Devil’s in the Details: Quick Cap Refresher on Relevant Offseason Issues

We look at some collective bargaining stuff as it relates to Fontecchio’s signing, a potential Mitchell trade, and the likelihood of former Wolves like Vanderbilt moving on. (Images via sltrib.com)

As one of Jazz Twitter’s resident nerds when it comes to the NBA’s collectively bargained transaction rules, I thought it might be helpful to address a few of the topics I’m getting questions about cap stuff — and some I’m not.

The Jazz’s final 2022-23 roster is obviously a work in progress, but with some transactions coming through (and others, uh, looming), you might have some questions about the cap minutiae of what has gone or might go down. Here’s my attempt to add clarity, in as understandable terms as possible.

Big picture

Making some assumptions here about how Simone Fontecchio’s reported 2-year deal might be structured, the Jazz are likely at a team salary figure of right around $142 million with 14 players on guaranteed contracts. That’s not counting any of the guys who were likely signed to summer deals and/or Exhibit 10 contracts — more on those later.

The salary cap this year is $123.7 million and the tax threshold is set at just over $150 million. That means it’s pretty likely that the Jazz will operate as an “exceptions” team this year: staying well over the salary cap but under the tax. It’s important to know that as we ponder how other transactions might be set up. For example…

Simone says

The Fontecchio deal could be interesting for basketball reasons, if you like 6-foot-8 guys who do a little bit of everything. But to cap nerds (including present company), it’s also an interesting signing because of what it signals.

At something like $3 million, Fontecchio’s starting salary is definitely too big to fit into a minimum exception, which means his signing was done using a chunk of either the bi-annual exception (BAE) or, more likely, the mid-level exception (MLE). The $4M BAE would be big enough, but it would limit Utah’s options next offseason, and the Jazz appear to be focused on future optionality. So if it came from the MLE — either the full $10.5M version or the $6.5M taxpayer MLE — that would be one more indication that the Jazz don’t intend to use it all in one shot to go after a single free agent. (There aren’t a lot of free agents left that warrant using the whole thing anyway.)

The Jazz will likely spend some of the remaining MLE doing what they have done in prior years: piece it out to whichever minimum-salary youngsters earn a shot between now and training camp. If one of their camp invitees makes the roster but signs via the minimum exception, the contract could only be for two seasons. But if they use part of the MLE instead, the contract can be for up to three (TMLE) or four (MLE) seasons. This gives them a longer look and possibly some team control if a player “pops.” A third and/or fourth year with a team option or guarantee trigger dates would give the Jazz the chance to keep useful dudes around on the cheap, but carry little to no risk if it doesn’t work out. OKC signed Lu Dort to that type of deal in 2019, and it got them the opportunity to sign him this summer to a 5-year deal with full Bird rights.

The Jazz can use up to $6,479,000 of the MLE that way within the taxpayer MLE amount. Once they spend even a dollar more of the MLE, they’re hard-capped for the year at around $157 million — but honestly, given the other things they’re working on, I doubt the hard cap becomes a concern.

As for Fontecchio himself, Jazz can make him a restricted free agent in 2024 with a $4M-ish qualifying offer if he stands out. Then they can re-sign him (or match offers) for up to the “Early Bird” exception in the low eight figure range. Other teams will be limited to what they can offer him because of what’s commonly known as the Gilbert Arenas rule. In short, if he’s good enough that the Jazz want to keep him, they’ll have options.

Trade talk

But with all due respect to the Italian forward, let’s get to the big fish.

In order to acquire Donovan Mitchell at $30.35M, an over-the-cap team would have to send out roughly $24.2M in salary. That means in a 2-team trade, at least $24.2M is coming back Utah’s way. If the trade were expanded, the Jazz wouldn’t necessarily need to take back all $24.2M of that (some portion could be routed to a third team), but for simplicity’s sake, let’s say that the Jazz are likely to take back somewhere between $24.2M and $38M in a Mitchell trade. That figure goes up if other players are involved.

One question I’ve gotten is about how Mitchell’s 15% trade kicker affects the transaction. Short answer: it doesn’t.

Trade bonuses can really complicate a deal. They’re calculated based on the remaining salary and paid by the player’s sending team (unless the teams negotiate a different arrangement using the receiving team’s yearly cash-in-trades allowance), but the part that makes them complicated is that they make the math more unbalanced. The acquiring team has to be able to fit the player’s entire new salary figure — with the trade kicker applied — but the sending team only gets to count the pre-bonus salary when calculating their side of the deal. It makes it harder to line up a dollar value that is legal for both teams, at least in theory.

