What the 2020 NBA offseason will look like still remains a bit of a mystery with everything from the timing of the start of free agency to exact figures for the 2020/21 salary cap still needing to be negotiated between the players and owners amid a huge decline in the league revenue that is split 50/50 between the two sides.
“There’s no doubt there are issues on the table that need to be negotiated,” Adam Silver said this week. “I think it’s — we’ve managed to work through every other issue so far. I think we have a constructive relationship with (the NBPA). We share all information. We look at our various business models together. So I think while no doubt there will be issues and there will be some difficult negotiations ahead, I fully expect we’ll work them out, as we always have.”
Those negotiations will take place upon the end of the NBA Finals once the final revenue numbers from the season are in. From there, teams will have a better roadmap on what the exact salary cap figures will be for next season, which is needed ahead of draft night, a very active night on the trade front for franchises.
Before the NBA season was suspended back in March, the league was projecting the salary cap to slightly increase from $109 million to $115 million for next season. However, in the wake of a sharp decline in revenues due to the coronavirus pandemic, that number is very uncertain. A safe guess would be the cap remaining flat at $109 million for 2020-21, which would put the NBA’s luxury tax for next year at $132 million but nothing will be clear until the union and owners settle on a plan in the next month.
A flat cap would hurt the Celtics and a few other teams (Warriors, Sixers, Nets) more than others since there are so many big money salary commitments on those teams already for next year. A flat cap or even a cap drop in 2021 (a possibility depending on how the players want to handle negotiations) would really squeeze the finances and flexibility of these teams.
The good news for C’s fans? Substantial losses in revenues and a flat cap that pushes the Celtics into the luxury tax isn’t going to change Boston’s building plans much for the offseason
“We’re anticipating being in the tax next year,” Danny Ainge said Thursday. “We’re prepared for that for the last couple of years as we’ve built this team, so we’re prepared to do that.”
This is a big deal from a competitive standpoint as a lot of teams around the NBA may be trying to reduce salary and limit spending this offseason to help offset their losses from the past several months. Those comments from Ainge about the tax indicate that won’t be the case with Celtics ownership.
So what exactly does being a tax team mean for the Celtics? If we project the tax line to remain where it is in 2019-20 ($132 million), that means the Celtics are already into the tax with their expected financial commitments for next season, assuming Gordon Hayward and Enes Kanter opt into their player options.
Kemba Walker ($34.3 million)
Gordon Hayward ($34.1 million – player option)
Jaylen Brown ($22.9 million)
Marcus Smart ($12.9 million)
Jayson Tatum ($9.8 million)
Daniel Theis ($5 million – non-guaranteed)
Enes Kanter ($5 million – player option)
Romeo Langford ($3.6 million)
Vincent Poirier ($2.6 million)
Grant Williams ($2.5 million)
Robert Williams ($2.0 million)
Semi Ojeleye ($1.8 million - team option)
Carsen Edwards ($1.5 million)
Javonte Green ($1.5 million non-guaranteed)
Total: $142.5 million to 14 players when including dead cap hits for Guerschon Yabusele and Demetrius Jackson
Projected luxury tax threshold for 2020-21: $132 million
Even if the Celtics let go of Green and Ojeleye (non-guaranteed deals) they will still be well into tax territory ($139 million) before even making any of their three first-round draft picks or free agent additions. This is another reason why the Celtics making more than two of those picks would be a complete shock.
So what options and limitations will the Celtics have to improve as a tax team?
The team will be limited to use the projected taxpayer mid-level exception (roughly $6 million) to add free agents if they go over the tax line ($132 million) along with veteran’s minimum deals. Those mid-level exception contracts will be a maximum of three years in length but that money can be spread across multiple players. The normal mid-level exception for non-tax teams is projected to be around $9.5 million based on the $109 million flat cap estimate.
Trade limitations
For tax-paying teams, trade restrictions are much tougher compared to usual NBA rules. Tax teams can only take back 125 percent of the salary (plus $100,000) in any trade, no matter how much money is sent out. Essentially, any trade for a taxpayer team is handled like a big-money deal for non-tax-paying teams from a rules standpoint.
That type of restriction can be limiting for a tax team wanting to make a big splash if it doesn’t have a lot of movable salary on a roster. If Ainge wants to keep his core five players in place, his next highest earner will be Enes Kanter or Daniel Theis at $5 million, followed by a lot of guys on rookie deals making $3.6 million or less. The Celtics could try to package a couple of those youngsters with Kanter in an attempt to trade for a player earning $10-15 million but the math to trade for any players earning more than that won’t be easily doable unless a bigger movable name like Smart or Hayward is involved. That would open up a lot of bigger doors for Boston to deal, although none of those would necessarily be appealing (we will look at some possibilities next week).
Tax penalties
The other tough part of being in the tax for Boston is that cutting or waiving a player gets more costly and there are a few candidates for that on this roster. In the past, saying goodbye to a guy like Vincent Poirier ($2.5 million) to clear his roster spot would be rather painless. However, with the Celtics in the tax, dumping him will cost the Celtics an extra $1.50 (at least) for each dollar they end up over the luxury tax at the end of the season. That added cost will likely make the C’s aggressive this offseason in finding teams to take salary they don’t necessarily want, by also adding a sweetener in the form of a second-round draft pick and/or cash.
Luckily, the Celtics don’t have any massive contracts they should want to move. However, if they decide that Kanter and Poirier are too costly at center, look for them to be dealt instead of being waived. Kanter will be far easier to find a taker for due to his production but a lack of cap space across the league this offseason could make it expensive for teams (via assets) to find new homes for players or contracts they don’t want. With tax penalties now in play, simply taking the loss and waiving a guy gets a lot more expensive for ownership so more alternatives routes will be pursued.
Final Thoughts
I’d expect this offseason to be focused on consolidation for the back end of the Celtics roster. Players with promise (Langford, G. Williams, R. Langford) will stick but no else in back half of the roster should feel secure about their spot. Ainge will be looking to turn this team into a better contender and being a tax team means every dollar spent matters a little bit more.