An Update on the Timberwolves Salary Cap Position

Below are the 15 guaranteed salaries for the Minnesota Timberwolves in 2016-17.

Ricky Rubio - $13,550,000
Nikola Pekovic - $12,100,000
Kevin Garnett - $8,000,000
Cole Aldrich - $7,643,979
Andrew Wiggins - $6,006,600
Karl-Anthony Towns - $5,960,160
Jordan Hill - $4,000,000
Kris Dunn - $3,872,520
Nemanja Bjelica - $3,800,000
Brandon Rush - $3,500,000
Shabazz Muhammad - $3,046,299
Gorgui Dieng - $2,348,783
Zach LaVine - $2,240,880
Adreian Payne - $2,022,240
Kevin Martin - $1,360,305*
Tyus Jones - $1,339,680

Guaranteed Total: $80,791,446

*Martin was waived by the Timberwolves and his contract has been “stretched” out through the next three seasons at $1,360,305 each year through 2018-19.

The Status of the Spreadsheet

As Wolves fans, we squirm when looking at the contract of a Nikola Pekovic, we wonder why Kevin Garnett (who serves primarily as a sweaty coach at this point in his career) is our third highest paid player, and ponder why Adreian Payne is being paid to play basketball. Or maybe that’s just me.

The reality of the situation is that, with all things considered, being upset about any of the contracts today is picking nits. After this off-season’s free agency explosion, the Timberwolves are undeniably in an enviable position from a salary cap perspective entering the 2016-17 season.

Rookie Scale Contracts

The best way to build a roster within the restrictions of the salary cap is to find talent on cheap contracts. We occasionally see this in the NBA when a veteran ring-chaser takes a steep pay-cut to play for a perennial contender. This offseason Zaza Pachulia signed with the Golden State Warriors on a 1-year, $2.9 million contract when comparable centers Timofey Mozgov and Ian Mahinmi both signed contracts for $64 million.

If you are not a contender, drafting and signing rookies to cheap rookie scale contracts is the most economical way to build. The rookie scale locks a player into a specific dollar amount tied to their draft position, and it gives the team four years of cost certainty.

In a league that has seen the salary cap increase by 62% from $58.04 million in 2012-13 to $94.14 million in 2016-17, the value of an inexpensive rookie contract is more so a commodity today than ever before, especially since the rookie scale has not increased commensurately.

In 2012-13, signing the first overall pick was already an exceptional value—$4.29 million (7.4% of the cap) in the first season of the contract. In 2016-17 the dollar amount has only increased by 115% - $4.92 million (5.2% of the cap) in the first season of the contract.

Over that 2012 to 2016 time frame, the Wolves have brought on Muhammad, Dieng, Wiggins, LaVine, Payne, Towns, Jones and Dunn. All eight of those players are on rookie scale contracts. From a financial perspective, there was no better time to rebuild through the draft, exactly what the Wolves have been doing.

The salary cap is set to begin a plateau entering next off-season. That means the best time to get back into the mix on the free agent market is on the immediate horizon. It appears that is exactly what the organization aims to do.

Flexibility to Spend

In six steps the Wolves could be in a position to have one of the largest cap space figures entering next offseason.

1. If we assume Garnett retires after this season, that is $8 million off the books.
2. Assume Rush moves on after his one-year contract, $3.5 million off the books.
3. Assume Payne’s $3.1 million is freed up after his rookie option is declined.
4. Only extend the qualifying offer of $4.2 million to Muhammad.
5. “Waive and stretch” Pekovic’s contract, his salary against the cap will drop to $3.8 million.
6. Keep Dieng’s $5.9 million cap hold

Taking this path would give the Wolves $39.6 million in cap space entering the 2017 off-season. The more ambiguous pieces in that equation are Dieng, Muhammad and Pekovic.

Dieng’s $5.9 million cap hold means he will only count on the team’s books for $5.9 million entering the free agency period, even if he is to sign a massive extension in the $15-18 million range. The Wolves, in theory, could spend all the way up to the salary cap on other free agents before resigning Dieng. After bringing in other free agents the contract figure, for Dieng, could then increase from $5.9 million and exceed the salary cap. This is an advantage of retaining players coming off of their rookie deal.

Muhammad is in the same situation as Dieng as he too is finishing his rookie contract at the end of the season, though his market value is harder to determine at the moment given his up and down play over the two seasons of his career.

If Muhammad has a great season, the Wolves could also go the cap hold route with him. However, Muhammad’s cap hold is higher than Dieng’s at $7.6 million because Muhammad was a lottery pick when Dieng was the 21st overall pick in the 2013 NBA Draft.

Muhammad would have to play at a high enough level this season as to justify that cap hold. If retained as a restricted free agent, Muhammad would limit Minnesota’s spending power on the open market, dropping down the cap space from $39.6 million.

More likely is Muhammad being extended the qualifying offer. This route gives Muhammad the opportunity to accept this one-year offer of $4.2 million or decline the offer and test the open market himself as an unrestricted free agent.

