Renegotiating Derrick Favors’ Contract: What Makes Sense?

May 25th, 2016 | by Clark Schmutz

It is against the rules of the current Collective Bargaining Agreement in the NBA for a player to renegotiate their contract and take a smaller amount of money. However, when a team is under the cap, they can renegotiate current contracts to give players more money than was originally agreed to. It hasn’t happened often, because the circumstances where a team can and wants to give a player more money is rare, but the Denver Nuggets recently renegotiated contracts with both Danilo Galinari and Wilson Chandler.

Photo by Jody Genessy

Talk of the Utah Jazz renegotiating Derrick Favors’ contract has been a hot topic among Jazz and NBA fans this offseason. Cap expert and Basketball Insiders Senior Writer, Eric Pincus recently wrote a good piece explaining why Derrick Favors makes a good candidate for a contract renegotiation. Many Jazz fans have been discussing such a renegotiation for a good while now, but to give credit where credit is due, I have not seen someone talk about it earlier than Mykroberts, so props to him/her.

For an explanation from the CBA on the rules of a renegotiated contract, I refer you to Larry Coon’s CBA FAQ, section 61:

CBA FAQ 61

In short, Derrick Favors is the only current Jazz player who can have his contract renegotiated this offseason, because

  1. He is not on his rookie contract
  2. In October, it will be 3 years since he signed his current contract
  3. He is currently on a four year deal
  4. The Jazz will be under the salary cap this offseason

The Realities of Derrick Favors’ Economic Future

Derrick Favors will make about $23 million over the next two seasons, $11 million next year and $12 million the following season. When he becomes a free agent in the summer of 2018, he will be eligible for  30% of the projected cap in his first year of a max contract. That deal would start in the neighborhood of $30 million with 4.5% increases added on each year. If Derrick Favors negotiated a similar deal to his current one in that economic market, he would make roughly $20 million each season. With that in mind, if Favors were to play out his current contract and seek a new contract in free agency, Favors would be set to make somewhere in between 63 and 83 million dollars over the next four seasons.

Derrick Favors is still on the underrated side of things. That could change this season. (Melissa Majchrzak/Getty Images)

Derrick Favors is still on the underrated side of things. That could change this season. (Melissa Majchrzak/Getty Images)

How the Numbers Might Look

If you have read the Pincus’ article, or been in on the renegotiation discussions, then you might already know that the Jazz could renegotiate a contract with Derrick Favors that would bump his upcoming seasons’ salary from $11 million to a maximum yearly salary in the neighborhood of $22 million. And according to the CBA rules and Pincus renegotiated salary projections, Favors’ salary could drop as low as $12.9 million in 2017-18 with two extra years extended at $23-24 million over those two seasons. Pincus’ proposal would pay Derrick Favors like this:

2016/17:     $22 million

17/18:          $12.9 million

18/19:         $12 million

19/20:        $11.1 million

Total:         $58 million over the next 4 seasons

How a Renegotiation Makes Sense for the Jazz and Derrick Favors

If Derrick Favors likes his role in Utah and would like to add two more years on to his current contract, renegotiating his salary makes a lot of sense. It gives Favors economic and geographic stability which might be very appealing for a 24 year old who has two daughters and a new home in Utah. For the Jazz, the benefits of renegotiating Favors’ contract are obvious. The Jazz have money to burn the next two seasons and if they don’t get their payroll above the salary floor the next two seasons, they will have to cough that money up anyhow. They might as well give it to Favors when they have the cap room, in hopes of saving money on the back end when Dante Exum, Rodney Hood, Rudy Gobert, and Gordon Hayward will all be up for new contracts.

But I don’t think the numbers quite add up for Favors in Pincus’ scenario. Why would Derrick Favors take $58 million the next 4 years now, when he is almost certain to make $63 or even $83 million if he waits it out? Favors has already helped the Jazz out financially in his current deal and that may make him less likely to do so again. Or maybe Derrick Favors is just that kind of helpful guy.

This Country Was Built on Compromise and So Can the Jazz Be

The answer may lie in the fact that the Jazz can pay Derrick Favors closer to what he might make the next 4 years AND save money on the back end. The extended seasons’ salaries can be no more than 40% lower than the final season of the current contract, but there is no reason Derrick Favors’ salary could only decrease by 20 or 30 percent and still save the Jazz some dough and give Derrick a much deserved bonus for the short term. Favors’ renegotiated contract could look something like this:

16/17:    $22 million

17/18:    $18 million

18/19:    $16.7 million

19/20:   $15.4 million

Total:    $72.1 million

Or like this:

16/17:    $22 million

17/18:    $16 million

18/19:   $14.8 million

19/20:   $13.7 million

Total:    $66.5 million

The Jazz and Favors’ representation could also agree to play out the season and talk about a renegotiation next offseason, when the Jazz will still have a large chunk of cap space available. Either way, the Jazz and Derrick Favors’ agent will discuss these options starting in October. And there may be a deal that would reward Derrick Favors appropriately while also saving the Jazz money on the back end when they will really need it.

 

Author’s note: Some of the numbers were updated to comply with current CBA rules about decreasing and increasing contracts. Again, many thanks to Eric Pincus for his article and input.

Clark Schmutz

Clark Schmutz is a Jazz fan living in North Carolina who has been blogging about the Jazz for 8 years. Just like with religion, politics and good deals on the internet, Clark likes to talk NBA basketball to find more truth and learning. Find him on twitter @clarkpojo.

5 Comments

  1. Run_Pappy says:

    In any case, this would be a second or third option in the offseason, as far as ways to use all our cap space go. Obviously we (should) want to sign a talented young player that meets our needs and timeline with all that cap space.

    Derrick should definitely take door number two if it’s offered. Loyalty, an immediate pay day with assurance on the back end. This should be called the “Tom Brady Special”.

  2. mykroberts says:

    Yea it is really better for both sides to wait until next offseason.

  3. joshg says:

    great article, with some fun possible speculation. I guess this could also come into play with Burks after the 17-18 season, but I don’t think it makes sense for the player in most cases. Who is going to be the better player in 19/20 Favors or Lyles?

    • Brent says:

      If that happens, (Lyles supplants Favors on the depth chart) then that Makes Favors very easy to trade. A player of his size and ability who would be in his prime and only making around $15-16 Million at that point, under the new Monopoly money rules would be a steal.

  4. Berdj Rassam says:

    Favors is a very good player and the Jazz should figure out a way to extend his contract.

Leave a Reply

Your email address will not be published. Required fields are marked *