How the Oklahoma City Thunder saved money – and whether they might have to save more

August 31st, 2018

The early days of NBA free agency saw the Oklahoma City Thunder go big early. In a move that was known to be happening long before it happened, they agreed to re-sign 2018 NBA All-Star Paul George to a four year maximum value contract, and within hours also agreed to re-sign key reserve forward Jerami Grant to a three year, $27.35 million deal.

This was both somewhat surprising and distinctly strong from a team that entered the offseason in a state of flux. In acquiring George and Carmelo Anthony in the summer of 2017, the Thunder strove to make a big stride back to the postseason and to relevance after the departure of Kevin Durant the previous summer. But to do so meant piling on the payroll, and to not take a stride backwards in 2018 meant piling on even more, keeping George and Grant on raises with a payroll that was already hefty without them.

Immediately after those moves, reports came out about how, once luxury tax calculations were factored in, the Thunder were looking at a $300 million total commitment for their team this upcoming season. The reports of a $300 million total payroll were accurate enough at the time. However, they were normally taken out of context during their aggregation and sharing.

That figure came about because of the heavy amount of repeater luxury tax that the Thunder were facing. Historically not a taxpaying team, the franchise has now paid luxury tax in the last three seasons, triggering the more punitive repeater tax rates for this upcoming season. The 2011 CBA created greater deterrents for teams crossing the luxury tax threshold; whereas before teams would previously pay a simple dollar-for-dollar tax on any amount they went over by, there are now various thresholds over which the amount increases (much like how standard income tax rates increase for you and I the more we earn), plus a stipulation that these rates get even higher if you are a “repeat payer” (defined as being payers in at least three of the previous four seasons). Once all this was added up, then, a circa. $157 million projected payroll was set to cost the Thunder nearly $300 million after tax.

The amount a team pays in luxury tax, however, is calculated only from a specific point in time. That time is the last date of the regular season, which will be some time in mid-April. And a team’s luxury tax position is calculated based on its team salary, i.e. the status of its salary cap at at the time, and not the amount of money it has actually paid out in salary (the two can be and often are different, usually by virtue of mid-season trades, as mentioned in our earlier look at the situation of Luol Deng).

Given that a team’s luxury tax expenditure is calculated based on their position on the last day of the regular season, this meant that the Thunder had plenty of time to make inroads into that amount. And this, they soon did.

Most notable was the Carmelo Anthony trade. Melo simply never helped the Thunder that much in his one season with the team, yet was set to earn $27,928,140 after declining his option to terminate the deal this summer. He arguably was not wanted by them as a player at all, he definitely was not at that price, and thus his departure was inevitable. And after lengthy deliberations, the Thunder eventually settled on a trade that sent Anthony and a top-14 protected 2020 first-round pick to Atlanta in a three-way deal that yielded Dennis Schroeder from Atlanta and Timothe Luwawu-Cabarrot from Philadelphia.

Combined, the Schroeder and TLC pairing are to earn $17,044,951 in 2018/19, a full $10,883,189 lower than Anthony’s $27,928,140. Opportunities to fully divest themselves of Anthony’s salary through a salary dump trade were limited by the few teams capable of doing such a deal, opting to pursue other options, if even they were pursued at all, and while Atlanta’s acquisition of Anthony was contingent on him taking a buyout with the team, thus reducing the amount owed to him, Anthony gave up only $2,393,857, a much less significant saving than the $10,883,189 saved by the Schroeder option.

Into that came some further salary dumping. Although he was set only to earn the second year minimum salary, third string centre Dakari Johnson (whose role last year had been that of very limited minutes spot starter as Grant and Patrick Patterson took the main reserve minutes, and who had surely lost any role at all with the acquisition of Nerlens Noel via free agency) was traded to Orlando for the unguaranteed salary of Rodney Purvis, who in turn yielded the partially guaranteed contract of Abdel Nader from Boston via another deal. Nader’s contract is only $450,000 guaranteed this season until 1st September with an additional unguaranteed season, which, as explored in our look at Luol Deng’s options, can be stretched if waived today (stretched over five years at $90,000 each, or, if his fourth year team option is exercised, $64,286 over seven).

Then as of yesterday came the easiest move of all. Kyle Singler, who received a five-year contract for some reason back in 2015 (presumably to outbid the hot competition for his services), was under contract for $4,996,000 next season, fully guaranteed, with a fully unguaranteed $5,333,500 season after it. By virtue of the stretch provision, however, the Thunder could stretch that level of guaranteed base salary over five years, at a cost of $999,200 per annum. And this, they did.

