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BBALLBREAKDOWN

How a 2019 cap crunch could imperil the Warriors’ dynasty

How a 2019 cap crunch could imperil the Warriors’ dynasty

The two-time defending champion Golden State Warriors will enter the 2018-19 NBA season as commanding favorites to three-peat next June, according to oddsmakers. They added DeMarcus Cousins with their taxpayer mid-level exception, while their closest competition, the Houston Rockets, lost both Trevor Ariza and Luc Mbah a Moute in free agency.

Even if the Warriors do trounce all challengers once again, the financial pressures they’ll face next summer could begin to unravel their dynasty.

As of now, the Warriors only have four players signed to guaranteed contracts in 2019-20: Stephen Curry, Draymond Green, Andre Iguodala and 2018 first-round pick Jacob Evans. If Kevin Durant declines his $31.5 million player option as expected, he’ll join Cousins, Klay Thompson and Kevon Looney as unrestricted free agents, while both Jordan Bell and Quinn Cook will be restricted free agents.

stephen curry, klay thompson

Keeping all of them in Golden State beyond next year will be impossible without exorbitant luxury-tax payments, as the Warriors are set to enter repeater-tax territory this upcoming season.

With 13 players under contract, the Warriors already have north of $143.5 million in salary on their books for 2018-19, which puts them roughly $20 million over the $123.7 million tax line. If they don’t shed salary between now and the end of the regular season, they’ll owe somewhere around $65 million in tax payments, putting their total roster cost over $200 million.

That’s only a preview of what could be to come.

If the Warriors re-sign Durant and Thompson next summer to max contracts—they’d have starting salaries of $38.15 million and $32.7 million, respectively—those two plus Curry alone would send Golden State above the projected $109 million salary cap. Throw in the roughly $35.7 million owed to Green and Iguodala, and the Warriors would be nearly $38 million above the cap and nearly $15 million above the projected luxury-tax line of $132 million.  Without factoring in any other players, Golden State would owe approximately $44 million in tax on those five alone in 2019-20.

klay thompson kevin durant

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Once a repeater team goes $15 million over the tax line, each additional dollar it spends is taxed at a rate of $4.25, and that increases by $.50 for every $5 million more it spends in salary. In December, ESPN.com’s Bobby Marks projected the Warriors could be facing a record tax bill of $225 million if both Durant and Thompson signed for the max in 2019. Even if they each took $7 million less than their max first-year salary, Golden State’s tax bill might still exceed $100 million.

While the Warriors may be printing money—especially as they prepare to open their new stadium in downtown San Francisco in 2019-20—a tax bill that steep may give team owner Joe Lacob second thoughts, particularly as general manager Bob Myers rounds out the rest of the roster. They may be high on Bell and/or Cook, but are they high enough on either player to add $20-plus million to their tax bill?

Shaun Livingston could wind up being a salary-cap casualty, too, as only $2 million of his $7.7 million salary for 2019-20 is guaranteed until June 30. While he’s been a steadying presence off the Warriors’ bench for the past four seasons, that looming tax bill again begs the question of whether Golden State to afford to keep him around beyond this season. Guaranteeing his full salary could cost north of $30 million after factoring in the tax ramifications, which is an enormous amount for a reserve who has averaged only 18.0 minutes per game during his four years in the Bay Area.

DeMarcus Cousins, Warriors

Cousins, meanwhile, is all but certainly a goner after this season, as the Warriors will only have his non-Bird rights by virtue of having signed him to a one-year deal. That prohibits them from offering more than 120 percent of his 2018-19 salary next summer, which would equate to a starting salary just shy of $6.4 million. Unless Cousins is a shell of his former self when he returns from the Achilles injury he suffered in January, he’ll be in pursuit of far more long-term financial security in 2019, making him nothing more than a one-year rental.

Durant and Thompson could ease Golden State’s tax burden by taking less than their respective maxes, although their willingness to do so remains unclear. The former has already sacrificed nearly $15 million in potential earnings over the past two years, so he may feel as though 2019 is his time to cash in. Thompson, meanwhile, has “already engaged in discussions regarding a contract extension, according to Marcus Thompson II of The Athletic, which would be an enormous financial coup for Golden State:

“The most he could get in the first year of an extension is a 120 percent raise. With the highest annual increases allowed, that would put Thompson’s extension at four years and just over $102 million. Add the $18.9 million he is due to make in 2018-19 and Thompson is looking at a maximum five-year salary of $121 million should he sign an extension.

“If Thompson were to play out his contract and sign a new deal with the Warriors before the 2019-20 season, the maximum he would be eligible for — based on current salary-cap projections — is five years, $188 million.”

According to that report, the two sides have discussed an extension “with an average of around $23 million a year—which would come out to about four years, $92 million, nearly $50 million less than he could get on the open market—and puts his five-year total at $111 million.” Though that’s far less than the four-year, $140-plus million max deal he could sign with another team next year, the choice between that or staying in Golden State on a discount reportedly “isn’t that hard for Thompson.”

Klay Thompson

ClutchPoints

If Thompson were to agree to a four-year, $92 million extension, he’d have a starting salary of roughly $20.5 million in 2019-20, more than $12 million less than his maximum. But if Durant took his full five-year, $221-plus million max, the Warriors would still be a few million dollars over the tax line with just him Curry, Thompson, Iguodala and Green. They may not be facing a triple-digit tax bill depending on their other moves, but the repeater tax would still likely cause them to think twice about any additional expenditures as they rounded out their bench.

There’s no guarantee Thompson winds up agreeing to an extension before 2019, either. While speaking with Damon Bruce of 95.7 The Game in late May, Klay’s father poured some cold water on the likelihood of that (via Drew Shiller of NBC Sports Bay Area): “Klay definitely wants to play his whole career in Golden State and the Bay Area—there’s no question about that. … But let’s just say that negotiations will probably continue in the summer of ’19.”

Barring a surprise—such as Thompson or Durant taking a massive discount, or Durant departing next summer as a free agent—the Warriors will soon have difficult financial decisions to make. How they go about retaining their Big Four and replenishing their supporting cast will help to determine whether they’re able to sustain this dynasty beyond the 2018-19 season.