The Chandler Parsons Contract: Salary Cap Implications of Exercising or Declining the Team Option
There is no obvious choice for the Rockets on whether to exercise or decline the team option on Chandler Parsons, but David Weiner takes a look at the salary impact of both routes.
***UPDATED June 7, 2014***
Due to additional information obtained and confirmed, as well as a more careful reading of the 2011 NBA Collective Bargaining Agreement, this piece has been updated to more accurately describe the cap hit for Chandler Parsons if the team option on his contract is declined.
This article is intended solely as an analysis of the salary cap effects of certain decisions that the Rockets make with respect to Parsons’s contract and is not intended to express an opinion on such decisions.
The Partial “Guarantee” And The Team Option That Nullifies It
On January 1, 2014, by not having been waived before such date, a portion of Parsons’s 2014-15 salary ($624,771, to be exact) became guaranteed. If Parsons is not waived by June 30, his entire 2014-15 salary ($964,750) becomes guaranteed.
However, these “guarantees” are illusory.
Parsons’s contract includes a team option for the 2014-15 season. Because it is a team option, the Rockets essentially get to decide whether that season of his contract exists or not. By declining the option, Houston has the power to nullify those guarantees, which would only exist if the option were exercised.
In the end, the partial guarantee earned on January 1 is largely pointless. (Hypothetically, the Rockets could exercise the team option on June 28 and then immediately change their mind about Parsons and waive him, in which case Parsons would be $624,771 richer for having had that partial guarantee . . . but that is a fairly ridiculous set of circumstances.)
With that little nugget of information now known, let’s take a closer look at the salary cap implications of the Rockets either exercising or declining that team option.
Exercising The Option
If the Rockets elect to exercise their team option on Parsons’s contract, then Parsons will earn — and will count against the salary cap in the amount of — only $964,750. That is only slightly greater than the minimum salary for a three-year veteran.
Because of Parsons’s miniscule 2014-15 salary, his cap hold on the Rockets’ books when he hits free agency in 2015 until he is signed (either by the Rockets or another team) will be a paltry $1,833,025. This figure is equal to 190% of Parsons’s 2014-15 salary, which is the method used to determine cap holds for players (other than those coming off rookie scale contracts, which Parsons is not) making below the average player salary and for whom a team holds full Bird rights.
By having such a small cap hold for Parsons, the Rockets would be able to use all of their available cap room in 2015 — except for that $1,833,025 cap hold amount — to pursue outside free agents (in a free agent class that is expected to include Kevin Love and LaMarcus Aldridge), then later exceed the salary cap to re-sign Parsons to any amount using his Bird rights.
Declining The Option
If the Rockets elect not to exercise their team option on Parsons’s contract, and if the Rockets extend a qualifying offer to Parsons (more on that below), then Parsons would become a restricted free agent.
By making Parsons a restricted free agent, the Rockets would have the right to match any offer he receives from another team. Typically, restricted free agents whose teams are clearly interested in re-signing them do not receive the level of interest that a similarly-situated unrestricted free agent does, thereby “chilling the bidding” on the player and potentially allowing his original team to re-sign him at a relatively lower salary. (A recent example of this is Nikola Pekovic, who had to wait around for most of last summer without an offer sheet before eventually re-signing with the Timberwolves.)
Because Parsons would have been under the same contract with the Rockets for three seasons (2011-2014), the Rockets would have full Bird rights on Parsons and could exceed the salary cap to re-sign him to a five-year deal at any amount up to the maximum salary (expected to be a starting salary in the $14 million range for players with 0-6 years of service).
(NOTE: Parsons is not subject to the “Gilbert Arenas Rule” that governed the structure of the contracts that the Rockets handed out to Omer Asik and Jeremy Lin. The Arenas Rule is limited solely to one- and two-year veterans. There is no “poison pill” that another team could work into an offer sheet for Parsons.)
If Parsons becomes a restricted free agent, then his cap hold next summer will be the greatest of (a) his “ordinary” cap hold of 190% of his 2013-14 salary (or $1,760,350), (b) the first year salary in any offer sheet he signs that the Rockets wish to match, or (c) his qualifying offer.
