With the 2018 NBA Trade Deadline just a week away, understanding the Denver Nuggets’ financial constraints is essential to making sense of the most hectic part of the NBA calendar.
Where were you on the evening of Jan. 29? I was trying to write a case summary for a management class. The Los Angeles Clippers trading Blake Griffin just months after declaring him a “Clipper for life” made focusing on that pretty difficult. The trade deadline makes focusing on just about anything other than TweetDeck difficult.
It is all-consuming, wonderful, terrible, wonderfully terrible, terribly wonderful. Sacramento Kings fan(s) wait for management to set the franchise back another half-decade. Boston Celtics fans insist, “Terry Rozier is untouchable, even in an Anthony Davis deal.” It is the one time during the NBA season when everything seems possible.
Of course, that’s not actually the case. Teams are restricted, sometimes heavily, in what they can feasibly do. I touched on the Denver Nuggets’ constraints briefly in a recent article, but the situation warrants a more comprehensive discussion.
Where the Nuggets stand
This year, the Nuggets are in a comfortable position with about $106 million in committed salary, over the cap, but well under the luxury tax. There are a few basic guidelines they must follow in any trade, but they are generally free to trade as they please.
Where the Nuggets’ limitations come into play is in the following years. In guaranteed money, the Nuggets only have $89.9 million committed next year, well under the projected salary cap of $101 million.
That, however, grossly understates the Nuggets’ true commitments in 2018-19. Wilson Chandler and Darrell Arthur both own player options next year, for $12.8 million and $7.5 million respectively. There’s a slight chance Chandler declines his, but it is overwhelmingly likely both exercise those options, bringing the Nuggets to $110.2 million in commitments. A slightly less favorable position, for sure, but perfectly manageable.
Well, not exactly. The Nuggets also have a $1.6 million team option on Nikola Jokic. And that sounds great, but it’s not. Here’s an excerpt from my recent piece on the Nuggets’ point guard situation explaining why:
"Nikola Jokic, as a former second round selection, is subject to different rules than most players on their rookie contracts.Former first round picks enter restricted free agency following the expiration of their four-year rookie scale contracts. Second round picks, meanwhile, become restricted free agents if they enter free agency with three or fewer years of NBA service. If they have four or more years of experience, they enter unrestricted free agency, in which the incumbent team does not have first right of refusal.This is Jokic’s third year of service. The Nuggets have a $1.6 million team option for Jokic’s fourth season. To maintain first right of refusal and not risk losing him, the Nuggets will decline Jokic’s mind-bogglingly cheap option and elect to pay him handsomely."
So, the Nuggets will not have a dirt-cheap Jokic in 2018-19. Instead, they will likely have one on a maximum contract with a starting salary of roughly $25.3 million, bringing their total commitments to $135.5 million, well over the projected luxury tax threshold of $123 million.
Cutting salary through trades is not an option for the Nuggets; it’s a necessity.
How the Nuggets got here
Unlike most teams in hazardous financial situations, the Nuggets haven’t done anything egregiously stupid. Sure, Arthur’s contract, originally worth $23 million over three years, is quite bad as a product of an out-of-control 2016 offseason, but it’s far from crippling. The Chandler contract is inconvenient, but it’s not particularly bad. He’s a competent wing, and competent wings are hard to come by.
The Nuggets’ only significant misstep was Mason Plumlee, signing him last summer to a pact worth $41 million over three years. The contract was mystifying at the time, because by then the Nuggets were prepared for Jokic’s impending payday (and Plumlee is who he is).
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I have a hard time chastising the Nuggets for their other burdensome deal, Kenneth Faried’s. He was a good, young player. Denver bet on him, and it bet wrong.
Otherwise, the Nuggets’ situation is largely a product of their own excellence. The Nuggets never expected Gary Harris to merit a massive contract extension. They never thought they’d have to pay this pudgy second round center a maximum contract. But the Nuggets’ scouting, player development and luck have been exceptional.
The Nuggets also deserve praise for cleverly allocating the money in both Harris and Plumlee’s deals to minimize their salaries in 2018-19, helping to alleviate the consequences of their problematic salary commitments.
Obviously, being forced to pay great players is preferable to not having great players to pay, but the Nuggets do have some muddy waters to navigate as a result.
What can the Nuggets do?
For the Nuggets, action is necessary, but thankfully, the situation is far from dire. Dumping Chandler alone, which I doubt would be difficult, would essentially solve their problems. But Chandler’s a fairly competent wing on a reasonable contract. The Nuggets shouldn’t have to do something that drastic.
Far preferable would be attaching a small asset to Arthur or Faried. The perfect target, by my estimation, is the Phoenix Suns. The Suns have $8.8 million in cap space and a glaring need at point guard. The Nuggets could send Arthur and Emmanuel Mudiay for Alex Len‘s expiring deal (provided Len approves the trade, which the Nuggets could guarantee by promising to buy him out).
That alone would likely clear enough 2018-19 salary to avoid the tax (depending on where exactly the tax line ends up and whether Jokic is willing to take a minuscule pay cut).
Next: 2017-18 Week 16 NBA Power Rankings
Whether the above deal is the exact route they take or not, the Nuggets have options. Yes, they need to shed salary, but they’re not going to be forced into some awful, one-sided salary dump, so don’t be surprised if the Nuggets stand pat at the deadline. Denver has work to do, but plenty of time to do it.