CLEVELAND CAVALIERS CAP SITUATION EXPLAINED: What is & isn’t possible for Koby Altman this summer

CLEVELAND CAVALIERS CAP SITUATION EXPLAINED: What is & isn’t possible for Koby Altman this summer

Happy Friday morning, ladies and gentlemen. Mikey McNuggets, real Cass fan, Luca, coming at you on a Friday morning. And Luca, you and I have texted back and forth and DM back and forth. We’ve talked on the phone back and forth about the current CBA, the Cavaliers restrictions due to the second apron. What can they and what can’t they do under the Second Apron restriction that they are currently facing. So, I figured what better way to help Cavs fans everywhere than bring you on to the Ultimate Cavalier Show and basically do a Cavs CBA primer for dummies. Now, I’m not calling you guys dummies. I’m just referring to the series of books which is anything for dummies, golfing for dummies, parenting for dummies. This is essentially the cash cap situation for dummies. And I could think of no better person to join me to discuss that than you. How you doing today, my friend? Doing well. Appreciate having us on. So, let’s dive into it. There is going to be probably five or six different avenues we get down for this discussion, but let’s start first and foremost with the basics, Luke. And I’m going to ask you questions. I’ll kind of interject when I feel like it’s needed, but I’m going to let you run with this because you are smarter on the Caps than I am. The Cavs currently are projected to be a second apron team next year. And unless there’s some sort of major moves made, I’m not quite sure they can avoid being a second apron team. So, can you tell all the good people, all the listeners out there, exactly what that means for Cleveland as they look to make any kind of moves this summer? Yeah. No, appreciate having us on to explain. And then we figured we’d put on the the collared shirt since we’re getting into the legalities of the CBA to to make it even more official. So, uh, essentially, you know, long story short, the aprons are spending thresholds that the owners implemented to curb spending to reduce some of the super teams and flatten the ownership advantages that we’ve seen the Cavs take advantage of, but the Warriors and others that have been able to sustain dynasties. So, in order to do that, they put in restrictive penalties. the further you went over the tax and the aprons were different thresholds kind of markers within that. So currently uh we heard a lot about the luxury tax at the trade deadline. Uh the Cavs this year were under the luxury tax, which one of the restrictions they put in was the longer you’re in the luxury tax, uh three out of four years, there are penalties down the road that impact trades, impact, um how much, you know, tax money your your pocketbook is being charged as an owner. Um also restricts movement of draft picks. It could be moved all the way back to the first round and restricts the ability to trade out in the future draft picks. So that’s why it was so important this year is to sustain flexibility and and avoid starting that clock. And now going into next year, the Cavs are in the second apron, which is the highest threshold of that system. Um, and so essentially what that does is there’s even more restrictive penalties for how the Cavs can operate transactionally moving forward. So the Cavs still can do some moves, but to the extent of what they can do is more limited than being over the tax versus being over the apron and now the second apron. So to give an example of some of those things, um they can only resign their own free agents as far as you know any kind of spending power. They can sign veteran minimums. That is the one thing they can do. But as far as using any type of exceptions can’t be done. They can sign draft picks. That is that is something they can do. Um, one of the biggest things that you’ve probably seen is trades. You know, how do those work when it comes to the second apron? Um, essentially they cannot So, the trades are post-transactional as far as apron goes. So, the ultimate result of the trade dictates the apron rules. So, the calves are in the second apron. Just doing a second apron trade, they cannot aggregate. And aggregate is the key word meaning you can’t combine salaries to reach whatever incoming salary you can’t comb and Isaac Aoro for someone making $17 million. Correct. Aggregate is the key word. So you cannot aggregate while in the second apron. But if the trade at the end leaves the cavs under the second apron, you can aggregate because aggregation is legal below the second apron. There’s some other consequences that are part of that, but that’s one of the biggest things. And on that point, Luca, because I want to I want to mention this because we have been tagged in a bunch of tweets