As the NBA's salary cap is expected to increase by 10% next summer, and in the ensuing years, it's time once again to take a look at the 140% veteran extent limit, and how it'll be increasingly for teams to extend with their own players.
As noted in earlier pieces, particularly in regards to the situation the Chicago Bulls find themselves in regarding Coby White and Ayo Dosunmu, NBA teams will more than likely find themselves in difficult positions when offering veterans extensions, as the salary cap increase.
Say the Indiana Pacers unlock something in Aaron Nesmith, who they recently signed to a three-year contract worth $33 million total, or $11 million per year.
For the sake of argument, let's pretend that Nesmith takes a small developmental leap over the course of the next two seasons, increasing his future contractual value.
The Pacers, who are paying Nesmith $11 million per year, will be limited in what they can offer him. It's either 140% of the $11 million, or 140% of the average salary, whichever is highest.
Essentially, Nesmith will have no incentive to accept an extension, and it would be in his best interest to explore unrestricted free agency. This means the Pacers stand at risk of losing Nesmith, unless he's developed to a point where he's looking for a max-level contract, and the Pacers stand to benefit via having his Bird Rights.
But, let's say Nesmith doesn't reach that specific level. Instead, let's argue he's projected to earn in the area of $25-30 million per year. Several teams could then come in, and make very competitive offers for him, with the Pacers having no measures of being able to match an offer sheet - as he's not on a rookie contract - nor will they be able to lock him into an extension prior.
Obviously, that sounds like a situation that's a little farfetched, but it's solely to illustrate the point of how teams making good, quality deals can ultimately end up costing themselves in the end, which seems potentially unreasonable when they've spent their money wisely.
But, wait. It might get even more challenging due to the annual 10% cap increases.
With raises capped at 8% off only the base-year salary, players see an annual raise of the same number each and every year. The cap increases do not work like that, as the 10% increase compounds every year.
Basically, the cap increases quicker than raises.
If a team has locked up a player on a long-term deal, and given the player a flat rate, meaning no annual raise, it suddenly becomes even more difficult to make a real extension offer.
Let's visit the Bulls again, specifically in regards to Patrick Williams who signed a five-year contract worth $90 million, all on a flat rate of $18 million per year. He's earning 12.8% of the salary cap this season.
Assuming Williams is worth the same cap percentage when his deal is finished, 12.8% of the cap will have increased by more than $10 million. At 12.8% of the cap, a re-signed Williams would start at more than $28.9 million, or $10.9 million more than his last salaried year.
Basically, Williams could see no real movement in his development, and his next contract would still be increased by over 60%.
That's a problem for Chicago who would be capped at offering Williams $25.2 million on a possible extension, effectively lowering the cap percentage of what he's earning now.
Overall, this won't affect all teams. But we could see situations pop up around the league, where teams will be forced to make tough decisions on players, if they realize they can't make competitive financial extension offers due to the explosion of the salary cap.
The Washington Wizards signed Deni Avdija to a deal that decreases in value, that sees his final contractual year sit at just $11.8 million. They moved him to Portland during draft season, so this will be the Blazers' problem down the line.
But let's face facts. It will be a problem from a financial perspective, unless the Blazers clear cap space and renegotiate their deal with him when he becomes extension eligible again.
By the time Avdija hits the last year of his contract, he'll earn just 6.3% of the salary cap. Compared to his production of last season, and assuming that sticks, he should probably be earning three teams that percentage. If Portland doesn't clear the aforementioned cap space, they'll be forced to either trade him before the end of his contract, or risk playing the free agency game with him, potentially losing him for nothing.
This is how the league is going to look from here on out, at least from a financial perspective. As soon as a team signs a player to a value contract, the clock is ticking on a forthcoming major follow-up decision.