With the NBA finals over, the league dives into free agency. This is the first in a three part series examining the Miami Heat’s salary cap and off-season.
The bad new for Miami Heat fans: free agency hasn’t begun and the Heat are already over the salary cap.
No, really.
According to the esoteric salary cap system of the NBA, the Heat must act as if they have a $104 million roster. The estimated cap for 2016-17 is $94 million, according to the latest reports.
Sure, the Heat only have six players under contract for next year. And the salaries of these six players only totals $49.8 million.
| Under Contract (6) | Cap Figure |
| Chris Bosh | $23,741,060 |
| Goran Dragic | $15,891,725 |
| Josh McRoberts | $5,782,450 |
| Justise Winslow | $2,593,440 |
| Josh Richardson | $874,636 |
| Briante Weber | $874,636 |
| Total: | $49,757,947 |
But, there are cap holds for the other nine players on the team. A cap hold is an amount the team is charged against the salary cap for the team’s free agents. Cap holds are supposed to prevent formation of “super teams.”
The cap holds against the nine Heat free agents totals $54.7 million.
| With Cap Holds (9) | Cap Hold |
| Dwyane Wade | $30,000,000 |
| Luol Deng | $13,197,096 |
| Udonis Haslem | $5,424,386 |
| Tyler Johnson | $1,180,431 |
| Gerald Green | $980,431 |
| Amar’e Stoudemire | $980,431 |
| Hassan Whiteside | $980,431 |
| Joe Johnson | $980,431 |
| Dorell Wright | $980,431 |
| Total: | $54,704,068 |
So, as far as free agency is concerned, the Miami Heat have a $104 million roster. This puts them over the estimated $94 million salary cap next year.
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If the Heat are already over the cap, how can they sign free agents? As it sits, the Heat can only sign free agents using salary cap exceptions. Along with cap holds, the NBA created various exceptions to ensure teams can retain free agents.
The most famous exception is the Larry Bird exception. The Bird exception permits a team to resign players who have been with the team for three years or longer. Bird rights allow the team to pay a player up to the maximum salary without consideration of the salary cap. Of the nine Heat free agents, the Heat only have full Bird rights for Dwyane Wade and Udonis Haslem.
Rumors have the Heat hoping to sign Hassan Whiteside for $19-$21 million and Dwyane Wade for $15-$20 million.
Signing Wade is easy. The Heat probably have a solid idea of Wade’s salary demands from last year’s negotiations. Since there has been no push back on the contract rumor from Wade’s camp, I assume the Heat are able to sign Wade at the mid-point of $15-$20 million which is $17.5 million. Regardless of their cap situation, the Heat can sign Wade using his Bird rights.
Signing Wade replaces his cap hold with his actual salary. This brings the Heat salary and cap holds down from $104 million to $92 million. At this point, the Heat would be rubbing against the salary cap, so they would still need to free up about $18 million to sign Whiteside.
A way to increase salary cap room is for the Heat to renounce the rights to some of their free agents. When a team renounces their rights to a free agent, the cap hold for the free agent is removed from the team’s salary cap calculation. However, the team loses the Bird rights to the player.
The Heat could free $18.6 million in cap space simply by renouncing the rights to Luol Deng and Udonis Haslem. Combined with Whiteside’s own $1 million cap hold, the Heat could then offer Whiteside up to a max contract.
I believe the Heat can sign Whiteside for slightly less than the max contract. The estimated 2016-17 max for a player with less than six years experience is about $21.6 million.
The Heat can offer less, yet still match the lifetime value of a max contract from another team for two reasons:
First, the Heat can offer 7.5 percent raises each year while any other team can only offer 4.5 percent raises.
Second, there is no income tax in Miami. Other suitors such as Boston or LA have state income tax of five percent and 13 percent respectively.
Using Boston as an example, a four-year max offer from Boston starting at $21.6 million over four years nets about $87.5 million. In contrast, a four-year contract from Miami starting at $19.7 million nets the same amount after considering the yearly raises. Meanwhile, Texas has no state income tax, so if a team like Dallas offers a max contract, the Heat could match the lifetime payout with a salary starting at $20.6 million.
I believe Pat Riley and Andy Elisburg can work their magic. I believe the nearly equivalent contract payout and the lure of Heat culture can convince Whiteside to sign with the Heat for around $20 million.
If the Heat sign Wade and Whiteside for nearly $37.5 million, the team salary will be a little over $87 million. Combined with minimal cap holds, the Heat will have at most $4 million to sign other free agents.
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Thus, even though the Heat are over the salary cap right now, they can get under it to sign their top two free agents. However, after signing Wade and Whiteside, the Heat will have almost no cap room to sign other free agents without getting creative. In Part 2, we’ll examine how the Heat can get creative to possibly retain Luol Deng and Joe Johnson.
All salary cap figures via spotrac.com