Future Finance Watch Part II: 2017-18

September 7th, 2015 | by Dan Clayton
Keep looking up, Rudy. The big man is a $20-30 million variable for the Jazz's '17-18 cap. (Photo by Andrew D. Bernstein/NBAE via Getty Images)

Keep looking up, Rudy. The big man is a $20-30 million variable for the Jazz’s ’17-18 cap. (Photo by Andrew D. Bernstein/NBAE via Getty Images)

Let’s continue our look ahead into the Jazz’s dozens of contingency options and an ever-changing cap sheet. As covered in part one of this two-part look, Utah has definitely given itself a number of different avenues to add talent or parlay assets this season and next.

Today, we continue by looking even further ahead: to the wild 2017-18 season, one that has an almost ridiculous number of game-changers and plot twists. All of the variables at play make summer 2017 too hard to predict, but it’s worth looking at some potential scenarios and options.

That summer, the cap will spike to a projected $108 million before potentially dropping back down a bit the following summer. If that sounds like a cap number that would be impossible to reach, consider the following high-dollar variables.

The truth: nobody has any idea what the summer of 2017 holds. (Source: BI)

The truth: nobody has any idea what the summer of 2017 holds. (Source: BI)

Rudy Gobert

The 2017-18 season will either be year one of an extension agreement between the Jazz and Gobert should they reach one by Halloween ’16, or year one of a new contract he will have signed as a restricted free agent that summer. And here’s the thing: either way, that could be a huge number.

Gobert’s growth over the next 1-2 seasons will dictate whether that’s a max deal or not, but consider this: a max deal for Rudy will start at $25.4M if the cap projection holds up, and could even balloon to $30.5M if he somehow makes back-to-back All-Star or All-NBA teams.

Again, there’s no guarantee that he’ll have a claim to the max label by then, especially if his offensive limitations linger. Similar players — promising young bigs who haven’t yet totally crashed the first tier — used to cash in at a pretty consistent market rate of 4/$48M or so. But adjust that for inflation and you’re still talking about a $20M starting salary for Gobert, or roughly $90M over four years. That’s probably about Rudy’s floor at this point.

Trey Burke and other RFAs

That will also be Burke’s next payday, and the range of where his value may be at that point is a lot wider. It’s hard to imagine him coming anywhere near the $25.4M max, but there’s a lot of middle ground for Trey, and it depends on whether he’s looking more like a Kemba Walker late lottery pick or a Jerryd Bayless late lottery pick. Like Burke, both of those guys were picked 9th/10th, but Bayless plateaued and became a journeyman while Kemba worked through some early struggles and is about to start earning his $48M extension that would equate to roughly $90M in Burke’s market.

That whole range — from minimum contracts to $20M/yr — is probably in play for Burke as a restricted free agent, which is why the next two years are extremely important for him. And, depending on Dante Exum’s progression and whatever else the Jazz may do in the meantime, there’s no guarantee that it will be Utah paying Trey that $1 to 20 million.

While they certainly won’t break the bank, Joe Ingles and whoever lasts out of Millsap, Cotton and Jack Cooley will also be RFAs up for negotiation.

Derrick Favors

Favors is technically locked up for 2017-18 at a modest $12M. But the Jazz do have a mechanism they can use to turn their ample cap space into a long-term commitment to Favors.

The current1 CBA has really gutted the use of extensions for veteran star players. The limit on year one salaries for such deals is a function of the final year salary, so it’s often well below the player’s max salary or market rate. This makes even a team’s best legal extension offer a borderline affront to the player. But there’s a unique mechanism, most notably used by Denver to lock up Wilson Chandler. Teams can use cap room to simultaneously renegotiate extra salary for their players and extend them based on that renegotiated salary.

Let’s say Favors projects to hit 2018 free agency2 and get something like a 3/$75M deal. That would be less than his max salary at that point, but it makes the math easier so let’s start there. The Jazz could go to him on July 1, 20173 and propose to negotiate his final year up by $8M and use that new salary figure to legally give him as much as a 3/$69M extension. Favors gets the same incremental money (actually gets $77M in that scenario instead of $75M), only he gets more of it sooner. And for the Jazz, they lock down a borderline star-level player, but get to apply some of the required money to a year when the cap is higher.

Of course, Favors would have to be willing to forego letting an open market dictate his price, but the security of a nine-figure deal might just do it. He is the prime candidate for such a cap play, and the fact that his renegotiation window is timed perfectly with the one-year cap spike helps. But it only works if the Jazz have the cap space to fund the extra $8M, and we haven’t even gotten to the two biggest variables yet.