about people saying, “Well, you actually can aggregate.” You guys are technically correct. You can aggregate. In theory, the Cavs can trade Evan Mowgli and Donovan Mitchell for Jannis Tendo because that is even though it is aggregating salaries, the Cavs would be shedding off so much salary they drop below the second apron of the tax. So in theory, yes, you can. When you start working with those aggregate trades in the second apron, you have to figure out if the other team, the team the Cavs will be trading with, A could take on that salary, B would want to take on that extra salary and get enough salary to drop the Cavs below the second apron. I was looking at Bobby Marks and his projected salary for the Cavaliers next season. This is all changing and the numbers. It’s actually crazy. Every stat website has a different number for where the Cavs are projected to be at salary wise and how far away from the second aent they’ll actually be. Bobby Marks has it at 21 $221 million is that projected salary for next year and the second a 27.8 million. So they’d have to get an aggregate salary what’s that? $13 million back to make any deal like that work. So is it possible? Yes. Does it cause a hundred different issues for both teams participating in Ted Deal? Also, yes. Which to me at least screams it is incredibly unlikely that the Cavs were able to make a superstar trade in that realm aggregating two of their bigger salaries to bring in a Giannis or somebody like that. Yep. And essentially like you mentioned they either have to get out of the second apron as a result of the trade to aggregate salaries or start the trade in the first apron which would mean dumping that x amount of salary elsewhere in order to do so. So that is the only way they can aggregate. Now the the loophole to that is doing simultaneous trades that are compliant with the second apron. What does that mean? So, say the Cavs trade, you know, this is an example, not putting this out there, just it’s a good clean example. Say the Cavs trade Jared Allen and Dean Wade for Rury Hachimura and Austin Reeds. Again, or Dalton Connect, we’ll say that. Not saying it is a trade, but from a logistical standpoint, um, one of the other, uh, key points of the second apron is you cannot take 1 cent more back in a trade. So, anything you do has to be below the outgoing salary if you’re going to stay in the second apron. So in that case uh in theory it operates as one deal. However, because Rory makes less than Jared Allen and Connect makes less than Dean Wade. In theory it can operate as one trade, but it operates as two individual trades because they’re taking back less money um and therefore would be compliant with the second apron. So you get into some of those technicalities as far as how it goes. you also get into um veteran minimums don’t count, you know, towards that that apron um threshold when it comes to aggregating salaries. So, there’s some caveats to it. Uh but in a large part, if you want to aggravate salaries that are above and beyond what the Cavs can afford, either individually or combined, you have to be in that second in that first apron. Yeah. And it’s just it’s one of those things the NBA did itself no favors with. It is very confusing. Objectively, it is very very very confusing. And even guys like Bobby Marx and guys like Keith Smith and Nate Duncan, some of the better cap guys out there have had to do their own research to confirm some of their thoughts to see what kind of loopholes there are and aren’t. So let’s talk about this as a big picture for the Cavs. Toby Alman said at his end of season presser, they’re likely to run it back. Now, of course, he’s going to say that at his end of season presser. He’s not going to go out and torpedo his own leverage by saying, “Hey, we’re going to break up the core four. uh let me hear what you got to offer. So that was to be expected, but from a financial standpoint and a cap sheet standpoint, when the Cavs made the DeAndre Hunter trade, they made that deal knowing they’d be a second apron team next year. And as Jason Lloyd has so eloquently put on on UCSS before, teams go into the second apron trying to be whole. You don’t want to be still filling pieces when you enter the second apron. So there’s a good chance because of how complicated it would be to pull off any kind of major deal here to shake up the core four, core five, whatever you want to call the DeAndre Hunter edition that they will run it back. But if they are going to make a change, Luca, what is some of the avenues or what what are some of the avenues or what are some of the options you think Kobe Alman and the rest of the front office have to try and navigate their way through who they can trade, who they can’t trade, and why. So, I think like you said, Jason put it