Knicks Free Agency Salary Cap Primer
Let the fun begin!
Good Morning,
Today is a special edition newsletter to get you ready for the start of free agency at 6:00 PM EST tonight. Enjoy!
Catch me up on the latest Knicks transactions…
Knicks waived Lance Thomas yesterday, and by doing so before June 30, they are able to save themselves the full $7.6 million owed to him in 2019-20. They would have been on the hook for $1 million had they kept him on the roster past June 30.
Ian Begley reported a few weeks ago the Knicks have interest in bringing him back once the rest of their free agency moves shake out. Since Thomas is an 8-year veteran, he could sign a minimum contract for $2.3 million (even if the Knicks are over the cap). Thomas would also be eligible to negotiate a no-trade clause as an 8-year veteran with at least four years played on the Knicks.
Knicks officially declined the team options of Henry Ellenson, Billy Garrett, and John Jenkins before their deadlines of June 29.
Knicks decided not to extend qualifying offers to Emmanuel Mudiay, Luke Kornet, or Isaiah Hicks, making all three players unrestricted free agents.
Catch me up on the latest free agency news…
Kevin Durant and Kawhi Leonard have been discussing free agent scenarios of playing together, with the Knicks and Clippers the two teams in cap position to sign both players. [ESPN] Adrian Wojnarowski notes that while this is true, “it is probably more unlikely than likely” that the two pair up together at this point.
Kemba Walker has conveyed to the Hornets that he intends on signing with the Boston Celtics. [The Observer]
Denver will exercise their $30.5 team option on Paul Millsap. [ESPN]
Nikola Mirotic has decided to sign with Euroleague club Barcelona. [The Athletic]
Detroit Pistons have emerged as the favorite to sign Derrick Rose. [The Athletic]
Nikola Vucevic plans to commit to a four-year, $100 million deal with Orlando. [The Athletic]
76ers expected to “back up the truck” to keep Tobias Harris. [Dallas Morning News]
Enes Kanter is receiving interest from the Lakers, Celtics, and Blazers. [KOIN News]
What’s going on with the Knicks?
Kemba Walker’s family, including his mother, was uninterested in moving back to New York, per Marc Berman.
Executives monitoring Julius Randle’s situation believe the Knicks are in strong position to land him, per Ian Begley.
Knicks have shown interest in bringing back Noah Vonleh, per Mike Vorkunov.
Which players have been linked to the Knicks?
Kevin Durant
Kawhi Leonard
Sum up the Knicks cap situation
The league released the official salary cap numbers last night.
The cap only increased $140,000 over the projected $109 million for the 2019-20 season.
That means the cost of paying Kevin Durant + Kawhi Leonard increases a total of $91,000. It also slightly increases the rookie scale amount owed to RJ Barrett, the minimum salary, and thus, minimum roster charges, and the room exception that the Knicks will have available to them.
As of June 30, the Knicks have between $69.9 and $70.7 million in cap space based on whether they waive Damyean Dotson before his guarantee date of July 15 (very unlikely).
In order to sign Kevin Durant and Kawhi Leonard (let’s go with the best possible scenario), the Knicks are $94,760 short of offering both players max-salary contracts, which is really an inconsequential amount.
In order to sign Kawhi Leonard and a second 7-9 year free agent, the Knicks have more than enough room (with a $5.3 million cushion).
Knicks need to spend $59.034M to reach the minimum salary threshold of $98.226M. Teams must spend at least 90% of the cap ($109.14M) by the final regular season game of the 2019-20 season. The Knicks could start the season below the threshold and add salary on a pro-rated basis throughout the season. If they land short, a surcharge is applied and spread to the players on the roster.
How do the Knicks maximize their cap space?
For the Knicks to reach $69.9 million in cap space, they must take the following steps:
Waive Lance Thomas before his $1 million for 2019-20 guarantees, which they did yesterday.
Renounce DeAndre Jordan ($27.5M), Emmanuel Mudiay ($12.9M), Mario Hezonja ($7.8M), Luke Kornet ($2.1M), Isaiah Hicks ($1.6M), and Noah Vonleh ($1.5M). This means that in order to sign any of those players back, they cannot do so using any non-Bird, Early-Bird, or Bird exception.
Knicks need $70.04 million to sign Kevin Durant and another 7-9 year veteran free agent, such as Kawhi Leonard, to max contracts. Durant is eligible for 35% of the salary cap on a max contract as a 10+ year veteran. That equates to $38.199 million on a $109.14 million cap. Kawhi Leonard (or any 7-9 year veteran) is eligible for 30% of the salary cap on a max contract, which equates to $32.742 million. Remember, you have to sign one player first, so once that player signs, the team is credited back one minimum roster charge of $898,310 which is why you need a little less cap space than the total of adding the two max contracts together.
It’s hard to imagine that $94,760 would prevent the Knicks from signing Durant + 7-9 year free agent to max deals, but if they did need extra room, they could simply waive Damyean Dotson to gain $720,210 in space. They could also create a lot more breathing room by trading someone like Frank Ntilikina or Dennis Smith Jr. for a future draft pick.
What does the roster look like if the Knicks actually sign Durant + Kawhi?
Let’s say the dream happens and the Knicks end up signing Kevin Durant and Kawhi Leonard to max contracts. For calculation purposes, we will also assume that they agreed to split the $129,071 shortfall so the Knicks didn’t need to make any additional roster moves to sign them.
What would the roster look like?
The Knicks would have Durant + Kawhi plus all of their young players under contract (Barrett, Ntilikina, Smith Jr, Knox, Trier, Robinson, and Dotson). They will also likely sign their second round pick Ignas Brazdeikis (more on this later).
