Knicks Salary Cap Outlook

As the Knicks head into one of the most important summers in franchise history, let’s take a deep dive into their 2019 salary cap outlook. 

The Knicks offseason can be broken down into two significant timeframes as far as accounting is concerned: before July 1 and after July 1.

  • Before July 1, the Knicks are operating over the cap. They are approximately $548,147 below the tax line. Since they used their mid-level exception to sign Mario Hezonja, they are hard-capped at the apron of $129.8 million.
  • After July 1the Knicks can create up to $73.2 million in cap space, assuming a projected $109 million cap, given their current roster, and including the cap hold for the number three lottery pick. 
  • Knicks need $70.85 million to sign Kevin Durant and another 7-9 year veteran free agent to max contracts. Durant is eligible for 35% of the salary cap on a max contract as a 10+ year veteran. That equates to $38.15 million on a $109 million cap. Kyrie Irving (or any 7-9 year veteran) is eligible for 30% of the salary cap on a max contract, which equates to $32.7 million.

BEFORE JULY 1

  • Knicks can’t waive a player on an expiring contract to create a roster spot. Since they have 15 players under contract, this means they can’t waive a player to sign a new player or add an extra player in a trade before July 1.
  • Knicks can’t trade a player on an expiring contract. However, they can exercise their team options on the likes of Trier, Ellenson, and Jenkins to make them tradeable (Billy Garrett has a team option, but can’t be traded until July 2).
  • A loophole was closed from the previous CBA that allowed teams to artificially inflate outgoing salary by including non-guaranteed contracts in trades. Under the new CBA, only guaranteed salary is counted as outgoing salary in trades. If a player is traded between the end of the season and July 1, the outgoing salary counts as the lesser amount of the guaranteed salary in the current season and the guaranteed amount in the next season. Therefore, if the Knicks trade Damyean Dotson without guaranteeing his 2019-20 salary, his outgoing salary would count as $0. Since Lance Thomas was signed under the previous CBA, the Knicks can still use his full $7.1 million salary as outgoing salary in a trade before July 1 (under the new rules, they would only be able to use $1 million). 
  • Draft picks count as $0 in outgoing salary if traded before the player is signed. In other words, if the Knicks traded their lottery pick before the draft, they couldn’t use the rookie scale of that draft pick as outgoing salary.

AFTER JULY 1

Before we get into the details, this is important: the Knicks control their own destiny in creating two max spots for Kevin Durant and one 7-9 year veteran. Ok, that said, let’s get into the nuance.

The Knicks will select third in the upcoming draft, which carries a cap hold of $7.8 million. A cap savings of about $1.9 million compared to if they had won the first overall pick, and a small consolation prize for dropping in the lottery. This amount allows them to guarantee Damyean Dotson’s salary before signing any free agents while maintaining space for two max free agents.

For purposes of calculating the maximum amount of cap space available to the Knicks given their current roster, I assume they waive Lance Thomas’s entire 2019-20 salary. He has $1 million guaranteed on June 30, so the Knicks could decide to wait until they see what happens in free agency before waiving him, and then stretch his $1 million guaranteed amount to open up an additional $666,666 in savings. But for now, let’s assume they waive the full amount.

Timing is always important to consider when projecting cap space. If the Knicks want to sign or acquire players BEFORE they sign two max free agents, they are left with only $1,627,714 in extra space before they start eating into the two reserved max spots.

Keep in mind: Each signing the Knicks make up to 12 players is offset in cap savings by the minimum roster charge of $897,158 (based on $109M cap). It’s a timing issue: they are charged a min roster charge until they fill their open roster spots, and then when they do, they are essentially credited that amount back.

So if the Knicks were to sign both Kevin Durant and Kyrie Irving, they would then gain $1.8 million back, which would give them $3.4 million in additional cap space to spend after the two max signings (given the rest of the roster outlined above remains the same).

