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Houston Rockets Salary Cap Update

David Weiner breaks down the Houston Rockets salary cap situation as they head towards the NBA Trade Deadline next month and explains why keeping Josh Smith beyond this season will be tough.

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Josh Smith Corey Brewer Houston Rockets

Back in October, I wrote that (a) the Houston Rockets had enough room to use the Jeremy Lin trade exception, possibly the Bi-Annual Exception (BAE) and still use salary matching rules to take on additional salary and (b) the luxury tax would not be a significant deterrent for Rockets owner Leslie Alexander.

Well, Rockets GM Daryl Morey has been busy following this very plan.

On December 19, Houston acquired Corey Brewer and Alexey Shved in a three-team trade with the Minnesota Timberwolves and Philadelphia 76ers, with the Rockets surrendering Troy Daniels and three second round picks in the process.  This trade was made possible by utilizing the Lin trade exception to absorb both Brewer’s and Shved’s (mid-sized) salaries without having to comply with the league’s normal salary-matching rules.  By consummating this trade as they did, Brewer and Shved will each be eligible to have their salaries aggregated with those of other Rockets players in trade packages on the NBA’s February trade deadline.

Then, just one week later, the Rockets signed Josh Smith to a one-year deal for the BAE after Smith was bizarrely waived by the Detroit Pistons.  A talented but troubled player was acquired for a song compared to his market value, thanks in no small part to Smith’s large guaranteed salary still being paid by Detroit.  Houston was able to outbid other contending teams because it did not spend its BAE during the offseason.  (As a free agent signing who will have been with his new team for less than 3 months as of the February trade deadline, Smith is ineligible to be traded during this season.)

To make room for Smith, Houston waived Tarik Black.  Black, who had done an admirable job manning the middle for the Rockets while Dwight Howard was out with injury, was the obvious (financial) choice to be cut, since his salary was mostly non-guaranteed.  When the Los Angeles Lakers claimed Black on waivers, the roughly $180,000 of his salary that would have otherwise remained on Houston’s books was cleared.

With these transactions completed, it’s time to once again take a look at the team’s current salary cap situation and where the Rockets can go from here.

Player Salary, Exceptions and Available Cap Room

(Salaries and contract information courtesy of ShamSports.com and some good old-fashioned digging.)

The Houston Rockets currently have the following player salary commitments, cap holds and salary cap exceptions available for the 2014-15 season:

Player salary commitments:

Howard ($21.44 million), James Harden ($14.73 million), Trevor Ariza ($8.58 million), Jason Terry ($5.85 million), Kostas Papanikolaou ($4.8 million), Brewer ($4.7 million), Shved ($3.28 million), Josh Smith ($2.08 million), Terrence Jones ($1.62 million), Donatas Motiejunas ($1.48 million), Clint Capela ($1.19 million), Joey Dorsey ($948,163), Patrick Beverley ($915,243, non-guaranteed), Isaiah Canaan ($816,482) and Nick Johnson ($507,336), along with guaranteed money owed to Jeff Adrien ($915,243), Francisco Garcia ($915,243), Ish Smith ($915,243*), Robert Covington ($150,000*) and Akil Mitchell ($150,000).

* Ish Smith (Oklahoma City) and Covington (Philadelphia) each signed deals with new teams and are eligible to have their salaries partially set off once their respective new deals become guaranteed on January 10.  This will result in some minor savings on both payroll and team salary, the latter of which should provide some welcome additional breathing room under the luxury tax threshold.  (Adrien’s new deal with Minnesota is not large enough to make his Rockets salary eligible for set off.)

Cap holds:  None.

Exceptions:  With the Jeremy Lin trade exception amount whittled down to a practically unusable amount, the Rockets’ lone viable trade exception is a small, $816,482 one generated in the trade of Daniels to Minnesota.  This trade exception could be used to acquire a player making the equivalent of the one-year veteran’s minimum but who is on a three- or four-year deal (meaning that he is ineligible to be acquired using the Minimum Player Salary Exception).

The Rockets are a little less than $1 million shy of the luxury tax threshold and nearly $5 million shy of the “apron” level that also acts as a hard cap for Houston this season.

Trade Season: Opportunities and Constraints

The Rockets have developed a sizable “middle class” (from a salary standpoint), which now consists of Ariza, Terry, Papanikolaou, Brewer, Shved and Smith.

While each of these players may end up as a key rotation piece for Houston, expect one, two or even three of these players (minus the ineligible Smith) to be shopped at the trade deadline as part of a package for a third star.  (While Ariza is far less likely to be traded — both due to his integral impact on the Rockets’ defense and the size of his contract — the fantastic early play of Brewer may make moving Ariza at least a little more plausible.)

Although the Lin trade exception possessed value at the February trade deadline (as a more appealing avenue for another team to dump salary than to take on an expiring contract) or next July (either in trade or as a mechanism to facilitate certain sign-and-trade deals to acquire free agents from other teams), Morey and the Rockets elected to utilize that exception sooner rather than later.  The chief benefit in doing so — aside from getting good players now — is that splitting it into two mid-sized contracts allows for more trade flexibility.  A trade exception cannot be combined with other player salaries for salary-matching purposes; but come February 19, the salaries of Brewer and/or Shved can be.

