The biggest order of business for the Celtics offseason begins with ensuring Jayson Tatum remains a Celtic for the longest period of time that is possible under NBA contractual guidelines. The All-Star will be eligible to sign a five-year rookie extension on the first day of free agency (roughly in 10-12 days) that would kick in during the 2021-22 season once his current rookie deal expires (he’s earning just $9.89 million in 2020-21 in the final year of that contract).
We’ve already outlined the parameters of a Tatum extension earlier this year here at BSJ but the numbers are ever-changing now in the midst of revenue losses and a reduced salary cap projection for future seasons.
The NBA’s salary cap for next season is expected to stay flat ($109 million) and (Updated) the players and owners agreed to a cap increase between 3-10 percent for the upcoming two seasons on Monday night. The expectation is those increases will be on the lower end of the range assuming no fans are in the stands for much of the upcoming season. Those tiny increases are essentially expected to be placeholders for the NBA, as the league recovers from a revenue standpoint over the rest of the decade once fans return to the stands and the world (hopefully) returns to normal after a coronavirus vaccine is approved.
Those cap projections for the next few seasons give the Celtics a better idea to plan their finances for the future (more on that later this week) but it will also impact finances and negotiations in the present as well, starting with Tatum’s extension.
As a reminder here is a guideline for the extension rules and terms that the Celtics will be working off when negotiating with the All-Star’s camp this month. There are actually two specific terms that will come up for a player receiving elite treatment coming off a rookie contract.
Designated Rookie Rule: This is a designation that teams can use to allow them to sign players to a five-year extension with one year still remaining on their rookie contract (i.e. Tatum’s current situation). In order to do this, a team must pay the player at least the max (25 percent of cap as a starting salary) for the length of the deal. If not, teams are limited to just four years with their extension offer before the season.
Rose Rule: The designated rookie rule allows a player to sign with his team for a longer extension (five years). The Rose rule opens the door for a team to pay a player more than the 25 percent max based on whether they reach a certain set of criteria. A player becomes eligible for up to a 30 percent max if they do one of the following things by their fifth NBA season:
—Named to All-NBA team in most recent season or in two of past three seasons
—Named Defensive Player of the Year in most recent season or in two of past three seasons
—Named MVP in any of the past three seasons
How will the designated rookie rule impact the Celtics and Tatum?
Danny Ainge has a history of playing it slow with rookie extensions (he went 11 years between them before signing Jaylen Brown to one in 2019) but that will not be the case in this instance. Tatum is a top-20 player in the NBA and is worthy of the Rose Rule five-year max deal right now. Locking up Tatum for five additional years will be Boston’s top priority this fall. The only question is whether Tatum opts for the longest possible deal or fights for a shorter pact (three or four years), that would allow him to hit unrestricted free agency (and another potential payday) sooner.
How could Rose Rule impact Tatum’s next deal with the Celtics?
Looking at the Rose Rule criteria, it’s unrealistic to think Tatum could emerge as an MVP or Defensive Player of the Year next season. However, Tatum is very much in the mix to be named to the All-NBA team for the second consecutive year, which will incentivize his camp to get the C’s to commit to a Rose Rule deal with escalating incentives. If he is named to an All-NBA team next season in the fourth year of his rookie deal, he will be eligible for whatever incentives are written into any extension he signs.
How would the Celtics handle this in negotiations?
The recent trend for All-Star level players negotiating rookie extensions is having these All-NBA thresholds written into the new deals. For instance, Pascal Siakam signed a four-year max contract extension with the Raptors this past fall that is worth 25 percent of the max as a floor. However, since Siakam made the All-NBA second team this season, his annual salary for his extension rose to 28 percent of the cap (with annual raises yearly) which will kick in next season. Higher thresholds were also included for him if he made All-NBA first team (29 percent) or MVP (30 percent) last season but those were not reached.
The Celtics could easily do something similar with Tatum, giving him a baseline max of 25 percent and a higher percentage of the salary cap for making any All-NBA team based on how well he performs next season (the final year of his rookie deal). This type of contract would cost the Celtics a few million extra per year in salary if Tatum hits the All-NBA incentives, but that’s a price any team would be happy to pay for an All-NBA player, leaving little downside for the team to offer the bigger payday.
Under a cap projection of $112 million for next season, here’s a look at what Tatum’s extension would look like under a regular max:
Standard five-year max for Jayson Tatum worth $163 million (25 percent of cap)
2021-22: $28 million
2022-23: $30.5 million
2023-24: $33 million
2024-25: $35.5 million
2025-26: $38 million
If he is given a full Rose Rule max deal, he would be eligible for an extension worth $196 million over five years (30 percent of cap) if he hits all his incentives
2021-22: $33.4 million
2022-23: $36.1 million
2023-24: $39 million
2024-25: $42.1 million
2025-26: $45.5 million