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The Chandler Parsons Contract: Salary Cap Implications of Exercising or Declining the Team Option

There is no obvious choice for the Rockets on whether to exercise or decline the team option on Chandler Parsons, but David Weiner takes a look at the salary impact of both routes.

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Chandler Parsons Contract

The decision on whether to exercise their team option on Chandler Parsons’s contract is among the Rockets’ biggest quandaries heading into the summer of 2014

***UPDATED June 7, 2014***

Due to additional information obtained and confirmed, as well as a more careful reading of the 2011 NBA Collective Bargaining Agreement, this piece has been updated to more accurately describe the cap hit for Chandler Parsons if the team option on his contract is declined.

This article is intended solely as an analysis of the salary cap effects of certain decisions that the Rockets make with respect to Parsons’s contract and is not intended to express an opinion on such decisions.

The Partial “Guarantee” And The Team Option That Nullifies It

On January 1, 2014, by not having been waived before such date, a portion of Parsons’s 2014-15 salary ($624,771, to be exact) became guaranteed.  If Parsons is not waived by June 30, his entire 2014-15 salary ($964,750) becomes guaranteed.

However, these “guarantees” are illusory.

Parsons’s contract includes a team option for the 2014-15 season.  Because it is a team option, the Rockets essentially get to decide whether that season of his contract exists or not.  By declining the option, Houston has the power to nullify those guarantees, which would only exist if the option were exercised.

In the end, the partial guarantee earned on January 1 is largely pointless.  (Hypothetically, the Rockets could exercise the team option on June 28 and then immediately change their mind about Parsons and waive him, in which case Parsons would be $624,771 richer for having had that partial guarantee . . . but that is a fairly ridiculous set of circumstances.)

With that little nugget of information now known, let’s take a closer look at the salary cap implications of the Rockets either exercising or declining that team option.

Exercising The Option

If the Rockets elect to exercise their team option on Parsons’s contract, then Parsons will earn — and will count against the salary cap in the amount of — only $964,750.  That is only slightly greater than the minimum salary for a three-year veteran.

Because of Parsons’s miniscule 2014-15 salary, his cap hold on the Rockets’ books when he hits free agency in 2015 until he is signed (either by the Rockets or another team) will be a paltry $1,833,025.  This figure is equal to 190% of Parsons’s 2014-15 salary, which is the method used to determine cap holds for players (other than those coming off rookie scale contracts, which Parsons is not) making below the average player salary and for whom a team holds full Bird rights.

By having such a small cap hold for Parsons, the Rockets would be able to use all of their available cap room in 2015 — except for that $1,833,025 cap hold amount — to pursue outside free agents (in a free agent class that is expected to include Kevin Love and LaMarcus Aldridge), then later exceed the salary cap to re-sign Parsons to any amount using his Bird rights.

Declining The Option

If the Rockets elect not to exercise their team option on Parsons’s contract, and if the Rockets extend a qualifying offer to Parsons (more on that below), then Parsons would become a restricted free agent.

By making Parsons a restricted free agent, the Rockets would have the right to match any offer he receives from another team.  Typically, restricted free agents whose teams are clearly interested in re-signing them do not receive the level of interest that a similarly-situated unrestricted free agent does, thereby “chilling the bidding” on the player and potentially allowing his original team to re-sign him at a relatively lower salary.  (A recent example of this is Nikola Pekovic, who had to wait around for most of last summer without an offer sheet before eventually re-signing with the Timberwolves.)

Because Parsons would have been under the same contract with the Rockets for three seasons (2011-2014), the Rockets would have full Bird rights on Parsons and could exceed the salary cap to re-sign him to a five-year deal at any amount up to the maximum salary (expected to be a starting salary in the $14 million range for players with 0-6 years of service).

(NOTE:  Parsons is not subject to the “Gilbert Arenas Rule” that governed the structure of the contracts that the Rockets handed out to Omer Asik and Jeremy Lin.  The Arenas Rule is limited solely to one- and two-year veterans.  There is no “poison pill” that another team could work into an offer sheet for Parsons.)

