Yesterday, Stein confirmed that my assumption about the McGee and Hardy contract was correct. He was only right because I trusted Marc Stein about Shams on the Mavericks information.
The Mavericks will sign Jaden Hardy, their 37th overall draft pick, to a multiyear deal this week, league sources say.
Sources say Dallas withheld a portion of the taxpayers’ mid-tier exception in reaching a deal with JaVale McGee to ensure he could sign Hardy to a long-term deal.
— Marc Stein (@TheSteinLine) July 5, 2022
But why did the Mavericks lower their MLE Tax to sign Jaden Hardy to three years instead of two? There are three main reasons why this three-year contract is better than the standard two-year contract:
- Low cost extra year
- Complete bird rights
- Limit space for 2024 and 2025
Let’s look at each of these separately.
Low cost for a third year of development
This is the most obvious reason. The Mavericks have Hardy at least for his third year. This is securing Hardy at the lowest possible cost. If Hardy shows any promise, he would get a better contract offer in the summer of 2024, as he will still be in his prime developing years.
With that third season, the Mavericks can see another year of Hardy’s development before they have to decide if he’s a long-term fit. This is a great advantage. They can also invest more time in his long-term development knowing that they can postpone the decision to re-sign him a year later.
Complete Bird Rights
If Hardy signed for two years, the Mavericks would only have early booking rights on Hardy in 2024. Somehow the artificial ceiling on his offer (about $13 million in the first year) could have been used in the same way they allowed Veterinary Extension limits. the Mavericks to lock up Dorian Finney-Smith at a lower-than-market rate extension. This is evident from the maximum trade stimulus of 15% in the Finney-Smith deal.
However, having full rights to the birds after an additional year of Hardy development is a preferable outcome. In the summer of 2025, the Mavericks will be able to offer any contract they want.
Cap Space friendly for 2024 and 2025
This is the real reason why I wanted to write this article. A lot of people (including Mavs MoneyBall’s Xavier Santos) focus on cap space possibilities. If he too is convinced cap space is the best route to get Luka’s co-star, then he should really like Hardy’s 3-year deal. However, I need to talk about a topic that I haven’t covered on Mavs MoneyBall yet: capitalization holds.
When a player becomes a free agent, he creates a hold the cap. This is an amount of money that remains in the team’s salary cap until the player signs a contract or the team relinquishes rights to the player. This cap has reserves that players place on the list. A team may not use the cap space that is blocking cap retention. So if you want to use that cap space for something else, you’d have to give up the ability to use the bird rights exception to re-sign that player. The amount of the cap is related to what type of rights (non-bird, early bird, full bird rights) the team has on the player AND the final year salary of the player’s just-terminated contract. For now, let’s just address cap holds for players with full bird rights.
The maximum cap for players the team has Full Bird Rights on is normally 190% of their final season salary.
For a player with a decent sized contract like Christian Wood, the cap hold to keep all of his bird rights is a huge amount.
Salary 2022-23 – $14,317,459
Cap retention for 2023 – $27,203,172
BUT for minimum salary players, the maximum cap is only the minimum salary a 2-year player would receive in the first year of a new contract. The projection for the minimum for 2-year veterans in 2025-26 is $2,227,273.
Jaden Hardy’s salary and salary cap
Salary 2024-25 – $2,063,940
Cap retention for 2025 – $2,227,273
The dreaded “cross the line” discussion
A lot of people think they can use the cap space and then re-sign their own players “over the cap.” The reality is that this “maneuver” is only for low-wage players who have gotten big raises. And it works especially for players coming off minimum wage contracts.
Example: Mitchell Robinson and the Knicks
Mitchell Robinson has a low salary cap of $1,836,090 because he is coming off a minimum 4-year contract. The Knicks are in a position to take these 3 steps to maximize their low salary cap advantage.
- He gives up all his free agents except Mitchell Robinson.
- Use all cap space to sign Jalen Brunson and Isaiah Hartenstein
- Use Bird Rights on Robinson to re-sign him to his 4-year, $60 million deal using the paltry $1,836,090 cap hold.
If he wants the Mavericks to use the cap space in 2024, Hardy will only count his salary against the Mavericks’ salary cap of $2,063,940.
In 2025, Hardy’s maximum cap will be $2,227,272. If he has become a $10 million+ player, the Mavericks can use the same 3 steps to use their 2025 cap space to chase a star. And then use the small-cap holdout to sign Hardy to whatever deal he wants.
Predicting whether any of this will make a huge difference is an exact science, but it’s easy to call this three-year contract for Jaden Hardy a win. The Mavericks reportedly identified Hardy as the 19th-best player in the 2022 NBA Draft. Now the Mavericks have the ability to retain him long-term while retaining the option to pursue free agents in 2024 and 2025.