How a Cap Maneuver Could Drop Conley’s 2020-21 Price, Extend His Stay in Utah

If the Jazz get creative with the cap rules, they can keep Conley for the medium-term future without asking him for a $34.5 million sacrifice. (Melissa Majchrzak via espn.com)

On the surface, Jazz guard Mike Conley has one of the easiest decisions anybody will make during this weird NBA offseason. Because of the deal he originally signed in Memphis before being traded to the Jazz in 2019, he has the ability to cut his contract short and forego a boatload of money. If he does nothing, he gets his $34.5 million next season. If he invokes his early termination option (ETO), he becomes a free agent and makes… a lot less than that.

Like I said, it’s not a hard choice.

But there is a way the Jazz and Conley could work together to get him his money while also easing the salary cap pain and committing to a shared medium-term future. To make it work, Conley would simply have to do the unthinkable: exercise the ETO.

The maneuver would work like this: Conley opts to terminate his current deal, then he and the Jazz could immediately agree to a contract extension designed to lengthen his stay in Utah. The idea was broached by The Athletic’s John Hollinger at a high level, but we figured it would be helpful to illustrate exactly how it could work.

The details

Unlike players coming off their rookie contracts, veterans can extend their stay with their incumbent team right up until the day before free agency begins. In Conley’s case, that means he could negotiate an extension with the Jazz even before he makes his ETO decision final. If he and the Jazz reached an agreement on a medium-term deal that made him feel OK about ripping up a $34.5 million paycheck, there really wouldn’t be much risk at all for him.

Because his 2019-20 salary was so high, the Jazz could actually start his new deal at literally any amount up to the max salary, and then negotiate increases or decreases of up to 8% of that first-year figure.

And here’s the tricky cap mechanism that really makes this work: a signing bonus. Players signing an extension can receive up to 15% of the total value of the extension up front, so if Utah does declining salary AND a max signing bonus, they can structure this to get Conley most of that $34.5 million right away, while adding some reasonably priced years to the back end of the deal.

The cap hit on that signing bonus makes it a bit more complicated, though. Almost any of these options would give Utah more financial flexibility today, but they’d eventually have to pay the piper in terms of the cap hit for that up-front money.

The numbers

If the Jazz gave Conley a new 3-year deal starting at $24.4 million, with declining salary and a full 15% signing bonus, he wouldn’t lose a penny of his planned 2020-21 salary, and the Jazz would get him for two more seasons at a far cheaper rate.

This scenario gives the Jazz $6.4M of added breathing room on this year’s cap sheet.

Because the entirety of the $10.1M signing bonus would be paid in year one, this scenario allows Mike to collect every dollar of his original $34.5M on schedule. It also effectively adds two additional years at $42.9M. The net impact to Conley of this scenario would make it pretty hard for him to say no: he wouldn’t lose any money in the short term, plus he’d get the added security of two additional seasons at what basically amounts to borderline star money — there’s really no downside for him. For the Jazz, it would give them an extra $6.4M of room under the tax/apron this season, but they’d have to make up for some of that later.

But Utah may not want to pay Conley nearly $43M in his age 34 and 35 seasons, especially since he’s coming off a season that included some ups and downs. And, even though the bonus is all paid up front, it’s charged to the cap over the life of the contract. So in this scenario, the Jazz would still owe a 35-year-old Conley $20.5M, but on their cap sheet it would actually be even worse than that. He would count on their 2022-23 books at $23.6M. That’s pretty steep considering that the Jazz are also due to give raises to All-Stars Rudy Gobert and Donovan Mitchell before then.

So the Jazz may instead try to negotiate a version of the above where Conley does sacrifice a little bit up front, but makes it back over the life of the deal. Here’s what the same structure looks like if they start at $21M instead of $24.4M:

The Jazz drop Conley’s 2020-21 cap hit by more than $10M here, with a slightly more reasonable back end of the deal.

Here, Conley still gets $29.7M next season between his salary and the 15% bonus — a $4.8M haircut from the salary he’d give up by using his ETO.

But he would essentially get that money back later on, and the total money on this deal would effectively add two years at about $16M per season. That’s probably more reasonable for what the Jazz can expect from Conley as he hits his mid 30s.

But again, even though those last two years sound reasonable in terms of the incremental cash Conley will earn at that stage in his career, the cap hit left over from the signing bonus would hurt their books: cap charges of $22M and $20M during some already pretty tight financial years. It would reduce Conley’s cap hit this year by more than $10M, though.

Of course, all of this is subject to negotiation, so they could try to get Conley to go lower on the total value, which he still might do because of the added security well into his 30s. Another way they could lessen the cap squeeze is to make the extension a 4-year deal.

This gives Utah $11.1M of cap breathing room this season, and spreads the bonus over more years.

Because the bonus is based on the total value of the extension, adding a fourth year increases the amount of cash Conley can get up front, but also adds another year over which that amount can be distributed for cap purposes. Basically: it makes it easier to frontload the cash Conley gets now without making the cap hit sting too badly later on.