In Mitchell’s case, it’s moot. Yes, he has a 15% trade bonus negotiated into his contract, but a trade bonus can’t take a player’s salary higher than that year’s max for a player of his experience level, and Mitchell is already making more than the max because of the standard 8% raise over last year’s salary. His trade bonus is considered amended to $0, meaning there’s no complicated ingoing/outgoing trade math to sort through.

There is still the ingoing/outgoing value calculation, but that’s a separate topic. Sounds like there is still a gap in what at least one suitor is offering relative to the Jazz’s asking price.

Just passing through?

The newly acquired players from the Rudy Gobert deal could be interesting trade ballast, as the quintet of former Wolves includes value veterans that might be of interest to teams in more competitive situations than what the Jazz might ostensibly be in after a Mitchell trade.

Those players can’t have their salary combined in a trade until September, but that doesn’t mean they can’t be included in the same trade with somebody else.

Let’s say for example that the Jazz had an offer to send out, say, Mike Conley Jr. and Pat Beverley for Player A at $25M and Player B at $10M player. Some might look at the deal and simplify that the Jazz sent out $35M in salary and received $35M back, illegally aggregating Conley’s and Beverley’s money. But from an exception standpoint, the Jazz could make that deal legally without aggregating. Conley’s salary would allow them to take back a player or players making up to $28.45M (125% of Conley’s $22.68M, plus $100K), so that covers Player A’s incoming salary. Then the part of the trade involving PatBev could bring back up to $18M (Bev’s $13M + $5M extra per the trade rules on that salary range), more than accommodating Player B’s $10M.

What they couldn’t do is combine Conley and Beverley to acquire a single player making $35M or even a $30M player and a $5M player (because the $30M player makes more than either outgoing Jazzman could bring back on his own). But as long as their salaries create separate exceptions that accommodate incoming players wholly without combining them, the two can be in the same deal.

Similarly, they could use Malik Beasley and Bojan Bogdanovic to acquire an almost endless combination of players. They could get two $20M players; or a $18M guy and two $10M guys, or two $15M guys, a $8M guy and a $3M guy. What they can’t do is combine their salaries and bring back a single $40M salary. That may not be the Jazz’s goal anyway from a competitive standpoint, but even if they’re just looking at ways to take on short-term salary for assets… they CAN trade the new guys in the same deal as their current vets, they just CAN’T combine their salaries to step up into a larger money tier.

The Jazz can aggregate the salaries of other players on their roster — just not the Minnesota transplants, until September 6.

Walker Kessler can’t be traded at all until August 9, as a recently signed first-round pick.

TPEs

When a team trades away a player without filling 100% of that same salary slot immediately, they actually receive a credit that can help for future trades. But the use of them is pretty restrictive, because as described above, they can’t be combined with each other or with players to create a larger asset.

Let’s go back to the Conley-Beverley idea. Let’s say the Jazz got an asset or two by sending both guards and letting a team “dump” a player making $25M onto their cap sheet. Since Conley’s salary alone is enough to acquire that player (again, 125% + $100K in Mike’s case), Beverley’s entire salary could create a separate trade exception the Jazz could use for up to a year for up to $13.1M: Beverley’s salary plus $100,000.

The Jazz actually have two of those “credits” or TPEs available in the high 7-figure range right now, but there are conflicting TPE structures on different online sites, so at present it’s not 100% clear which two.

Teams get to decide how to structure the use of exceptions on either end of a trade, so the Jazz had choices as to which TPEs they used to receive the smaller salaries in the Wolves deal. Going into the Gobert trade, Utah had a $9.7M TPE (left over from Joe Ingles) and an $8.8M TPE (Royce O’Neale). Neither was big enough to accommodate Beasley & Beverley, so those two had to come out of Gobert’s salary, leaving a difference of $9.6M.

Jarred Vanderbilt and Leandro Bolmaro had to go into one of those three figures when the Jazz demonstrated to the league which exceptions they were using to complete the trade. If they took those guys into the remaining Gobert amount, they could keep the Ingles & O’Neale TPEs intact, but it would make the new Gobert TPE almost unusably small ($2.8M). It might make more sense to slide Vanderbilt and Bolmaro into one of the two older TPEs and create the largest possible Gobert TPE ($9.6M) since it will be available for the longest amount of time.

