Russell Westbrook and Robert Covington were supposed to make this Houston Rockets team more dangerous. Instead, after a promising season, James Harden and the Rockets found themselves in a familiar situation -- eliminated in the second round.
The Rockets are known for turning over their roster, including the acquisitions of Chris Paul and then Westbrook. This offseason, the lack of roster flexibility and draft assets will present a challenge. They also have decisions to make on possible extensions for Harden, Westbrook and P.J. Tucker.
Houston also had other big decisions to make with the departures of Mike D'Antoni as coach and Daryl Morey as general manager. Earlier this month, Morey stepped down and the Rockets named Rafael Stone as the new GM. And on Wednesday, ESPN's Adrian Wojnarowski reported that the Rockets were expected to hire Stephen Silas as their new coach.
Note: The team financial data here is based on the salary cap and luxury tax holding at the 2019-20 levels, as expected. Dates are subject to adjustment.
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The options with the roster
Daryl Morey was one of the most innovative executives in the NBA, constantly exploring options for improving the roster to chase a championship, but with an eye on the Rockets' financial situation.
After becoming the GM in 2007, Morey had made 73 trades, including the acquisitions of Harden, Paul, Westbrook and Covington. The Rockets never had a losing record under Morey, and they've paid the luxury tax only twice: $757,000 in 2010-11 and $4.9 million in 2015-16.
But Morey is gone now and the Rockets could be approaching a dead end on roster improvements.
They have $83 million committed to Harden and Westbrook for next season.
They owe $57.4 million guaranteed to Eric Gordon, including $16.9 million in 2020-21.
They are sitting right at the luxury tax line with $131.7 million in salary. While they can use their $9.3 million and $3.6 million exceptions, they cannot exceed $138.9 million in total payroll.
They have no draft picks this year.
The Rockets cannot trade any first-round picks beyond their 2022 pick. They can trade a first-rounder in either 2021 or 2022, but not both. In 2021, the Rockets will have the least favorable of their own, Oklahoma City's and the Heat's picks, limiting its trade value. If they trade their 2022 first-rounder, it has to be unprotected.
While this paints a gloomy picture, the Rockets do have Tucker's expiring contract. Covington's deal is reasonable and expires in two years.
The Rockets had a strong track record of signing second-chance players to minimum contracts -- most recently Austin Rivers and Ben McLemore -- and finding role players such as Danuel House Jr. and Jeff Green. That should continue after the promotion of Stone from executive vice president of basketball operations to general manager, maintaining some continuity within the front office.
Extension candidates: Tucker, Harden and Westbrook
Back in February, former teammate Chris Paul made the case for why Tucker deserves a new contract. "[Tucker] needs a [contract] extension," Paul told the media during All-Star Weekend. "That's all the man wants. The man plays every night and can't get an extension." Paul called the 35-year-old Tucker the "unsung hero" of the NBA.
In the three years since signing a four-year, $32 million contract, Tucker has yet to miss a game, and he's played every position he's been asked to play, including center in Houston's small-ball lineups.
Although league rules allow for teams to extend a player for a total of five seasons (including what is left on his contract), the length of Tucker's extension would be limited by the NBA's over-38 rule. So in this case, the extension would essentially be for only three additional years at the most.
(The Rockets can still sign him to the maximum extension allowed, which is four years at $55.3 million, but the final year would be considered deferred compensation and would be spread over the first three seasons and be counted as such for salary cap purposes.)
Here is an example:
If the Rockets offer him a more reasonable two-year, $20 million extension, there is no additional cap hit in each season beyond the $10 million.
The Rockets have $124 million in committed salary between five other players: Harden, Westbrook, Gordon, House and Covington. With or without a Tucker extension, the Rockets will likely be a tax team in 2021 (if the threshold stays at $132 million) once their roster is filled out.
Normally players with three years left on their contract are not extension-eligible. However, Harden and Westbrook both signed supermax extensions in 2017, so they have fulfilled the three-year anniversary criterion to sign a new deal.
In each case, an extension would first have the player exercise his $47 million player option in 2022-23. The Rockets could then add an additional two seasons, for a total of $103 million ($49.7 and $53.7 million) of new money. That would be the maximum number of years and salary allowed.
While there are restrictions on how much the first year can increase over the previous year, in this case 105% off the player's 2022-23 salary, there is no limit on how much the salary in the first year of an extension can decline. We saw an example last October, when Kyle Lowry signed a one-year, $30 million extension with the Toronto Raptors, which was for $3.3 million less than his 2019-20 salary.
Westbrook would be 35 and Harden 34 in the first year of an extension.
Offseason cap breakdown
The Harden and Westbrook supermax contracts -- combined with the Gordon extension -- leave the Rockets with $131.5 million in salary, $1 million below the projected tax threshold.
Houston will have the $9.3 million midlevel and $3.6 million biannual exception to use. But using more than $5.7 million of the midlevel would trigger the $138.9 million hard cap.
The Rockets have four trade exceptions, for $3.6, $2.6, $2.6 and $1.6 million.
Resources available to build the roster
P.J. Tucker's expiring contract
Cash to send out or receive in a trade
$9.3 million midlevel and $3.6 million biannual exception
Dates to watch
Unless there is a drastic decline in the salary cap that would affect the minimum-salary scale, expect Rivers to opt out of his $2.4 million contact. If the cap level remains the same as in 2019-20, Rivers could opt out and expect to receive at least the same starting salary as a free agent. Rivers has until 5 p.m. ET the day before free agency begins.
Former Sacramento Kings lottery pick McLemore resurrected his career with the Rockets. McLemore was out after the league after he was traded and eventually waived at the 2019 trade deadline. His $2.3 million contract for 2020-21 becomes guaranteed if he is on the roster the first day of free agency.
The Rockets have until the day before free agency begins to exercise the $1.8 million team option of David Nwaba. Signed during the transaction window in late June, Nwaba has not played a game since tearing his Achilles tendon in December. Since Nwaba has established non-Bird rights, the Rockets can decline the option and sign the guard to a contract for more than two seasons.
Restrictions
Harden has a 15% trade bonus in his contract. The bonus becomes voided if Harden is traded because it would exceed the maximum salary allowed in one season.
Nwaba and Rivers cannot be traded until a decision has been made about their team/player option.
McLemore's and Chris Clemons' contracts are non-guaranteed and would count as zero in outgoing salary.
The draft assets
For a fifth consecutive draft, Houston has traded out of the first round. In fact, the Rockets do not have a pick in the 2020 draft, with their second-round pick in possession of the Atlanta Hawks.
The Rockets owe Oklahoma City first-rounders in 2024 (top-four protected) and 2026 (top-four protected).
In addition, OKC has the right to swap picks in 2021 (top-four protected, with Houston receiving the least favorable of its pick, OKC's pick and Miami's pick), and 2025 (top-four protected; OKC has the right to swap with the Rockets or Clippers).