KJ McDaniels 2015 Free Agency

From Derek Bodner's Philadelphia 76ers Wiki

I took a look into this not too long ago in a mailbag, but I'll summarize it here, and update as new information comes along.

KJ's contract is limited by what is commonly referred to as the "Gilbert Arenas provision".

What

First, I'll quickly list what KJ can get next year in the 2015 offseason as a restricted free agent, then I'll describe why he's limited to that below.

Year 1: $5.464 million
Year 2: $5.710 million
Year 3: ~$16.07 million*
Year 4: ~$16.7 million
Total: 4 years, ~$43.944 million

Note: This is based on 2014-15 salary structure. If/when the cap rises, this will change. We will not know for sure what the cap for 2015-16 is until July. This is only meant to serve as a guideline/estimate.

Why

The Arenas provision, which impacts restricted free agents with one or two years in the league, limits what can be offered.

For season 1, the maximum that can be offered is the Non-Taxpayer Mid-Level Exception. This is already defined for the 2015-16 season, set at $5.464 million.

For season 2, the maximum that can be offered is a 4.5% raise over season 1. With the maximum for season 1 at $5.646 million, this sets the maximum for season 2 at $5.710 million.

For season 3, teams can go up to what would have been the maximum salary for a 4 year contract if season 1 wasn't artificially limited. To figure out year 3, we then have to figure out what KJ could have earned if he weren't limited by the Arenas provision.

For a player with 0-6 years of experience, year 1 of a new contract is limited to 25% of the salary cap1 (Kind of. See below). With the 2014-15 salary cap set to $63.065 million, the maximum first year salary for a player with 0-6 years of experience was limited to $14.746 million.

The salary cap will obviously change in 2015 (although not the big spike expected when the new national TV deal hits), we can use this to approximate the year 3 and 4 earnings KJ can get. Ultimately, the new salary cap won't be set until July 1, and we should be informed of the new cap structure a couple of weeks before that.

Using a 2014-15 contract as a starting point, a 4 year deal for a player with 0-6 years of experience could max out at:
Year 1: $14,746,000
Year 2: $15,409,570
Year 3: $16,073,140
Year 4: $16.736,710

Year 3 is then set at a maximum of $16,073,140, the maximum KJ would have been able to earn if not restricted by the Arenas provision.

For year 4, the maximum is set to a 4.1% raise over the year 3 value. With a maximum at $16,073,140 at year 3, 4.1% over that would be $16,732,139.

The contract cannot be for more than 4 years. The only way to sign a 5 year deal is if a team has Larry Bird rights for that player, which neither the Sixers nor any other team will have.

Again, this will change when the 2015-16 cap is set at the beginning of July, but it serves as a baseline.

1The salary cap is set using 44.74% of the basketball related income, with maximum salaries set using a different calculation of the salary cap, this time 42.14% of the basketball related. This is why the maximum for the first year of a contract is not, actually, 25% of $63.065 million

Who can offer this?

Since the first years salary is limited to the Non-Taxpayer Mid-Level Exception, virtually any team in the league will be able to offer KJ McDaniels the maxmimum he can earn in 2015-16 and 2016-17. However, in order to increase year 3 of the contract more than 4.5% over year 2, you have to have enough cap space to fit the average annual value into year 1 of your salary. So, if the total contract you want to offer is 4 years, $32 million, a team would need $8 million in cap space next offseason to offer that kind of contract. A team without cap space would be limited to 4.5% raises in years 3 and 4, as defined by the Non-Taxpayer Mid-Level Exception.

How would this be applied to the salary cap?

If year 3 of the contract is greater than a 4.5% raise over year 2, the cap hit would then be equal to the average annual value of the contract. If year 3 is less than a 4.5% increase over year 2, then it's applied normally. The amount KJ will actually receive will not be the annual value, but the actual salary, regardless.

Can KJ accept the qualifying offer?

In order to be restricted, the Sixers have to extend a qualifying offer of $1.2 million (for 1 year) to KJ, which KJ can accept at any time. This would again make KJ a free agent in 2016. However, he would once again be restricted, and in much the same situation as he would be this upcoming offseason.