While the Rockets have great flexibility in how they can structure trades over the next two months, there are new constraints facing them as well.

One such constraint is the more stringent salary-matching rules imposed against tax-paying teams.  Teams whose total team salary would exceed the luxury tax threshold following completion of a given trade may only acquire a maximum of 125% of outgoing salary, plus $100,000.  Teams who would fall below the tax threshold may acquire up to 150% of outgoing salary, plus $100,000 under many trade scenarios.  But with Houston so close to the tax threshold already, and with the Rockets looking to acquire a high-caliber player whose team would not want to take on more salary than it is trading out, any notable trade would likely result in the Rockets venturing into luxury tax territory.

An even bigger constraint to the Rockets this trade season will be the hard cap itself.  Houston cannot exceed the $80.829 million “apron” level at any point this season.  There is no salary cap exception, 10-day contract or other veteran’s minimum signing of which the Rockets could avail themselves to exceed this cap.  For example, if Houston sought to trade four players for one star player, with the Rockets taking on $4-5 million in additional salary in the process, there would be little (if any) room left under the hard cap for Houston to add a 13th player.  If the prorated two-year veteran’s minimum salary at that point in the season is greater than the Rockets’ remaining room under the hard cap, this hypothetical trade would be prohibited by the league office.

2015 Cap Room

Assuming the currently projected 2015-16 cap figure of $66.5 million ends up being accurate (more on that here), and assuming that no further trades are made, the Rockets could have about $7.6 million in available cap room next summer.

To get to this figure, Houston would need to renounce its rights to all free agents except for Beverley (who is inching closer to being due a $2.725 million qualifying offer for meeting the league’s “starter criteria”) and either trade away its 2015 first round pick(s) or have any such player(s) playing overseas next year.  (Since the original publication of this article, I have learned that Brewer officially declined his 2015-16 player option.)

While the Rockets could always open up some additional room by trading away salary, it is unlikely that — barring a trade of Ariza for little to no salary in return — they could generate enough cap room to make a legit run at a star free agent this summer.  Again, that assumes that the current projections remain intact.

This may explain why the Rockets seem to be going “all in” this season.

What To Do With Josh Smith After This Season?

Because the Rockets only signed Smith to a one-year deal, they will not have (full) Bird rights to re-sign him next summer.  Houston will hold “Non-Bird rights” to Smith, which would allow the Rockets to exceed the salary cap to re-sign Smith to a starting salary of up to 120% of his prior salary (in this case, about $2.49 million).  If Smith — who is due to receive about $5.4 million annually from the Pistons through 2019-20 — would be willing to accept this amount, that would be the most ideal scenario for the Rockets (short of Smith taking the veteran’s minimum salary).  But don’t expect Smith to be overly charitable in this regard.

Another option is to use the Mid-Level Exception (MLE) on Smith.  The Taxpayer MLE amount next year is $3.376 million, which the Rockets could pay without having to face many other cap restrictions.  The Non-Taxpayer MLE amount next year is $5.464 million.  Houston could pay this larger amount but would then once again become subject to a hard cap at the “apron” level.

The only way for the Rockets to be able to pay Smith more than the Non-Taxpayer MLE amount would be for Houston to create enough salary cap room to do so.  But this would require renouncing rights to several of their own free agents, losing other salary cap exceptions and otherwise constraining the Rockets’ ability to (re)construct their roster.

The options for re-signing Smith seem to get less and less palatable the higher the amount becomes.  Here’s hoping Smith’s play this season will make the decision as difficult as possible for Morey and company.

Conclusion

After a series of moves, the Rockets have built themselves a nice middle class, which should help them both on the court and in mid-season trades.  Unless the league’s salary cap projections for next season change dramatically, expect Morey to be aggressive in his attempts to add another major contributor to this roster by the February trade deadline.  While the team must maneuver around and under the constraints of dealing with the luxury tax and the hard cap, do not expect Alexander to be deterred by the prospect of cutting a luxury tax check to the league after this season.

The Rockets are very much in “win now” mode.  We’ll just have to wait and see what opportunities present themselves between now and February 19 for Houston to further vault itself up another branch on the very crowded championship contender tree.

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Mike D’Antoni: The Rockets isolation offense wasn’t pretty, but it was effective

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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.”

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Why Alperen Sengun will come off the bench

With Bruno Fernando expected to start, here’s the plan for the Rockets second-year center

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Alperen Sengun Houston Rockets

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.

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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

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Kevin Porter Jr. signs Rockets extension

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.

“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.

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KJ Martin reportedly drawing interest on trade market

Rockets have had “ongoing talks” with Phoenix Suns about the third-year forward

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KJ Martin Houston Rockets

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.

 

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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

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Jabari Smith Jr Houston Rockets

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.

https://twitter.com/brhoops/status/1576753965730889729?s=20&t=X5YfCfDU5HwynBnvqoicSQ

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.

https://twitter.com/FraudeauxNBA/status/1576358215406989312?s=20&t=X5YfCfDU5HwynBnvqoicSQ

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.

Rotation Notes

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.

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