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Houston Rockets Salary Cap Update: 2015 Off-Season Edition

David Weiner breaks down the current salary cap situation for the Houston Rockets after an off-season full of ups and downs,

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Houston Rockets 2015 Offseason

It’s been an up-and-down journey thus far for Houston Rockets fans this off-season.

UP:  The Rockets pulled in a nice haul in the 2015 NBA Draft, nabbing Wisconsin small forward Sam Dekker with the #18 pick and stealing Louisville power forward Montrezl Harrell with the #32 pick.  Mock drafts had Dekker going as high as #8 and rarely lower than #15; and most mocks had Harrell as a sure-fire first round pick.

DOWN:  Not long after the draft, word came out that Spanish star point guard (and 2009 second round pick) Sergio Llull had elected not to accept a contract offer from Houston, believed to be for a substantial portion of the Non-Taxpayer Mid-Level Exception (MLE).  One of the world’s best players outside the NBA, Llull represented a potential solution to the Rockets’ point guard troubles.  But, alas, it was not meant to be this summer.  (Note: Llull has since reportedly agreed to a contract extension with Real Madrid that might actually lower his NBA buyout amount for next summer.)

UP:  Early in the July Moratorium, the Rockets agreed to terms on new deals with Corey Brewer (three years, $23.4 million) and Patrick Beverley (four years, $23 million).  Both signed contracts that decline in salary each year.  Brewer’s starting salary is the maximum amount Houston could sign him to with Early Bird rights; and his total contract pays him the exact same amount as Trevor Ariza over the next three years.  The fourth year of Beverley’s deal (at just over $5 million) is fully non-guaranteed.  Given the contracts that have been handed out this summer, both deals were largely viewed as reasonably good value.

DOWN:  On July 4, the league’s premier (departing) free agent, LaMarcus Aldridge, announced that he was joining the San Antonio Spurs, shunning the Rockets’ bid for him.  A key reason for the speedy agreements with Brewer and especially Beverley (a restricted free agent) was to prove to Aldridge that Houston would be fielding a competitive roster.  It is believed that the Rockets were attempting to acquire Aldridge via sign-and-trade using a package centered around Jason Terry (to be signed-and-traded via his Bird rights), Kostas Papanikolaou (and his non-guaranteed contract) and young players and/or draft picks.

UP:  The Rockets added veteran shooting guard Marcus Thornton on a one-year veteran’s minimum deal.  While not much of a defender, Thornton is expected to provide much-needed three-point shooting to a team that utilizes the three-point shot more than any other team.  He is also capable of the occasional scoring outburst.

DOWN:  Seeking a more defined role in advance of hitting free agency again in 2016 (and probably also a little miffed that the Rockets were not willing to use their MLE on him), Josh Smith bolted Houston for the Los Angeles Clippers after endearing himself to Rockets fans during the team’s recent playoff run.

UP:  The Rockets agreed to a new deal with restricted free agent K.J. McDaniels (three years, $10 million, using a portion of the MLE).  The McDaniels contract includes a team option in Year 3; and by virtue of signing him outright (rather than waiting to match an offer sheet he could have signed elsewhere), the Rockets can trade him without restriction after December 15.

DOWN:  Several hours went by following news of the McDaniels signing without the Rockets making another roster move, leaving many fans to be moderately bored for a short period of time.  But Houston’s most notable off-season move came later that evening.

Ty Lawson traded Houston Rockets

In Ty Lawson, the Rockets have that secondary play-maker they’ve lacked

UP:  Houston pulled off a major trade, acquiring Nuggets star point guard Ty Lawson and a 2017 second round pick in exchange for Papanikolaou, Pablo Prigioni, Joey Dorsey, Nick Johnson, and a lottery-protected 2016 first round pick.  In order to make the salaries match in this trade, the Rockets had to renounce their rights to Terry, whose $8.7 million cap hold came off the books, allowing Houston to take back over 150% of its outgoing salary, which is reserved only for teams whose total team salary (including players’ cap holds) does not exceed the luxury tax threshold upon completion of the trade.

