The Halloween deadline to finalize contract extension on players on the last year of their rookie deals is approaching. And news about the negotiations between Kawhi Leonard and the Spurs are starting to pop up, as Woj reported that there was no progress on the talks, with Leonard holding out for the max.
We've covered this subject extensively over the past couple of months but with others starting to chime in on the subject, we thought it would be a good idea to provide a primer on Kawhi's extension/free agency situation, so that you have the information you need before forming an opinion. Here we go.
Is Kawhi a max player?
Yes, undoubtedly. You have to understand that the words "max player" don't always mean the same thing in the context of the collective bargaining agreement. There are different tiers. As a player who has only been in the league for four years, the maximum salary on the first year of an extension Leonard can receive equals 25% of the salary cap. The more years you spend in the league, the larger the percentage of the salary cap you can receive as a max salary. So Leonard is not going to get LeBron, Carmelo or Kobe money. With the current projections, he would make between $16 and $17 million in the first year of his contract.
Is he worth that much? The market has overwhelmingly established that players like him absolutely are. Wings are in high demand. Eric Gordon and Gordon Hayward are max players and Chandler Parsons got very close to the max. It's safe to say that Leonard is at least on their level. Additionally, Kawhi is young enough yet has already accomplish so much that he makes sense for pretty much every team out there. If he reaches free agency, he will get a max offer.
Then why aren't the Spurs offering a max extension?
There are two reasons. First, restricted free agency is a powerful tool for teams. If the Spurs extend a qualifying offer (they will), they get the ability to match any offer sheet Leonard signs. Additionally, San Antonio has Bird rights to Leonard, which means they can offer more money than any other team, including an extra year. An extension would have 7.5% annual increases in salaries as opposed to the 4.5% increases Leonard would get by signing with a different team.
That means that by simply letting Leonard become a restricted free agent and sign a max offer sheet with another franchise, the Spurs would be paying Leonard less than he would get through a max extension. Kawhi would still nominally be a max player, since he signed an offer sheet for the maximum individual salary someone was allowed to offer him in free agency. But the Spurs would be on the hook for approximately $3 million less over four years thanks to the smaller yearly increases.
The other reason has to do with team building instead of dollars. If Leonard is extended, next off-season the salary corresponding to the first year of his new contract would count against the cap. But if he is not extended, only the much smaller qualifying offer counts against the cap until he signs an offer sheet or re-signs. That would give the Spurs almost $8 million more to play with in free agency, which could come in handy if Duncan and Ginobili retire and the team needs to find replacements.
That means the Spurs could sign a free agent and then go over the cap to extend Kawhi Leonard. That's the ideal scenario for the Spurs.
Are there any risks to not extending Leonard? Could he leave in free agency next season?
Leonard is going nowhere, at least not for one more year. The Spurs will extend him a qualifying offer, which as mentioned gives them right of first refusal. That means that any offer sheet Leonard signs, the Spurs will match. And they can also obviously wait until the next off-season and offer him the max then instead of now. The system is established in a way that gives teams that draft players all the tools they need to retain them after their rookie scale contracts are up.
So Leonard is not leaving. But that doesn't mean there aren't any risks or possible suboptimal results.
The worst case scenario involves Kawhi Leonard signing his qualifying offer, just like Greg Monroe did. By doing that, he would be leaving money on the table for the 2015/16 season but would enter the following off-season as an unrestricted free agent.
That course of action wouldn't necessarily mean he wants to leave the Spurs; he could just be vying his time until the salaries rise along with the salary cap. But it wouldn't be a good sign. The Spurs would lose the control that restricted free agency affords them and the fact that they couldn't agree to an extension in two previous opportunities would probably point to a strained relationship between the player and the team.
The other risk is Leonard entering restricted free agency and signing a contract similar to Chandler Parsons'. Parsons structured an offer sheet with the Mavericks that guaranteed him two years for close to the max and included a player option for the third. The Rockets refused to match. By signing that offer sheet, Parsons secured short-term financial security for himself while retaining the ability to enter free agency again soon. This would arguably be the best case scenario for Leonard if he can't secure the five-year max he seems to be looking for.
Now, unlike the Rockets, the Spurs would probably match that offer sheet. One of the reasons Houston didn't is because it also gave Parsons veto power on trades. That wouldn't dissuade the Spurs, since they likely don't plan on trading Leonard. But it would mean not having a bargain deal in the books by the time the salary cap jumps considerably and worse yet, facing the possibility of losing Leonard in unrestricted free agency in a couple of years.
Is Kawhi selfish for asking for the max?
No, not at all. Leonard seems to be all about winning and he seems happy in San Antonio. But he has an agent to look out for his best financial interest for a reason. Kawhi has been severely underpaid compared to his peers so far, considering his production, because of the rookie scale. This is his first chance to have a huge payday.
In the past, the Spurs have been able to get stars to sign for less than they potentially could have secured in the open market. So it's not surprising that some Spurs fans expect Kawhi to follow suit. But the situation with Leonard is completely different. With Parker already taken care off, the only other big piece left to sign is Leonard. There's no one the Spurs can point to and say "we need you to sacrifice so we can bring him back." Additionally, everyone knows that the league has signed a very lucrative TV deal that will cause the salary cap to rise. So Leonard knows that even if he signs for the max, the Spurs will have flexibility moving forward.
Considering all those factors, Kawhi would be foolish to take anything less than as much as the rules allow.