NBA AM: Setting It Straight On Howard’s Options
Setting It Straight On Dwight: Yesterday in my chat I made a comment about Dwight Howard and his contract options, which may not have been entirely accurate.
After getting some heat from fans, I reached out to our CBA guru Larry Coon, to make sure the information was accurate.
Here is what you need to know about Dwight Howard and his pending contract situation, because no one, including the Orlando Magic, has the details entirely right.
High level Magic sources have been telling reporters that in order for Dwight Howard to get his full value that he needed to be traded by January 1st. That’s not entirely true.
“He needed to be traded by January 1 (actually December 30) in order to EXTEND with his new team (because the new CBA prohibits extensions within 6 months of a trade if the extension gives him more than he could have received in an extend-and-trade — i.e., 3 total years, 4.5% raises). But Howard was never going to extend anyway. The most he could get in an extension is 4 years, which includes current years on his contract. And even if he extends on June 30, the current season counts as one full year. That means an extension could add two new seasons only (on top of this season and next season, where his ETO would be voided).
If he’s EXTENDED he’s losing guaranteed money. So he’s not going to extend — he’s going to become a free agent. Therefore the January 1 deadline was meaningless.”
It’s been said in Magic circles that the only team that can give Dwight the most money is Orlando, again, not entirely true.
“He could be traded on March 15, and his new team would inherit his Bird rights. If he opts out, the he could sign with that team for the maximum contract — 5 years, 7.5% raises — just the same as he could with Orlando if he’s not traded. This is obviously what Dwight wants to do — get traded to the team he wants to be with long-term, opt-out, and re-sign with them. He gets the best contract, AND the team of his choice.”
It’s also been said that Orlando is the only team that Dwight could do a five-year deal with, again not entirely true.
THE TEAM HE FINISHES THE SEASON WITH can do a five year deal, and everyone else can do a four year deal.
So what are the real scenarios for Dwight Howard?
So this really comes down to the following comparison (in Dwight’s head). If Orlando doesn’t trade him, should he:
A) Re-sign with Orlando because he can get a five-year deal and 7.5% raises; or
B) Sign with the team of his choice (eg: NJ or Dallas) for a four-year deal and 4.5% raises.
So it’s a matter of choosing between the team and the money. But how much money? Let’s look at the years first.
People like to say “he’s giving up $20 million,” but that’s not accurate. That’s because they’re comparing a four-year contract to a five-year contract. The comparison is only valid if this is the last contract he’s ever going to sign. Unless something catastrophic happens, he’s going to sign another contract or extension eventually, so he’ll eventually get paid for that fifth year.
What we’re really talking about is locking in that money now, as protection against a catastrophic injury in the next three years that would prevent him from signing that next contract. I don’t think he chooses his teams on the basis of what amounts to an insurance policy.
The other factor is the raises. Let’s compare apples to apples — a four-year deal in either case. With 7.5% raises he gets $84,533,793 over four years (his starting salary is $18,996,358 whether he re-signs or changes teams). With 4.5% raises it’s $81,114,449 over four years — a difference of $3,419,344 over four years, or an average of about $855K per year.
So the REAL question is, which choice does Dwight make:
A) Re-sign with Orlando to get an extra $855K per year and insurance for that fifth year; or
B) Sign with the team of his choice for $855K less per year, and waiting 3 years for the opportunity to lock in the salary for year 5.
Can the Magic really call Dwight’s Bluff?
“It used to be that the home team had the advantage even if the player wanted to go to a different team, because they could utilize a sign-and-trade to give the player the best contract, and still get something in return for their departing player. But the new CBA nearly eliminated this advantage. Now with a sign-and-trade, the player can only get four years and 4.5% raises — the same contract he can get by signing with that team directly. If the team has the cap room to sign him, then there is no reason for Dwight to go to Orlando to get a sign-and-trade.
The only time a sign-and-trade is needed is if Dwight wants to go to a team that doesn’t have the cap room to offer him the contract he wants. For instance, if he wants to go to the Lakers this summer, the only way he can get there is by signing for the mid-level, or through a sign-and-trade. But we already know he has NJ and Dallas on his list and both of those teams will have sufficient cap room.
If Orlando knew that none of Dwight’s preferred teams will have cap room, then maybe they can call his bluff and say, “Fine, leave on your own, because unless you want to play in someplace like Indiana, you’ll need us this summer.” But we already know that two of Dwight’s preferred teams will have cap room. In other words, THERE IS NO BLUFF to call.”
