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Can the Rockets Afford the King?

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NBA: Cleveland Cavaliers at Philadelphia 76ers Bill Streicher-USA TODAY Sports

As we’ve all seen, the rumor-mongers are out in force saying that LeBron is only considering four teams this offseason — the Cleveland Cavaliers, the Los Angeles Lakers, the Houston Rockets, and our very own Philadelphia 76ers. It’s exciting! But just because we’re one of four teams — for simplicity I’m going to treat the rumor as fact here, so just imagine that appropriate caveats are placed at the beginning of every sentence — doesn’t mean we have a one in four chance! It could be a lot higher or lower than that. We can get a better handle on the problem by looking at the competition. So, I was planning to write a piece about how it’s virtually impossible for the Houston Rockets to fit LeBron under the cap. But then I saw Tim Cato did a better job than I ever could. If you’re interested in the subject, click here and read the piece; it’s awesome. In fact, even if you don’t want to read it, click on it anyway so he gets credit for his efforts. Because now I’m going to attempt to summarize the situation, and I wouldn’t understand it nearly so well if it weren’t for Cato’s exemplary work.

Here we go. WARNING: This will require talking about cap holds. Sorry, it can’t be helped!

Folks, I am not pretending to be the world’s salary cap expert, or to be even slightly expert on the narrow area known as cap holds. But the basic situation is this: as a fan, it always seems as though there’s this sweet deal with re-signing your players using their “Bird rights.” Say you’re Houston. You have the amazing Chris Paul on an expiring deal. Perfect, you think, this’ll be easy. Step 1: sign LeBron for $35 million. Then, sign CP3 for the $35M that he, too, so richly deserves. Then, when someone points out that you went over the cap, simply say these two words: I forgot!

Just kidding, that’s from the old Steve Martin routine on how to make a million dollars and not pay any taxes. Great stuff, that guy is a genius. Anyway, if you’re Houston, a fan might think, you don’t say “I forgot,” you say two other words: “Bird rights.” “We’re allowed to go over the cap to sign our own player, Chris Paul, because we have his Bird rights.”

Fortunately for the Sixers’ chances at the King, these two words provide an incomplete summary of the rules. Yes, the Rockets have the Bird rights, and so they can indeed go over the cap to sign Paul. But before that happens, they have to deal with his cap hold. It goes like this: right now the Rockets have CP3’s Bird rights, but they also have his cap hold. A mere pittance at $39 million for 2018-19. That counts as part of their salary cap total. They can get Paul off the cap easily by renouncing him. BUT THEN THEY LOSE HIS BIRD RIGHTS!! See the catch-22? They can go over the cap to resign him, but only if they don’t renounce, and if they don’t renounce he counts as $39M on the cap until he signs a new deal.

Now, you may be saying to yourself, wait a minute — in that case CP3’s Bird rights aren’t doing Houston any good at all. Why are we always hearing about Bird rights if they’re basically useless, as seen here? The answer is, Bird rights are very useful if you want to go over the cap to give one of your players a raise. To see this, we need look no further than the Rockets’ terrific young center, Clint Capela. Capela has a cap hold of around $5M and will be a restricted free agent this offseason. He is developing nicely and fits perfectly in Houston, so they are expected to match any offer to keep him. I have yet to see an analysis of just how little good players are going to be signing for this summer relative to the past as a consequence of so few teams having much cap space. So your guess is as good as mine on Capela. But let’s say that his promise is sufficient that someone signs him to a $20M offer sheet. Houston can match that deal even if they have already added free agents whose costs bring them right up to the cap. And when I say up to the cap, I mean up to the cap counting Capela at his $5M (approximately) cap hold. So paying him $20M would put them $15M over. That’s OK, Bird rights allow it. So as I say, those rights are very valuable when a guy is getting a big raise. It’s just that Paul, whose max possible contract of $35M is actually lower than his cap hold, is not a case where Bird rights play much of a role. Unless there’s some trick Daryl Morey knows that I don’t, which can’t possibly be more than about 95% likely!

OK, with that as preamble, we can see the bind Houston is in. I mean, don’t get me wrong, 28 teams would love to be sitting where they are! But with Harden at $30M, if you pay LeBron and CP3 the max of $35.4M each, you’re already at $101M, which coincidentally is precisely the level of the projected 2018-19 salary cap. That means... well, you can’t do that! The cap assumes you spend at least the minimum on each of the remaining 12 roster spots, so you’re over. And there are two additional problems:

The first is that Houston can’t just drop a good-but-overpaid player like Ryan Anderson and his $20M contract, they have to find a team to take it without giving salary back, and that could be challenging. But, as with our man Bayless, Anderson could be moved if he were packaged with the right picks.

