A Note on Carmelo Anthony’s Trade Kicker

If you read the site regularly, or are following the Carmelo Anthony story, you may have seen my piece from earlier in the week addressing the cap math of getting Anthony to the Los Angeles Clippers.

As I always seem to do, I went on for hours (totaling almost 2,000 words) about the ins and outs of salary matching, Melo’s contract, and the Clippers’ hard cap situation. There was also a nice tangent about negotiating to remove protections on the future picks the Clippers owe in order to create flexibility to trade future draft assets—just the type of technically-legal-but-unlikely-to-ever-happen idea that I like to waste time on. But as with any long, in-depth article (especially when the topic is the NBA salary cap), there are going to be omissions and errors. There have been times in the past where I simply made mistakes—mis-reading rules, math errors, etc. This time, I made an editorial omission for the sake of keeping my article under 2,000 words. As a result, it wasn’t totally thorough, so I’ll attempt to fill in that gap here.

I’ve been asked a few times about Carmelo Anthony’s trade kicker this week. A lot of my first article is based around the idea that the Clippers don’t just have to take back Carmelo’s $24.5 million salary, but rather roughly $29.5 million as a result of Melo’s trade bonus. Here are the basics:

First of all, Anthony has a trade kicker worth 15% of his remaining contract. For 41 more games this year and 82 games each of the next two years, Anthony is scheduled to make $66,451,590. 15% of that salary is $9,967,739, and because the final year of Anthony’s deal is following an early termination option, that bonus must be split between the two guaranteed years of his contract. That extra $4,983,869 this year moves his salary up to $29,543,249. In order to match that salary, they’d have to send out about $23,554,600.

That one isn’t too rough—what’s rougher is the Clippers’ hard cap situation:

The Clippers are hard-capped at $117,287,000 because they used their full non-taxpayer mid-level exception this summer to sign Wesley Johnson. They currently have $2,546,968 in wiggle room underneath that hard cap. That means, essentially, that for any trade to be legal, the following must be true:

(incoming salary) - (outgoing salary) </= $2,546,968

By that formula, the Clippers must send out at least $26,996,281 in salary. It’s important to note that this is the far, far low end of the spectrum for outgoing salary: this places the Clippers at 100% of their hard cap allowance, without any room to sign players into their open roster spots. Depending on the deal, it’s likely that the Clippers will need at least some wiggle room for buyout additions.

So, pretty straightforward. Here’s what gets tricky: players are allowed to waive their trade bonuses under certain situations. It doesn’t really apply here, which is why I chose not to include it in the original article, but I want to talk about it now for two reasons: to clear up the most common question I’m getting on Melo trade math, and to raise an interesting asset management idea I reached following discussions on Melo’s trade kicker on twitter.

Let’s look at how the basic version of the trade goes down:

First, send Wesley Johnson anywhere, for nothing, into a team’s cap room or a TPE. This creates a 5.6M TPE for LAC, and gives them roughly 8.2M in room under the hard cap. Now, they can move Jamal Crawford and Austin Rivers for Anthony and have the space to take back Carmelo’s salary without matching it dollar-for-dollar. Still, Rivers and Crawford make a combined $24.25M—125% of that is over 30 million, which means Carmelo wouldn’t be able to waive part of that trade kicker.

The outcome of this deal is the same as that of the Rivers/Crawford/Johnson for Anthony swap I outlined before—even in a direct trade with the Knicks, they’d set the deal up so that a TPE would be created for Wesley Johnson’s 5.6M salary.

So, we tried something, but it didn’t let Melo waive his bonus, so his salary is still giant, and it didn’t save the Clippers from sending out anything extra.

Let’s switch some stuff around and build something that makes him waive his bonus:

If the Clippers send Austin, Jamal, Wesley, and Alan Anderson to the Knicks, they can create an even bigger TPE and force Melo to decline his bonus. From New York’s perspective, this is simply one trade—Anthony goes out (24.5M) and Rivers, Crawford, Johnson, and Anderson come back (30.8M), which is a legal trade. From the Clippers’ perspective, it works as two trades:

Rivers (11M) goes to the Knicks for nothing, creating an 11M TPE, and

Crawford, Johnson, and Anderson (19.8M) go to the Knicks for Anthony (24.5M), which is a legal trade

Since the Clippers would be sending out $19,861,443 in salary in the Anthony trade, the max that they’d be able to bring back would be $24,926,804—that gives Carmelo only about $500,000 of his trade bonus, forcing him to waive the rest for the trade to go through. It actually increases the Clippers’ wiggle room under the hard cap, since they’re sending out more salary than they’re taking back, and it takes LAC out of taxpayer territory by a few million. Then, next season when they likely won’t be restricted by the hard cap, they’ll have that $11 million Rivers TPE to work with—we’ve seen how valuable those big exceptions have been for Cleveland in adding role players for nothing.

Just for fun, here’s an even crazier idea that could never happen:

Send Wesley, Jamal, Paul Pierce, and Anderson all out for Carmelo Anthony. This trade is the only way I can conceive to legally land Anthony on the Clippers and retain Austin Rivers for the bench. Paul Pierce serves the same function as Austin Rivers above—he goes out for a TPE to create enough room for the Clippers to fit Melo under the hard cap, while the same Crawford/Johnson/Anderson package is actually swapped for Melo. The Clippers’ total outgoing salary in this deal is $22.9 million, and Melo’s incoming salary is the same as above—$24.9. The Clippers’ 2.6 million of wiggle room under the hard cap shrinks to $600,000, but it’s all legal, and the Clippers keep Austin. They’d have to use that last shred of flexibility to sign a player (they’d only have 12, and teams are required to carry 13), and the Knicks would have to cut three guys (presumably, Anderson, Pierce, and one of their own benchwarmers).

The problem, of course, is that there’s no trade value in that Clippers package—this is definitely a scenario where they’d have to work with Toronto and Boston to remove protections, freeing up two future first-round picks to go to the Knicks in 2021 and 2023.

There you have it—two scenarios where the trade can be manipulated so that Melo is able to waive his no-trade clause. The first is obviously more practical—the Knicks are getting the same package based around Austin Rivers, but some cap gymnastics force Anthony to waive his bonus, lowering the incoming salary for the Clippers and helping them dodge the tax and have enough wiggle room to fill out the roster with buyout guys. The second one is a much more bare-bones approach—the trade is legal but the Knicks are getting nothing of value (except for draft considerations) and the Clippers would be walking the hard cap tight rope. Is it worth it, should the Knicks be willing? Of course. Would the Knicks be willing? Of course not.

If the Clippers are interested in the Melo sweepstakes, they’re playing the waiting game right now. Anthony says he wants to stay, but that he’ll waive his no-trade clause if the Knicks decide to blow up the team and rebuild—beyond that, rumors have been all over the place, and often conflicting. If Anthony decides to pull the trigger by saying he’d waive his no-trade clause, things could start moving very quickly. Until then, nothing is possible.