Warning: This is a long post.
So there has been a lot of talk about the TPE. I feel like many Celtics fans have become very knowledgeable about it in a short time given how important getting a TPE from a Hayward S&T could be to the Celtics future. But I thought I’d make a post summarizing how a TPE could be used. Keep in mind I am not a CBA expert, so if anybody sees any errors let me know and I’ll fix them.
Question 1: How big will it be?
-This depends on two factors. The first is Gordon Hayward's first year player salary. He has agreed too, but not yet signed, a 4 year 120 million contract. That contract could be structured in a number of different ways ranging from an ASCENDING deal starting at roughly 28 million, to a DESCENDING deal starting at roughly 32.5 million, to a flat deal at 30 million per year. The second factor is if the C’s take back salary in the S&T. Lets say to make the deal happen the C’s take back Cody Zeller, he has 14 million this year on his contract so the TPE would be Hayward's first year salary minus 14 million. I doubt the C’s will be looking to take back significant money in a Hayward S&T so the most likely outcome is a TPE of Hayward's first year salary. For obvious reasons the Celtics would prefer Hayward's contract to descend giving them a large TPE. The Hornets probably want that as well, as it gives them slightly more flexibility in future years. But Hayward may not want that so it’s an open question.
-As a side note the Celtics could take back a player in a Hayward S&T and still get the full TPE if they match salaries for that player separately. Let’s say for example they take back George Hill (10 million) from OKC as part of a 3 team Hayward S&T where CHA dumps a contract on OKC. They could match Hill’s salary with Theis+Semi (6.75 total salary x 1.75= 11.8 salary match) and thus get the full TPE value from Hayward.
Question 2: How much is actually usable this year?
-Its important to note the c’s are hard capped at the tax apron this year because they used the full MLE on Thompson. The Apron is a salary line roughly 6 million above the MLE which kicks in in certain situation like if the acquire a player via S&T or use the MLE. Right now the C’s are roughly 22 million below the apron and 16 million below the tax. This means they absolutely CANNOT take on more than 22 million without dumping salary currently on their roster.
-However in practical terms they almost certainly won’t go into the tax either. Why not? Well if the C’s can duck the tax this year they reset their repeater tax clock, the repeater tax kicks in if you are in the tax and have been in the tax 3 of the previous 4 years. If the c’s are in the tax this year that will be 2/3 years in the tax, meaning that by the 22-23 season the c’s could be in the repeater if they stay in the tax the next three years. With Tatum’s possible 30% extension kicking in next year, and especially if they use a large portion of their TPE it gets near impossible to avoid the tax going forward, especially if the c’s want to compete. If they avoid it this year the clock resets and the repeater won’t be an issue until the 25-26 season. Pushing that back could save the c’s ownership 10’s of million in luxury tax payments over those 3 years. So the tax line, which the C’s are again 16 million under is probably the limit THIS YEAR.
-A good example of how costly the repeater tax can be is the GSW's and the Kelly Oubre contract. Oubre makes 14.5 million this year but because of repeater tax penalties will cost a combined 82 MILLION in contract+tax.
Question 3: What are the rules?
-Its is usable to bring in a player via trade. It however CANNOT be aggregated with other player salary to increase its value. A 30 million dollar TPE could not be combined with the 5 million dollar Theis contract to bring back 35 million for example. However it can be used in conjunction with player(s) in a trade. For example, if you wanted to acquire Aaron Gordon 18.1 million dollar contract in exchange for Romeo Langford (3.6 million) + a 1st round pick at the trade deadline you could. Gordon would simply be absorbed into the 30 million TPE. That creates a 18.1 million dollar TPE for ORL. Romeo Langford is then in effect absorbed into THAT new TPE leaving ORL with Langford, a 1st and a 14.5 million dollar TPE.
-It cannot be used to sign a free agent; however IT CAN be used to acquire a free agent via S&T. Since free agency is basically over this year it doesn’t matter this offseason, but it might next. However, keep in mind doing so triggers the hard cap, and with Tatum’s contract extension kicking in it would be very hard, if not impossible to acquire a player in a sign and trade using the TPE and get below the hard cap. Kemba + Jaylen + Smart + Tatum alone would count 109 million against a hard cap probably somewhere around 140 million. So to use a sizable part of the TPE in a S&T next off season likely means someone (probably Kemba) is out. But hey, if the guy you are signing and trading for is Giannis maybe you do that in a heartbeat.
Question 4: When does it expire?
-The TPE can typically expire in a one year. Now whether that will still apply given the altered NBA off season time frame I don’t know, but it should be available at least through some part of next off season.
Question 5: Can it be split up?
-Yes, a let’s say 30 million dollar TPE could be used to acquire a 15 million dollar player at the deadline leaving 15 million left to use in the offseason for example.
Question 6: How valuable is it really?
-That’s always subjective right? In some ways it is more valuable than just an expiring contract, in other ways less. For example a 30 million dollar expiring can used to salary match a higher salary than a 30 million dollar TPE, where a 30 million TPE is capped at 30 million. However a 30 million dollar TPE counts nothing against the luxury tax this year which is probably important to c’s ownership. Perhaps more importantly for trade purposes a TPE allows you to absorb salary without sending nearly as much (or any at all) back. That can be VERY useful to your trade partner because it means A) Their ownership can cut costs dramatically. B) They can dump a guy to get under the tax. C) They can dump a guy to generate cap space or to generate their own TPE. So for financial reasons alone a TPE has value.
-In most cases to get someone good the Celtics will have to give up assets to entice a team, then use the TPE to absorb that players contract. But the important thing here is the flexibility a large TPE provides. If your goal is to bring in a player in the 18-30 million dollar range the Celtics currently have no practical way of doing so without trading Marcus Smart for salary matching purposes. The c’s of course don’t want to do that because he’s valuable to their team, but also not every team really needs Smart because he’s more valuable to contenders. This makes bringing in starter level or better guy near impossible for the C’s. A TPE doesn’t guarantee the C’s get a good player but it opens up a very wide range of trades for them that flat out are impossible without it.
Question 7: Who are some targets with the TPE this year?
-It makes anybody below the value of the TPE theoretically a target, but in practical terms at least for this year while the c’s are trying to avoid the luxury tax you are probably looking at bring in more than around 18-20 million (if they trade Langford/Theis/Nesmith/Williams as part of the package). Here are some names, some will depend on their team being bad (not a complete list):
Aaron Gordon (18.1) (my first choice), Evan Fournier (17.0), Eric Gordon (16.9), Kelly Oubre (14.4), Davis Bertans (13.7), Covington (12.1), George Hill (9.6), PJ Tucker (8.0), Rudy Gay (14.0), Terrence Ross (13.5), JJ Reddick (13.0), Justice Winslow (13.0).
-And of course next off season your options open way up. If Hayward's contract starts at 32 million and descends for example that would put all but a handful of NBA players theoretically in play (KAT, Booker both make 31.6 next year if you want to dream). So maybe next year you make some godfather offer of some combination of Langford + Nemsith + Pritchard + Williams + Williams +21’ first +23’ first+ 25 1st + Swap rights + Whatever you can get for Kemba in a separate trade and absorb KAT into the TPE? Dream big.