If Parsons becomes a restricted free agent, then his cap hold next summer will be the greatest of (a) his “ordinary” cap hold of 190% of his 2013-14 salary (or $1,760,350), (b) the first year salary in any offer sheet he signs that the Rockets wish to match, or (c) his qualifying offer.

A qualifying offer is the minimum amount that a team must offer to a player (as a one-year deal) by June 30 each year in order to make him a restricted free agent.  Without a qualifying offer, the player automatically becomes an unrestricted free agent.  Under the prior CBA, this would have been a similarly low amount to his “ordinary” cap hold. However, the new CBA changed the rules regarding qualifying offers to young players who significantly outplay their draft status.

Under the new CBA, if a young player taken outside the first half of the lottery meets certain “starter criteria” in either the year prior to his free agency or averaged over the two years prior to his free agency, then he is entitled to a higher qualifying offer.  In the case of second round picks meeting the starter criteria, they are entitled to a qualifying offer equal to 100% of the rookie scale qualifying offer for the 21st selection of the draft class whose rookie scale contracts are up for qualifying offers this summer.

As applied to Parsons this summer, he is entitled to whatever qualifying offer the 21st pick in the 2010 NBA Draft would have gotten if signed to 100% of the rookie scale.  (FYI, the 21st pick in 2010 was Craig Brackins, but that is irrelevant here.)  That amount is $2,875,130.

(For more information about restricted free agency, qualifying offers and the starter criteria, read this portion of Larry Coon’s NBA Salary Cap FAQ.)

On the other hand, if Parsons is not extended a qualifying offer and is allowed to become an unrestricted free agent in 2014, he would count against the Rockets’ cap in the amount of his “ordinary” cap hold ($1,760,350).  However, since the chief purpose of declining Parsons’s option is to make him a restricted free agent, it is unlikely this would happen.

So, for all intents and purposes, the cap hit for Parsons if his option is declined will be $2,875,130 . . . until he signs an offer sheet or a new contract.

While the Rockets do not expect to have much (if any) salary cap room in the summer of 2014 assuming that no further roster moves are made, it is entirely possible that subsequent roster moves (such as those involving Asik and/or Lin being traded for less salary or expiring contracts) could create a situation in which 2014 cap room becomes a legitimate priority for the Rockets.  In such an event, the amount that Parsons counts against the cap could become a material concern.

Conclusion

The Houston Rockets face a major decision on whether to exercise their team option on Parsons.  Of course, there are various other factors in play here besides just the salary cap mechanics associated with each decision.  Such factors include the team’s need for salary cap room in light of subsequent roster moves (such as an Asik trade), the availability of outside free agents, any additional leverage held by NBA super-agent Dan Fegan (hired by Parsons this past summer), and, perhaps most importantly, the “human element” of dealing with Chandler Parsons on a personal level.

When all factors are included, there is no easy choice for the Rockets.  But it is a choice that will be closely followed by Rockets fans.

Houston Rockets

Jabari Smith steals show in Rockets preseason opener

The Rockets rookie is legit as we take a look at what else stood out in Houston’s preseason rout of the Spurs

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Jabari Smith Jr Houston Rockets

Finally, Rocketball is back — the Rockets destroyed the San Antonio Spurs 134-96 in the preseason opener Sunday night.

Granted, the Spurs look flat out terrible (the top contender for Wembanyama?) and may finish dead last (and it showed), but there were a number of things that played out in this game that should get Houston fans excited.

But before I get into that, I want to give a huge shout out to everyone who supported RocketsWatch Sunday night. We are watching and discussing Rockets games in realtime this season and the debut was overwhelming. There were over 700+ fans watching the game with Roosh Williams and I in what might be the largest online watch party ever for a Rockets game. The live reactions from the fans were priceless!

Let’s talk about what stood out in this game:

Jabari is the real deal

Going into Sunday night’s preseason opener for the Rockets, the biggest question on the minds of fans was simple — how will #3 overall pick Jabari Smith Jr. look in his first NBA action?