A qualifying offer is the minimum amount that a team must offer to a player (as a one-year deal) by June 30 each year in order to make him a restricted free agent. Without a qualifying offer, the player automatically becomes an unrestricted free agent. Under the prior CBA, this would have been a similarly low amount to his “ordinary” cap hold. However, the new CBA changed the rules regarding qualifying offers to young players who significantly outplay their draft status.
Under the new CBA, if a young player taken outside the first half of the lottery meets certain “starter criteria” in either the year prior to his free agency or averaged over the two years prior to his free agency, then he is entitled to a higher qualifying offer. In the case of second round picks meeting the starter criteria, they are entitled to a qualifying offer equal to 100% of the rookie scale qualifying offer for the 21st selection of the draft class whose rookie scale contracts are up for qualifying offers this summer.
As applied to Parsons this summer, he is entitled to whatever qualifying offer the 21st pick in the 2010 NBA Draft would have gotten if signed to 100% of the rookie scale. (FYI, the 21st pick in 2010 was Craig Brackins, but that is irrelevant here.) That amount is $2,875,130.
(For more information about restricted free agency, qualifying offers and the starter criteria, read this portion of Larry Coon’s NBA Salary Cap FAQ.)
On the other hand, if Parsons is not extended a qualifying offer and is allowed to become an unrestricted free agent in 2014, he would count against the Rockets’ cap in the amount of his “ordinary” cap hold ($1,760,350). However, since the chief purpose of declining Parsons’s option is to make him a restricted free agent, it is unlikely this would happen.
So, for all intents and purposes, the cap hit for Parsons if his option is declined will be $2,875,130 . . . until he signs an offer sheet or a new contract.
While the Rockets do not expect to have much (if any) salary cap room in the summer of 2014 assuming that no further roster moves are made, it is entirely possible that subsequent roster moves (such as those involving Asik and/or Lin being traded for less salary or expiring contracts) could create a situation in which 2014 cap room becomes a legitimate priority for the Rockets. In such an event, the amount that Parsons counts against the cap could become a material concern.
The Houston Rockets face a major decision on whether to exercise their team option on Parsons. Of course, there are various other factors in play here besides just the salary cap mechanics associated with each decision. Such factors include the team’s need for salary cap room in light of subsequent roster moves (such as an Asik trade), the availability of outside free agents, any additional leverage held by NBA super-agent Dan Fegan (hired by Parsons this past summer), and, perhaps most importantly, the “human element” of dealing with Chandler Parsons on a personal level.
When all factors are included, there is no easy choice for the Rockets. But it is a choice that will be closely followed by Rockets fans.
Mike D’Antoni: The Rockets isolation offense wasn’t pretty, but it was effective
Former Rockets coach Mike D’Antoni made an appearance on the Thinking Basketball podcast to discuss his career, and he went into his stretch with the Houston Rockets (2016-2020).
One of the big topics discussed was the isolation sets that the Rockets ran often and why they did it.
“If that one-on-one was not efficient, we wouldn’t do it,” said D’Antoni. “But it was doing, if I’m not mistaken, 1.2-something (points per possession) ridiculous. 1.16, for a long time, was the standard of the best offense an NBA team had. We kind of blew that out of the water a little bit (at) 1.20, but our isolation game was like 1.25, 1.24, so it was like — why wouldn’t we isolate?”
The former Rockets coach admitted it was not the most pleasing offense to the eye.
“People don’t like it,” said D’Antoni. “Aesthetically it’s not good. I don’t love it. I would rather pass the ball around. And if I had a team that didn’t have James Harden, guess what? We’d be passing the ball around… It wasn’t pretty. People can complain. But when you have the most efficient offense in NBA history, or close to it, why wouldn’t you do it? Just because you want to look pretty?”
D’Antoni talked about how good the Rockets second units were in the 2017-18 season because of Chris Paul, citing how often the Rockets boosted their lead or turned a deficit into an advantage when they turned to the bench.
“Chris was just a maestro at running our offense, and doing it a little bit (Steve) Nash-like,” said D’Antoni. “Harden had to do it like Harden did it, but both of them were good. Both of them were perfect.”
D’Antoni said part of the reason for the iso sets was he wanted to maximize James Harden and make him “the best player he can possibly be.”
