The salary cap machinations of the double sign-and-trade involving Kevin Durant and D’Angelo Russell

On top of the surprise that Kevin Durant and Kyrie Irving have agreed to team up in Brooklyn, the Nets weren’t done dropping shocking news – D’Angelo Russell, who looked to be entirely out in the wake of the Nets’ two big-name signings, was not necessarily being let go to sign with any team that had the cap space to pick him up, but rather was going back to Golden State in a double sign-and-trade to bring Durant to the Nets.

Like Miami with Jimmy Butler, the Warriors had no way to acquire Russell on their own; they had to rely on the Nets to be willing to sign-and-trade him to their club. The Warriors have reportedly agreed to send a first-rounder to Brooklyn in order to pay them for their participation in the trade, though we don’t quite know the details of that pick right now. Golden State won’t have to worry about any Base Year Compensation issues with Durant; it may kick in, depending on how high Durant’s actual salary with the Nets is, but it won’t change anything other than the traded player exception the Warriors receive in the deal. Under the publicly agreed upon version of the trade, which requires that both Russell and Durant are signed-and-traded for one another, there will be no trade exception for the Warriors, as Durant’s max deal will trigger the BYC rules for the Warriors and therefore his outgoing salary will be $30 million, his 2018-19 salary, which is enough to take back Russell, Shabazz Napier, and Treveon Graham, but not enough to create an exception to be used later.

Golden State had the same massive apron issues Miami did in the Butler acquisition, though the Warriors solved theirs in a separate move from the sign-and-trade for Russell. Andre Iguodala was shipped to Memphis along with a protected 2024 first-round pick for the Grizzlies’ willingness to take on his $17.19 million salary for 2019-20. That trade plays a massive part in Golden State ducking the apron, which they’ll have to do for the remainder of the season, just like Miami will.

Unlike Miami, who has a bunch of players making mid-tier money, the Warriors are extremely top-heavy. Stephen Curry’s $40.23 million and Klay Thompson’s newly-agreed $32.74 million max contract take up nearly half of the apron by themselves, leaving just about $65.95 million for the rest of the Golden State roster. Russell takes up another $27.29 million himself, along with Draymond Green, who makes $18.54 million next season. The rest of their roster will be filled out with players making $5 million or less, since they still need to field a full team while still staying under the apron. Thompson’s absence after tearing his ACL amplifies the need to find quality role players at the minimum or on Two-Way contracts, as the Warriors will need all the help they can get until he’s able to return.

Golden State has come to three further agreements in recent days: Kevon Looney will return on a three-year contract worth $15 million and Willie Cauley-Stein and Glenn Robinson III will join the team. Terms on the contracts for Cauley-Stein and Robinson aren’t known at this point, though it’s been rumored that Cauley-Stein’s salary will be just north of the minimum. For now, neither player appears in the Warriors’ cap sheet here on Early Bird Rights, but they’ll be added as soon as we get firm numbers on those deals.

Assuming Cauley-Stein comes in at $2 million flat and Robinson is at the minimum, the Warriors will have very little additional flexibility to add to their team. Even minimum contracts add up quickly at $1.62 million apiece. Fortunately, the Warriors have a pair of second-round picks who should be able to help them next season, both of whom only count for $898k on their books for apron purposes. That’s the difference between rookies and sophomores who sign as second-round picks, rather than undrafted free agents; they count for less money on the luxury tax and apron calculations.

Below is an example of what the Warriors’ apron calculation could look like, assuming they stretch the $2 million guaranteed to Shaun Livingston:

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They can open up some more room below the apron by outright trading Livingston, eliminating his $667k stretched hit from their books. Doing so would require a team to have cap space for his full $7.69 million salary; there are only four teams with that kind of room right now: Atlanta, Dallas, and the two teams in Los Angeles, both of whom are waiting on Kawhi Leonard’s decision and would not want to impact their books with Livingston’s salary. Atlanta seems like the best bet; they’re not saving their cap space for anything special and just so happened to be helmed by former Warriors assistant general manager Travis Schlenk.

While not an immediate concern, the Warriors also have a luxury tax issue on their hands. Paying the tax this year would trigger the repeater tax, and while it wouldn’t be all that much in actual cash, doing so would keep the repeater tax clock alive, rather than cutting it off and restarting with the non-repeater tax next year, should the Warriors spend through the 2020-21 threshold. It’s something they can figure out later in the summer or during the season, but with teams’ cap space quickly dwindling, finding a move to get out of the tax may be more difficult.

