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The Salary Cap’s Impact on Re-Signing Justin Holiday

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Likely up against the Tax, the Pacers are in an interesting position

Indiana Pacers v Phoenix Suns Photo by David Dow/NBAE via Getty Images

In the wake of last week’s news that the NBA season could restart as early as December 22nd, the off-season is primed to make the Bubble look like a light jog.

Also of note; the salary cap and tax line need to be set.

Currently, cap specialists and NBA insiders are projecting the salary cap to hold pat at $109 million and the luxury tax threshold at $139 million.

Here’s where things get interesting for the Pacers; the Pacers have just under $125 million in guaranteed contracts on the books for the 2020-2021 season.

The Pacers are still accountable for Monta Ellis’ stretched contract at $2.245 million. The gift that keeps on giving (until next season ends).

With the 12 guaranteed contracts next season and Monta’s dead cap on top, the Pacers have roughly $127 million hitting the cap.

Cap Holds

Indiana has five free agents, and one contract that isn’t fully guaranteed in T.J. McConnell’s. McConnell’s contract is only guaranteeed for $1 million and is worth $3.5 million.

Brian Bowen, Jakarr Sampson, Alize Johnson, and Naz Mitrou-Long are all on cap holds that are roughly $1.5 million. So, we’ll call their collective cap hold $6 million.

Justin Holiday has a $5.7 million cap hold for the coming season.

As a theoretical, let’s say the Pacers re-sign all 5 and don’t shed T.J. McConnell’s contract. That would put the Pacers at roughly $139 million and you’d also have to account for the contract of whomever Kevin Pritchard and co. select with the 54th pick in November.

Essentially, the Pacers would be capped out and only have the wiggle room of $2.5 million based on whether or not they fully guarantee McConnell’s contract. I personally doubt that they’ll do anything other than guarantee T.J.’s money. He’s a rock solid vet who played a significant part of the bench unit and provides playmaking/a dribble drive game that the team doesn’t have a wealth of.

In all hypotheticals moving forward, we’re assuming that the MLE and BAE are the same (~$9.3m & ~$3.6m).

First Dilemma

The salary cap and tax threshold are not yet set as mentioned previously. Why’s this a problem?

If the tax threshold ends up lower than the aforementioned $139m, the Pacers will have to find a way to slash their payroll. Barring significant movement of money off the Pacers books, it would be extremely unlikely that the Pacers end up using the MLE outside of re-signing Justin Holiday. If Justin were to walk for a higher offer, then the Pacers might use the MLE elsewhere.

But, again it depends on the tax threshold.

The issue with signing Justin to the MLE in this scenario; all of the other cap hold players are signed to two-way deals or vet minimum contracts for the most part. So, those deals aren’t going to cost any/much less if they go to other players to fill out Indy’s roster; minimal wiggle room.

Nate Bjorkgren’s introductory presser last week indicated that the Pacers may be running it back with largely the same roster; albeit with different schemes and philosophies. That’s just speculation and assumption; anything can change over the next two months before the proposed season. However, if the Pacers do maintain their roster, I think it will be harder to re-sign Justin Holiday.

This team is not in a place where ownership would likely be comfortable paying the tax, making the use of the MLE on Justin very difficult, as a full MLE offer or even partial offer above his current cap hold would send the Pacers into luxury tax territory.

Trade Scenario

Hypothetical Trade - For Argument’s Sake
https://tradenba.com/trade-machine

Pretend that once the trade moratorium ends, this trade happens.

The Pacers would open up over $6.5 million in cap space and the Suns can absorb all of Victor Oladipo’s money as they are one of the few teams with cap space this off-season.

However, the 10th pick in this season’s draft would carry a significant cap hit relative to available cap space.

Cam Reddish and Mikal Bridges, the 10th picks in 2019 and 2018 respectively, earned $4.2 million and $3.5 million in their first season. If the Pacers were to not trade this pick, I’d bank on the cap hit being around $4 million dollars again.

So, if this deal or a similar deal occurred, the Pacers would then have the money to use most of the MLE, but in this way, it’d more than likely be to re-sign Justin Holiday, or sign another player of similar caliber if he were to walk. There’d be no wiggle room to both use the MLE and sign Justin to his cap hold.

Again - Just a hypothetical! I don’t actually think this would happen nor am I implying it should!

Let’s say for instance that this trade happened. Indiana would have the optionality to re-sign Justin to his cap hold and also use the full MLE without worrying about going over the tax threshold.

Depending on the re-signing of two-way players and veteran minimum guys as well as the 54th pick, the team could also opt to use the BAE.

Conclusion

Barring a fairly substantial move this off-season, it appears unlikey that Justin Holiday will be re-signed & the MLE will be used on another player concurrently. If I were a betting man (I haven’t won a hand of Poker since 2016), I’d bet that Justin Holiday is brought back using part of the MLE and there’s possibly some cap fanagling to potentially free up more of it for him.

Given the current state of the NBA economy, I sincerely doubt that the cap threshold and salary cap will be higher next season.

The burning question is whether or not it will be lower. If the tax threshold is even two or three million dollars less, that could impact the Pacers significantly in free agency. Cathartically, Monta Ellis is still having a subtle impact on the Indiana Pacers.

We’ll be on the lookout and keeping our eyes and ears open to keep you informed on the cap situation, upcoming off-season dates, and all things Pacers.