The answer is good. Really good.

Jabari threw down a dunk out of the gate and then locked in on high-energy defense on the other end and right away you knew — the Christian Wood Era was over. Jabari’s impact was immediate on both ends of the floor. Smith finished with 21 points on 8-15 shooting, including a blistering 5-8 from deep, to go with eight rebounds in 24 minutes.

Jabari described himself as “a lot more loose” than he was at Summer League, when he struggled to knock down his shots.

“It was easy,” said Jabari. “My teammates made it easy for me, finding me when I was open. The rest just came from knocking down shots, running the floor, trusting the offense and trusting my teammates.”

What most impressed me was how quick of a trigger Jabari had on the catch-and-shoot. He would receive a pass out of the post or a cross-court pass in the corner and would instantly let it fly, shooting easily over his defender’s reach. This trait stood out and was very Klay Thompson-esque. In the second half, Jabari hit a pull-up triple in transition (his fourth) that was very enticing, then absolutely slayed those of us in the RocketsWatch room when he took two long strides back from the free throw line to drain another triple.

At that point, it was official — the rookie was clowning the Spurs. I can’t tell you how thrilled I am that the Rockets drafted Jabari. This man is going to fit like a glove and will be a ridiculous two-way weapon for the Rockets long term.

Defense. They’re actually playing it. It’s true.

I don’t need to repeat that the Rockets were dead last in defense last year, but… the Rockets were dead last in defense last year. Although, maybe I need to turn that frown upside down.

Sunday, however, was a different animal and you could tell immediately. The Rockets were hustling, moving quickly on rotations and closeouts.

“It’s the defense, obviously, that we’ve been concentrating on,” said Stephen Silas. “Our help was good tonight. Our multiple efforts were really good… I’m super encouraged by our intensity on the defensive end.”

Jabari was a big part of that. He made some clear mistakes, sure — I’m not going to say he was perfect — but he seemed to set the tone. Still, it’s not just Jabari — it’s clear to me the mindset of this team is in stark contrast to what we’ve seen the past two seasons. Maybe it’s the Jabari Effect or maybe Lionel Hollins is making his presence felt, but this does not look like the 2021-22 Rockets on this side of the ball.

Tari Eason is pretty much plug-and-play

I had my doubts that Tari Eason would get a ton of run in this game, but Silas played him early (note: Jae’Sean Tate sat this game out). Without having any clear plays run for him, Tari fought and scrapped for 21 points and 10 rebounds (six offensive!) in just 21 minutes. He hit 9-13 from the floor.

“My mentality never changes,” said Eason. “I’m always going to be in the right spot, get after it defensively and be one of the hardest playing dudes on the court. I think that translates at any level and I’m just going to continue to do that.”

He plays like his hair is on fire and has tremendous potential as a two-way demon. Throw him out there when things get stagnant and he’s going to make things happen.

I’ve felt that the Rockets will likely bring Tari along slowly until they figure out what the long-term solution is for guys like KJ Martin, but Operation Patience isn’t going to work if he keeps putting up lines like this. You can’t keep him to the bench or send him to the G-League.

Is Bruno Fernando the backup center?

It sure seems that way. After news broke that the Rockets had signed Fernando to a four-year, nearly $11 million deal, Bruno was the first big off the bench, subbing in for Alperen Sengun.

I’ll be honest — this really surprised me. I expected that Usman Garuba would have the clear inside track to the spot. Fernando also seemed like a good bet to be on a two-way contract, but now with this new deal, Fernando is going to be on the 15-man roster and barring a trade, someone has to be cut (Boban? Favors?) that isn’t expected to be.

But Fernando, who sources say has been terrific in camp, showed why he got that contract, finishing 3-3 from the field and was a +18 in just 11 minutes. He was very effective on rolls, capping a pair of alleyoop passes from Kevin Porter Jr. I would be lying if I said I saw this coming, but it’s a welcome development.

Rotation Notes

It’s only one preseason game, but we still can draw a lot from how Silas sees the rotation.