The moral of this story is that not every team understands how things work, and it’s becoming clear that the Orlando Magic may not have as firm a grasp on their situation as they believe.
Either that or they are deliberately putting out false information which wouldn’t be a stretch either.
One thing is clear, in NBA money $3,419,344 over four years isn’t much of a deterrent, especially if its moving from Orlando to the top media market in the world.
In Related: Thanks to Larry Coon for his insight on this topic. Larry penned an article for ESPN on this topic that’s worth the read, make sure to swing by and check it out.
Looking Past The Bucks: Bucks’ guard Brandon Jennings is into his third season in the NBA and is having a solid season. Some have mentioned Brandon in the All-Star discussion, although his 11-14 Bucks are not nearly good enough as a team to get serious consideration from the coaches who name All-Star reserves, but he is having a solid season none the less.
The future for Jennings continues to look bright, although it may not include Milwaukee according to Jennings.
“I am going to keep my options open, knowing that the time is coming up,” Jennings said in an email to ESPN’s Chris Broussard. “I’m doing my homework on big market teams.”
“I’m not saying I won’t (sign an extension with the Bucks) and I’m not saying I will,” he said. “I’m just keeping my options open.”
Jennings admitted that seeing other stars head to larger markets and bigger opportunities has caught his eye, and that he will weigh things extensively when it’s time to sign his next contract.
“When you start seeing other players like Dwight Howard or CP3, you start thinking,” said Jennings.
“It has nothing to do with the city of Milwaukee or anything like that because that’s where I started my career,” Jennings said. “They’ve been nothing but good to me. (Coach) Scott Skiles and (general manager) John Hammond have been good to me. It’s just that I’m understanding the business of basketball now.”
“I’m going to keep playing hard every night for the Bucks as long as I’m there,” Jennings said. “I’m not promising that’s where my future will be. I will make sure me and (agent Bill Duffy) look at all the best options.”
The Bucks can begin contract extension talks with Jennings this summer. Jennings will not qualify for the Derrick Rose provision that would get him 30% of the salary cap, but he could seek a deal similar in size and scale to that of Oklahoma City’s Russell Westbrook.
Westbrook inked a five-year, $78 million contract extension this summer setting the ceiling for Jennings.
If Jennings does not reach a deal with the Bucks this summer, he could be made a restricted free agent in 2013.
Unless Jennings forces a trade out of Milwaukee the earliest he’d be an unrestricted free agent is July 2014, so it’s awfully early to be talking about cities other than Milwaukee.
But in reality Jennings has always marched to the beat of his own drum, so is this really unexpected?
Sacramento Is On The Clock: The NBA trade deadline is the date most basketball fans care about, however there is another date looming in the NBA and that’s March 1st.
The NBA in its decision to keep the Kings in Sacramento this season established March 1st as the drop dead date for Sacramento to secure an arena funding plan and to lock in plans for a new arena or the Kings would be allowed to relocate without significant penalty.
The city has 20 days to go and things still look a little dicey.
The Sacramento city council wanted the Sacramento voters to have their chance to weigh in on the still-evolving financing plan which may be built around Sacramento selling off the rights to manage the city’s parking lots and parking meters, a deal that could raise as much as $200 million.
The council ended up voting 5-4 to keep the issue moving without voter approval. Putting the issue on the June ballot would have likely cost the city the Kings, so there is still a lifeline of hope.
Sacramento Mayor Kevin Johnson said he feels the city will either have a plan approved or be close enough to approval to satisfy the NBA.
The 10-16 Kings are the seventh-worst team in the NBA according to the standings, and coincidentally are the seventh-worst team in the NBA in attendance drawing an average of 14,739 per game.
The NBA urged the Maloof family to give Sacramento a chance to deliver on a new arena after a compelling and emotional pitch from Mayor Johnson.
The Maloffs have a standing offer to relocate to Anaheim should things fall through with Sacramento.
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NBA Chats: There are two NBA chats today starting with Yannis Koutroupis who will drop his weekly chat at 11am EST. Yannis serves as a Senior NBA Writer and the College Basketball Editor for HOOPSWORLD so get your questions in early as Yannis’ chats fill up fast. HOOPSWORLD’s Alex Kennedy will host his his NBA chat at 1:00pm EST. You can always find the next upcoming chat here: Upcoming NBA Chats or if you are looking for a chat that already completed try here: Previous NBA Chats