With that, they were down to $145,582,564 in committed salary, $75,077,297 by my maths in luxury tax, for a $220,659,861 total commitment. With the seven-year stretch for Nader, they would be down to $144,268,608 in salary, $68,044,138 in tax, $212,302,746 in tandem, with 14 guaranteed contracts in place. In cutting surplus players who didn’t play anyway in the forms of Johnson and Singler, retaining their star and their only good bench player from last season, while adding productive players in the forms of Schroeder and Noel, Oklahoma City have added much needed talent while just about keeping their payroll manageable.

It is not however going to be easy to trim much more off of that this year.

The salaries of George ($30,560,700), Russell Westbrook ($35,654,150), Steven Adams ($24,157,304) and Andre Roberson ($10,000,000) are too core to the team to move merely for financial reasons, while Grant ($8,653,847) was not re-signed to be dumped straight away. Neither was Schroeder, not so much because he would not be, but because he cannot be; as one of the few non-rookie scale contracts in this league to run beyond the summer of 2020 currently, yet under-performing on it, Schroeder’s salary has negative value, and Lord knows the Hawks had previously pursued all avenues before opting for clean dumping it via Melo. The mid-size salaries of Patterson ($5,451,600) and Alex Abrines ($5,455,236) may theoretically be moved to save money down the road, but there are not many draft assets available to faciliate such dumps.

This is a significant departure for a team that, a few years ago, would not pay tax at all. Back in 2012, it was financial pressures like these that cost the Thunder James Harden.

In extension negotiations, the Thunder offered Harden very nearly the maximum salary, yet Harden wanted a full max, and knew he could get it elsewhere. Under threat of signing a maximum offer sheet in free agency next summer, Harden asked to be traded from the team; unwilling to pay the luxury tax, and also seemingly unwilling to use the amnesty clause on then-starting centre Kendrick Perkins to dodge it for Harden, the Thunder traded Harden before losing him, and although the trade package returned yielded Adams, Harden has gone on to be an all-timer. It is impossible to know for sure how much losing Harden has cost Oklahoma City, yet it is self-evidently a lot.

To go from being the team that lost a future MVP over a few million dollars to a team prepared to pay a potential $74 million tax liability for Dennis Schroeder and Jerami Grant is quite jarring. Nevertheless, as easy to cite of a criticism as that is, it is not a fair one. No one should be compelled to make the same mistake as they did once before purely for the sake of consistency; we should all seek to learn from our mistakes, and that starts with not making them again.

Furthermore the franchise’s financial position is different. Since that time, the Thunder have experienced changes in their ownership structure, including bringing in new investors with particularly deep pockets. Sam Presti and the front office are empowered to spend more money on the playing roster now not only because of the fallout from the Harden situation, but also because they simply can. There is more money now, and thus more spending power.

The question is, how long for.

Per the above, the core of the team is the quartet of Westbrook, George, Adams and Roberson. That foursome is a fearsome defensive group – Westbrook can do it, even if he so often chooses not to, while the other three are among the league’s best at their positions. Roberson in particular provides invaluable help all over that half of the court, as seen in the team’s second-half struggles last season without him before Corey Brewer provided a patch-up job to close things out.

That quartet, however, is also terribly spaced. George is a plus outside shooter as long as he is not in a three-point competition, but the rest are not at all. Adams leaves the paint on offence only to screen, Westbrook has never been a good outside shooter (perhaps because he jumps so high and does not hold onto his follow-through), and Roberson is infamously a non-shooter.

It does not help that the team’s best shooting options outside of George are Abrines and Patterson, the two movable expiring mid-range salaries per the above who could otherwise theoretically be moved to provide short term financial relief. It further does not help that Grant is a limited shooter from the outside, and Schroeder is a sub-par one for a lead guard as well. It only makes it worse that both Noel and third string point guard Raymond Felton are also not plus shooters, and that while Terrence Ferguson projects to be a decent shooter in his future, he is not one yet. Luwawu-Cabarrot has a similar projection yet has not done enough in two years to show himself as being worthy of a spot in the rotation; the rotation, then, features one good shooter (George), two decent ones who do little else, don’t do anything significant to get open and who would ideally be salary dumped (Abrines and Patterson), and a bunch of mediocre to bad shooters.

As a one-year aberration, this is navigable, albeit not ideal. The concern though is how it shapes the core going forward.

Of the core four, Westbrook is the flagship of the team, the designated Supermax recipient, the one posting historic numbers, the flawed genius who will never give up. Adams is almost as invaluable at centre, and George, while the most movable of the three, is also in theory the perfect counterbalance to those two.

That, then, leaves Roberson. The defensive specialist, the rebounder, the man most noticeable by his absence, yet maybe the one whose salary may prevent the team from making the required upgrades that it needs, through no fault of his own.