Bruno looking like a good bet for the backup center role was not the only surprise. KJ Martin and Daishen Nix, along with Bruno, were the first subs of the night. That indicates what we expected, that Nix is in the lead for the backup PG spot over TyTy Washington, who I would guess will run the show with the RGV Vipers early on. I like TyTy as the better bet for this spot long term, but right now the job appears to be Nix’s to lose.

But KJ is a little surprising, given he reportedly wanted out this past offseason with the Rockets slated to bring in a couple bigger prospects (Jabari and Tari) at his position.

Garrison Mathews played only five minutes. The prediction many have made that Silas would play him 15+ minutes this year is not looking so hot.

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How a potential return of high schoolers to the NBA Draft impacts the Rockets

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2024 NBA Draft

So the opportunity for high school players to jump straight to the NBA is set to return.

According to Shams Charania of The Athletic, the NBA and Players Association are “expected to agree on moving the age eligibility for the NBA Draft from 19 years old to 18, clearing the way for the return of high school players who want to make the leap to the NBA.”

According to the report, the new age limit “would go into effect as early as the 2024 NBA Draft.”

How does this impact the Houston Rockets?

It’s tough to say right now, but looking strictly at Houston’s own picks, it doesn’t help. Granted it’s a sunk cost, but the Rockets still owe first-round picks to the Oklahoma City Thunder from the ill-fated Chris Paul-for-Russell Westbrook trade in 2019. Houston owes picks in 2024 and 2026 to OKC — both are top-four protected. They also owe a top-10-protected first-round pick swap in 2025.

The first draft that sees these new rule changes — often referred to as the “double draft” — will be loaded as both the top high schoolers and top one-and-dones will likely make themselves eligible, theoretically creating an abnormally deep and stacked draft.

The Rockets, for their part, plan to make several changes in the summer of 2023 after (hopefully) adding another top pick in the Draft and leveraging their massive cap room. That’s when they will flip the switch and making winning the top priority. They do not want to send OKC a top draft pick in 2024, but if they fall just short of the play-in or playoffs, they will still send the Thunder a very good pick if it’s the double draft.

The good news: Brooklyn. The Nets owe first-round picks in 2024 and 2026 and swaps in 2023, 2025 and 20276 to Houston — all unprotected. So for the Rockets to really benefit from the double draft, they need Kevin Durant, Kyrie Irving and the Nets to implode sooner rather than later.

A look at the picks the Rockets have over the next five years and ones they owe:

Houston Rockets Draft Picks Chart

Even though the year for the double draft is not set, the fact that it could be as soon as 2024 could make it tougher for the Rockets to acquire a 2024 pick for Eric Gordon, even if lottery-protected. Forced to guess, I think the best the Rockets will be able to do is net a 2023 lottery-protected pick from a strong team needing a boost at the deadline. Rockets GM Rafael Stone has held out for more so we will see what happens here.

All in all, the news today is mixed for the Rockets. It likely increases the value of a pick the Rockets already gave up to OKC, but it could make a pick they own from Brooklyn more valuable to use or trade. Look for the 2023 offseason to be when the Rockets really show their hand as they hope to make enough significant changes that they are catapulted into playoff contention.

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Houston Rockets Prospects Power Rankings – Volume 1

The Rockets are loaded with young prospects so let’s take a look at how they rank in order of importance to this team’s future

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Houston Rockets prospects

It’s hard to believe, but Houston Rockets training camp opens later this month and the 2022-23 NBA season is right around the corner. Like a highly-anticipated second season of a popular show, the Rockets present a surprisingly-large amount of storylines that could go in a number of directions.

The reason for that is simple: Houston, after using seven first-round picks in the last two drafts, is stocked with young talent. The upside, however, varies for each one. Here’s how I currently rank the Rocketss most valuable prospects for the future heading into camp.

12. Bruno Fernando

We don’t talk about Bruno.

