Houston Rockets Salary Cap Update: The Impact of Harden’s Deal

Now that we’re nearly a quarter of the way through the 2012-13 NBA season, let’s take a look at the team’s current salary cap situation.

The Rockets’ Latest Moves
Since my last update, the Rockets have made the following roster moves:

• The Rockets traded Kevin Martin, Jeremy Lamb, two first round picks (those owed from Toronto in the Kyle Lowry trade and from Dallas in the Jordan Hill trade) and a second rounder (owed from Charlotte in the Courtney Lee sign-and-trade) to Oklahoma City in exchange for James Harden, Daequan Cook, Cole Aldrich and Lazar Hayward.
• The team trimmed the regular season roster down to the maximum of 15 by waiving Shaun Livingston, Gary Forbes, Hayward, JaJuan Johnson, Jon Brockman, Demetri McCamey and Kyle Fogg.
• The fourth-year option on the contract of Patrick Patterson was exercised.
• The third-year option on the contract of Marcus Morris was exercised.
• The Rockets signed Harden to a five-year, maximum salary extension. More on that below.

The Harden Contract

Harden's contract includes incentives that could impact the team's salary cap situation

While most reports of Harden’s extension pegged it at $80 million (actually, $78.6 million), the figure is merely an estimate based on the salary cap for the 2012-13 season. However, since the starting salary of the extension is based on salary cap figures for the 2013-14 season, the actual amount of Harden’s salary will not be known until around July 10, 2013, when such figures will be determined. The starting salary of Harden’s extension will be approximately 25% of the 2013-14 maximum team salary cap (although that figure could increase to 30% in the unlikely event that Harden wins the NBA MVP award this season).

The fifth year of Harden’s extension is actually only 50% guaranteed, but it becomes fully guaranteed if Harden meets any one of several incentives that should be fairly easily attainable for him. Such incentives include making at least one All-Star team starting next season (so this season doesn’t count), playing a key role in the Rockets advancing to the second round of the playoffs, or meeting certain statistical marks (which are geared to avoid a ball-hogging situation in order to meet them).

By being signed to a five-year extension (as opposed to only four years), Harden has become the Rockets’ “Designated Player,” meaning that the Rockets may not sign any other player to a five-year contract extension for the length of Harden’s extension (through 2018). The Rockets may, however, acquire another team’s Designated Player via trade during that time. For instance, if the Rockets somehow traded for someone like DeMarcus Cousins in the next few months, they would be unable to offer Cousins the same type of extension they gave Harden; however, if Cousin were made Sacramento’s Designated Player and then traded to Houston later down the road (say, 2-3 seasons later), it would be permitted for the Rockets to have both Harden’s and Cousins’s contracts on the books at the same time.

Salary Commitments and Available Cap Room
(All salaries courtesy of ShamSports.com)

Barring any further roster moves, the Houston Rockets now have approximately $50.2 million in team salary for the 2012-13 season: Jeremy Lin ($8.37 million), Omer Asik ($8.37 million), Harden ($5.82 million), Cook ($3.09 million), Carlos Delfino ($3 million), Aldrich ($2.45 million), Patterson ($2.10 million), Toney Douglas ($2.07 million), Morris ($1.91 million), Royce White ($1.65 million), Forbes* ($1.5 million), Terrence Jones ($1.49 million), Donatas Motiejunas ($1.36 million), Hayward* ($1.17 million), Johnson* ($1.09 million), Livingston* ($1 million), Brockman* ($1 million), Chandler Parsons ($888,250), href='http://www.clutchfans.net/players/greg_smith/' title='Greg Smith Houston Rockets'>Greg Smith ($762,195, of which 50% is guaranteed), Machado ($473,604, of which 50% is guaranteed), and the cap hit from the Derek Fisher* buyout ($644,005; more on that here).

[* – indicates players no longer on Rockets’ roster. Also, ShamSports.com shows that the Rockets also owe E’Twaun Moore $381,098 (50% of his 2012-13 salary), supposedly the product of a renegotiation of his contract with Boston prior to the Courtney Lee sign-and-trade deal in which the Rockets acquired him. However, according to a source familiar with the Rockets’ salary cap situation, the Rockets have not paid Moore; hence, I am disregarding this salary for purposes of my own cap calculations. However, even if ShamSports.com is correct about Moore, the acquisition of the Charlotte Bobcats’ 2013 second round pick from Boston was well worth the small incremental loss of cap space, as it contributed to the acquisition of Harden.]

Based on this season’s maximum salary cap of $58.044 million, the Rockets have approximately $7.84 million in salary cap room entering the season (or about $7.46 million if they do, in fact, take a cap hit on Moore). For the record, the Harden trade actually increased the Rockets’ available cap room this season.

It will be very interesting to see what GM Daryl Morey does with that cap room, which allows him to take on that much more incoming salary in trades without regard for salary-matching rules. With only Cleveland, Houston and Phoenix possessing cap room of any significance, the Rockets may be a popular team this coming trade deadline as a landing spot for other teams’ bloated (but likely expiring) contracts, with Houston receiving some form of compensation (draft picks, cash, etc.) for its troubles. That will probably be only a backup plan for Morey, who more likely will attempt to use that cap room to acquire a star-level player via trade. With the Rockets slated to have even more significant cap room next summer (see below), don’t expect the Rockets to take on salary beyond this season unless it involves the Rockets acquiring a star-level talent in the process.

Interesting (Well, Not That Interesting) Fact
With the contracts of Lin and Asik structured so that they are only actually paid $5 million each this season despite their cap figures, the Rockets’ highest-salaried player this season is Harden at a relatively paltry $5.82 million. That appears to be the league’s lowest “team-high salary.”

The player being paid the second most money this season by the Rockets?

That’s Luis Scola, who currently plays for the Phoenix Suns but is still being paid approximately $5.26 million this season by the Rockets.

Summer of 2013
Based on the salary cap remaining at $58.044 million, barring any trades happening this season (yeah, fat chance) and assuming that Harden does not win the league MVP this season, the Houston Rockets will have approximately $45.8 million in team salary for the 2013-14 season: Harden ($13.67 million), Lin ($8.37 million), Asik ($8.37 million), Delfino ($3 million, non-guaranteed if waived by June 30, 2013), Patterson ($3.11 million), Morris ($1.99 million), White ($1.72 million), Jones ($1.55 million), Motiejunas ($1.42 million), Parsons ($926,500), Smith ($884,293, non-guaranteed) and Machado ($788,872, non-guaranteed). That amount could increase if the Rockets miss the playoffs and, thus, retain their first round pick.

If the Rockets make the playoffs this season, and if they simply waive Delfino, Smith and Machado, they could open up as much as $15.44 million in cap room without having to make any trades (although the team could still have as much as $14.75 million in cap room and still keep Smith and Machado). That would be nearly enough to offer most players a maximum salary contract. While not quite enough to offer the “super-max” to guys like Dwight Howard (eligible for a starting salary of $20.51 million) or Chris Paul (eligible for a starting salary of $18.69 million), other moves could be made to create the additional cap room if absolutely necessary.

Conclusion
The Houston Rockets finally have themselves a franchise player in Harden around whom to rebuild, but most true title contenders have more than one star player so there is still much work to be done by Morey and the Rockets’ front office. That said, with a roster filled with young talent (the youngest in the league) and plenty of cap flexibility, the Rockets are still well-positioned to make a move if/when another star becomes available, either prior to this February’s trade deadline, next summer or beyond.

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