The downside risk of acquiring Lawson — who not long ago was arrested for his second DUI this year — was mitigated by several factors.  None of the players traded to Denver were in the Rockets’ rotation.  The 2016 first rounder immediately converts to a 2017 second rounder (via Portland) if the Rockets somehow miss the playoffs this season.  But most notably, Lawson agreed to make the final year of his contract (for over $13.2 million) fully non-guaranteed, essentially making it like a team option for Houston (although, unlike with a “real” team option, the Rockets would not have any Bird rights to Lawson next summer if they waived him).  At worst, the Rockets will have wasted a draft pick and some money on a troubled point guard.  At best, Lawson can be that second ball-handler and shot creator the Rockets desperately missed in their recent playoff run.

With those ups and downs out of the way (and with more sure to come), it’s time to once again take a look at the team’s salary cap situation and where the Rockets can go from here.

Player Salary, Exceptions and Available Cap Room

The Houston Rockets currently have the following player salary commitments, cap holds and salary cap exceptions available for the 2015-16 season:

Player salary commitments:  Dwight Howard ($22.36 million), James Harden ($15.76 million), Lawson (12.4 million), Brewer ($8.23 million), Ariza ($8.19 million), Beverley ($6.49 million), McDaniels ($3.19 million), Terrence Jones ($2.49 million), Donatas Motiejunas ($2.29 million), Dekker ($1.65 million), Clint Capela ($1.24 million) and Thornton ($947,276).

Cap holds:  None.

Other Salary Cap Exceptions:  Houston has some small trade exceptions from the Alexey Shved ($1.62 million), Isaiah Canaan ($816,482) and Troy Daniels ($816,482) trades.

The Rockets used a portion of the MLE — which can be either the Non-Taxpayer MLE ($5.464 million) or the Taxpayer MLE ($3.376 million) — on McDaniels.  If Houston elects to use the Non-Taxpayer MLE (of which they will have about $2.27 million remaining) this season, it will be subject to a hard cap at the “apron” level of $88.74 million.

The maximum team salary (or “soft” salary cap) for 2015-16 came in at $70 million, with the luxury tax threshold coming it at $84.74 million, both numbers a little higher than projected.  However, based on their existing salary commitments (totaling over $85.2 million thus far), the Houston Rockets are officially over the luxury tax threshold.

More Moves Coming

With the Rockets already in tax territory, they need to be very careful about their next moves; but with only 12 players under contract, they still need to add to their roster in advance of training camp in a couple of months.

Reports are that Houston has agreed to terms with former Rocket Chuck Hayes on a one-year (partially guaranteed) veteran’s minimum deal to re-join the franchise that gave him his NBA start.  Assuming that Hayes makes the roster and is not waived before January 10 (when all NBA contracts become fully guaranteed), Hayes will make nearly $1.5 million this year based on his years of service in the league; however, by signing Hayes to a one-year deal, the Rockets will only have to pay him the two-year veteran’s minimum salary ($947,276, which will also be his cap hit), with the league picking up the tab for everything above that amount.  (Thornton is in a similar situation on his one-year deal, getting paid nearly $1.2 million, with only $947,276 of that coming from Houston.)

There are also reports that the Rockets have extended a contract offer to Terry, presumably also a one-year veteran’s minimum deal.  While Terry may still be negotiating for a second year on his deal, that concession could be costly to the Rockets, both this season and next.  Terry’s minimum salary (like Hayes) is nearly $1.5 million this year; however, for two-year minimum deals, the team is on the hook for the player’s full salary (and the cap hit would match that salary).  Signing a two-year deal with Terry would cost the Rockets an extra $1.38 million this season in salary and luxury tax than what they’d pay for a one-year deal, let alone the salary commitment for 2016-17.

Shortly after the draft, it was reported that the Rockets had reached an agreement to sign undrafted free agent Christian Wood to a contract.  Presumably, it is a two-year minimum deal with a partial guarantee.  Although his rookie minimum salary would be $525,093, for purposes of determining whether the Rockets are over the luxury tax threshold or the apron level, his cap figure will be the two-year veteran’s minimum salary ($947,276).

