Houston Rockets Salary Cap Update: Lockout Edition

Imagine, if you will, a world… a world in which the collective bargaining agreement (CBA) in effect for the 2010-11 season carried over for the next two seasons.

Unfortunately, this world does not, in fact, exist. The CBA expired on June 30, the league locked out its players, and NBA fans everywhere are left without any clue when their teams will begin play again.

Despite all the rhetoric being spewed by both the owners and the players union, one thing is clear: whenever the league does recommence operations, it will be doing so under a drastically different set of rules. While it is not known whether the owners will successfully force the players union to accept a hard salary cap (as opposed to the “soft” salary cap structure that had been in place previously), there will certainly be many changes to the size, length and guaranteed amount of player contracts going forward. The players will also be entitled to a lower percentage of basketball-related income (BRI)–they have already offered to lower their percentage from the previous 57%–which may result in a lower salary cap, all else equal.

Notwithstanding that it is literally impossible to know what the league’s salary cap situation will be, let alone any particular team’s, it may be helpful to some to see what the Rockets’ salary cap situation would look like under the previous CBA.

The Rockets’ Latest Moves
Since my last update, the Rockets have made the following roster moves:

  • In April, the team waived DeMarre Carroll, having previously agreed to a buyout with Jared Jeffries.
  • Also in April, the Rockets filled their two vacant roster spots by signing each of PF/C Marcus Cousin and SF/PF Marqus Blakely to three-year deals. (The first year only covered the last week of the 2010-11 season, and the 2011-12 and 2012-13 seasons are non-guaranteed. The reason for the third year was, unfortunately, due to the very real possibility that the entire 2011-12 season is lost to the lockout.)
  • With the #14 pick of the 2011 NBA Draft, the Rockets selected Marcus Morris, SF/PF out of Kansas.
  • The Rockets traded C Brad Miller, the #23 pick of the 2011 NBA Draft and a 2013 lottery-protected first round pick from Memphis (acquired in the Shane Battier trade) to the Minnesota Timberwolves in exchange for PG Jonny Flynn, the #20 pick of the 2011 NBA Draft (which was used to select Donatas Motiejunas, PF/C out of Lithuania) and Minnesota’s own 2012 second round pick (protected only if the pick is 56-60).
  • A few days prior to the expiration of the prior CBA, the Rockets exercised their $2.108 million team option on Goran Dragic.
  • On July 1, presumably, Les Alexander had to fork over his first ever luxury tax payment to the league office.
  • On July 8, news broke that Yao Ming had filed for retirement with the league office.

Salary Commitments and Potential Cap Room
Again, the rules used from this point forward are not the salary cap rules that will govern the Rockets once the lockout ends. But in the interest of enlightening others to the Rockets’ cap situation under one particular set of variables, here’s a look at what the team could have expected under the old rules. Again, everything that follows is merely a hypothetical under a set of rules that will likely not exist after the lockout.

The Rockets will have a minimum of approximately $46.81 million in salary commitments to eleven players for the 2011-12 season: Kevin Martin ($11.52 million), Luis Scola ($8.59 million), Kyle Lowry ($5.75 million), Hasheem Thabeet ($5.13 million), Flynn ($3.41 million), Jordan Hill ($2.86 million), Terrence Williams ($2.37 million), Courtney Lee ($2.23 million), Dragic ($2.11 million), Patrick Patterson ($1.96 million) and Chase Budinger ($884,293). Actually, Budinger’s salary is not guaranteed until after August 1, but we can safely assume that he’ll survive getting waived before then.

Add to that amount the rookie scale cap holds of the recently-drafted Morris ($1.57 million) and Motiejunas ($1.17 million); and each of Cousin and Blakely is set to earn $788,872 (or whatever the league minimum salary is under the new CBA) if they manage to remain on the roster into next season. Chuck Hayes, the Rockets’ lone remaining free agent after Yao’s apparent retirement, will have a cap hold of about $3.95 million.

Based on last season’s salary cap figure ($58.044 million), this leaves the Rockets (with all of its players’ rights still under control) with slightly less than $2.98 million in salary cap room.

Assuming that Morris and Motiejunas are not waived (a likely bet), that Cousin and Blakely are waived (we’ll see) and that Hayes’s rights are renounced (not so sure about that), the Rockets’ “realistic” maximum cap room under the old rules and with the current roster is approximately $8.5 million.

2011 Free Agency

Memphis Grizzlies free agent Marc Gasol

The Rockets are not in the ideal position to pursue 2011 free agents like Marc Gasol

That’s enough cap room to offer a player like Nene or Tyson Chandler a five-year, $49.3 million deal. That’s certainly a lot of money, but probably not enough to beat out Denver and Dallas, respectively, who could also offer higher annual raises and a sixth year.

Moreover, an offer sheet of that size would likely be insufficient to cause teams like Memphis and the L.A. Clippers to balk at matching on restricted free agents like Marc Gasol and DeAndre Jordan, which is why hoping to sign away a young restricted free agent is about as likely as getting Yao to play 82 games next season.

With the list of remaining free agents (after weeding out those the Rockets cannot afford and those restricted free agents whose teams will not be deterred from matching any offer sheet) little more than “slim pickings,” the Rockets need to ask themselves this:

Is the 2011 free agent class worth (a) losing Hayes over and (b) more importantly, hurting the Rockets’ chances in 2012 free agency?

The Case for Waiting Until 2012
Rather than pursue a weak free agent class armed with $8.5 million in cap room, why not instead re-sign Hayes (one of the unquestioned leaders of this Rockets team and a valuable defensive contributor) to a sensible multi-year deal AND retain the $7.35 million traded player exception (TPE) generated from the Battier trade?

If the right trade comes along, that Battier TPE (which is not scheduled to expire until next February) could come in handy. However, in order for the Rockets to use their cap room, they would have to renounce that TPE altogether.

The Rockets could sit out free agency in 2011 (for the most part), take their licks in Kevin McHale’s first year as head coach, focus on developing players like Patterson, Morris, Thabeet, Hill and Williams… then go “all in” in 2012 free agency, when the Rockets could conceivably have in excess of $20 million in available cap room.

Of course, all of this assumes an outdated salary cap system that we know will not be the same in a few months.

So, … there’s that.

Conclusion
Regardless of the salary cap system within which the Rockets will have to work once the lockout is over–be it a similar soft cap or a hard(er) cap–the Rockets’ roster and salary flexibility will be greater in 2012 than it will be this offseason. While it remains to be seen how free agency will shake out this summer, I just don’t see the team being able to add a significant free agent (although I’d imagine they’d at least make an earnest attempt at someone like Nene). Knowing Daryl Morey, it seems like improving the roster via trade is a more manageable strategy and one that also increases salary flexibility for 2012. At that point, the Rockets could have more cap room/salary flexibility than they’ve had at any time since 1998, when the Rockets acquired Scottie Pippen via sign-and-trade. Here’s hoping they can make just as big a splash in 2012, but with a better end result.

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