fantastically. The Cavs, if you believe in the core and you believe that it worked, they are set up well to maintain and be a second apron team. A second apron team is not a death nail. It’s a death nail when your core or your best players don’t work as we’ve seen with the Suns, that’s when it becomes owners. However, if you have a team that is well built and well sustained like the Cavs are, you know, you have your your top five or six guys that are locked in long term for several years. you have your bench guys, you know, locked up on cheap deals. So, if that works, the second apron with the owner willing to pay can be sustainable. Now, the t the windows of that the sustainability may shrink because of the penalties that come at the end of those windows where they’ve made it a flatter, you know, more parody, but they can sustain it. uh where it becomes an issue is that if your core doesn’t work going into that or your key players don’t work, that’s when it becomes an issue because it’s so much harder to navigate in the second apron and do the types of things you want to do being a second apron team with players that don’t work. Um so, you know, moving forward, it really one of the key things that I think makes it even more difficult is there’s also you solve the second apron issue and the aggregation issue, you open up the door to another set of issues. So getting under the second apron is not a pan, you know, not a cure all. You’re not going to resolve all the issues. The next thing you run into is that if you do aggregate salaries in any extent, whether it be in the deal that you’re trying to get under second apron with or say you dump a coral and then you go out and aggregate salaries, aggregating salaries in the first apron is an automatic hard trigger on the second apron hard cap. Meaning if you aggregate salaries while in the first apron, so the one right below the second apron everyone’s saying to get out of, that means you cannot exceed that second apron by any means. Not by um better minimums by resigning your own free agents. You can’t exceed that apron. So, okay, you get under the f the second apron to aggregate salaries. The Cavs are going to have probably about nine or 10 players, we we’ll say 10 players under salary. there is a a minimum requirement to have 14 salaried players next year. So within that then you have to fill out that extra four spots. Um Tristan Thompson last year was about 2.2 million as far as what he counted against the cap because of the the veteran exceptions as far as how they work or he’s paid more but in order to not discriminate against younger players and older players and the pay differential they say it only counts against cap to kind of flatten that as well. So if you take four Tristan Thompson’s LA uh from last year say to this year that’s about 8.89 million right there. So not only do the Cavs have to then you know be under the cap to aggregate salaries you then also have to count in as far as how far below that they then have to be to fill out the rest of their roster and then you get into is it a valuable way isn’t competitive. So it’s hard to make those moves and remain competitive. Now, some people will argue say, “Well, strip it down, you know, get a star player and and nothing else matters.” You’re that’s a high-risisk, high reward scenario. And last thing I’ll say with any of that, the market’s going to dictate what they can do more than they dictate what they do. Meaning, the market for Allen, the market for for Garland is going to dictate more of what they do than their willingness to trade them. Additionally, the Cavs are not the only team in this situation when it comes to trying to offload salaries. The Nets are really the only team that has significant cap space when it comes to dumping being a dumping ground for salary. So, the Cavs are not going to only want to be competing to dump salary into that space. They don’t have the picks to do so. The other caveat is you can dump um salaries into the non- taxpayer mid-level exception. There’s about eight or nine teams that have that. So, really there’s only a third of the league that can really absorb that type of salary that the Cavs looking to dump and they’re not the ones doing it, which is going to drive up competition. So for everyone saying you can just dump salary. Sure there’s a will there’s a way but it’s going to be competitive. It’s going to be hard and it’s why all these little things feed into the difficulty in making the move. Doesn’t mean they can’t do it. It just adds a difficulty. Keith Smith put out a good graphic that you sent me that I’m just going to put up over while we talk here. So if anyone’s watching this, this has kind of the restrictions, what is, what isn’t legal, and how it all breaks down. So I’m just going to leave this up