Because the Rockets are over the luxury tax threshold, each veteran’s minimum signing will cost owner Les Alexander at least an extra $1.42 million in luxury tax (or more, if an older vet is signed to a two-year deal), on top of the player’s actual salary.

The Curious Case of Montrezl Harrell (and the MLE)

Montrezl Harrell Summer League Rockets

Montrezl Harrell is worth a portion of the MLE, but at what cost to the Rockets’ cap flexibility?

Probably the most intriguing roster move may relate to what the Rockets do with Harrell.  As a high second round pick, Houston ideally would like to sign him to a three- or four-year deal paying above the minimum salary using the MLE.  Some players drafted shortly after Harrell have received some relatively sizable contracts, such as #33 pick Jordan Mickey (four years, $5 million, presumably with over $3 million guaranteed) and #36 pick Rakeem Christmas (four years, $4.3 million, with $3.15 million guaranteed).

Unfortunately, while Houston still has more than enough remaining of the Non-Taxpayer MLE to give Harrell a similar deal, the Rockets are dangerously close to the apron level, where they would be hard-capped if that MLE were used.  Assuming that Terry, Hayes and Wood are all added on minimum deals, the Rockets would only have enough space to pay Harrell about $665,000 in Year 1 of an MLE deal without salary being cut elsewhere.  This would also limit the Rockets’ ability to add any more salary, even for 10-day contracts and other minimum salary signings.  The hard cap is truly a HARD cap.

For these reasons, it seems that the likeliest course of action (barring a trade involving Harrell or otherwise freeing up a meaningful amount of salary) would be to sign Harrell to a one- or two-year rookie minimum deal.  However, Harrell does not have to accept a two-year minimum deal if he does not want to.  He could instead opt to accept a one-year non-guaranteed contract for the rookie minimum — the required minimum tender for the Rockets to retain his NBA rights — and become a restricted free agent next summer.  This was the same strategy used by McDaniels last year with the Philadelphia 76ers, and that strategy clearly paid off for K.J. this summer.  But McDaniels had the benefit of assured playing time on a horrendous Sixers team, whereas Harrell will likely be relegated to the D-League for most of this season, with no assurances of NBA playing time on a talent-laden Rockets roster.

With Harrell not being signed to an MLE deal, the Rockets would be free to sign as many minimum contracts as they wish in order to fill out their training camp roster and would be free to make trades taking back additional salary (although they will likely be limited to the 125% matching rules for taxpaying teams).  Of course, any additional salary would still be subject to payment of the luxury tax.

To Extend or Not to Extend?

Another key issue on the table for the Rockets this off-season: whether or not to extend the contracts of Jones and/or Motiejunas.  Each is eligible for an extension of their rookie contracts, which can be up to four (new) years in length and at up to the maximum salary (based on the new increased salary cap), although odds are that each would get less than that on an extension.

As Bobby Marks wrote about recently, Jones and Motiejunas could be two of the most highly coveted free agents next summer.  With the vast majority of teams expected to have copious amounts of cap room, and with the league mandating a minimum team salary at 90% of the new salary cap, teams will be spending like drunken sailors, out of both desire and sheer necessity.

Terrence Jones Donatas Motiejunas

Both Terrence Jones and Donatas Motiejunas are due lucrative new contracts next summer

But even with the imminent threat of them being poached in free agency next summer, it is not expected that the Rockets will take the extension route with either player.  If allowed to hit free agency, each would have a much lower cap hold than what he would likely get on an extension or in free agency ($6.22 million for Jones; $5.72 million for Motiejunas).  Having those lower cap holds gives the Rockets greater flexibility if they want to pursue another star free agent, such as Kevin Durant in 2016, or other avenues for roster improvement.  The Spurs recently used this strategy (electing not to sign Kawhi Leonard to an extension last summer) in order to gain the cap flexibility to sign Aldridge this summer.

