Could Pleiss Deal Clear the Way for Extensions?

August 29th, 2016 | by Dan Clayton
 AP Photo/Steve Dykes

AP Photo/Steve Dykes

The Jazz’s Friday trade with Philadelphia shows that the erstwhile asset-hoarders have changed gears. Spending picks at all is a big shift for GM Dennis Lindsey, who has been on the receiving end of those types of trade more often than not during his Jazz tenure.

But this time around, he ponied up. The Jazz sent the best and worst of their four second round picks in the 2017 draft1 along with Tibor Pleiss to Philadelphia for the non-guaranteed salary of Kendall Marshall, whom they waived almost immediately.

The move clears Pleiss’ $3 million2 from the Jazz’s cap sheet. What’s curious is why that $3M was worth parting with two draft assets. The Jazz themselves have shown that a single pick can net a lot of cash. At least in theory, they could have eaten Pleiss’ salary, then sold those same two picks at next year’s draft and likely come out ahead. So this wasn’t about saving money; it was about creating cap space.

That raises an interesting question: what can they do with ~$12.3 million in cap space that they couldn’t do with ~$9.3 million3?

More specifically, the $9.3M they had available before making this deal would have been plenty to do a meaningful “renegotiate & extend” deal with either Derrick Favors or George Hill. In the aftermath of a rare August trade, many started to wonder: is $12.3M enough to R&E both?

First, a bit of a primer on the R&E concept. It’s a useful tool because the rules for veteran extensions are pretty inadequate to keep up with the quick rise in NBA player salaries. An extension for Favors or Hill could start at 107.5% of their respective salaries in the final years of their current contracts. That would start a Favors extension at $12.9M in 2018, or Hill at $8.6M next season — in either case, well below their market value.

Renegotiation allows under-the-cap teams to use space to bump a player’s current contract up as high the cap and the player’s max will allow, and then a player can be extended starting anywhere between 60% and 107.5% of that figure. James Harden’s and Russel Westbrook’s teams just used this mechanism to lock in their All-League guys at max figures. The Jazz, though, might be interested in using the R&E tool more like Denver did with Danilo Gallinari and Wilson Chandler in 2015. Instead of taking those guys as high as they could go, they essentially sought to replicate the same incremental money that Gallo and Chandler could have gotten from the marketplace over the extended term, but apply some of it to the current contract through renegotiation, spreading out the cap hit but giving them more or less the same money they’d have gotten as free agents.

It only works if a team and player can agree on what that market value is, and if a player is willing to sacrifice free agency as a means of getting some of the money sooner (and mitigating injury risk). So what are those market values in the Jazz players’ cases?

  • Favors is eligible for a 2+2 R&E (two years renegotiated, plus two extended) as early as October 16. If he were to hit free agency in 2018, as he’s currently scheduled to do, he would most likely get max offers. Since his max that year starts at $30.5M, anything that doesn’t net him an extra $62.4M4 for the extra years probably wouldn’t get his camp’s attention.
  • Hill will be a free agent next year, when he’s likely to cash in on a seller’s market and get at least a deal starting at low-end starter money. That’s around $15M, so for a 1+3  R&E to be worth his time, it probably needs to net him an extra $45M, at the low end.

Can the Jazz swing both of those?

If Utah waited until after trimming their roster to 15 this October — let’s assume for argument’s sake that they cut Chris Johnson and Marcus Paige — the club would have $13,794,808 to split between Favors and Hill. If, for example, they used $5.5M for a Hill R&E and the remaining $8,294,808 for Favors, they could do the following:

  • They could give Derrick a proportional $8.917M raise in year two, then use that as the basis for a two-year extension starting at 107.5% of his new salary. In total, he’d be adding two years and $63.87M to his deal, a little better than he’d do by playing out his contract and signing a two-year max deal. Plus, he’d be getting more than $17M ahead of schedule.
  • Hill’s new salary of $13.5M would mean the Jazz could pay him anywhere between $8.1M and $14,512,500 to start a 3-year extension. If they did 13M-13M-13.5M for the extension, then Hill would pocket exactly an incremental $45M while adding three years to his deal — roughly the same as playing the year out and then re-signing in the low-end starter range.

