Public Service Announcement: Estimating Cap Space
On Friday, I was reading the comments on an ESPN article and noticed someone talking about how the Golden State Warriors will have $50 million in cap space in 2014. While asking why I was reading the comment section on an ESPN article might be a better question, it felt necessary and appropriate to put together a little primer on how to make an estimate of how much space a team will have to work with. Keep in mind this is a quick way of doing so rather than full depth.
The biggest misconception out there has to be that expiring contracts and cap room are the same thing. There are two ways that they diverge: teams can be over the cap (so not all of the salary coming off converts into cap room) and players/picks retained by the team in question do not go off the books entirely due to cap holds.
Since the commenter in question used the Golden State Warriors in 2014, I will use that as the example of how to make a rough estimation of cap space.
1. Find a contract site that you like and trust. Of the publically accessible sites, my personal favorite is Storytellers.
2. Estimate the salary cap for the year in question. While we never know the cap for future seasons ahead of time, I like to ballpark it by increasing the cap about $2 million per season in the future. Since the cap sits at $58 million right now, the rough guess for the 14-15 cap would be $62 million.
3. Figure out who the team in question has under contract for that season, giving your best guess for team and player options. In the case of the Warriors, they have David Lee, Stephen Curry, Harrison Barnes, Klay Thompson, Festus Ezeli and Draymond Green under contract for a combined $33,795,136. Theoretically, this would lead to $28.2 million in cap space. However, there are a few key additional steps to include.
4. If a team has less than 12 players under contract at any point in the summer, the league puts in cap holds at the minimum rookie salary (since theoretically they would have to use those to fill the spots if everything filled up) that take away space. The 14-15 Warriors have six players under contract, so six minimum salary holds at $507,336 for 14-15 would add up to $3,044,016 and reduce the estimated cap space to $25.16 million.
5. If the team has any players who they drafted but are playing in Europe, their cap holds come back on the books in the summer unless the team renounces them. Replace any minimum holds with these numbers if applicable (particularly guys like Nikola Mirotic taken in the first round).
6. Replace any minimum salary holds with draft pick holds for any first round picks between now and then. For the Warriors, this is a 2014 first round pick, so I will ballpark that as a $500k increase over the minimum hold. Their space is now down to $24.66 million.
7. Look at any players whose contracts expire between now and then. If the team will want to bring them back, adding in a number for a cap hold is a good idea. If the person will be paid more in that season than they were under their previous contract, a good rough number to use is their most recent salary multiplied by 1.5 (unless this puts the player over the max) since that is the minimum increase in the cap hold for a Bird rights free agent. If you think the player will make a smaller salary than that number, just use your estimate for their contract instead.
8. In the context of the Warriors, the big question mark here is Andrew Bogut. If they want to retain him, his cap hold will actually be a max hold for around $17.5 million. The only ways to reduce that number would be to sign him for less than that or renounce him and then be unable to use Bird rights to get him back. If you think the Warriors will retain Bogut, it would be best to estimate his salary (I’ll use $10 million the first year) and take that off the cap space. That would cut the number down to $15.33 million. That cap space reduces further if you think the team will bring Brandon Rush, Jarrett Jack, or Carl Landry back and/or sign any free agents this summer to multi-year contracts.
9. By now you have a good rough estimate on cap room. The last number to consider is the Mid-Level exception. As an exception, the MLE actually counts against the cap space unless a team officially chooses not to use it. For 2014, the non-taxpayer MLE is $5.305 million. If that $5.3 million takes up more room than the team has, they are effectively capped out and would use the MLE instead of cap space.
Hopefully this process can help explain how this process works and be used to make more accurate estimations of what teams will have to work with moving forward.