Knicks Salary Cap: How much cap space is projected for 2020?

A detailed breakdown of the New York Knicks’ salary cap situation heading into the 2020 offseason.

The New York Knicks enter an offseason unlike any in NBA history. As the leaves change color in the metropolitan area, usually the team is readying for training camp, their draft and free agency decisions already decided. But this year, due to a global pandemic that has kept Madison Square Garden in the dark since mid-March, the league calendar is different. It’s unclear when the draft and free agency will finally begin.

There is also uncertainty surrounding how much teams will be able to spend this offseason. Will the cap shrink due to lost revenues? Will there be some kind of smoothing mechanism over several years? Those decisions are yet to be made.

What we do know is how much money the Knicks already have on their books. And using a reasonable estimate of where the salary cap will land, we can project how much cap space New York could have this offseason.

How much cap space will the Knicks have this offseason?

The New York Knicks can practically create between $42.4 – $47.8 million of cap space, depending on whether the cap remains flat at $109 million or adjusts to the pre-pandemic projection of $115 million. To put that in perspective, the maximum starting salary for a veteran player with more than 10 years of service, or the highest possible free agent contract a team can offer, would be $38.2 million on a flat cap. The Knicks have enough cap space to sign any player to a max contract, while also leaving extra money available to spend.

The graphic above contains two columns: on the left, you can see what the Knicks’ roster would look like if the team takes practical steps in maximizing their cap space; and on the right, you can see all of the roster decisions that result in freeing up $42.4 million of space. For purposes of this article, we will assume the salary cap remains flat. We will also assume the Knicks guarantee Mitchell Robinson’s salary (more on this later). If you want to adjust the numbers above, just subtract the corresponding salary from the right column (i.e. Damyean Dotson’s) from the $42.4 million total (net a minimum roster charge of $898,310 for up to 12 players), and you can calculate the new cap space amount.

For the Knicks to create up to $42.4 million in space, they would need to take the following steps:

• Decline Bobby Portis’ and Theo Pinson’s team options.
• Waive Taj Gibson, Wayne Ellington, Elfrid Payton, and Reggie Bullock by October 17.
• Decline to offer Damyean Dotson a qualifying offer and let him walk.
• Sign Jared Harper to a two-way contract.
• Renounce Maurice Harkless’ free agent cap hold (and thus forfeit his Bird rights).

By dropping far enough below the cap, the Knicks would also lose the following exceptions (more on this in a bit):

• $3.9 million trade exception.
• $3.8 million Bi-Annual Exception.
• $9.8 million Non-Taxpayer Mid-Level Exception.

In making all of the roster moves above, the Knicks would carry $4 million in dead cap weight and incur approximately $1.8 million in minimum roster charges. Of course, they also continue to hold Joakim Noah’s stretched cap hit of $6.4 million.

How much practical cap space will the Knicks have during the 2020 offseason?

While the Knicks can create a maximum of $42.4 million of cap space (under a flat cap), practically, they might choose to create less by deciding to keep some of their veteran players beyond this season.

While the official date could change, sometime around the 2020 NBA Draft, the Knicks will need to decide what to do with seven of their current players. Five of them are on non-guaranteed deals, and two have team options for the 2020-21 season.

The easiest decision is with Mitchell Robinson, who is on a non-guaranteed contract for a minuscule $1,663,861 amount. He will most certainly be brought back.

If the Knicks decide to waive any combination of the players listed below on non-guaranteed deals before October 17 (initial league deadline), they would incur a $1 million cap hit for each.

• Taj Gibson: $9.45 million ($1 million if waived)
• Wayne Ellington: $8 million ($1 million if waived)
• Elfrid Payton: $8 million ($1 million if waived)
• Reggie Bullock: $4.2 million ($1 million if waived)

Leon Rose can decide to waive all of these players before their guarantee date, saving $25.65 million in team salary, while incurring $4 million in dead cap weight. For any of the players waived on partially-guaranteed contracts, New York can stretch their guaranteed amount—which would add up to $2.7 million in additional cap space.

Both Bobby Portis and Theo Pinson have team options in their contracts. New York can decline both options before the deadline date (~ October 17) and save a combined $17.45 million in cap space.

• Bobby Portis: $15.75 million ($0 if team option declined)
• Theo Pinson: $1.7 million ($0 if team option declined)

Which Knicks are restricted free agents?

As a player who wasn’t selected in the first round, but has played three or fewer years in the league, Damyean Dotson qualifies to become a restricted free agent this offseason. In order to officially make him an RFA, the Knicks must extend a qualifying offer that would give them the right-of-first-refusal against any other team trying to pry Dotson away.