So it works… with a pretty big caveat.

Doing those two transactions and then retaining Gordon Hayward and Rudy Gobert at their respective max salaries runs Utah $5.3M and change over the luxury tax limit. That’s with 12 players under contract and before the Jazz sign their two 2017 first-round draft picks, or make a decision on free agents Joe Ingles, Shelvin Mack and Joe Ingles.

Salary info from online sources, mostly BasketballInsiders.com and The Vertical

Salary info from online sources, primarily BasketballInsiders.com and The Vertical. Highlighted cells are based on hypotheticals described in this article.

If Trey Lyles is ready for a bigger role by then the Jazz could dodge next year’s tax by waiving Boris Diaw, whose $7.5M salary for next season in non-guaranteed until next July 17, but that only helps temporarily. The team would be in a similar position the following year, when the second contracts of Rodney Hood and Dante Exum would kick in, and Utah would be right back to teetering on — or sprinting right over — the tax line.

Even if you buy the argument that Gobert’s comps put him in a range just below max salary5, it doesn’t change the larger reality here: the Jazz just can’t keep everybody at their market rate and avoid the tax.

At some point, something’s gotta give. That could mean Utah venturing into the tax for the first time, or somebody taking a discount to help the group stay together… or it could simply mean Jazz brass making a decision on who is really vital to a championship core.

As for the Pleiss deal itself, it will be easier to evaluate it in the context of what Utah does with the extra cap cushion it creates. But for now, one thing we can say for sure is that it makes the Enes Kanter trade haul look a bit worse.

Look, the Jazz had to trade Kanter, for chemistry reasons and to clear the way for a burgeoning defensive star in Gobert. We all get that. There’s also no way they were going to pay him the $80 million he got as a restricted free agent. Trading the Turk was the right thing to do, and the benefits of the swap go far beyond the specific pieces it brought back.

But that package looks sparser all the time. The two players it yielded — Pleiss and Grant Jerrett — flamed out after appearing in just 15 Jazz games combined. So the Jazz essentially turned Kanter into two fringey NBA guys and two picks.

Basically what they’re left with now is an OKC non-lottery first rounder6 and a Detroit 2nd, less the value of two picks7. That’s a rough return for a guy who was averaging 18 & 10 per 36 minutes… even if the Jazz had no intention of keeping him and the entire world knew it.

But the real mistake here might have been guaranteeing $6.4 million of Pleiss’ salary. Had they not done that, they wouldn’t have needed to dump him at the cost of a pair of picks, and the remaining asset haul from Kanter would look less anemic. It’s unclear why the Jazz gave Pleiss so much guaranteed money — $2.9M last year, $3M for the upcoming season, and $500K of his $3.1M for ’17-18 — when they weren’t negotiating against any other NBA teams. Pleiss was a solid bench contributor for maybe the best non-NBA team in the world, but there were still valid concerns about how his game would translate. The Jazz bet heavily they could work with the giant German to answer those doubts, and in the end the wager cost them a couple of assets.

It was a minor misstep in an otherwise well-managed return to relevance, though. And if the Jazz are able to use the resulting cap room to extend Favors’ and Hill’s stays in Salt Lake City, people will quickly forgive and forget a slight overpay of Utah’s imported-then-exported center.

Dan Clayton

Dan Clayton

Dan covered Utah Jazz basketball for more than 10 years, including as a radio analyst for the team’s Spanish-language broadcasts from 2010 to 2014. He now lives and works in New York City, but contributes regularly to Salt City Hoops and BBALLBreakdown.
Dan Clayton

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9 Comments

  1. Ryan says:

    Good article. I’m looking forward to Oct. hoping that they R&E Favors. Seems like a bit of a gamble to extend Hill with all of the upcoming contracts coming up over the next two years.

