[Updated] The 2018 offseason guide to the Knicks' salary cap

Note: I made some changes from the original article. The changes include a new up-to-date multiyear salary breakdown and exception figures as well as some additional content about the 2019. Additional sentences and comments will be italicized.

There's no basketball to be played this week, which means the time is right for a journey through the heart of the Knicks' salary cap. Basically, I've congregate d all the relevant salary cap and collective bargain agreement (CBA) information from various sources into one convenient post/location so you as Knicks fans do not need to consistently go digging for key pieces of information to base offseason takes on. I do provide the primary sources as well as some essential articles on the Knicks. Fortunately, you’re already on Posting & Toasting, so you’re reading quality articles and listening to quality podcast ‘sodes.

Without further ado, let’s get into it!

Key Terms

I know you folks want to get into the meat of the article, but knowing the important terms is critical to evaluating the offseason. If you don’t know the difference between Full-Bird Rights and Non-Bird Rights, it can cause confusion. Here are the terms:

• Salary Cap Exception: The basic rule of the NBA’s salary cap is that a team can’t sign a player or make a trade that leaves the team’s team salary above the cap unless the team is using an exception. Full-Bird Rights, Early-Bird Rights, and Non-Bird Rights are considered exceptions.
• Full Bird Rights: This exception allows teams to exceed the cap in order to re-sign their own free agents, up to the player’s maximum salary. The player needs to be under contract for three or more years. These contracts can be up to five years in length, with raises up to 8% of the salary year-over-year based on the first season of the contract.
• Early Bird Rights: A team may use the Early Bird exception to re-sign its own free agent for up to 175% of his salary in the previous season, or 105% of the average salary in the previous season, whichever is greater. The player needs to be under contract for two or more years. Early Bird contracts can be up to four years in length, with raises up to 8% of the salary year-over-year based on the first season of the contract.
• Non-Bird Rights: This exception allows a team to re-sign its own free agent to a salary starting at up to 120% of his salary in the previous season (not over the maximum salary), or 120% of the minimum salary. Raises are limited to 5% of the salary year-over-year based on the first year of the contract, and contracts are limited to four seasons when this exception is used.
• Minimum Player Salary Exception: Teams can offer players minimum salary contracts even if they are over the cap. Contracts can be up to two years in length. For two-year contracts, the second season salary is the minimum salary for that season. The contract may not contain a bonus of any kind. This exception can also be used to acquire minimum salary players via trade. There is no limit to the number of players that can be signed or acquired using this exception.
• Cap Holds: Cap holds are placeholders for players the team is expected to sign in the future. For example, a team is expected to sign its unsigned first-round draft pick, so an amount is reserved for this signing in the form of a cap hold. A team $10 million below the cap with $4 million in cap holds has $6 million in cap space. A team $5 million under the cap with $6 million in cap holds is considered $1 million over the cap and must use exceptions to sign players. In order to remove cap holds to not have them count against the salary cap, teams must waive their rights (like Non-Bird Rights) to their pending free agents.
• Qualifying Offer: In order to make their free agent a restricted free agent, a team must submit a qualifying offer to the player between the day following the last game of the NBA Finals and June 30. The qualifying offer is a standing offer for a one-year guaranteed contract, which becomes a regular contact if the player decides to sign it. This ensures that the team does not gain the right of first refusal without offering a contract themselves. The amount of the qualifying offer for players on rookie scale contracts is based on the player’s draft position. The qualifying offer for all other players must be for 125% of the player’s previous salary, or the player’s minimum salary plus $200,000, whichever is greater. A qualifying offer counts as a cap hold.
• The Stretch Provision: A team can waive a player with his salary divided into even amounts over a period of time. This is the formula to use: (the number of years left on a players contract x 2) + 1. Using Joakim Noah as an example: If Noah is waived using the stretch provision once the 2018 year begins, his $37,825,000 remaining on his contract would be spread out over 5 years ([2 x 2] + 1) for roughly $7,565,000 per year. That $7,565,000 still counts as a cap holds for each ensuing season’s cap sheet.

If you believe there are other key terms that everyone should know, do not hesitate to write them in the comment section.