Again, not sure what they did —  but either way, they currently possess two TPEs that are somewhere in the $8.8M to $9.7M range, as well as some smaller ones that will most likely expire unused.

Camp deals

If you fell in love with anybody on the Jazz’s Summer League squad, here’s some good news: there is some chance said player could stick into vet camp in the fall, or even beyond.

The NBA allows for teams to sign “summer contracts” which are a type of “uniform player contract” except that the salary isn’t counted on team’s cap sheet until the regular season starts. But they are contracts. Many also contain an “Exhibit 10,” an addendum which allows the team the right to convert the player to an open two-way slot. The player doesn’t earn any money on an Exhibit 10 contract, other than lodging expenses and per diem while with the team, and a cap-neutral signing bonus that can be up to $50K. If a contract has a signing bonus of more than $50K, it is ineligible for Exhibit 10.

So if a player accepts one of those contracts to come to camp and the team likes him, they can keep him by simply NOT waiving him before the season starts, or converting him to an open two-way deal (if there is an Exhibit 10). Of course, there would have to be an open roster spot, so we’ll see what else happens with Utah’s roster.

Others who come to camp on such deals might actually be acquisitions meant for the SLC Stars. The G League allows its teams to claim rights to some players waived in their parent club’s NBA training camp, so some of the dudes who make the 20-man camp roster might actually be heading that route. Usually players and their agents know that’s the case, and have chosen to join a specific team’s training camp because they like the opportunity they’ll be given with that team’s G League affiliate, or perhaps because that team was offering a bigger Exhibit 10 bonus than other teams were offering. So nobody’s getting screwed here: these are fringe NBA guys who are giving up a little bit of liberty in order to line up what they think might be their best shot of showing their stuff and making it to the league.

Once a player with an Exhibit 10 is cut, the G League rights belong to that team’s affiliate, but any NBA team can sign the player.

Two-way shuffling

Relatedly, it’s worth mentioning that two-way players can get shuffled in and out of spots fairly painlessly. Two-way players make $509K, so it’s a much more coveted offer than an Exhibit 10 deal. But that salary doesn’t count towards a team’s cap/tax calculations, so even to the extent that the salary is guaranteed, it costs a club nothing on the cap sheet to move on from a two-way player if they want to try someone else. (It might cost them actual cash, though.)

That’s a long way of saying that if someone went to camp and played their way in front of Johnny Juzang or Xavier Sneed, the Jazz would still have the option of rewarding that player with the promotion to a two-way spot. They’d have to waive one of Juzang/Sneed to make it happen, but the move would be cap neutral. Juzang/Sneed would walk away with whatever portion of their salary had been guaranteed up front (or earned by the time they were cut), but that dollar figure would only matter in the Jazz’s checkbook, not on their cap sheet.

Teams waive guys off of two-ways fairly regularly. So Utah’s two-way spots might be currently filled, but that’s not the same thing as saying that the battle for those roster spots is over.

Asset roundup

In all, what does that leave the Jazz with, asset-wise?

• The contractual rights to all currently signed players, from Mitchell’s $30.35M to Jared Butler’s $1.56M.
• Up to three tradable first-round picks of their own. (They can trade their 2023 now that they acquired another pick for that year, plus they can trade up to two in 2026-2029 with the right conditional language based on their outstanding debt to OKC.)
• An additional five first-round picks from the Gobert and O’Neale deals, as well as swap rights that could sweeten their 2026 pick.
• Up to four second-rounders: 2025, 2026, 2029 and technically a chance at a top-12 second-rounder from Memphis in 2026.
• Two TPEs in the $8.8M-$9.7M range, plus smaller ones.
• Likely about $7.5M remaining of the MLE, or $3.5M of the TMLE if they don’t want a hard cap.
• Possibly the $4M BAE, although it’s unlikely they use it during a transitional year (and doing so would also hard cap them).
• FA rights (but not matching rights) for Eric Paschall, Trent Forrest, Hassan Whiteside and Juancho Hernangomez.
• Up to $6.36M in cash they can send in trades. (They can also receive up to $6.36M.) That’s just cashola straight from/to the bottom line, it doesn’t impact the cap and doesn’t free up any other exceptions not already described here.)

Did I miss something?

If you have other questions not covered here, let me know.