“James is one of the smartest players — and there are a bunch of them — that I ever coached,” said D’Antoni. “I thought probably two or three years there, he had a complete mastery of the game. He went over 50 I don’t know how many times in a row. We were banged up one night and I said, ‘James, you might have to get 50 tonight for us to even have a chance to win.’ He gets 60 and we win. Stuff like that. He was able to do stuff (that)… just a mastery of the game.”
On how close the Rockets were to winning a title, said D’Antoni, “I thought we had it, the third year until Chris went down. Maybe not. Who knows, because Golden State had hearts of champions. Those guys are hard to beat. But I thought we had a good chance at it, that’s for sure.”
Why Alperen Sengun will come off the bench
With Bruno Fernando expected to start, here’s the plan for the Rockets second-year center
When the Rockets traded Christian Wood, it was crystal clear that Alperen Şengün was the new starting center for the Houston Rockets.
As we’re on the cusp of the Rockets 2022-23 season opener, there’s only one problem — he’s not.
Bruno Fernando is expected to get the starting nod at the five for the Rockets, leaving many to wonder why the second-year center out of Turkey is coming off the bench.
There are a couple reasons why.
First, the Rockets are trying to optimize their prospects, putting them each in the best position to succeed. In the case of Sengun, they want to leverage his passing skillset by making him an offensive hub. That’s difficult to do when you have ball-dominant guards in Jalen Green and Kevin Porter Jr., who thrive out of isolation and are trying to make progress leading pick-and-rolls.
Fernando is a much more limited player, but he fits better right now with the starters because he screens/rolls hard and plays above the rim as an alleyoop threat — it’s been fairly apparent in the preseason how the guards use him. While not a great defender, Fernando also is more of a rim protector than Sengun.
Secondly, Sengun needs to adapt more to the NBA game. The Rockets very much believe in his prospects — he’s only 20 years old — and they still consider him the best five on the roster. But the NBA is a much different game than EuroBasket, which is where he spent more of his offseason focus. The days of just dumping the ball into a post player seem to be dwindling in the NBA. He’s got to get quicker, stronger, tougher — but most important of all, he’s got to shoot the ball better from range.
In a culture where coming off the “bench” is considered a demerit (it shouldn’t be), you have to explain the reasons why — but keep in mind, his minutes will still be significant. I expect he will likely get in the 24-26 range this year, an increase over the 20.7 he got last season. He’s still going to have plenty of opportunity to develop.
My two cents: I give the Rockets props for doing this so early. It’s been apparent to me that the Rockets have multiple players who would be considered secondary playmakers, and to maximize their skills, they need the ball in their hands (imagine if the Rockets drafted Paolo Banchero … grateful every day that Jabari fell to #3!). This hopefully allows for that. Playing Sengun off the bench gives you an opportunity to play a variety of ways and also covers up a current deficiency at backup point guard.
I don’t want to watch Sengun follow the guards around — I want to watch peak Sengun running offensive sets.
Overall, I like it — let’s get the season going.
Rockets extend Kevin Porter Jr. to incredibly team-friendly deal
What’s being reported as a four-year, $82M extension is actually a one-year, $15.8M extension with full club control
Today was the deadline for the Rockets to extend Kevin Porter Jr. The Rockets have had an offer extended to KPJ for some time and the word behind the scenes was it was likely this day would come and go without a deal.
That changed in a hurry Monday morning.
The Rockets and KPJ agreed on a reported four-year, $82 million extension — at least, that was the initial report.
In truth, the deal is not that at all and is more the spin of an agent. Only the first year of the deal, at just $15.9 million, is guaranteed. The Rockets have until June 30, 2024 to decide if they want to pick up the two following years (2024-25 and 2025-26).
It’s clear KPJ accepted the Rockets longstanding offer because it is one extremely team-friendly deal.
What's being reported: KPJ signed a four-year, $82M deal extension.
What actually happened: KPJ signed a one-year, $15.8M extension.
Rockets have two years to watch KPJ's progress and decide if they want to pick up an additional two-year extension or not.
— ClutchFans (@clutchfans) October 17, 2022
“We value the player and the person that Scoot is becoming and are eager to invest in him and his journey,” said Rockets General Manager Rafael Stone. “He’s expressed how happy he is to be with this organization and has shown his commitment to putting in the work both on and off the court. We are excited for the opportunity to continue to build something special with him.”