Don’t be surprised if the Rockets explore trade scenarios for at least one of Jones or Motiejunas, perhaps for a future draft pick or a power forward with more years remaining on his contract.  It is unlikely that Houston can afford (or is otherwise inclined) to re-sign both to large new contracts when both play the same position.  On the other hand, the Rockets may just as well be inclined to let both play out the year and go with whichever player best distinguishes himself.  Or hell, they could re-sign both.  There are options galore on that front.

Conclusion

It has been a pretty wild off-season thus far for the Houston Rockets.  With the addition of Lawson, they are positioned as a top title contender this season.  While the likely inability to lock up Harrell on a longer-term deal is not ideal, it is a small price to pay for avoiding a hard cap and being able to add to the roster and to make in-season moves.  And with a roster lined with veterans on reasonable contracts and first round picks on rookie scale deals, the Rockets have plenty of flexibility going forward, whether via trade, free agency or otherwise.

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Houston Rockets Draft Decisions: Who Will Be the #3 Pick?

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Houston Rockets Podcast

It’s officially NBA Draft Week!

The weeks of speculation are coming to an end as we’ve just about arrived at the 2024 NBA Draft. The Rockets hold picks #3 and #44 and could be quite active on the trade market.

Dave Hardisty and David Weiner paired up on the ClutchFans podcast to discuss the options before the Houston Rockets as they approach the June 26th NBA Draft. Is it really down to Donovan Clingan and Reed Sheppard as options? The pair also discuss trade-down options and whether Devin Carter could be intriguing to Ime Udoka. And are the Rockets a darkhorse for a Paul George trade?

The podcast premieres at 8:00am CT! Come join us!



CLUTCHFANS PODCAST: SPOTIFY | APPLE

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Podcast: Houston Rockets options with the #3 pick of the 2024 NBA Draft

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Houston Rockets 2024 NBA Draft prospects Zaccharie Risacher Stephon Castle Reed Sheppard Donovan Clingan

The offseason is now underway.

The forecast looks good for the Houston Rockets, but… there’s pressure as well this offseason because there are a handful of other West teams that might have rosier futures. Ime Udoka wants to win and win big. As we are about five weeks away from the NBA Draft, what are the Rockets looking to do this summer?

David Weiner joined Dave Hardisty on the ClutchFans podcast to discuss the Rockets shockingly landing the #3 pick and their options in this draft, including Reed Sheppard, Donovan Clingan, Zaccharie Risacher, Stephon Castle, Matas Buzelis and others. They also discuss the possibility of some big game hunting in Houston.


CLUTCHFANS PODCAST: SPOTIFY | APPLE

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Podcast: Steven Adams, Mikal Bridges and Trade Possibilities for the Rockets

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Houston Rockets Trade Deadline 2024

The Houston Rockets already made one deal, acquiring center Steven Adams from Memphis for a handful of second-round picks, but we still have several days left before this Thursday’s NBA Trade Deadline.

Are more deals on the way?

Rumors of interest in Mikal Bridges have swirled, with the Rockets holding precious (and unprotected) first-round picks from Brooklyn. They also could use some help inside this season, which Adams can not provide. Shooting is always in demand.

David Weiner joined Dave Hardisty on the ClutchFans podcast to discuss the Adams trade, its impact on the Rockets in 2024-25 and beyond, the Mikal Bridges rumors, the Brooklyn picks, other trade possibilities and options for Rafael Stone moving forward. Also discussed is the play of Houston’s core 6 prospects: Amen Thompson, Cam Whitmore, Alperen Sengun, Jabari Smith Jr., Tari Eason and Jalen Green.


CLUTCHFANS PODCAST: SPOTIFY | APPLE

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Rockets trade for center Steven Adams

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Steven Adams Houston Rockets

The Rockets made a surprise trade on Thursday, sending the contract of Victor Oladipo and three second-round picks to Memphis for center Steven Adams.

The deal came together quickly and the Rockets had a small window to get it done, hence why this trade was made with a week to go until the trade deadline.