Key 2018 Financial Figures

The values below are all estimates. This is because the values are based off year-over-year changes in the salary cap, and the NBA league office has not officially announced the actual salary cap and tax level. For example, if the salary cap increases by 4% from 2017–18 to 2018–19, then the exception amount also will increase by 4% from 2017–18 to 2018–19.

The average player value is based on 104.5% of the previous season’s figure, while the minimum salary falls under the same calculation as the exceptions.

Based on the salary cap projections by Eric Pincus, the 2018–19 salary cap projects to be $101 million. That’s a 1.92% increase from this past season, which was $99,093,000. Once there is an exact salary cap figure, then I can calculate the exact values for the exceptions. But for now, these are pretty much what the values will be more or less, unless that $101 million figures increases or decreases noticeably.

(New salary cap and key figures are based on this press release from the NBA as well as calculations based on the exact numbers).

• Non-Tax Mid-Level Exception: Teams not over the luxury tax, but over the cap — $8.641 million
• Tax Mid-Level Exception: Teams over the luxury tax — $5.337 million
• Room Exception: Teams under the cap & don’t qualify for the Bi-Annual Exception — $4.449 million
• Bi-Annual Exception: Teams under the tax apron ($129,000,000) have every other year — $3,382,166.35
• Average Player Value: $8,196,457.50
• Minimum Salary: $838,464

Note: multiple players can be signed using these exceptions.

New York Knicks Multi-Year Salary Chart

This is the foundation of the guide. Knowing New York’s salary moving forward is critical in knowing what will constitute a “good” or “bad” decision. I forgot to mention two things in the note section. First, I have Lance Thomas’ salary in the 2019 offseason as $1 million as that figure is Thomas’ guaranteed amount of his last year. I listed that instead of the actual figure because you know damn well the Knicks aren’t paying Lance $7 million to brick shots off the side of the backboard and trip over his own feet if they don’t have to.

Second, I have Mitchell Robinson’s salary as the rookie minimum with 5% raises as his salary is not listed. It can very well be more, but I’m going to stay on the safe side with these projections.

Unless Enes Kanter opts out of his contract (Enes Kanter opted into his deal), the Knicks simply do not have cap space to sign unrestricted free agents except with the non-taxpayer mid-level exception. How much cap space do the Knicks have? Let’s get to the next section to find out.

Pending Free Agents

The Knicks have two known pending free agents: Jarrett Jack and Michael Beasley. They have Non-Bird Rights since they have been under contract for just this season. Enes Kanter and Kyle O’Quinn can become free agents if they opt out of their contracts. Both players have Full-Bird Rights. O’Quinn has been under contract for three seasons and Kanter retained his rights when he was traded to New York last offseason.

If Kanter opts out, his cap hold would be $30,850,201.5 Knicks would renounce him to clear space probably because why do they need to keep his Bird Rights? If O’Quinn opts out, his cap hold would be $7,766,250.

As detailed in the table above, if both Kanter and O’Quinn opt out and if the Knicks renounce Beasley, Kanter, Jack, and O’Quinn, New York’s maximum amount of cap space would be $18,347,097. That’s a good chunk of change to have as it creates financial flexibility. Given that there aren’t too many benefits in keeping Beasley’s and Jack’s Non-Bird Rights worth keeping a combined $3-million-plus cap hold on the books, here are the cap figures based on how Kanter and O’Quinn options and renouncing Beasley and Jack:

• Kanter opts in and O’Quinn opts out with O’Quinn’s rights maintained: $8,041,666.00 over the cap.
• Kanter opts in and O’Quinn opts out with O’Quinn’s rights renounced: $275,416.00 over the cap.
• O’Quinn opts in and Kanter opts out with Kanter’s rights maintained: $16,759,354.50 over the cap.
• O’Quinn opts in and Kanter opts out with Kanter’s rights renounced: $14,090,847.00 in free space.

It’s important to note that if the second bullet point happens, New York would need to use an exception to re-sign O’Quinn. Teams can only use one exception (excluding minimum player exceptions) per year and cannot double dip. For example, if the Knicks use the non-taxpayer mid-level exception, they cannot use then use the taxpayer mid-level if they go over the tax nor could they use the bi-annual exception.

