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David Lee Trade and Salary Cap Implications FAQ

By Greg Chin

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The Golden State Warriors completed their first trade of the season, respecting David Lee’s wishes for more playing time on a different team and dealing him to the Boston Celtics. The Warriors were also motivated to complete the trade to reduce their luxury tax payments, as they were projected to have over $100 million in guaranteed salaries next season after Draymond Green’s near-max contract extension.

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Here are some questions that you might have in light of this news.

Q: What are both teams receiving in the deal?

According to reports, the Warriors will receive Gerald Wallace from the Boston Celtics.

And while the full details of the trade haven’t been released (teams cannot release information regarding any transactions during the NBA moratorium – which ends on July 9), it appears as though the Warriors are only giving up Lee as part of their trade package. However, due to the both teams being over the cap, both trade packages must be within 125 percent of the sum of all the contracts each team is receiving.

As a result, the outgoing salaries from the Celtics must be within $11 million to $19.36 million. Gerald Wallace’s contract is worth $10.1 million, so the Celtics will have to add in another $900k to make the trade work. There is speculation that Chris Babb, whose contract is non-guaranteed, could be thrown in to make the salaries work. The Warriors could then waive Babb’s contract.

It is still unknown whether the Warriors are giving up a future draft pick, but it seems unlikely.

Q: How does this affect the Warriors?

Assuming that the Warriors receive just Wallace’s contract as the only guaranteed contract, they will cut $5.4 million from their wage bill. With the new contract figures (Leandro Barbosa’s $2.5 million and Draymond Green’s $14.25 million) added, the Warriors will have $95.9 million in guaranteed contracts next season.

While it doesn’t seem like much, the $5.4 million will end up saving the Warriors a lot more in luxury payments. The Warriors drop into the third tier of the luxury tax bracket, and will end up paying less per dollar they are over the luxury tax line.

Luxury Cap Tiers (Courtesy of cbafaq.com)

Projected Luxury Tax Payment: $7.5 million + $8.75 million + [$2.5 x ($14.3 million – $10 million)] = $27 million

As per my previous calculations, the Warriors would have had to pay close to $39.15 million in luxury tax payments had they kept David Lee.

Q: Will the Warriors keep Wallace?

The short answer here is: it depends.

The Warriors could end up keeping Wallace if they think he can contribute for them coming off the bench. However, they could also choose to use their stretch provision on Wallace and end up stretching his $10.1 million cap hit over the next three years ($3.37 million per year for the next three years). This would end up saving them even more, as it drops them to the second luxury tax bracket.

Personally, I don’t think the Warriors will keep Wallace. At 32, Wallace is a former shell of himself. He played a career low 32 games last season, and averaged just 1 point per game. Famed for his rebounding prowess, Wallace had just 57 rebounds in total last season.

It seems unlikely that the Warriors would have acquired Wallace if they didn’t plan on using the stretch provision. With those numbers, the Warriors could sign a free agent at the veteran’s minimum and still end up with better production.

Q: How much do the Warriors pay if they stretch Wallace’s salary?

If they do decide to use the stretch provision on Gerald Wallace, the Warriors will have his $3.37 million salary as a cap hit over the next three years. The Warriors will then have $89.17 million in guaranteed contracts next season, putting them $7.57 million over the projected $81.6 million luxury tax line.

Luxury Cap Tiers (Courtesy of cbafaq.com)

Projected Luxury Tax Payment: $7.5 million + [$1.75 x ($7.57 million – $5 million)] = $11.998 million

The Warriors end up saving close to $12 million if they use the stretch provision on Wallace. His $3.37 million cap hit won’t even seem like much after this season, as the cap is set to rise significantly. Under the projected $89 million salary cap for the 2016-17 season, Wallace’s cap hit amounts to 3.7 percent of the salary cap – which is essentially peanuts.

Q: Are these values final?

No, as I said earlier, the NBA’s moratorium is yet to be lifted, which means the values of these reported contracts could still change. The Warriors are still yet to announce their signing of their first round draft pick (and subsequent contract), Kevon Looney, which would obviously impact their salary cap.

But, don’t expect these numbers to change by much.

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