The Price

When you consider that Memphis did this for cost savings primarily and that Adams would not play for any team in the league this season, the price seemed a little high to me. The Rockets gave up the OKC second-round pick this year, which is no big loss, but they also give up the better of Brooklyn’s or Golden State’s second-round pick this season. That’s a pretty good pick (likely in the late 30’s). They also give up the better of Houston’s or OKC’s second-round pick in 2025. If things go as planned for the Rockets, that pick should be in the 45-55 range.

But they didn’t sacrifice a first-round pick, which would have been brutal, and they were not going to use all those seconds this season. So it’s just a matter of opportunity cost — who else could they have gotten for this package?

My understanding is they (particularly Ime Udoka) are very high on Adams.

The Rockets also did this move for cap purposes as well. By moving out the Oladipo contract, which was expiring, and bringing in Adams’ deal, which is signed for $12.4M next season, the window for the Rockets to put together a trade package for a star player is extended out until the 2025 trade deadline. They continue to wait to see which players, if any, shake loose here and become available. They want flexible (see: expiring) contracts that they can combine with assets and this gives them another year to be in that position.

The Trade

It’s not often that the Rockets acquire a player I had not considered beforehand but that’s the case with Steven Adams. The Rockets sorely need a big with size that provides more traditional center strengths, making Clint Capela, Robert Williams, Nick Richards or Daniel Gafford potential candidates, but Adams was overlooked for a few reasons.

First, the 30-year old big man is out for the season after knee surgery cost him the entire 2023-24 campaign, so the Rockets won’t get any benefit from this trade this season. Secondly, Adams is not your traditional center either when it comes to rim protection.

But what Adams does do, he’s really good at and he has some of the same strengths of Brook Lopez, who the Rockets tried to sign in the offseason. Adams is quite possibly the strongest guy in the league and a legitimate 6-foot-11 with a 7-foot-5 wingspan. He’s an outstanding screen-setter, something that could really benefit the likes of Fred VanVleet, Amen Thompson and Jalen Green. He was also an elite rebounder last season, finishing 6th in the league in caroms at 11.5 a game despite playing just 27.0 minutes a contest.

After watching Jonas Valanciunas absolutely bully the Rockets inside on Wednesday, it should be apparent by now to everyone that this was a pretty big need.

In 2021-22, the Memphis Grizzlies finished #2 in the West at 56-26. Their top two players in Net Rating that season were Dillon Brooks (+11.0) and Adams (+8.3), key cogs in a defense that held opponents to 108.6 points per 100 possessions. They’re both now Houston Rockets.

So this adds another trusted vet to Ime Udoka’s rotation.

The question is will the 30-year old Adams return to form after the knee injury? Adams sprained the posterior cruciate ligament in his right knee a year ago, which cost him the end of that season and the playoffs. He tried rehabbing it and it never got better, so surgery became the option just as this season was kicking off.

I like to think the Rockets did their due diligence on that, despite the short time it took for this deal to come together, but that’s unclear.

If he does bounce back, then Udoka has a big man he can turn to reliably in situational matchups or on nights when the younger bigs struggle. He wouldn’t be Boban or even Jock Landale in that scenario — he’s going to play, so the frontcourt depth in 2024-25 should be better. In the end, they got a starting-caliber center who will have no problems coming off the bench, and that’s what they were looking for.

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On the KPJ trade and future of the Rockets

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The Houston Rockets are back to being a professional NBA team once again.

The Rockets finally ended the Kevin Porter Jr. era on Tuesday, coughing up two second-round picks in order to unload his contract to the Oklahoma City Thunder, getting back the contract of Victor Oladipo and third-year forward Jeremiah Robinson-Earl. The move puts an end to a long investment and very rocky tenure with KPJ.

David Weiner joined Dave Hardisty on the ClutchFans podcast to discuss the Porter Jr. Experiment, the price paid to move him, Houston’s potential trade options moving forward, the new culture and the current state of the Rockets young core.

ClutchFans Podcast: On Apple | Spotify

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