  2. Agustín says:

    I’d rather save the potential “Hill money” for our youngsters in the upcoming years. By the end of the season we would have a better understanding of who is part of the “championship”core and who is not. And I have the feeling that Lyles, Hood, Exum, Favor, Hayward and Gobert fill that spot. We are going to need all the cap space we can get in the next few years to sorround them with role players.

    • Diggin' it says:

      I would extend Rudy Gobert this fall so he doesn’t get overpaid by the market.

      Then play out the 16-17 season, pay Hayward.

      THEN decide on R&E Favors. you have to factor in how well Lyles is playing too.

      • Diggin' it says:

        Calculating all of these young guys new salaries begs the question:

        Do they want to have a couple lower tier stars surrounded by very good role players? Or do they want STARPOWER!!

        Some people swear you can’t win an NBA title without a superstar, and Gail Miller wants a title for SLC, that’s why she brought in Dennis Lindsey.

        • Agustín says:

          I’ll play the 2004 Pistons Championship here. Although, it looks like an exception, rather than the rule. Also, I’m betting that one of Lyles/Hood/Exum becomes a true Super-star. If that is Lyles, you can always trade Favors to fill holes in your bench.

          • Diggin' it says:

            Yeah, the Jazz have a good rhythm going, I wouldn’t want to break up this deep team, I want to keep all the youngsters and George Hill, and bank on their defense to win a championship. We only saw it for about a 32 game sample size, but this team can play historically good defense rather than having just one historically good player like LeBron.

  3. LKA says:

    The glass half full/half empty applies to the Kanter trade. On paper Jazz lost their shirt but in reality the cut out a cancer. So be it I would do it again and I love the moutains too. I would wait on Hill and see if they can extend Favors/Gobert. I still see a trade getting rid of Mack. I like him but Neto has the highwer cieling and I don’t think they will keep both. Also see Chris Johnson being waived for sure. Talking about this money seems like nickels and dimes. (The younger core will ask “What is a nickle and dime.)These players make more money lacing up their shoes on opening night than I do in one year. But seeing Dr. J in person and these kids today I like to see all the energy they have.

  4. Paul Johnson says:

    The Jazz could clear even a bit more cap space by trading Shelvin Mack to a team for a second round pick. At the end of the season last year with the Jazz, Mack proved he could be a valuable contributor off the bench for just about any team in the NBA (especially on the defensive end), and he has a very reasonable contract for the 2016-2017 season of approximately $2.4 mil. The Jazz don’t really need to keep a full roster of 15 players, whereas they are already searching for playing time for the top 10 players on the roster. And, even though Mack is Hayward’s college buddy, he is apt to be more content playing elsewhere this season, where he might actually be able to get some minutes on the floor–whereas it doesn’t appear that either he or Neto will be getting many minutes with the Jazz, absent an injury.

  5. Don says:

    Great article,

    One thing we haven’t discussed much yet is the inevitable trade of a young high-potential player for future picks. Virtually any of the top seven young core players could at trade deadline 2018 or before feel like that player.

    To me, that feels like the last move they have to get right to be a title contender for a while.

    My order of most likely player to be traded looks like this:

    Burks
    Lyles
    Favors
    Hood
    Favors
    Hayward
    Gobert

    There is a lot of duplicity at the Wing and PF positions. The truth is, if they all meet their potential, they should all net a high first or multiple firsts. So my goal would be to find that great fit then do what San Antonio did with coincidentally, George Hill. They traded him for what ended up being Kawaii Loenard.

    We may not get a Kawaii, but if we get someone who has a shot at being that type of player and can be a high-level rotation guy through his rookie contract, then we have put ourselves in position to be competing for a ring for ten years. That is the best we could hope for.

    Who knows, maybe we end up doing that two or three times. The Deron Williams trade was the first such trade to start that process. Kanter should have been another that bombed as noted here.

    We just need another New Jersey or New York to swindle.

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