11. Daishen Nix Daishen Nix Houston Rockets

I like Nix. I love what he’s doing in the G-League. I think he’s a solid point guard who is built like a tank. He has reshaped his body and clearly he’s putting in the work. He hit 30-76 (39.5%) from three in the G-League last year, which is a big improvement over his G-League Ignite season before the draft. But hitting less than 60% from the stripe for a guy who makes a living off of creating contact and getting to the line is a big issue. He’s got to make the leap from G-League dominator to Big-League contributor.

10. Usman Garuba

Garuba is capable of moving up the rankings quickly — if he’s healthy. The problem is he rarely was his rookie season, even missing Summer League in July. He’s representing Spain in EuroBasket, coming off the bench in a limited but important role. Garuba is smart and energetic, but I need his defense to shine, not just be solid. He will have every opportunity in camp to earn the backup center role. I admit I’m a little lower on him now than I was after the 2021 draft (where he was likely my favorite of the four picks, relative to position) but I still hold out hope he can be a valuable role player.

9. KJ Martin

We really don’t know what KJ Martin thinks, but we do know his father, former NBA star Kenyon Martin, wants his son out of Houston. In a way, I don’t blame him. Since the 2022 Draft, the writing is on the wall that his role could be reduced as the season goes on. Martin is a great cutter, unbelievable athlete and an improving shooter. His game is limited, however, and he will need to be playing off of great players to carve out a role as an energy athlete. Does that make him a trade candidate? Let’s see what the future holds here but my feeling is he won’t be a Rocket beyond this coming season.

8. TyTy Washington TyTy Washington Rockets

My hunch is that Washington ends up playing heavy minutes in the G-League. With KPJ starting and Nix in line ahead of TyTy for the backup role, meaningful minutes early in his rookie season are likely only to be found in the Valley. But I love what TyTy brings to the table — outside of consistent rim pressure, he can do a little bit of everything and has a good feel for the game. I expect him to be the backup, if not higher, by 2023-24. If he does go to RGV, we’ll be watching those games.

7. Josh Christopher

I try not to ever let Summer League performance impact my outlook on a prospect too much, but I confess I did just that with Jaygup. I thought he played very selfishly in Vegas when focusing on setting up his teammates would have gone a long way. He’s a tough dude with a legit NBA body for his position and has a scoring mentality. However, for a guy who drew Jrue Holiday projections from Rockets GM Rafael Stone, Christopher’s defense was fairly terrible in his rookie season. He’s got to get a better understanding of how to defend in schemes off the ball. He’s young and that part is fairly normal — that should come with time.

6. Jae’Sean Tate

I’m not sure the 26-year old Tate falls under the “prospect” category, but this is only his third season in the NBA and both the front office and coaching staff love him. Tate brings intangibles and is a valuable role player on just about any team. Can he develop a consistent three-point shot? He’s 31% from distance and that’s not going to consistently draw a defense and create space out there on the floor. This is a big thing holding him back. Given that he’s undersized, he has to improve there to unlock the next step.

5. Kevin Porter Jr.

This is the single most important season of KPJ’s career. I know it’s cliché but it’s very true in this case. We already know Porter Jr. is one of the better isolation scorers in the league and is tough for any one player to stop. We also know he showed improvement off the ball last season, hitting over 48% of his catch-and-shoot three-point attempts. But for me, success for Scoot this season in Houston won’t hinge on his scoring ability but rather how he, as the starting point, gets the Jalens and the Jabaris and the Senguns involved and puts them in positions to succeed. With a contract extension (if not signed before the season) hanging in the balance, I can’t overstate how important this season is for him.

4. Alperen Sengun Alperen Sengun Turkey

Sengun’s so happy and so are we watching him play. The man is an old-school human highlight reel. He might be the funnest player to watch on this team and his passing just wows you on a consistent basis. With Christian Wood gone, the starting center position is all Alperen’s. It’s up to Stephen Silas to leverage his unique skills on offense and allow him to conduct the show in a secondary role at times. My big concern with Sengun — and it’s admittedly large — continues to be his defense. It’s not a lack of will but simply a lack of athleticism and measurables that really hold him back. He needs to improve there to separate himself as a true starting center rather than an offensive spark off the bench, but the offensive upside here is really high.