Dotson’s qualifying offer is relatively cheap at 125% of his previous salary, so $2.0 million. The young guard can accept that offer and play on a one-year contract before becoming an unrestricted free agent in 2021; he can negotiate a more expensive contract to remain in New York, potentially long-term; or he can sign an offer sheet to see if the Knicks would match it (assuming they extend a qualifying offer).

A lot of people confuse the qualifying offer on a restricted free agent with their free agent cap hold. Since Dotson is a Bird free agent who is not coming off a rookie scale contract and makes less than league average in salary, his free agent cap hold is 190% of his previous salary, which is $3.1 million. The cap hold included in calculating team salary on restricted free agents is always the higher of their free agent cap hold ($3.1 million in Dotson’s case) versus qualifying offer amount ($2.0 million).

Recently-signed guard Jared Harper is also a restricted free agent. However, it is expected that the team will sign him to a two-way contract for next season, which would take his cap hit off the books.

How do draft picks count against team salary?

First round draft picks carry a cap hold even before they are selected and signed by the team. With the Knicks picking 8th and 27th in the upcoming draft, they have two cap holds for each of those picks, which equates to 120% of their respective rookie scale starting salaries.

Second round picks do not count against team salary until the player is signed. For purposes of projecting the Knicks’ cap space, I assumed they would sign their 38th overall pick to a league minimum deal.

Salaries for first round picks are set by the league using a rookie scale that is based on where the player was selected. Teams can sign first round picks for any amount within 80-120% of the rookie scale amount. Most draftees, especially lottery picks, sign for the full 120% scale. Once the official contract is signed, the cap amount adjusts to reflect the agreed upon salary instead of the 120% placeholder used ahead of the signing.

How do cap exceptions work?

Salary cap exceptions are sort of like cheat codes for teams operating over the cap. Technically, under a “hard” cap, once a team spends enough money to reach the cap threshold, they aren’t allowed to add any more salary to their roster, unless they create room with a corresponding salary reduction.

Let’s explain using an example: If the Knicks spend $108 million this offseason, under a hard cap, they would only have $1 million remaining to spend, unless they traded or cut a player with a non-guaranteed contract to open up more cap space.

The NBA has a “soft” cap for teams operating below the apron (which we won’t worry about now). The reason it is a soft cap is because salary cap exceptions allow teams to spend above the cap threshold under certain conditions.

Which cap exceptions do the Knicks currently have?

It’s important to consider the league calendar when understanding the cap exceptions available to the Knicks. Technically, since we are still in the 2019-20 cap year, the Knicks are operating over the cap until the new league year begins, probably sometime in October.

Once the league calendar turns to 2020-21, the Knicks can start making roster moves to create cap space as outlined earlier in this article.

The salary cap exceptions available to the Knicks will depend on how far they fall below the cap. If their current roster decisions keep them above the cap, they would have three main exceptions available to them.

1. $3.9 million trade exception from from the Marcus Morris trade (set to expire in February 2021).
2. $3.8 million Bi-Annual Exception.
3. $9.8 million Non-Taxpayer Mid-Level Exception.

All of these exceptions are included in team salary calculations until they are used or renounced. In other words, if the Knicks make a series of roster moves to fall $8 million below the cap in terms of player salary, they would still technically be over the cap by adding the value of the exceptions listed above.

This prevents teams from dropping below the salary cap, so they can sign a bunch of players, and then using salary cap “exceptions” to add more talent. You either have cap space, and use it, or you don’t have cap space, so you need to use exceptions.

However, if the Knicks fall far enough below the cap that the total value of the exceptions listed above would fail to bring them back over the cap, those exceptions are lost, or never received.

Instead, the Knicks would gain the Room Mid-Level Exception, which is projected to be worth about $5 million. This exception can be used to sign one or multiple players for up to two years in length with 5% annual raises.

Teams are always allowed to spend above the salary cap to sign players to league-minimum deals.

Which Knicks are extension candidates?

The Knicks can offer extensions to either Frank Ntilikina or Dennis Smith Jr., since both players have one year remaining on their rookie scale contracts. An extension must be agreed to before the start of the 2020-21 season. These “rookie scale extensions” can extend up to four years beyond this upcoming season for any amount as high as the player’s maximum salary.

Mitchell Robinson is eligible for a contract extension this offseason, but his case is a bit more complicated, so I cover that in much more detail here. The short of it is the Knicks can offer him up to a four-year, $56 million extension by opting out of his 2021-22 club option and replacing it with the first year of his extension. Or they can wait and live off his incredibly low cap hit for the next year, or two.