In essence, the structure of this contract fully acknowledges the risks associated with betting on KPJ. It’s not the money you’re giving him — it’s the years. If you give him a long-term deal with fully guaranteed money and things go south, that is an unmovable contract — a cardinal sin to give out when your rebuild is going so phenomenally well after the drafting of Jalen Green and Jabari Smith Jr.
This deal reflects that risk and comes close to eliminating it. The Rockets control all the upside. If KPJ pans out beautifully, they can extend him — it’s 100% their decision. If he doesn’t pan out or the roster/core shifts in an unexpected way — such as being in position to draft Scoot Henderson — KPJ could be a large expiring contract next season.
The Rockets basically signed KPJ to the Sam Hinkie Special (contracts you saw with Chandler Parsons, Jae’Sean Tate and KJ Martin), but with much bigger dollar figures.
For KPJ’s part, there is a small win — he’s gets almost $16 million next season and is signed for this season ($3.2M) and next. He doesn’t have to worry about the finances as much while still staying highly motivated to play well. He didn’t fully bet on himself and take this to restricted free agency, but he did still take a deal that incentivizes him to earn it. But this deal isn’t in the same stratosphere as the ones you saw signed by Tyler Herro and Jordan Poole.
The bottom line: There are risks to signing KPJ that were mitigated by this unique contract structure. If you are a fan of the Rockets remaining flexible as they strive to build a contender, you should be thrilled with this. Big win for Stone and the Houston front office.
KJ Martin reportedly drawing interest on trade market
Rockets have had “ongoing talks” with Phoenix Suns about the third-year forward
According to Jake Fischer of Yahoo Sports, the Phoenix Suns have had “ongoing talks” about acquiring Rockets forward KJ Martin while Portland and Miami are “two other known teams with interest in Martin.”
There has been talk of trading KJ since before the summer when his father, former NBA All-Star Kenyon Martin, reportedly sought a trade for his son. With the Rockets holding multiple picks in the draft, it appeared the writing was on the wall for reduced minutes for KJ.
Martin has looked like a trusted member of Stephen Silas’ rotation so far in preseason. KJ has played in all three games, averaging 11.0 points and 4.0 rebounds in 26.0 minutes, hitting 5-11 from deep.
At the same time, Jabari Smith Jr. is the future, Jae’Sean Tate seems to be the coaching staff darling and Tari Eason has exploded onto the scene. Minutes for KJ could be available but they will be hard to come by.
If the Rockets are going to trade KJ, what should be the asking price? My feeling is a “good” second-round pick (one that could be expected to be in the 31-42 range) would be the goal. If the Rockets were offered a lottery-protected first-round pick, I think that would be a steal right now for Houston.
What could make more sense is if the Rockets combined KJ Martin with a player like Eric Gordon, especially given the goals of suitors like the Suns, Blazers and Heat.
Jabari Smith steals show in Rockets preseason opener
The Rockets rookie is legit as we take a look at what else stood out in Houston’s preseason rout of the Spurs
Finally, Rocketball is back — the Rockets destroyed the San Antonio Spurs 134-96 in the preseason opener Sunday night.
Granted, the Spurs look flat out terrible (the top contender for Wembanyama?) and may finish dead last (and it showed), but there were a number of things that played out in this game that should get Houston fans excited.
But before I get into that, I want to give a huge shout out to everyone who supported RocketsWatch Sunday night. We are watching and discussing Rockets games in realtime this season and the debut was overwhelming. There were over 700+ fans watching the game with Roosh Williams and I in what might be the largest online watch party ever for a Rockets game. The live reactions from the fans were priceless!
Let’s talk about what stood out in this game:
Jabari is the real deal
Going into Sunday night’s preseason opener for the Rockets, the biggest question on the minds of fans was simple — how will #3 overall pick Jabari Smith Jr. look in his first NBA action?
The answer is good. Really good.
Jabari threw down a dunk out of the gate and then locked in on high-energy defense on the other end and right away you knew — the Christian Wood Era was over. Jabari’s impact was immediate on both ends of the floor. Smith finished with 21 points on 8-15 shooting, including a blistering 5-8 from deep, to go with eight rebounds in 24 minutes.