If bullet point one happens and the Knicks want to use their non-taxpayer mid-level exception and re-sign O’Quinn, New York would first need to sign a free agent with the mid-level exception and then re-sign O’Quinn using his Full-Bird Rights.

Kristap Porzingis’ Looming Extension & Long-term Salary Concerns

Mudiay technically qualifies as well, but, you know, that’s not happening. I’m, for all intents and purposes, copying from the CBA FAQ with this information that follows. Rookie scale contracts may be extended for up to four seasons beyond the last option season in the contract, bringing the total contract length to five seasons. Teams can also select up to two players (called “Designated Rookies”) who can receive five-year extensions, bringing the total contract length to six seasons.

In general, the salary in the first year of an extension to a rookie scale contract may be any amount up to the player’s maximum. This is usually the 0–6 year maximum, which is 25% of the salary cap. However, a player may receive up to the 7–9 year maximum, which is 30% of the cap, if he meets the “5th Year 30% Max Criteria.” Below is the criteria:

• The player was named to the All-NBA First, Second, or Third team in the most recent season, or both of the two seasons that preceded the most recent season.
• The player was named the Defensive Player of the Year in the most recent season, or both of the two seasons that preceded the most recent season.
• The player was named the NBA Most Valuable Player in any of the three most recent seasons.

The salary in the first year of an extension to a rookie scale contract for a Designated Player must be the player’s maximum salary. If the player has also met the 5th Year 30% Max Criteria, his salary may be any amount between the 0–6 year maximum and the 7–9 year maximum. Raises are up to 8% year-over-year based on the first year value.

So, regarding Porzingis, the table below details key salary cap and contract figures if Porzingis signs either the 25% max contract or the 30% max contract.

As you can see, the Knicks do not have much cap space in 2019 if Porzingis signs an extension this summer based on the current salaries on the books. Moving Courtney Lee this summer without taking on salary would be helpful, but still does not free up a max contract — well, it technically does… kind of. If Porzingis ends up receiving the 25% max contract and Lee is traded without taking on additional salary, New York can have $27,907,945 in space, which is right now enough for another 25% max contract.

Keep in mind that the space does assume that the varying Bird Rights of Ron Baker, Trey Burke, Enes Kanter, Emmanuel Mudiay, and Troy Williams are renounced, Kanter and O’Quinn are not on contracts passed 2019, and that Lance Thomas is released. There simply isn’t as much flexibility in 2019 as there will be in 2020 once Noah is officially off the books. New York better hope that Tim Hardaway Jr begins producing above the value of his contract because it certainly does not help the salary cap.

In order for New York to have a 30% max contract slot available in 2019, they can stretch Noah beginning on September 1st — $6,431,666.67 over three seasons — trade Courtney Lee into space or a contract that expires in 2019, or both. Stretching Noah and trading away Lee can add an additional $25,623,003.33 in 2019 cap space, which adds up to a whopping $52,552,891.33 in space. The Knicks can add two legitimate players with this space and then sign Porzingis to an extension with his Bird Rights. We would then begin to talk about luxury tax complications and future extensions of Ntilikina, but let’s wait until the time comes.

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The 2019 offseason is still a year away, but what the Knicks do with Porzingis, Kanter, and O’Quinn can have significant impacts on future available cap space. Signing Kanter and O’Quinn to long-term deals could be disastrous (O’Quinn to a lesser extent). If the plan is to have Kanter opt out in order to re-sign him on a multi-year deal at an average annual value (AAV) of something similar to his potential 2018–19 salary — just over $18 million — that cripples any flexibility in the 2019 offseason if Porzingis is extended at the 25% max as well as offering two contracts to big-name free agents in the 2020 offseason with a first-year value of roughly $29.5 million ($59 million / 2). Even if Kanter wants to re-sign at a “discount” valued at an AAV of $10 million per year, it kills the Knicks’ flexibility in 2019, especially if Porzingis gets the 30% max — i.e. New York is over the cap.