3. Tari Eason

Eason checks nearly every single box for me. He’s built like Kawhi with a strong frame, huge hands and a long wingspan. There’s tremendous potential here as a defender, but he’s also a two-way player: He can create, he has shown improvement shooting the ball and he gets to the line. There’s no liability on either end of the floor, which is why I rank him this high. The only real question is his understanding of the game. If he takes to learning schemes, understanding sets on both ends and playing within the structure of an offense, the ceiling is much higher than just a role player here.

2. Jabari Smith Jr. Jabari Smith Jr. Houston Rockets

Jabari struggled making shots in Summer League and, surprise, surprise — that’s all some needed to project him as a disappointment. Let them run with that. This is a 19-year old who might end up being 6-foot-11, can shoot lights out and plays the game with a rare passion on both ends of the floor. While “The Locksmith” is earning that nickname, his defensive impact seems to be felt way beyond just a single assignment. Finding his way offensively will take time, however. I could go on and on about how high I am on Jabari — give me every share you’re selling. In my book, he and Jalen Green are the only locked-in core pieces in Houston at the present moment.

1. Jalen Green

Green already has an elite skill. His first step and electrifying athleticism will make it almost impossible for defenders to hang with him. In theory, he can get his shot off anytime he wants. If it becomes truly efficient? Look out. We could seriously be talking about a generational scorer here. Where he has to improve is, however, is everywhere else: Defense (both on and off the ball), handles, strength, physicality, playmaking. If his work ethic is the real deal, and it appeared to be in his rookie season, he will improve in those areas. Franchise cornerstone potential.

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Rockets to add Willie Cauley-Stein

Rockets bring backup center into a crowded Houston roster to compete for minutes at the five

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Willie Cauley-Stein Houston Rockets

The Rockets are set to sign center Willie Cauley-Stein, according to Shams Charania of The Athletic.

Cauley-Stein is expected to compete for the backup center minutes against the likes of Usman Garuba, Boban Marjanović and Bruno Fernando in training camp. Alperen Şengün all but has the starting center spot locked up.

A former high-lottery pick, Cauley-Stein was taken 6th overall by the perenially-dreadful Sacramento Kings in the 2015 NBA Draft. However, the seven-footer never met expectations placed on him after a strong freshman season at Kentucky. In 422 games over seven seasons, WCS is averaging 8.7 points, 5.9 boards and 0.8 blocks in 22 minutes a night.

It’s definitely not an earth-shattering move. Cauley-Stein was released by the Sixers last season in a move to create space to sign DeAndre Jordan, which doesn’t exactly inspire confidence. But the Rockets need options that differ from the strengths/weaknesses of Sengun and WCS has potential as a rim-running big.

There is a current issue, however: The Rockets are already at the offseason maximum number of 20 players, so they will have to release someone before making the signing official. Marquese Chriss, Trey Burke and Sterling Brown all seem like potential candidates.

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Interviewing Rockets legend Mario Elie

ClutchFans interviews the Rockets great as he tells stories from behind the scenes of Houston’s 1994 and 1995 championship runs

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Mario Elie Houston Rockets

When I started ClutchFans in 1996, Mario Elie was a big reason why. His toughness and grit was a big attraction and I even wrote a regular piece called “Super Mario’s World” that jokingly pretended to be from The Junkyard Dawg’s point of view.

So it was pretty crazy to me to get the chance to be part of an interview of the Rockets legend on Thursday.

Mario joined Lachard Binkley, host of the ClutchFans Rocket Fuel podcast, and I to discuss his career, how he worked on his game overseas, his championship runs with the Rockets, where Hakeem Olajuwon stands among NBA greats, the matchup with Michael Jordan and the Chicago Bulls as well as his thoughts on the current Rockets — as well as several other topics.

Mario didn’t pull any punches so it was a dream to get his insight on the championship Rockets. You can subscribe to Rocket Fuel on Apple and Spotify.

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