For the Nets, receiving Durant through sign-and-trade hard-caps them in the same way it does to Miami and Golden State, but they have no real issues with the hard cap due to being so far under the salary cap to begin the summer. They don’t even have to match salary on Durant’s incoming money, since they have the cap space to simply sign him outright. It will be a sign-and-trade, however, because that’s how it has to be in order for the Warriors to acquire Russell; they can’t match Russell’s incoming salary with Durant outgoing in a similar fashion to the Nets.

Brooklyn’s interest in operating as a hard-capped team is entirely based around the first-rounder they got from Golden State to do so, even though the hard cap won’t actually affect them in any tangible way. It’s very difficult for a team to use massive cap space and have to deal with the luxury tax or apron during the same season.

The last bit of intrigue with the Nets is in how they structure the contracts for Durant, Irving, and DeAndre Jordan. They don’t have enough cap space for all three guys at the numbers that have been reported. Durant at his max, Irving at his max, and Jordan on about $10 million will push the Nets way over the cap – I assumed that Jordan was taking the minimum to team up with his buddies when the news first got out that he was going to the Nets. The first solution would be to shave that money off Durant and Irving’s contracts in order to accommodate Jordan’s salary, but ESPN’s Bobby Marks reminded us of a better solution – structure Durant and Irving’s contracts to include “unlikely bonuses”, which come off the cap immediately after a player is signed to his contract. The Miami Heat used unlikely bonuses in 2017 to stretch their cap space further than it would have gone otherwise and the Nets could do the same thing here.

By removing some of their max cap hit through the use of unlikely bonuses, but still making those bonuses possible to reach, the Nets can get Durant and Irving all of their money and still have room to add Jordan to the team. For Durant, the important thing is to tie those bonuses to team success, rather than individual success, since he’s probably going to miss the entire 2019-20 season after tearing his Achilles in the NBA Finals a few weeks ago.

Another way to do this is a sign-and-trade, with the Nets acquiring Durant over the cap after signing Irving and Jordan before him. As Albert Nahmad outlined on Twitter on Wednesday (though not in a thread so you’ll have to scroll back to find his thought process), there’s a path to signing Irving and Jordan, then signing-and-trading Russell (along with Shabazz Napier and Treveon Graham) for Durant.

Operating via sign-and-trade for Durant will maximize his base salary without having to take any off the top for unlikely bonuses. Irving will similarly see his base salary maximized, though he still will fill out the remaining $420,728 of his salary with bonuses, which will drop his cap hit to $32,321,272 and allow them to sign Jordan and Russell (to then be traded to Golden State for Durant). The Nets will also have to guarantee all but $270,573 of Shabazz Napier and Treveon Graham’s contracts to make the deal work, though both will immediately be moved to Minnesota so as to not impact the Warriors’ apron issues.

This can all be a bit confusing, so I’ll outline the steps of each step of the way for the Nets:

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After making the pair of trades that sent out their 2019 first-round picks and Allen Crabbe, the Nets walk into the summer with $67.11 million in cap space.

They can then sign Jordan, Russell, and Irving in almost any order they want, except for a single restriction: Irving can’t go last. Since they’re going to use unlikely bonuses on his contract, they have to have the cap space at the time of the signing to include his base salary and all bonuses, but then once he’s officially on the books, those unlikely bonuses come off their cap.

Considering Russell is the one who is being signed-and-traded to Golden State, it makes the most sense for him to be the last signing, even though technically they could sign Russell first because a sign-and-trade isn’t actually an absolutely simultaneous transaction. It will be written into the contract that Russell has to be officially traded within 48 hours of the execution of the contract, rather than it being an immediate event.

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At this point, they have exactly $898,310 left in space, since the final roster charge won’t come off their cap until after the final of those three signings are made. At this point, they trade Russell, Napier, and Graham for Durant’s max salary. Napier’s contract will have to be fully guaranteed for this deal to work, while Graham’s contract will be guaranteed at least $1,374,784. They could also fully guarantee Graham’s contract and have Napier take a small cut off his guaranteed amount.

Trading for Durant will put them over the cap. After that, they’ll use their Room Exception on Garrett Temple and a minimum on Wilson Chandler and have their final (for now) roster:

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Without a firm answer at this point, we’ll have to wait and see how the Nets and their two stars structure things, though a sign-and-trade for Durant makes a lot of sense from a cap management perspective.