The second problem is that LeBron James is not going to be interested in playing on a team with only three good players. For that matter, neither is Chris Paul. Those guys won’t sign unless the team can hold onto its core guys, or add some quality from outside. That core is some subset of:

Eric Gordon: $13M

Capela: $5M cap hold

Nene: $3M

In truth even if the team could hold onto those three, they’d be doomed without some other solid players to fill out the roster, solid players such as those they now have -- Ryan Anderson, Trevor Ariza, old processor Luc Richard Mbah a Moute, etc. It’s hard to imagine Houston letting go of Capela, though of course in pursuit of LBJ teams may find themselves doing things they never thought they would! But since Capela has the Bird thing going it feels as though it would be crazy not to keep him. So the question is, if you have an amazing Big Four of James, Harden, Paul and Capela, how little can you spend on the other 11 guys — which is to say, really the next four or five guys — before they are so lousy they ruin your chances? Just to have a number to work with, let’s say they can do it for $10M, which seems insanely low, but it’s possible Houston can get one high-quality backup with the mid-level exception or something, and maybe one or two at the veteran minimum, and remember those don’t count against the cap. So in this scenario they are paying a few million each to a few Nene-quality players, and then adding a good veteran on the MLE and a couple vet-minimum folks, and Bob’s their uncle.

In that case LeBron and CP3 have to accept, by my calculation, $15M below the cap between them. Right? At $35.4M each, plus $35M for the Harden/Capela combo and $10M for the rest, you’d be at $116M which exceeds the expected cap by $15 million.

Now, LeBron has said he won’t take a discount, but people say a lot of things, maybe in the end he’ll cave. Will Paul take a big discount to play with his buddy? Hard to say. We should also note that this plan still requires the team to shed the overpaid Anderson, but if they’re willing to include the underpaid Gordon in the package there would likely be takers. And under this plan Gordon probably has to go anyway. Or maybe he doesn’t, if Paul and James will take salaries far below the maximum, they can have the pleasure of playing with a fine player like Eric Gordon. No one really knows what’s in these guys’ minds. But my guess is the shedding of the salaries of players like Anderson and Nene will be doable if the other barriers are resolved.

Instead, I think the big problem is getting James to come and Paul to stay under these circumstances. Basically the team would have to trade or renounce almost everybody besides the Big Four. James is then gambling on Morey’s ability to build the entire bench using approximately zero cap dollars. It doesn’t seem likely those deals can be arranged in advance — Houston will have to strike fast when free agency starts in order to nab James. But in those first few days of the free agency period, one would think the bench players Houston wants will be shopping their services, trying to get a lot more than the minimum. In the end they may indeed recognize that a minimum deal in Houston is their best option, but LeBron is, I suspect, going to have to commit without knowing one way or another about that. James will be betting in the dark, as the poker players say, counting on Morey to work a low-cost miracle with the bench.

So that’s the unravelling story. First, you need either James or Paul or both to take a major discount. Maybe they’d do that for a terrific shot at a title. But how terrific would that shot be if they have no idea what players they’ll have on the team? It would be quite a gamble. But, maybe Morey can pull it off — after all, joining PG13 with the Lakers or staying in Cleveland with Rodney Hood or joining the young Sixer core are gambles too. Anything can happen. But as a Sixer fan, I have to say that the more I look at the Houston situation, the less I think that’s the team we’re going to lose out on LeBron to.

Again, I recommend the Tim Cato piece for a more detailed look, he works through scenarios such as “what if Cleveland trades LeBron to Houston?” I don’t think that stuff changes the core story much, fundamentally if you add the discount CP3 voluntarily takes to the discount LeBron voluntarily takes and subtract $5M or so from that, that’s the cap space Houston can use to build out their fifth starter and bench. Either those two need to sacrifice a lot for the sake of winning, or Morey has to create a quality bech using almost no cap space, or they have to find a way to pay guys under the table like the Patriots do with Tom Brady. Oops, sorry, meant to say “as 100% unsubstantiated accusations suggest the Patriots do with Tom Brady.” Yeah, that’s the ticket!

As always I welcome arguments, analysis, theories, and any other thoughts in the Comments section.