Jabari described himself as “a lot more loose” than he was at Summer League, when he struggled to knock down his shots.
“It was easy,” said Jabari. “My teammates made it easy for me, finding me when I was open. The rest just came from knocking down shots, running the floor, trusting the offense and trusting my teammates.”
What most impressed me was how quick of a trigger Jabari had on the catch-and-shoot. He would receive a pass out of the post or a cross-court pass in the corner and would instantly let it fly, shooting easily over his defender’s reach. This trait stood out and was very Klay Thompson-esque. In the second half, Jabari hit a pull-up triple in transition (his fourth) that was very enticing, then absolutely slayed those of us in the RocketsWatch room when he took two long strides back from the free throw line to drain another triple.
At that point, it was official — the rookie was clowning the Spurs. I can’t tell you how thrilled I am that the Rockets drafted Jabari. This man is going to fit like a glove and will be a ridiculous two-way weapon for the Rockets long term.
Defense. They’re actually playing it. It’s true.
I don’t need to repeat that the Rockets were dead last in defense last year, but… the Rockets were dead last in defense last year. Although, maybe I need to turn that frown upside down.
Sunday, however, was a different animal and you could tell immediately. The Rockets were hustling, moving quickly on rotations and closeouts.
“It’s the defense, obviously, that we’ve been concentrating on,” said Stephen Silas. “Our help was good tonight. Our multiple efforts were really good… I’m super encouraged by our intensity on the defensive end.”
Jabari was a big part of that. He made some clear mistakes, sure — I’m not going to say he was perfect — but he seemed to set the tone. Still, it’s not just Jabari — it’s clear to me the mindset of this team is in stark contrast to what we’ve seen the past two seasons. Maybe it’s the Jabari Effect or maybe Lionel Hollins is making his presence felt, but this does not look like the 2021-22 Rockets on this side of the ball.
Tari Eason is pretty much plug-and-play
I had my doubts that Tari Eason would get a ton of run in this game, but Silas played him early (note: Jae’Sean Tate sat this game out). Without having any clear plays run for him, Tari fought and scrapped for 21 points and 10 rebounds (six offensive!) in just 21 minutes. He hit 9-13 from the floor.
“My mentality never changes,” said Eason. “I’m always going to be in the right spot, get after it defensively and be one of the hardest playing dudes on the court. I think that translates at any level and I’m just going to continue to do that.”
He plays like his hair is on fire and has tremendous potential as a two-way demon. Throw him out there when things get stagnant and he’s going to make things happen.
I’ve felt that the Rockets will likely bring Tari along slowly until they figure out what the long-term solution is for guys like KJ Martin, but Operation Patience isn’t going to work if he keeps putting up lines like this. You can’t keep him to the bench or send him to the G-League.
Is Bruno Fernando the backup center?
It sure seems that way. After news broke that the Rockets had signed Fernando to a four-year, nearly $11 million deal, Bruno was the first big off the bench, subbing in for Alperen Sengun.
I’ll be honest — this really surprised me. I expected that Usman Garuba would have the clear inside track to the spot. Fernando also seemed like a good bet to be on a two-way contract, but now with this new deal, Fernando is going to be on the 15-man roster and barring a trade, someone has to be cut (Boban? Favors?) that isn’t expected to be.
But Fernando, who sources say has been terrific in camp, showed why he got that contract, finishing 3-3 from the field and was a +18 in just 11 minutes. He was very effective on rolls, capping a pair of alleyoop passes from Kevin Porter Jr. I would be lying if I said I saw this coming, but it’s a welcome development.
It’s only one preseason game, but we still can draw a lot from how Silas sees the rotation.
Bruno looking like a good bet for the backup center role was not the only surprise. KJ Martin and Daishen Nix, along with Bruno, were the first subs of the night. That indicates what we expected, that Nix is in the lead for the backup PG spot over TyTy Washington, who I would guess will run the show with the RGV Vipers early on. I like TyTy as the better bet for this spot long term, but right now the job appears to be Nix’s to lose.
But KJ is a little surprising, given he reportedly wanted out this past offseason with the Rockets slated to bring in a couple bigger prospects (Jabari and Tari) at his position.
Garrison Mathews played only five minutes. The prediction many have made that Silas would play him 15+ minutes this year is not looking so hot.