If New York were to extend one of Kanter or O’Quinn, the no-brainer answer is O’Quinn because he’s simply the better all-around player. The dilemma that causes with the Knicks’ cap is how much is too much for O’Quinn? The center market projects to be depressed in July due to the influx of talented rookies in the draft on their scaled salaries as well as not many teams having significant cap space that are also in the market for a center. Teams that have space and a need at center, such as the Phoenix Suns, Atlanta Hawks, and Dallas Mavericks, are in prime position to draft a cost-controlled one. Furthermore, DeMarcus Cousins, Clint Capela, and potentially DeAndre Jordan are pending free agents, shrinking the demand. Are we sure that there is even a market for O’Quinn if he opts out?

O’Quinn has two choices: either opt back into his contract and try to make bank in 2019 where 23 teams are currently projected to have at minimum $19 million in cap space or opt out and sign a long-term deal now at a depressed value (O’Quinn chose to opt out of his deal). If New York can re-sign O’Quinn for multiple years and less than $6 million AAV, that would be huge moving forward, especially if he continues to marginally improve as he has every year with the Knicks. With that said, that is not the smartest financial move for O’Quinn if he wants to get paid more money. Opting in and improving from this past season could go a long way for the Queens native. But that’s not guaranteed, so why not lock into some financial security now? Tough choice for Kyle.

Sources and Finals Thoughts

The primary sources for this post are as follows:

• Both the 2011 and 2017 NBA CBA documents can be found here.
• Larry Coon’s CBA FAQ is the best cap resource if you do not want to be a weirdo like me and read the actual CBA. All the official cap figures such as the tax apron and the exceptions were either provided or confirmed from this website.
• The Knicks Spotrac Page was the main source for these figures, but I calculated a good chunk of the numbers myself.

I know I wrote quite a bit of my two cents in the previous section, but this point cannot be stressed enough: signing long-term contracts this offseason if given an opportunity to is a bad financial idea.

You can make the case for a player like Kyle O’Quinn to remain in New York’s long-term plan. And as someone who does follow the team, watch all the games (some more than once), and write about the team, having guys like O’Quinn on the team, especially in an apparent lost season, makes the games more fun to watch. That entertainment value in and of itself is valuable. I’m all for O’Quinn being a Knick lifer.

Re-signing Porzingis this offseason may be the only opportunity for the Knicks to potentially get a discount on the contract given this ACL injury. It the possibility plausible? Honestly, I do not have the slightest of clue. Mills and Perry could try to convince The Unicorn to take a Curryesque discount and sell him on the idea of recreating the financial flexibility that allowed Golden State to sign Kevin Durant. This outcome only happens if Porzingis believes in the organization’s management to both nail the next two drafts and not screw up the salary cap, the coaching staff in creating a worthwhile offensive and defensive system, and his teammates improving and reaching their full potential. Given Porzingis’ stormy relationship with the Knicks, this remains doubtful.

All isn’t doom and gloom, though. Even if Porzingis doesn’t take a Curryesque discount and forces New York’s hands to give him the Designated Rookie Extension — he would need to come back next year healthy and meet the criteria in order for that extension to kick in — the Knicks are in a prime position in the 2020 and 2021 offseasons to make noise. In order for New York to bring ring da motherf*****’ ruckus in those offseasons, they cannot screw up this one, which should be easy to not screw up.

Steve Mills and Scott Perry, in case you are reading this article (which I don’t know a reason not to), here are the steps to follow:

• Step One: Extend no one long term not named Kristaps Porzingis this year or next year.
• Step Two: If you do decide to extend Kyle O’Quinn if put in that position, make sure it’s a good contract for the organization.
• Step Three: Sign no free agent to a long-term deal, unless it’s a cheap deal on a player where you know he’s going to outperform the value of the contract significantly. Not in a position anyway if Kanter opts in, plus there aren’t many free agents who fit the description.
• Step Four: If you decided to skip steps one through three, just remember to maintain the status quo.

Now, if you’re a player and reading this, you go get as much money as you can. Collect them checks! But not we are getting into a whole different discussion, and this article has been long enough.