Pekovic is a far different scenario. He assuredly is not worth the $12.1 million that he is on the books for this season, to say nothing of the $11.6M guaranteed for 2017-18.

However, for this season, the calls to cut Pekovic are completely unwarranted. And that is not just my bias, I love Pek. Throw me a follow me on twitter at @nikolapekovic. Seriously, that’s my handle.

Why we should not waive Pekovic this season is quite simple. Right now, the Wolves have $80.79 million committed in guaranteed salaries to 15 players for this season. The salary floor in the NBA for this season is $84.73 million. Yes, that means Minnesota is nearly $4 million below the minimum amount of salary a team is required to pay their players. If they do not find additional partial-season contracts or make a trade taking on additional salary during the year, that $4 million will be distributed among the 15 players on the roster.

It is very rare for a team to not meet the salary floor. Only four teams since 2011 have done so, and no team has ever finished the season more than $2 million under the salary floor.

That is why moving Pekovic’s contract of $12.1 million would have a negative opportunity cost for the season. The Wolves brain trust made the decision that spending on the market this summer was not in their best interest, and there is simply no one else to give all of Pekovic’s money to this season.

Next off-season is a different story. There will be a new crop of free agents and more available spots on the roster. Assuming Pekovic’s health does not greatly improve, the most likely scenario is that Pekovic will be waived entering next season.

At that time there will be $11.6 million left on his contract and that contract can be “stretched” over the next three seasons. This is what the Wolves did with Kevin Martin who will be paid $1.4 million by Minnesota for the next three seasons.

For Pekovic, rather than counting for $11.6 million against the cap for one season, Pekovic would only count as $3.9 million against the cap for three seasons if he were stretched. These stretching moves essentially lessen the blow of having a negative asset.

If the team were to waive and stretch Pekovic before this season, while there are two years left on his deal, his contract would instead be spread out over five seasons, per the rules of the stretch provision. This would see the Wolves pay Pekovic $4.74 million for the next five years. They will not be wanting to have a nearly $5 million dollar sunk cost on the books years down the road when Wiggins, LaVine and Towns are coming off their rookie contracts and receiving major raises in salary.

What Cap Space Could Mean

So again, if we assume no Garnett, Rush, Muhammad, Payne and Pekovic, the franchise is looking at nearly $40 million in cap space entering an off-season with some intriguing names on the unrestricted free agency market. Blake Griffin, Steph Curry, Serge Ibaka, Andre Iguodala and J.J. Redick to name a few.

Without major cap maneuvering, no team other than the Philadelphia 76ers could have the enormous cap space to attract free agents that Minnesota has.

Blake Griffin or Serge Ibaka would not only fit in nicely at the power forward position, but the Wolves could also pair those players with an additional free agent the likes of Andre Iguodala or J.J. Redick for under that $39.6 million dollar figure.

The difference between the Wolves and teams like the Sixers with cap space is that not only do the Wolves have the cap space, but also the allure of a franchise that is up and coming. A team that in the not so distant future could be a contender.

Through the rosiest-colored glasses, Minnesota could not only be the team with cap space, but also be the team that intrigues players in the “ring-chaser” mold. Winter’s not that bad in Minnesota. Right? Right...

Roster Longevity

Of course, with youth comes the potential for growth. The young players on the roster are not only likely to improve their performance but also are under cost controlled (cheap) contracts for the foreseeable future. Two more years for Wiggins and LaVine. Three years for Towns. Four years for Dunn.

Even once that time expires, those players will still be restricted free agents and the Wolves will have the rights to, if necessary, go over the salary cap to retain every last one of them.

What all of the young players market value is at that point is largely conjecture. Yes, Towns is almost assuredly worth a maximum contract when the time comes to extend him, and maybe if Wiggins, LaVine, and Dunn continue to excel they too will be up for huge contracts. This is not something to be afraid of.

As fans, we should be excited to know that if the team wants to they can not only retain these players throughout their rookie contracts, but they can sign them to any future contract. This is because the Wolves will possess the Bird Rights to go over the cap to retain their own players.

If the Wolves are willing to dole out maximum dollar value contracts to all three players, under the current collective bargaining agreement, that would guarantee seven more years of Wiggins and LaVine and eight more years of Towns. While they can only sign one of them to a five-year maximum extension per current CBA rules, any and all can be retained at maximum dollar figures.

This is How Dynasties Are Built

If we look back at past NBA champions, we can see they often have the highest salaries in the NBA. This is not necessarily a case of the richest owners spending the most money to win. Championships can also be built in house. That is done by having players initially on small contracts and then resigning them to bigger contracts after the previous contract expires.

Cap space is an asset in bringing in players from other teams. But the strongest asset is to build in-house talent at an initial cheap contract value and then give the players raises accordingly.

The Wolves are in a position to have both the cap space and the in-house assets. So, get excited about the roster this season, but know that from a roster building standpoint, there may be no team in the league with a better financial forecast.