Two new Suns?

Note: I could be entirely wrong on some of my conclusions. I welcome anyone who can provide evidence to the contrary.

We need to clear up some questions about the Collective Bargaining Agreement (CBA), and its impact on the Suns this summer. We Suns fans are in territory we haven't been since 2005 - UNDER the salary cap, for purposes of signing new free agents.

One reason the Suns have not signed any players to big contracts in the past several years, or acquired huge contracts for nothing in return, is because they were not allowed to do so. Teams over the cap (salaries + cap holds + exceptions > $58.044 million) can only sign guys to $5 or less or exchange equal-sized contracts in trade.

Per Larry Coon's, the Suns could position themselves in one of two ways this summer:

  1. As a team UNDER the cap
  2. As a team OVER the cap
When they agreed to large (ie. bigger than $5 million per year) contracts with Eric Gordon, Michael Beasley and Goran Dragic this week, the Suns apparently announced to the NBA that as of July 11, 2012 they would be UNDER the cap.

That means no TPE from the Nash deal, and as I wrote yesterday it also means the Suns have to stay "under the cap" for the next year, with the only exception being the new "room team exception" of $2.5 * 2 years.

(Of course, there's an "out" to this that the allows the Suns to have their cake and eat it too, if they want to spend even more money this summer. Read on for details.)

(Yes, there's another the way the Suns could conceivably execute these contracts while being "over the cap", which will be explained later, but that's a lot less palatable.)

How is that possible for the Suns to make their own decision on being "over" or "under" the cap, you ask?

It's all about cap holds for free agents. At bare minimum, a team is only "under the cap" if their salaries + the midlevel exception ($5 million) + any outstanding trade exceptions put them over $58.044 million. The Suns are under that threshold, even if you theoretically count an $8.2 million TPE from the Nash deal.

At maximum, though, the Suns COULD call themselves "over the cap" by counting all their free-agent cap holds, which exceed $50 million dollars at this point. But while that gets them the TPE, that precludes the Suns from signing ANY players for more than the MLE ($5 million in first year). There are ways around this (below), but they are not very pretty.

Clearly (to me at least) the Suns have decided that they are "under the cap" this summer, by signing Gordon, Beasley and Dragic to deals starting at more than $5 million the first season.

This means they will have to renounce some free agents. Though Nash and Hill may be off the books that day anyway, via the Lakers, the Suns would also have to renounce Lopez, Brooks, etc at least while the Gordon offer sheet is outstanding. If the Hornets match the offer, the Suns can un-renounce as if nothing happened. But if the Hornets don't match, those guys are gone.

Now there ARE ways to keep the rights to their free agents while also signing Gordon, Dragic, and Beasley to bigger-than-$5-million contracts:
  1. Have Beasley and Dragic wait until the Gordon offer sheet is resolved, before signing with the Suns. This one might work, and allows the Suns to keep moving forward without losing assets.
  2. Work out a sign-and-trade with New Orleans for Gordon in lieu of the offer sheet, sending out some salary to New Orleans to offset the Gordon salary, but it does NOT have to be a matching set of salaries. Both the Suns and Hornets are under the cap. The downside here is that the Suns lose assets.
  3. Work out sign-and-trades with Houston for Dragic and with Minnesota for Beasley. The downside of this is that the Suns lose assets (at the least, a second-rounder in each). This strategy, though, would allow the Suns to declare themselves "over the cap" as long as Minny and Houston are under it, so the sign-and-trades don't have to be matching salaries. If the Suns can do all this and declare themselves "over the cap" then they do get to keep the TPE for future use as well as the MLE for more free agents.
While the third option sounds wonderful, I am skeptical that the Suns would do it.

That strategy gives the Suns more room to spend money this summer (the $8.2 TPE and $5 MLE) in addition to Gordon, Dragic and Beasley and I am not convinced that Sarvers wants to immediately put himself back into potential luxury-tax territory.

It's not a bad idea to give yourself options, and the SnT for all three guys gives you that for sure, but I don't know that the Suns care to use those options this summer.

We'll see.

At this point Eric Gordon’s future is in the hands of Hornets GM Dell Demps, yet that didn’t stop him from continuing to try to talk his way to Phoenix on Thursday in Las Vegas where he...

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Steve Nash is riding off into the sunset. Some of you feel betrayed. Others are happy that he got what he wanted. Maybe you’d rather forget; you’re just glad the Suns got something in...

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The ValleyoftheSuns team breaks down all the craziness on Planet Orange, from the Nash trade to the Lakers to the Eric Gordon offer sheet as well as the Goran Dragic and Michael Beasley signings.

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Image of the 2012-13 Suns?

Suns President of Basketball Operations Lon Babby said he wanted to be careful with the Suns cap situation, to allow for a measured rebuilding process that might include one-sided trades where the Suns could absorb a bad contract in order to get a valuable asset (draft picks, young players on cheap contracts, etc). At the least, the Suns wanted to strike on the right players, rather than overspend on middling players.

