maintain flexibility.
Caution now can pay off in the future
The Spurs' ability to get discounts from their stars allows them to retain their role players on fair contracts. But Kawhi Leonard could easily get the max soon, taking up a significant percentage of the Spurs' cap. If Duncan and Ginobili retire, the Spurs should still have cap space to maneuver. But if they decide to come back, keeping the team in win-now mode, cap flexibility will be important, and the best way to do that is to avoid the temptation to use the available exceptions - especially the MLE - just because they are there.