New Math: Your Post-Extension Cap Questions Answered

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The Jazz cemented their defensive identity on Halloween, committing to a near-max deal for their young star center Rudy Gobert. The elite paint protector and his rising team agrees to a four-year extension that will start next season and earn Gobert $102 million.

Gobert’s 2014-15 explosion prompted a complete existential redirection in the build of the franchise, starting with a trade of the teams’ former #3 pick and an assertion that Utah was going to zig while the rest of the NBA zagged. Monday’s extension decision validates that decision, and also changes the financial realities facing the team.

After spending Monday afternoon answering cap questions on Twitter, SCH decided to bring some of the most common questions here for the benefit of all. Here are some answers you may be looking for as it relates to the Gobert extension and the Jazz’s resulting asset and salary situation.

How is Gobert’s deal structured?

The Jazz don’t release salary information, but usually details start to trickle out after a big signing through league sources. For example, Jody Genessy has already reported that the deal is a straight four-year deal with no options.

In terms of year-by-year salary, it’s just a guess for now. Since the value of the deal was less than a max 4/$108M extension, it could mean that Rudy’s first year is slightly lower than the max, but he still gets the highest yearly raises allowable: 23M-24.7M-26.5M-28.2M. Or it could be that they gave him the max first year but with flatter raises: 24M-25M-26M-27M. We should know more soon.

Was this the max for Gobert?

No, but it turned out to be pretty close. Assuming a $103 million cap next summer, Rudy could have gotten about 4/$108M from the Jazz, or he could have fielded offers of 4/$103.6M from other teams¹. So Rudy took as much as a $6M haircut in exchange for the early financial security.

Could the contract be frontloaded to make later years easier to manage?

Not really, if the total is $102M. The thing is, the deal can only start as high as Gobert’s max salary: which will be something like $24.0 to 24.2M, depending on where the cap comes in. With that as a starting figure, it’s hard to get to $102M over four years if the salary drops at all.

Why couldn’t the Jazz do a 5-year extension?

They could have, but they couldn’t have gotten any discounts for doing so.

The rules for rookie contract extensions generally allow adding four additional seasons. Teams can designate a single player for a 5-year extension, but it has to be for the full max contract, and they can only have one player on their roster on whom they’ve used that “Designated Player” tag. A DP extension for Rudy would have been around 5/$140M, and to get the slight discount they got off the max salary, they had to limit themselves to a 4-year deal.

Will Utah offer Gordon Hayward the full five-year max?

The “Designated Player” rule only applies to rookie contract extensions. Hayward is neither coming off his rookie contract nor is he extension eligible. He will be a free agent², meaning the Jazz can offer him a 5-year deal for any amount up to his max without any problems. Will they? We’ll see.

How much cap room does Utah have remaining for this season?

Since Gobert’s extension doesn’t kick in until next year, this deal doesn’t change their ’16-17 space. They had (and have) about $13.6M remaining under the cap, which they could use to bring back uneven salaries in trades, or to renegotiate player contracts.

Can Utah still re-sign Gordon Hayward and Derrick Favors?

Without a doubt, the most commonly asked question in the wake of the Gobert news.

The short answer is yes: teams generally need cap room to sign other teams’ free agents, but even teams over the cap will have mechanisms available to retain their own guys. The exact exception they can use depends on when the last time was the player in question changed teams as a FA. In the case of Hayward, Favors and in fact most of the Jazz players, they have full Bird rights — meaning the Jazz can offer them as much as they want up to the full max salary, whether they have cap room or not.

What about youngsters like Dante Exum, Rodney Hood and Trey Lyles?

Same answer applies to all three of those guys. The Jazz will have the Bird rights to all three when they become free agents. In fact, assuming that the Jazz decide to make qualifying offers, they’ll also have rights of first refusal, meaning they can match a contract offer any teams submits to Exum, Hood and Lyles and automatically retain the player.

Now, at some point it does get tricky to pay EVERYBODY a max or near-max deal. Depending on what Hayward and Favors agree to and whether the Jazz make moves to hold onto George Hill, they could be getting awfully close to the luxury tax limit even before raises for Exum and Hood kick in for the ’18-19 season. In the past, the Jazz have avoided going into luxury tax territory as a matter of principle; as a team that has fought for a system that gives small market teams a level playing field, they have expressed in the past that they lose some high ground if they spend into oblivion. There’s a chance the winds could shift on that, but as of right now, I’m assuming the luxury tax is the upper limit for Utah’s spending?

Let’s say the Jazz wanted to offer Exum and Hood extensions starting at $15M³ or so, which is at the low end of starter money these days. To do that without incurring tax, they’d pretty much have to move somebody making eight figures — like an Alec Burks. So yeah, at some point they’ll have to make some decisions to move on from at least one “core” guy, or else make a decision to be OK paying luxury tax.

What would the Jazz have to do to keep Hill via free agency?

This is a judgment call as oppose to a straight factual answer, but based on what we’re seeing right now, Hill wouldn’t have a hard time finding starter money somewhere. In the new NBA economy, that’s probably $15 to 18 million. Re-signing Hill to a deal in that range makes it pretty hard to extend or re-sign all of the youngsters coming up, but that figure probably gets it done.

The Jazz could still try the renegotiate and extend route with Hill that we’ve talked about for Favors. In other words, they could use their remaining cap room now to add another three years and $45-50M, but apply some of that money to this cap year, while the Jazz have plenty of room.

When is the deadline for extending Favors or Hill?

Both can be renegotiated and extended anytime between now and 2/28. There is some buzz that extension rules may change when the league and players union agree to a new set of collectively bargained rules, so Utah may wait on Favors and Hill for now.

What are the realistic chances that Hayward stays in Utah?

Your guess is as good as mine… but locking up Gobert can’t hurt. Wouldn’t you rather arrive on Gordon’s doorstep at 10:00 p.m. next June 30⁴ knowing that you can sell him a long-term core that includes Rudy (and possibly even Favors)?

Look, the Jazz could have maintained at least the option of showing Hayward a sub-max salary cap slot next summer by keeping Gobert at his artificially low cap hold. But they’d have also been showing Hayward — who had to wait for his own money back in 2013 —  that they still are as interested in cap maneuvering as they are in locking down the core.

Now, Gordon is a smart enough guy to understand why the Jazz might play their hand that way — but if you’re asking him to have faith in the core that the front office has put together, why not show him that the front office has faith in the core they’ve put together? Cap space is no longer a market differentiator anyway, in an environment where most teams will have the ability to create room next summer. You know what IS a differentiated asset?

Rudy.

And Hayward seems pretty OK with the decision by the Jazz to keep that asset in house:

Thrilled to hear about my guy @rudygobert27’s extension with the @utahjazz! He couldn’t deserve it more! #TakeNote pic.twitter.com/S3XB31ofzm

— Gordon Hayward (@gordonhayward) October 31, 2016