Until Brewer plugged the gap, the Thunder struggled horribly without Roberson last year. Much as we may cite their good defensive units and personnel, Roberson is the hub of it just as much as Adams is. as evidenced by the team’s defensive ratings last year. Prior to his injury, with him on the court, the Thunder had a 96.4 defensive rating that climbed to 108.3 when he was off of it.

That said, the struggles without him were only partly due to Roberson’s own impact. In large part, they were also due to the lacklustre options that replaced him. Abrines was a timid shooter who had too many nothing games, Terrence Ferguson took even fewer dribbles than he, and although he was the best defender of the bench, Josh Huestis was somehow even less of an offensive threat that Roberson, while not being the tour de force on defence. Singler wasn’t trusted at all, and ultimately, two point guard line-ups featuring Felton became a turned-to option, such was the plight at the position sans Roberson. Brewer shined in relative terms by virtue of being able to play both ends of the court capably, not because he was especially good.

It is to the Thunder’s credit that they have been able to upgrade their team despite the cap crunch this summer, even if it relies upon a favourable projection of the remainder of Dennis Schroeder’s career to do so. The Thunder are a good team, finishing last season with a 48-34 record and the fourth overall seed in the Western Conference despite a slow start adjusting to their new personnel, one they quickly remedied. But the path from there to a title is a long one that relies upon the right balance of players, both core and role, which they are unlikely to have given their significant outside shooting dearth. They surely cannot achieve great success when they are so likely to be either league-worst or second-worst in such a vital efficiency category.

Internal growth projections for the Thunder’s shooting disparity are not favourable. Westbrook would have to make a significant post-30 improvement, and in five years, Schroeder has somehow gone back under the 30% mark again. Felton has managed only a 32.9% career mark in 13 seasons. Abrines has the best looking stroke, but his physical profile makes a high volume of shots hard to foresee, while Patterson’s knee problems have seen him really regress as a player. Ferguson could be a good one, but needs to prove himself capable of a sizeable role for that to be of true value. The same is true of rookie HamIdou Diallo, whose form thus far has been better than his results. Adams and Noel have shown no signs and should be on the offensive glass anyway. And although Grant is now likely getting the starting stretch four role, he has never been a good one anyway.

Additionally, the need to move either Abrines or Patterson may be too strong to resist. Starting from the above post-Singler, post-Nader tax position ($212,302,746 combined tax and salary expense), that number would plummet to a combined $182,904,953 if Abrines was salary dumped for no returning salary, or $182,924,042 if Patterson was. If we play devil’s advocate for a moment (and conveniently ignore minimum roster size rules for the sake of argument), that number could be $158,590,895 if both somehow were.

The Thunder need both plenty of outside shooting, and salary cap flexibility. And yet they could save $54 million by getting rid of Abrines and Patterson. $54 million they could reinvest, both immediately and in the future, on better players, and via otherwise exhaustible assets they currently stand only to lose. Do they really need Abrines and Patterson that badly?

It is of course neither hugely realistic nor ever required to completely pass off their salaries for nothing in return, particularly in the case of Patterson, who is older and who has an option for next season. Yet were it to be done, those are the savings that could be recouped. Savings which could then allow the team to utilise its as-yet mostly unused mid-level exception and eight figure trade exception to get better quality players than those two. They are the two best shooting role players that the Thunder have, but this does not make them good value.

As constructed, the Thunder are looking at significant expenditures both immediate and longer terms. The remedies for the two are different; as above, sacrificing either or both of Abrines and Patterson can save more money this year, if so required. Abrines however expires after this season, yet the Thunder already have a near-$150 million committed payroll for next season.  Short of something shocking regarding Westbrook, George or Adams, if savings to the core are required, Roberson thus defaults to being in the firing line. Grant is also far from immune, earning much the same amount as Roberson, yet it is hereby assumed that Roberson has the better trade value, thus moving him better aids the competitive window. He has been treated as a core player hitherto for a reason, after all.

It will be hoped, then, that remedies are not required.

Shooting isn’t everything, but to be a title winner, a team cannot have such a glaring weakness. If the Thunder feel they are able to keep the core four together and work the margins sufficiently well to get into legitimate contention without the need for cost-cutting, that would be grand. If they feel they need to change the core talents without having to cut salary, and can compile trade scenarios to remake yet improve the team without a focus on saving money, that would also be fine. The check book has been wide open of late, and were it to stay as much, this may be a non-issue.

But if they cannot keep this spending up, perhaps Roberson will have to be on the chopping block. May I suggest Dallas?