for a few minutes while we continue our discussion here, Luca. But in terms of teams looking to dump off salary, Boston’s another example of a team that is looking to get under the second a championship, so their ownership was willing to pay and pay up big this year, but with Tatum being hurt next year, a new ownership group taking over. For them, it makes sense to try and duck under. So that’s a team with some other bigname guys that they could be looking to dump off salary to get under. Detroit has cap space, but they’re going to resign some of their own guys. Kate Cunningham’s extension is going to kick in. All that is a factor. Utah has a little bit of cap space. I’m not sure they’re going to be willing to take on many players with how many young guys they already have. Brooklyn has 54 million in cap space. That is the most logical team, but as you mentioned, a lot of teams are trying to get that money off their books to get under the first or second apron. And the Cavs will not be the only team looking to do so. And they really don’t have many picks to dump off with them. So to your point, easier said than done. Luca, how does where the Cavs currently stand on the cap sheet impact their ability to resign their own free agents, mainly Tai Jerome and Sam Mer? Ask Dan Gilbert. That that’s really what this comes down to is if they operate as a second apron team, how much pain is Dan Gilbert willing to sustain to keep those guys? So, uh, Jerome and Merryill are a little bit different as far as how they can retain them. Jerome. Um, want to put this out there. They have early bird rights on him, meaning they are restricted as far as what they can pay him in the first year of his next contract and what his contract looks like overall. So, because early bird rights and and the bird rights are essentially done to incentivize teams to retain talent and be able to sign them and give advantages over the open market to kind of retain uh that young talent they’ve developed. So, because they’ve had Jerome for two years, that limits how they can resign him. So means that the contract has to be at least two years. You can’t have a player option in the second year. It can only be in the third or fourth year. Um has to be between a two and four-year contract. Um what he makes uh has to be comparable to what he made last year or 105% of the average player salary from this year, which is calculated. That’s kind of why we see some different stuff, but Bobby Marks confirmed that 14.3 million is the max he can make next year. Um and then 8% raises year-over-year is what the max the Cavs can offer. So it works out to be about a 4year 62 $63 million deal. And they can that cannot change under any circumstance. If they dump a coral, if they do this, if they get in a second apron, whatever have you. Early bird rights are independent of anything else. They cannot change what they can pay Jerome. Now the impact what that has on Gilbert’s pockets can change. So we talked about, you know, the restrictions and the the longer you get in the tax and the deeper you get in the aprons, the higher percentage you pay per dollar you’re over the apron. So pending where the the Cavs land, the discussion with Jerome ultimately and even Merrell becomes what is Dan Gilbert willing to sustain because he not only has to pay that salary to them individually, but then times whatever, you know, X times whatever how far they are in the in the apron, he has to pay that out the end of the year. I saw in John Hollinger’s end of season report, he had mentioned, I’m not sure these numbers are exactly accurate, but he said to resign Tai Jerome to an 11 million dollar contract would cost Dan Gilbert 62 million. So that is the cap verse actual cash spent. And 11 million verse 62 million, Luca, let me do my mental math. That’s $51 million difference. Now, is Tyron worth 11 million? Absolutely. Is he worth 62 million? That’s a question for Dan Gilbert to answer. So, those are the kind of things that being in the second apron and being in the first apron, being a tax team for the Cavaliers hinders their ability to to do. Or hinder is not the right word. Makes them think twice. Is that a better way to phrase it? Because for 11 million, it’s a no-brainer. It’s is Dan Gilbert will want to pay 62 million for a player who we just saw against Indiana um not look great, for lack of a better way to phrase it. So, so if you see them start talking about trading some other players to afford them, it’s not from a salary perspective or being able to change what they pay Jerome or Mel. It’s to lessen the impacts on the tax at the end of the year. Um, with Mel, just recapping that. So, they have full bird rights on him, so they can pay him whatever they want. There’s no restrictions on on years or or money. So, they’re they’re