New York would have the following signing mechanisms available to them:
~ $800,000 in remaining cap space
Room Exception of ~ $4.8 million
Unlimited amount of minimum salary contracts
Ability to convert Kadeem Allen and Kris Wilkes to regular NBA contracts
Keep in mind: Each signing the Knicks make up to 12 players is offset in cap savings by the minimum roster charge of $898,310. It’s a timing issue: they are charged a min roster charge until they fill their open roster spots, and then when they do, they are essentially credited that amount back.
So if the Knicks were to sign both Kevin Durant and Kyrie Irving, they would then gain $1.8 million back, which would give them $0.8 million in additional cap space to spend after the two max signings (given the rest of the roster outlined above remains the same).
Why only the Room Exception?
If the Knicks max out their cap space this summer, they will have limited exceptions available to them to add additional players. Once the Knicks drop far enough below the cap to sign top-paid free agents, they lose their mid-level exception. They would also lose their bi-annual exception, but they lost that anyway since they used it this past season on Allonzo Trier.
Under this scenario, the Knicks would gain the Room Exception of $4.8 million. They could split up this exception to sign multiple players, each for up to two years in contract length with 5% annual raises.
Of course, they can always add players on minimum contracts.
Signing the Rookies
RJ Barrett has not yet signed his rookie scale contract with the Knicks. However, his cap hold counts in team salary calculations at 120% of the rookie scale for the 3rd overall pick. First round draft picks can sign for any amount between 80-120 percent of the rookie scale based on their draft position. Most lottery picks eventually sign for the max 120%.
The Knicks don’t receive any special exceptions to sign second round picks, like they do first round picks, so there is no cap hold associated with Ignas Brazdeikis. If the Knicks want to sign him (and they will), they must sign him using cap space, the room exception, or on a minimum-salary deal. If the Knicks max out their cap space and then want to sign Iggy, they would be limited to the room exception or minimum-salary exception, both of which limit the length of a contract to two years.
Explain how cap holds work
Cap Holds count against team salary until the team renounces them. By renouncing the cap hold, the team still maintains the right to sign the player, but loses any associated Bird rights. The idea is that cap holds prevent a team from clearing cap space, signing a bunch of new players, and then using the Bird rights on their own players to exceed the cap. They must maintain the cap hold of their Bird players in order to exceed the cap in re-signing them.
If the Knicks land Kevin Durant and another max star, they will need to renounce all of their cap holds in order to create the requisite space.
DeAndre Jordan and Mario Hezonja are non-Bird free agents, meaning preserving their cap holds would only allow the Knicks to make modest increases on their 2018-19 salaries, which would price both players well above their market value, anyway. The Knicks will almost certainly renounce both cap holds. If they end up signing either player, they would do so using space or an exception.
Noah Vonleh has an extremely low cap hold of $1.6 million based on the amount of his minimum salary that is not reimbursed by the league. However, he probably played himself into a more lucrative contract than the modest 120% increase the Knicks could offer him by maintaining his non-Bird rights.
RESTRICTED FREE AGENTS
Knicks will NOT extend qualifying offers to Emmanuel Mudiay, Luke Kornet, or Isaiah Hicks.
By not extending qualifying offers to either Mudiay or Kornet, the Knicks officially open up an additional $15 million in cap space.
Mudiay’s qualifying offer is only $5.75 million, but his cap hold as a Bird free agent would be $12.9 million. If the Knicks want to bring Mudiay back, they can do so by signing him as an unrestricted free agent (and there appears to be mutual interest). Extending a qualifying offer to make him a restricted free agent would have tied up valuable cap space; however, the Knicks could have later withdrawn the QO once they learned their free agent fate. As they prepare for meetings with top free agents, I am guessing they just want the cap space already there.
Kornet’s cap hold as an Early-Bird free agent of $2.1 million is only slightly higher than his qualifying offer of $2.01 million. Since the Knicks are within a ninety thousand dollars of having two max spots with one of those max players being Kevin Durant, they need to save all their cap pennies. If the Knicks want to re-sign Kornet, his minimum salary of $1.6 million starts only slightly lower than his qualifying offer amount, so it depends on market dynamics if they could get him back at close to the same rate if they don’t end up using that extra cap space.
Isaiah Hicks was on a two-way contract last season, but eligible to become a restricted free agent for a qualifying offer of $1.6 million. Since the Knicks have both Kris Wilkes and Kadeem Allen on two-ways, there was no roster space for him there, and if they want to bring him back, they can just do so as an unrestricted free agent. Had they offered him the qualifying offer, he might have just taken it and then the Knicks would be on the books for that money.
TWO-WAY PLAYERS
Kadeem Allen and Kris Wilkes are on two-way contracts.
Neither player impacts the Knicks current salary cap situation.
If the Knicks want to eventually convert either player to a standard NBA contract, they can do so at a league minimum rate, no matter how much cap space they have remaining.
Obviously, as we saw with Trier last season, the Knicks can sign either player to a more lucrative contract if they have the cap space or exception to do so.
TRADE RESTRICTIONS
Who can’t be traded?
If the Knicks bring back DeAndre Jordan, Mario Hezonja, Noah Vonleh, John Jenkins, Henry Ellenson, or Billy Garrett on one-year deals (including with a team or player option), they would each need to consent to any trade since they all would be playing on one-year deals leading to Early-Bird rights.
Something needs to happen to trade these players…
The Knicks can trade their draft picks without restriction until the player is signed, after which they must wait 30 days. Draft picks count as $0 in outgoing salary until the player is signed.
Thanks for reading, talk to you tomorrow!