Alec Burks is also technically eligible for renegotiation of his 2017-18 salary starting on 10/31/17, but since he’d still have two years of contract left, it’s unlikely the Jazz would use this tactic where he’s concerned.

Gordon Hayward

When Hayward signed his contract last summer, that last year at $16.7M looked pretty high for a player who was still trying to prove himself as an upper echelon dude. Now, he’s a borderline All-Star and a 19-5-4 guy who could easily opt out and get something at or close to a max deal starting at $30.5M that summer. Wow.

Hayward is almost sure to opt out, and the Jazz will have to pay handsomely to keep him at that point. Whether his market is set at his full max depends on a bunch of different variables, but suffice it to say that Hayward’s cap number for the Jazz in ’17-18 will likely come in well above the $16.7M we currently have penciled in… or it will be $0, which would be an even bigger blow to the franchise.

Technically, Hayward is also a candidate for the same type of renegotiate-and-extend we addressed with Favors, but in his case, that only happens after he opts in. The Jazz can’t legally start negotiating such a deal with Gordon until mid-July4, which comes after his opt-in deadline. If the Jazz do anything before that point beyond vaguely intimating to Gordon’s reps that they’re willing to discuss renegotiation5, they are exposed to potential tampering charges. So Hayward would have to opt in based on faith that the Jazz would take care of him, and it’s both unlikely and inadvisable for him to do so as it would kill any leverage he has to maximize his earning power that summer.

But there’s one more nuclear variable that could blow all of this up, including Hayward’s risk tolerance and the Jazz’s overall cap situation.

The CBA

The summer of 2017 is the NBPA’s first opportunity to opt out of the collective bargaining agreement and go to battle for a more favorable split. The union’s new chief and several prominent players have indicated that they’re raring for a fight, even though the new TV deal guarantees everybody more money.

It seems safe to assume that the players, who downgraded their share of revenues from 57 percent to 49-51 percent on the last round of negotiations, will try to get some of that pie back. But myriad other smaller machinations could change in ways that make the market landscape almost impossible to predict.

A higher revenue split would likely mean a higher cap, but depending on what other rule changes the sides push for, it could also push the Jazz to be more fiscally conservative ahead of 2018 extensions due to Dante Exum and Rodney Hood. There are enough moving pieces that some players may prefer to lock in whatever they can get ahead of a possible work stoppage, but the bullish ones will probably want to wait until all the dice are cast in case the new CBA climate gives them a higher earnings ceiling. One way or another, it is certain to factor into the way someone like Gobert will think about the decision to extend in the fall of next year or enter free agency on the other side of whatever resolution awaits in 2017.

Have questions about the Jazz’s cap or the various rules governing what they can and can’t do? Ask away in the comments section, and Dan will check back with answers.

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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5 Comments

  1. Mewko says:

    So the Jazz have to pay a lot of cap space in 2016-17, yet retain flexibility to lock up Gobert, Favors, Hayward, Hood, and Exum.

    Do you suggest that they absorb an albatross expiring deal that year? That way they have money to meet cap minimum, and flexibility to keep core guys long term.

    • Dan Clayton says:

      That’s perhaps an option, although I guess part of my point is that 2017 is the year that things could certainly get crazy fast. Let’s say Gordon opts out and then gets a deal starting at 30M, Rudy gets the max, and Derrick gets the renegotiate-and-extend i described. Those three transactions would put them above the salary floor and give them under 8M of room under even the crazy high cap. Obviously none of those three things are a sure thing — let alone all three — but the Jazz have plenty of ways to spend 2017 money without leaving their own clubhouse.

      I think it’s far more likely that they acquire help this/next season with salary attached through the end of 2016. But we’ll see. There’s also a chance that not all of these guys are going to be Jazz men forever, so maybe there are more plot twists than we’re anticipating.

  2. ishallakam says:

    One thought that keeps coming to my mind when looking at the team’s financial future is that Hood may end up being a very similar player to Hayward. It would be a drastic move, but if Hood develops well this season, and Burks comes back strong, then the Jazz may consider trading Gordon. It would likely be a big step back in terms of competitive quality, but could free up a bit more money for Gobert and Exum, while possibly bring in a good deal of depth.

    • Dan Clayton says:

      I suppose there’s a chance. Thing is, and you yourself hint at this, Hood might be similar stylistically to Hayward, but he’s nowhere near as good, and there’s no guarantee he will ever catch up. To round the corner and become title contenders, every team has to reach a point where they stop worrying about acquiring assets and start building around the special guys they have. Hayward, Gobert and Favors are those special guys. None are untouchable (maybe Rudy because he’s so singular at what he is), but if they trade any of those three, it won’t be about clearing space.

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