they’re more freely able to negotiate with Mel than they are Jerome. Uh the good thing they have working for them is as far as Jerome, you know, the market based off what we saw in the playoffs and just in general, there’s not a lot lot of money to spend that may help them retain him. But ultimately, it comes down to are they a second apron team or not? And how comfortable is Dan Gilbert willing to go into that second apron, which we we saw Kobe Alman say, we have some flexibility and good ownership, but every owner has its threshold. And we’ll see what ultimately that is. I’m curious, Luca, when it comes down to how teams, not just Cleveland, but all these teams operate. We’ve seen teams in the past say, “We’re not trading a star for a bunch of roll guys. The dollar is worth worth more to us than four quarters.” But now because of some of the financial restrictions and constraints of the second April, I’m curious if maybe that philosophy will change and maybe the Cavaliers are willing to turn Jared Allen into two pieces or Darius Garland and his $40 million salary into three pieces to match up with that 40 million. And I I’m don’t even know if there’s a right or wrong answer. I just wanted to point it out there that there’s been one way of thinking in the NBA for the last 40 years and because of the new cap and really the Cavs quite frankly are the first test case of this. Boston won a championship so take them out of the equation. It worked. The question is will an owner like Dan Gilbert and a team like Cleveland that hasn’t had the postseason success continue to push forward into the unknown depths of the second apron without the results to fall back on. It’s one thing to ask your owner to pay up when you have a Larry O’Brien trophy to show for it. It’s another when you’ve gotten kicked out of the NBA playoffs in the second round two consecutive seasons. And I don’t know if anyone has that definitive answer on the Cavaliers. Know what Kobe said in his end of season presser, but what Kobe says at his end of season presser or what any general manager says at his end of season presser is by no means a hardline truth. We we saw Steve Bulmer last year. This is, you know, as teams are deeper into this, you know, there there’s going to be more movement and and more reactive to the environment that they’re in. We saw Steve Balmer last year, one of the richest people on earth, one of the richest owners in the world, flinch when it came to how they handled the the Paul George negotiations. We saw um their GM Lawrence Frank came out and say, “Look, the second April was definitely deciding factor and deciding how long we wanted to commit to Paul George and ultimately, you know, led to him being traded.” So Steve Balmer of all people is watching what this is doing. And you know, does it give owners an easy out? Sure. But we’re dealing with with humans here who are watching their pocket push just like you and I, maybe on a different level. But there is a there’s the moral of the story. There’s a pain point for every owner. What that pain point is for Gilbert, we don’t know. But to your point, it probably depends on how competitive they are each and every year. And one of the other things that I think is important to note is the Cavs don’t have to get under the second apron automatically. Yeah. The sec the apron status is ultimately so it it’s factored into trades as far as how they’re executed, but where you’re at is calculated at the very end of the year. June 30th is the year this year as far as when the new league year and old league year is. So the current league year goes through June 30th and then flips the calendar July 1st. So during the year you’re operating as your your your um salary actually is but ultimately what you’re penalized or paid out happens at the end of the year. So the Cavs can go just like they did this this year. This year they went into the season as a taxpaying team and operated as a taxpaying team. But by the trade deadline they made the move. They threaded the needle which may be the the avenue they look to for trading any of their guys with the Hunter. they got below the tax with a move to do that and ultimately they’re not going to be a taxpaying team at the end of the year. So that’s important to note as well is that they very well may operate a second apron. It doesn’t mean at the end of the year because they have all up until the trade deadline to make moves to duck that apron. Yeah. It does not have to be done at once in the summer. It is like you said at the end of the season. So Luka, we’ll wrap it up here with this. If someone asked you like I’m going to do right now, can you explain the Cavs cap situation and give me a realistic expectation for Cleveland this summer? How would you answer that in 90 seconds? The Cavs cap