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Phoenix Suns, Cap Space and CBA Junk: Explaining The Suns Options

Two new Suns?
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.

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