Paying luxury tax for an NBA roster struggling to make the playoffs is bad business.
But so is losing an All-NBA player for no compensation.
Free-agency starts Sunday at 6 p.m., with Charlotte Hornets point guard Kemba Walker among the stars on the open market. The Hornets have huge advantages in what they can offer Walker. But general manager Mitch Kupchak has said the team doesn’t intend to pay the luxury tax, and the price of retaining Walker could flirt with that.
The Dallas Mavericks, Boston Celtics and Los Angeles Lakers are among the teams expected to recruit Walker. All can argue they’d provide Walker a better chance to win over the next few seasons than the Hornets, who have missed the playoffs the past three seasons.
Under NBA rules, the biggest contract most other teams can offer Walker is $140 million over four years. The Hornets can go as high as $221 million over five years. However, given the team’s intent to avoid the NBA’s tax on bloated payrolls, it seems unlikely the Hornets would offer Walker the full amount. Or perhaps anything close to it.
The Hornets have about $98 million in guaranteed payroll for next season when the salary cap is projected at $109 million per team and the luxury-tax threshold at $132 million. A maximum-salary contract for Walker would likely start at about $32 million next season, with annual raises beyond that.
The only thing the Hornets control in this free-agent process is what they offer Walker. In every other sense, Walker and his representatives are in charge. General manager Mitch Kupchak acknowledged as much on draft night, saying he didn’t know yet when and how the Hornets would meet with Walker.
“Maybe we can get something done very quickly and he meets with nobody” else, Kupchak said. “Or maybe he has six or seven things set up, and he meets with two or three, and then we get something done and he cancels the rest. Or maybe he meets with everybody and we’re the last visit.”
Under NBA rules it was impossible for the Hornets to sign Walker to a competitive extension before he reaches free-agency. The team has had limited interaction with Walker since the season ended, but Walker said he would see owner Michael Jordan before free-agency began.
It appears that happened in France recently when Jordan Brand, the Nike subdivision built on Jordan’s fame, had a promotion in Paris. Jordan and Walker, a Jordan Brand endorser, were both at the event.
Hornets payroll problems
The Hornets have five players on next season’s payroll making $13 million or more, topped by Nic Batum at $25.5 million. Kupchak indicated last week he’s exploring ways to move one or more of those contracts to add flexibility below the luxury-tax line, and that he wants to do it quickly.
The Hornets have never had a payroll high enough to set off a luxury-tax payment, which is computed at the end of each season. Jordan has said it doesn’t make sense to be a tax-paying team for a roster that wouldn’t contend for a title.
Paying the tax wouldn’t just cost Jordan millions. It could also impact how much the Hornets receive under the NBA’s revenue-sharing program. And, it would reduce the tools Kupchak can use to reshape the roster, including some exceptions to the salary cap.
For a small-market team such as the Hornets, revenue sharing can be the difference between making or losing money in a given year.
Walker spoke with Charlotte media June 13 at his basketball camp at Ardrey Kell High.
He called re-signing with the Hornets his first priority and said he’s open to taking less than the full $221 million. However, he also said he’s prepared to move on. He intends to meet with teams other than the Hornets before making a decision.
He has also said a fifth year on his contract — which only the Hornets can offer — is important.
That’s where this gets complicated for Kupchak and Jordan: Is there a dollar amount and contract structure that staves off other teams and stays within their financial limitations? Would a fifth year have to be fully guaranteed? How would the Hornets improve the roster around Walker once he signs a contract that could average as much as $44 million a season?
In the summer of 2016 the Hornets were either going to re-sign Batum or lose him for nothing. To wall off the competition, they chose to meet with him immediately and agreed to a five-year $120 million contract. It now appears the Hornets overpaid.
Without knowing Walker’s plans, Kupchak said he’d prefer to be the last team on the player’s schedule.
“Typically you’d like to be the last for a lot of reasons,” Kupchak said.
“It’s not like we have to show him the city and recruit him. He knows I’m here, he knows who the owner is, he knows who the coach is.”