In this scenario the first-year salary drops by a million, but Conley actually gets MORE of his original $34.5M up front because of the bigger bonus: he takes only a $3.9M haircut off the bat. Then he has three pretty reasonably-priced years to follow — not insignificant amounts of cash, for sure, but essentially in line with what veteran starters make. Again, take his ETO amount out of the total here and what you’re basically asking Conley to accept is a small deferral of that initial payday, plus a 3-year $46.5M deal added on.

The drawback is that this deal goes into the age 36 season of a guy who has missed some time in recent years. So there is some risk. 

Again, all of these details can be individually negotiated, so there are far more scenarios than these three. For example, the scenario C math with an $18M start means $7M of his 2020-21 money would get deferred and he’d be agreeing to a more modest 3/$39M pact in terms of net new money — if he’d accept it. They could make it a smaller signing bonus — or none at all — which makes it harder to get Conley a bigger chunk of money right away, but eases the cap strain on later years. Or they could even make it just a 2-year extension to reduce the long-term risk. (A 2-year extension starting at $24M with declining money and a max signing bonus would basically be the same as giving Mike his money back for 2020-21, and then giving him an incremental $18.5M for 2021-22, but with a cap hit of $25M.) So there are a lot of ways it can work.

Why Conley might do something like one of these three options

When Conley signed his current contract, it was the most lucrative player deal ever signed in NBA history. It has since been eclipsed by many others as the cap has climbed, but the fact remains that Conley has done pretty well for himself. He certainly has a nest egg at this point that would allow him to be patient about when he sees the full $34.5M he’d be opting out of, especially if doing so gives him the added security of an 8-figure guarantee well into his 30s.

If he’s realistic about where his production (and salary) will likely be by the time he’s 34, 35 and 36, then there should be a way to structure this deal so that Conley doesn’t feel like he’s sacrificing much. With the NBA potentially set to lose billions in revenue to the coronavirus crisis, the security of locking in even low-end starter money might be enough for Mike to say yes.

Why the Jazz might do it

It’s simple: this maneuver allows them to reallocate some of Conley’s meaty 2020-21 salary figure to future years, while also keeping this new core together. The Jazz still don’t feel like they’ve gotten an earnest chance to see how good the roster they’ve built could be together. Conley struggled, then was hurt, then had to work his way back to starting, and by the time he had done all that, the new core had only a month or so together before it was Bojan Bogdanovic’s turn to miss time. They’d like more time to see how good the Gobert-Mitchell-Bogey-Conley core could be, especially with a smart rotation upgrade or two.

Doing this would give them more time to unlock Conley’s best. 

Why Conley might not do it

Any time a GM starts a pitch with, “We’d like you to turn down $34.5M,” he’s on pretty tenuous ground.

Conley’s a smart guy and Utah’s brass could surely point out to him and his representatives that the net effect of all this maneuvering would be more security as he enters the latter part of his career. But even so, Conley may prefer to keep his 2020-21 paycheck intact and then bet on himself in 2021 free agency. He’ll be 34 then, which means it could be his last chance to score one more really lucrative deal. It’s not clear how likely such a deal is given the financial environment, but that unknown hypothetical payday is what the Jazz will have to negotiate against if they want Mike to approve the cap gambit.

Why the Jazz might not do it

I wrote above that the maneuver could give Utah more time to unlock the version of Conley they see as being a key to their title hopes. But it could go the other way, too: they could be paying eight figures for the privilege of watching Conley’s slow (or not-so-slow) decline. It’s a big risk for the Jazz to line up that much cash for Conley’s age 34, 35 and 36 seasons.

The fact that Gobert and Mitchell have new deals coming only exacerbates that risk, as does the fact that the future financial picture is cloudy for the league as a whole.

In other words, Utah should only do this if they still fervently believe in Conley’s ability to hasten the team’s climb to solid contender status. From what I gather, they still do believe. But there are no guarantees.

So… will it happen?

There are other wrinkles, too. A new majority owner might have his own ideas about the club’s future and Conley’s place in it, or he may have a different mindset when it comes to risk, spending and the luxury tax that could make it more or less likely that he would green-light this type of investment. Who knows? Or, he may be committed to being as hands-off as his predecessor, Gail Miller, who by default let the basketball brains make basketball decisions.

There’s also a question of time: will the sheer number of days between the provisional cap rules being set and the start of free agency be enough for the Jazz and Conley to explore the various versions of this deal? At this point, that’s all very unclear.

But frankly, if Conley believes in where the Jazz are headed, and the Jazz still believe in Conley as an important piece of the championship puzzle, then there is likely some variation of the math above that could achieve both sides’ objectives. The fact that Hollinger is talking about it likely means that possibility has been floated by one side or both. Now it’s just a question of finding that magical middle ground where a theoretical deal exists.