sit the summary of the entire podcast. This is the very end. This is the summary of the entire podcast. The the Cavs cap situation is like is like playing Madden. Being in the second apron is like playing an all Madden. doesn’t mean you can’t win, but who is controlling those picks is even more important than it is playing on rookie mode. And the ability to win and win at the highest level is determined by your creativity and ability to play the game, which this will test Kobe’s metal. The Cavs have an owner who’s willing to pay. There’s going to be a pain point. Um, any transaction that they make, there’s going to be some sacrifice that they have to live with. So, is it being in the second apron, paying that tax? Is it getting below the apron but then not being able to resign Merryill or Jerome because of being hardcaped by aggregating salaries. So just because they solve one issue doesn’t mean they solve everything. And there’s going to be consequences because of them being in the apron that the CBA set forth. Um moving forward, you know, one of the other things to think about as well is these trade assets that the Cavs have become in infinitely more valuable in protecting those salary slots. So what do we mean? Don’t go dumping uh Dean Wade or Isaac Aore just to duck the apron. If they’re going to do it, they’re going to do it for a very specific reason to make the team better, not just to duck the tax. So, we saw last year with the Phoenix Suns, they resigned Joshua Oki to a deal that was above his market value, but the reason they did that was to make him a tradeable asset. And the higher that they retain him for because the ability to repay to pay him being his own free agent opened up the market as far as who they could ultimately trade him for. So when you look at icicle corn or Dean Wade, don’t go trying to dump that right away because those are really the two key pieces they can trade leading up to the trade deadline without touching their top players. So if you want Ferry to get off his hands and do something, those are key pieces to do that leading up to the deadline. So Aoro and Wade, those are your salary slots to be able to afford a key piece moving forward. So moral of the story, there’s a re every every action there’s a reaction. doesn’t mean things are impossible, but before you look at a trade or look at a scenario, think about how is this compliant with the CVA because ultimately a lot of the times it’s not. And if it is, you have to think about the downstream effects of what move that has. Well, that was the best 90 seconds of the podcast. It’s probably more 90 seconds. Uh, last thing we get out of here. Will the Cavs open the 2025 2026 season with the core four and DeAndre Hunter, all five of those guys on the roster? Yes or no? Yes, I’m gonna say no. I think Jared Allen ends up being traded in some capacity. Uh, and I hope I’m No, I’m just going to leave it at that. I I end up thinking Kobe ends up making a move here. What it is, we got three, four months to find out, Luc, I’m sure I’ll send you many trades beforehand, and I will run it by you to make sure it is cap compliant before I put it out there online, unlike Joe Simmons and Ryan Marillo and a lot of other mod media folks here in the Cleveland market. Uh, that is Luca from Real Cavs Fan. He is the best. And I do not mean this to blow smoke, but I’m serious. Luka, you are the best Cavs cap guy around. If you don’t follow Luca at reals fans, his Twitter handle is on your screen there. It is real Cavsfans. He runs the Real Cavs fans account. He does a terrific job game byame analysis, pointing out stuff. Uh, just an absolute must follow here at Cavs Fans. Luca, I appreciate you joining me on this Friday morning. And uh I hope this helped Cavs fans listening get a better grasp on what is realistic and what is completely unrealistic as we enter what’s going to be an incredibly long off season.

The Cleveland Cavaliers enter the offseason with limited options to make moves.

The Cavs will be a second apron team next and the current CBA puts a lot of restrictions on teams in that part of the luxury tax.

So as we approach silly season in the NBA rumor world, Luka from RealCavsFans joined Mikey McNuggets to give you what is realistic, what’s not, and the basic constructs of the Cavs cap situation entering this summer.

Think of this as — the Cavs Cap Situation For Dummies.

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The Ultimate Cleveland Sports Show is your daily source of the best conversation about the Cleveland Browns, Cleveland Guardians, Cleveland Cavaliers and Ohio State Buckeyes, as well as sports throughout Northeast Ohio. Produced by Mike Lucas, Anthony Antonelli, and Earl Mauldin. Hosted by Jay Crawford, Adam the Bull, G Bush, Jason Lloyd, and Tyvis Powell.