Since taking over as Sixers General Manager, President of Basketball Operations, and Part-Time Team Mascot (little known fact, he's Betsy Ross), one of Sam Hinkie's main focuses has been utilizing the team's cap space to acquire assets attached to acquisitions of onerous contracts. After this happens, the reaction among many is usually "hey, we got something for nothing, great move Sam!"
That's not a bad way of looking at it. It's not inaccurate. It is an advantage to collect assets for using cap space the team isn't going to use anyway. There's no reason the team shouldn't get as close to the floor as possible, both in terms of collecting assets and keeping ownership happy that they aren't just throwing money away. The Sixers are the exception to every rule of these type of salary dump trades. They lose some leverage because they have such an abundance of cap space, but they should also be every team's first phone call when they're trying to dump salary.
I wanted to take a bit of a deeper dive into how much these draft picks actually cost to acquire as a market average. While it's nice that Hinkie is acquiring picks just to take on
Bo Travis Outlaw's expiring contract, is he actually paying what should be the market price for these picks? Is he overpaying, or is he getting a great deal?
Please note that this isn't a study of what these picks are worth from a value standpoint. There's been plenty of studies done on what the value of a player on a rookie salary is, from a variety of different metrics. This is purely a study about how much these picks cost to acquire, and how that translates to the value they produce is a study for another day.
And by "cost to acquire" I'm referring not to the actual cash paid but to the salary cap space needed to absorb contracts. Combined with the cap space, I am also including direct cash payments. Cash payments included in trades are capped at a net of $3M per season by the CBA. I'm not referring to the actual amounts paid to players in the deal specifically, just these two resources. The reason for the distinction? The Sixers are so far below the salary cap that any money they take on does not result in more real money being paid out.
I went back to the 2012 NBA draft to take a look at every trade made in the NBA over that time. (Why 2012? It's the first offseason under the current Collective Bargaining Agreement, which changed the market from past years.) What qualifies as a salary dump trade? Here are two points to consider:
1. A team trades a draft pick along with a player in exchange for an asset that is either fungible (like a Euro-stash that is likely never coming over) or almost certainly non-existent (like a top 55 protected pick from a team that starts Chris Johnson at shooting guard).
2. The main purpose of the trade is for one side to dump salary and the other side to acquire something for doing that favor. This is obviously subjective, but if it looks like a duck, and quacks like a duck, it's probably a duck. This doesn't always have to be a Sixers-style trade-and-waive every time either. The player whose salary is being dumped could still be a real NBA player, but the main purpose of the trade remains to get his salary off your books. The player adds very little to the value of the trade, and in most cases detracts from it.
Also, in my analysis, I excluded trades that had the following characteristics:
1. Trades where draft picks weren't a main asset in the deal. Again, this is subjective, but draft picks move around all the time in the NBA. If they're just a throw-in to a larger trade (and when you're dealing with 2nd round picks, they usually are), it's hard to quantify their value, which throws off the whole experiment.
2. Trades where teams didn't actually have to pay out guaranteed money to acquire the pick. Both of the Keith Bogans trades this summer were an example of this, where it was really just teams swapping around non-guaranteed contracts to create trade exceptions. Again, while these are technically salary dumps, from a financial standpoint, the cost of the pick is really $0, and that throws off the experiment as well. It's a different category of trades.
3. Trades where an argument could be made that a player was traded for the pick. This is where the Evan Turner trade falls for me. While, yes, the Danny Granger salary was dumped on the Sixers, you very easily could make an argument that Evan Turner was worth a late 2nd round pick. I wouldn't, of course, but you could, especially before he actually started playing for Indiana. Again, for experimental purposes, I tried to avoid these type of trades.
Given these guidelines, I found 18 trades that can be classified as salary dumps. The amount in the table is the net amount of salary cap hit the team acquired in the trade. Keep in mind that that doesn't necessarily mean the amount of real money the team paid, which can be higher (like the Jeremy Lin trade, where the actual salary owed is over $14 million), or lower (like the Byron Mullens trade where the Sixers only paid out around $350,000 since Mullens was acquired midseason, or any Sixers trade recently as they're so far below the salary cap floor the marginal dollar value spent is zero).
A couple things I tried to consider:
1. These trades aren't necessarily on the auction block. Some of these deals could have potentially been shopped around more, while others could've been massive overpays because they were done in a vacuum. Every trade is really different, and while we can try to gauge the market, deals are going to happen all the time over-market and under-market for a variety of reasons, including personal relationships between friendly GM's that are impossible to quantify.
2. Some of the players traded in these deals do have potential value, so they aren't necessarily great barometers of pure salary dumps. For example, in the Jason Terry trade, the Rockets essentially bought 2 second round picks for $6 million, which is way above the market average, but they also got Terry, who, while on the tail end of his career, isn't the worst guy to have on your bench as an expiring contract.
3. Are current picks worth more than future picks? While typically you would think so, I think there aren't enough examples though to judge one way or another.
So what are the results?
1. Six first rounders have been sold since 2012, and the average cost they were sold for was $7,226,824 per pick.
2. 20 second rounders have been acquired in salary dumps, and their average cost is $2,152,533 per pick. There's a couple high side outliers there that really pull up the average, most notably Utah absorbing two years and $7.2 million of Steve Novak's contract in exchange for a 2017 2nd round pick, which is just baffling.
Now, what does that mean for the Sixers?
If you go solely by the average, every pick the Sixers have acquired is below the average, which is good. Way to go, Sam!
But taking out the big outlier again, which is the Novak deal, the average drops to $1.88 million, which is right around where most of the Sixers trades have been, including the Outlaw trade and the Maynor trade.
The question of the value of present picks vs future picks brings into question a deal like the Outlaw trade, where the Sixers paid close to sticker price for a pick five years down the road, and the right to swap picks in 2018 (which, for reference purposes, I quantified at $250,000, because of the oft chance that could be a pick in the top portion of the round, which would carry more value). But again, that's an issue of every trade being made in a vacuum, plus the Sixers having such an abundance of cap space that they have to use it somehow, and not every trade is going to be made at Blue Book value.
Another factor to consider is the cost of simply buying picks outright on draft night. I wanted to include those in the study as well, but unfortunately, the amount those picks sell for is often unreported, whether because the team's just guard that information closely, or because not enough people care how much a billion dollar organization is paying for a pick. In the 2014, seven second round picks were sold on draft night, with pick #44 being sold for $1 million, and pick #46 being sold for "just less than $2 million."
There is a yearly cap on cash as I mentioned earlier. However, since the draft is technically at the end of the league year, teams can trade their remaining cash without fear of long-term consequences, since their totals will reset upon the start of the new league year two weeks later.
Here's the conclusion I came to: The true market price for a 2nd round pick is somewhere closer to the $1.8 million dollar mark, and as long as a team can stay close to that number, even on the high side of it, the deal can be considered a success. When dealing with existing player salaries, it's hard to hit an exact amount. If a player is making $2.5 million, do you turn down a pick for him because it's technically over market value? Probably not.
Using that number as an example, the Sixers efforts have been at or below market value each time. The Outlaw deal was done below market-value, and Hinkie struck gold with both the Mullens and Teague deals, coming in well under market-value. The Maynor deal was higher if you look at it in isolation, but when you consider that the Sixers owe second round picks in each of those years, the rationale makes sense for the Sixers to take on that deal.
With this benchmark in mind, it will be a lot easier to evaluate future Sixers salary dump trades as the team continues to use its cap space to acquire assets beyond simply writing it off as "something for nothing." Cap space isn't nothing, and it is something that can be quantified, but the Sixers seem to have a good grasp as to its proper value.