Allonzo Trier becomes a multi-layered decision based on potential trades, cap space, and market interest. The Knicks can:

  • Exercise his $3.5 million option by 6/20, which would then require them to move another young player (Ntilikina, Dennis Smith Jr., Knox, or their draft pick) to preserve two max slots. However, it would lock Trier in for the 2019-20 season at a favorable rate without concern of the market pushing up his value in restricted or unrestricted free agency. They would acquire his Early-Bird rights in 2020, providing them one more season to decide whether to keep him or let him walk. They could also immediately use his salary in a trade.
  • Decline his option and extend him a $4.2 million qualifying offer by 6/29. This would obviously take up more cap space, but it would allow the Knicks to pause on their decision by gaining the flexibility to rescind the offer by July 13. It would also expose them to the RFA market, where a team could extend an offer sheet at a term (at least two years) and rate higher than what the Knicks are looking to pay.
  • Decline his option, refuse his RFA status, and see what happens. The Knicks could essentially let Trier walk, play their cards in free agency, and either sign him back using space, or if they fill up all of their space and still want him back, they could offer him a min deal (unlikely to work) or use a portion of their Room Exception of ~$4.8 million to re-sign him.

*Note: If the Knicks waive Lance Thomas and don’t reduce his guaranteed amount in a buyout or stretch his cap hit, they can later re-sign him. Thomas would earn the $1 million guaranteed in his contract plus his new salary amount. Since Thomas is an 8-year veteran, he could sign a minimum contract for $2.3 million (even if the Knicks are over the cap), which equates to a $3.3 million pay day next season, which isn’t a bad deal. Thomas would also be eligible to negotiate a no-trade clause as an 8-year veteran with at least four years played on the Knicks.


SALARY CAP EXCEPTIONS

If the Knicks max out their cap space this summer, they will have limited exceptions available to them to add additional players. Once the Knicks drop far enough below the cap to sign top-paid free agents, they lose their mid-level exception. They would also lose their bi-annual exception, but they lost that anyway since they used it this past season on Allonzo Trier.

Under this scenario, the Knicks would gain the Room Exception of ~$4.8 million. They could split up this exception to sign multiple players, each for up to two years in contract length with 5% annual raises.

Of course, they can always add players on minimum contracts.

Unlike first round draft picks, there is no cap hold or exception specific to signing second round picks. If the Knicks want to sign the 55th pick in this year’s draft, they will need to do so as they would with any free agent, using cap space or an available exception. Late second round picks are usually signed to a minimum contract, anyway.


CAP HOLDS

Cap Holds count against team salary until the team renounces them. By renouncing the cap hold, the team still maintains the right to sign the player, but loses any associated Bird rights. The idea is that cap holds prevent a team from clearing cap space, signing a bunch of new players, and then using the Bird rights on their own players to exceed the cap. They must maintain the cap hold of their Bird players in order to exceed the cap in re-signing them.

  • If the Knicks land Kevin Durant and another max star, they will need to renounce all of their cap holds to create the requisite space, unless they trade some of their guaranteed contracts to open up a sliver of space to bring back someone like Luke Kornet using his Early-Bird rights.
  • DeAndre Jordan and Mario Hezonja are non-Bird free agents, meaning preserving their cap holds would only allow the Knicks to make modest increases on their 2018-19 salaries, which would price both players well above their market value, anyway. The Knicks will almost certainly renounce both cap holds. If they end up signing either player, they would do so using space or an exception.
  • Noah Vonleh has an extremely low cap hold of $1.6 million based on the amount of his minimum salary that is not reimbursed by the league. However, he probably played himself into a more lucrative contract than the modest 120% increase the Knicks could offer him by maintaining his non-Bird rights.

RESTRICTED FREE AGENTS

Emmanuel Mudiay and Luke Kornet are eligible to become restricted free agents this summer. If the Knicks decline the options of Allonzo Trier, Henry Ellenson, or Billy Garrett, they would all become restricted free agents. The Knicks must submit a qualifying offer by June 29 to make any of these players restricted and gain the right-of-first-refusal on potential offer sheets.