OKC built their juggernaut by piling up losses (they had top-12 picks for 6 of 7 seasons until 2009-10) and cap space. They used that cap space in 2007 to absorb Kurt Thomas' $8 million salary in exchange for 2 low #1 draft picks. Those Suns picks were ultimately used to draft PF Serge Ibaka at #24 overall and C Cole Aldrich at #11 overall (acquired by trading their own #21 and the Suns' #26 to New Orleans for the #11 and Morris Peterson's $5 million salary). To recap, that's absorbing $8 million in one year and $5 million in another for the rights to a lottery pick and a perennial contender for Defensive Player of the Year.

Sounds like keeping some cap space is a good, measured approach right?

Well, that measured approach lasted all of 4 days.

While Steve Nash was jetting off to LA, the Suns secured commitments from the first 3 players they targeted this summer. Michael Beasley, Goran Dragic and Eric Gordon all agreed to play for the Suns after free agent visits.

The damage? Adding in first-round pick Kendall Marshall, the Suns have committed nearly $28 million in new money for the 2012-13 season.

The problem? The Suns only had a little less than $26 million available to spend, and that's ONLY if they renounce their rights to ALL of their unsigned free agents, including young center Robin Lopez. Whoa.

What does this mean? Hit the jump.

For starters, don't dismiss the problem just because New Orleans will likely match on Gordon, freeing up half that committed money. The Suns still need that cap space on July 11 to even offer Gordon the contract in the first place. In addition, neither Beasley nor Dragic (as far as we know) were told their offers were contingent on Gordon being matched. All three will be signed on July 11. Marshall's cap hold is there on July 11 too, regardless of whether he signed a contract yet or not.

Second, don't count on any TPE from the Nash trade. There is no TPE (traded player exception) for sending Nash to LA for nothing because the Suns are under the cap. The TPE is only granted for teams over the cap sending a player to a team that's under it. Suns had a TPE for the Kurt Thomas and Amare Stoudemire trades, for example, because they were over the cap at the time. Not so, in the Nash trade. Suns just have the salary cap space he leaves behind, which was spent already.

Anyway, back to free agency, where the Suns have already overspent. Unless the Hornets match the Gordon offer AND Dragic and Beasley wait until July 14 to sign their contracts after Gordon's money is freed up again. But that's a game of losers poker. You have to play to win, and that means assuming New Orleans won't match.

They need to rid themselves of at least 2 million in salary by July 11 (unless the Suns work out a sign-and-trade instead, that includes current players heading out to New Orleans) in order to sign all three guys that day.

The easy answer is to use the amnesty clause on either Josh Childress ($6 million this year, $21 million over next 3 years) or Hakim Warrick ($4 million this year, nothing guaranteed beyond that). Amnesty removes the players's salaries from the salary cap calculation, but all the money is still owed to the player on the original schedule.

It sure helps that LA gave the Suns $3 million in cash yesterday, going a long way to completely paying for a Warrick amnesty. Now that the Suns have Frye, Morris and Beasley at PF, the Suns definitely do not need Warrick anymore. And with the LA/Nash money, it would only cost $1 million to make Warrick disappear and to pay for all their commitments (as opposed to still costing $18 million to make Childress go away).

The bummer of amnestying Warrick already is that takes one more round out of the barrel for future moves. Yet, amnesty only helps if you are UNDER the cap, and this month may be the last time the Suns will be under the cap again for years. No use waiting to use Childress' bigger contract for more space. It does not help if you're over the cap.

So, all signs point to an amnesty of Hakim Warrick next week because it's the easiest option.

And even then, there's just enough under the cap for their current commitments. And not enough for Robin Lopez, or Aaron Brooks, or Shannon Brown, or Grant Hill or any other unsigned Suns free agent. The Suns would get the newly-created "room" exception of $2.5 million, given to those teams under the cap who max out the $58 million cap. That might get them a backup 2-guard.

Good news: if New Orleans DOES match the Gordon offer sheet, the Suns do have the ability to UN-renounce players to get their rights back (this is allowed in the case of an offer sheet). So, Lopez and/or Brown or Hill can get their Bird Rights back if the Suns want them.

The only other option is to trade a veteran into someone else's cap space. Armed with extra first round picks, you could envision someone taking on Warrick or Frye with the carrot being a low first-round pick being thrown in to seal the deal. But I suspect the Suns would rather not give away assets in a salary dump anymore, even low first-round picks.

It's possible the Suns will include current players in a sign-and-trade with New Orleans for Eric Gordon, making the net salary increase on Gordon less than $12.9 million this season. But right now the Hornets are dead-set on simply matching the offer sheet to Gordon and thanking the Suns for doing all the work. Again, the Suns still have to create the space to make the offer in the first place, before New Orleans matches it and frees up the money again.

Congratulation, Suns fans! The Suns went out and spent every penny they had. Again.

Here's the Suns vision of an ideal 2012-13 lineup.

Depth Chart
C Gortat Frye
PF Beasley Morris Frye
SF Dudley Beasley Childress
SG Gordon Dragic Min Sal
PG Dragic Marshall Telfair

If New Orleans matches on Gordon, you'd better hope O.J. Mayo is still looking for more money than anyone's willing to offer yet. But that's almost 2 weeks from now.

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