Reconstruction Brings Scalable Financial Perspective for Rockets
This upcoming 2021-2022 NBA season would have been the first for which the Houston Rockets would have qualified to pay the dreaded repeaters tax, a reason cited in previous seasons as to why the franchise had to cut costs every year, even at the end of the day. heyday of James Harden. first. Under the rules of the league’s collective agreement, if a team has paid luxury tax in at least three of the previous four seasons and again exceeds the tax threshold in that season, l The team is eligible for the repeat tax penalty, a steep mark-up from the standard penalties.
But with Harden’s trade last season, it’s now a new era in Houston and the rebuilding is underway. This comes with new financial incentives and a revised perspective on the management of the salary cap.
At the time of writing, the Rockets have a total taxable salary of $ 123.69 million, which leaves them ample room below the 2021 luxury tax threshold of $ 136.61 million. dollars. The team also still have their mid-tier non-taxpayer exception at their disposal, retained after signing and trading with the Chicago Bulls to acquire center Daniel Theis. Observers will recall that in years past it was a dance with the tax line for the franchise every year, with then general manager Daryl Morey having to step over the threshold to form his team.
There is no tiptoeing now, and there is no expectation of the team paying the luxury tax, at least not in these initial stages of rebuilding. But that doesn’t mean there wouldn’t be a prudent way to use the space the team has. Indeed, general manager Rafael Stone should see the team room under the tax line as an asset in itself.
The most obvious route would be to use the mid-tier exception to sign promising young players with longer-term deals than what’s allowed at the league minimum. The player’s minimum wage exception limits contracts to two seasons, while the mid-level exception can be used for contracts of up to four years. Under Morey, the Rockets have consistently signed undrafted free agents and second-round picks, such as forward Gary Clark, using mid-level games so they can keep promising young talent under control. a cheap club for longer periods.
The most upward path could be to ‘hire’ some of the nearly $ 13 million the team has below the tax threshold to help a contender strengthen for the playoffs and also pass. under the tax line itself. It would be a role reversal from when the Rockets offloaded Brandon Knight’s contract to acquire Iman Shumpert in 2019, sending a 2019 first-round pick to Cleveland in the process. By following this formula, the Rockets could send Danuel House to a contender and resume a longer-term deal, which would be a boon to their help. House’s $ 3.9 million contract expires and his skills could be of value to a competitor.
Less likely given the length of the contract, but Theis could have value to a competitor and his $ 8.3 million contract is fair value to a player with his production. Because the Rockets plan to be a tax-free team, they could trade Theis and recoup amounts up to Theis’ outgoing salary of $ 8.3 million plus $ 5 million. Such an agreement could allow a competitor to reduce their tax bill and also recover a valuable and robust contributor.
Whatever nature of the maneuvering the Rockets do during the season, they’ll need to keep their 2023 cover sheet in mind. It’s summer that the team’s books will be completely clean with the $ 47 million. John Wall’s dollars coming out of the cap (barring very likely separation before) and Eric Gordon’s unsecured $ 20.92 million. If you exercise club options on the team’s talented young core (the Rockets will have club options this summer on each of this year’s draft picks as well as Kenyon Martin Jr.), Team No. will only have $ 35 million committed this summer. With Christian Wood an unrestricted free agent and Kevin Porter Jr. restricted, Stone will need to ensure he recaptures any long-term wages in trades that could hamper the team’s ability to offer a free agent maximum contract.
In years past, Morey was building up the roster for the long run to the playoffs with minimal signings from veterans on the waiver thread. Jeff Green was a prime example in 2019-2020. Green had initially signed a ten-day contract before being signed for the rest of the year. While his hit cap was only $ 91,557 over the 10-day span, that was a number the club needed to actively consider given how dangerously close to luxury tax he was. This year, not only will Stone not need to tiptoe around prorated contract numbers, but he probably won’t be looking to add veterans to his squad in the process, either.
Morey and Harden are now out of Houston, as are the franchise title aspirations. The product in the field isn’t the only thing that’s different. The Rockets have new financial motivations as they begin their rebuilding.