  • Mudiay’s qualifying offer is $5.75 million. However, his cap hold remains at $12.88 million. 
  • Kornet’s qualifying offer is $2.02 million, but his cap hold is $2.11 million as an Early-Bird free agent.
  • If the Knicks decline Allonzo Trier’s option and extend him a qualifying offer of $4.23 million, they could be on the hook for that amount, which is greater than the $3.51 million he is owed in his club option. 
  • If the Knicks decline Henry Ellenson and Billy Garrett, their qualifying offers would be $1,876,700 and $1,643,842, respectively. 
  • Isaiah Hicks is discussed in the next section.

TWO-WAY PLAYERS

Isaiah Hicks and Kadeem Allen are on two-way contracts. I have not seen it officially reported whether they are both on one-year or two-year deals; however, I believe Hicks is ending his one-year deal and Allen is signed through next season.

  • Assuming Hicks is on a one-year contract, he is eligible to be a restricted free agent (with Early Bird rights) given he spent 15 days with the Knicks this past season. We know Hicks played in 3 games, but it is impossible to know how many days he actually spent practicing with the big clubHicks’ qualifying offer would be the minimum salary of $1.4 million since he has played two seasons as a two-way player under the Knicks. He is only eligible to play on a two-way for one more season. The Knicks can sign him to another two-way to keep him on the team without any salary cap impact.
  • Assuming Kadeem Allen is signed through next season on a two-way contract, he has no impact on the Knicks salary cap this summer.

IMPORTANT DATES

  • May 14: NBA Draft Lottery
  • May 21: John Jenkins can be traded if club option exercised.
  • June 2: Henry Ellenson can be traded if club option exercised.
  • June 20: Allonzo Trier’s club option
  • June 20: NBA Draft
  • June 29: John Jenkins, Henry Ellenson, Billy Garrett club options
  • June 29: Emmanuel Mudiay, Luke Kornet, and Isaiah Hicks (if RFA) qualifying offers due. If options declined on Allonzo Trier, Henry Ellenson, and Billy Garrett, qualifying offers also due.
  • July 1: Free agency begins
  • July 2: Billy Garrett can be traded if club option exercised.
  • July 15: Damyean Dotson’s $1.6 million contract guarantees
  • October 31: Frank Ntilikina and Dennis Smith Jr’s 2020 club options

TRADE RESTRICTIONS

Who can’t be traded?

  • DeAndre JordanMario HezonjaNoah VonlehEmmanuel Mudiay, and Luke Kornet are on expiring contracts without team options that can be exercised, so they cannot be traded.
  • If Luke Kornet or Emmanuel Mudiay eventually sign qualifying offers with the Knicks, both players would be granted de-facto no-trade clauses as they would need to approve any trade. This is by rule of the current CBA which requires consent on trades from players on one-year deals leading to Bird or Early-Bird rights. If the Knicks simply sign either player to a new one-year contract, the same trade consent rule applies.
  • If the Knicks bring back DeAndre JordanMario Hezonja, or Noah Vonleh on one-year deals (including with a team or player option), they would each need to consent to any trade since they all would be playing on one-year deals leading to Early-Bird rights. If the Knicks decline Allonzo Trier’s option and bring him back on a new one-year contract, the same would apply to him (as it would for EllensonJenkins, and Garrett).

Something needs to happen to trade these players…

  • The Knicks can trade their draft picks without restriction until the player is signed, after which they must wait 30 days. Draft picks count as $0 in outgoing salary until the player is signed. 
  • Knicks must wait 90 days to trade players they signed to NBA contracts after December 15, 2018. John Jenkins can’t be traded until May 21, Henry Ellenson can’t be traded until June 2, and Billy Garrett can’t be traded until July 2. None of these players can be traded unless the Knicks exercise their 2019-20 options.
  • Allonzo Trier can only be traded if the Knicks exercise his 2019-20 team option.

Who can be traded?

  • Damyean Dotson can be traded, but if he is traded before his contract is guaranteed, his outgoing salary would count as $0.
  • Lance Thomas was signed under the previous CBA, so he is allowed to be traded using his full salary amount, instead of only the guaranteed portion ($1 million) owed to him next season.
  • Mitchell RobinsonKevin KnoxFrank Ntilikina, and Dennis Smith Jr. have no trade restrictions.

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