The Klay Thompson Extension and Summer of 2015 Flexibility

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The Warriors are going to re-sign Klay Thompson. Short of New Orleans deciding they need to trade Anthony Davis for a third eight figure salaried shooting guard, it’s unlikely the Warriors move Thompson.

The Warriors have until October 31st to re-sign Thompson. If an extension isn’t reached, both sides are forced to wait until restricted free agency period in the beginning of July 2015. And with restricted free agency status, the Warriors are free to match any offer to retain Thompson.

Still early in the negotiation process, Thompson’s agent Bill Duffy has been pushing for a max contract:

“Meanwhile, Thompson’s agent, Bill Duffy, has been seeking a max deal in extension talks with the Warriors as well.”

Golden State can offer Thompson a max contract worth up to approximately 5 years, $84 million. (Figure based upon 2013 BRI and cap.  Actual amount of max is not known until after the 2015 season) 

Should the Warriors even try to ink an extension early? In theory the Warriors would be trying to re-sign Thompson before the season starts, at a rate below the max. He would be giving up his restricted free agency ability to find max offers in exchange for security. Stephen Curry did this, because of risks over his ankle. Had Curry waited till July 2013, he would have received max offers.

If the Warriors wait till next summer, Thompson would be represented as a cap hold (250% of his previous salary) until he signs an extension or the Warriors release his rights.

Assuming Thompson does not sign an extension this summer, he would be eligible to sign offer sheets with other teams on July 10, 2015. The Warriors would have 72 hours to match it or let Thompson leave. Other teams can offer Thompson approximately 4 years, $63 million. Given the dearth of quality wings, it’s unrealistic to think Thompson won’t receive those offers next summer.

For reference, Charlotte offered Gordon Hayward that amount on the first day of restricted free agency, despite having his worst shooting season. Utah ultimately matched and he stayed with the Jazz. Chandler Parsons received a pro-rated 3 years, $46 million offer from Dallas. The Houston Rockets decided not to match to pursue other targets. Should this scenario happen with Thompson, it’s hard to see the Warriors not matching. They have given every indication they will.

The Warriors cap situation entering next summer assuming neither Thompson nor Green sign an extension:

Guaranteed Salary
Team Option
Cap Hold

Per Larry Coon: “The numbers for 2015-16 are now projected to be $66.5 million and $81.0 million, respectively.”

The cap projection could increase beyond the projected $66.5 million figure:

“Grantland reported in July that the league is considering methods of pinching the onrush of money to avoid a gargantuan one-year jump in the cap level. Teams are speculating that the league might apply future TV money to the 2015-16 cap, nudging it up above the current projection of $66.5 million.”

For the Warriors, a cap increase beyond $66.5 million won’t have much impact on what they can do in the free agency market. Their current projected $78.8 million salaries + cap holds will be too far above the cap to sign any meaningful impact player without giving something up.

Even if the Warriors don’t pick up Rush, Speights, Nedovic, Ezeli and Kuzmic’s options, they will likely be up against the luxury tax with Thompson and Green’s extensions alone. With little flexibility the Warriors might think there is little logic in waiting out to resign Thompson. Might as well try to negotiate a deal both sides are happy with before being stuck with the inevitability of matching a max offer sheet.

If the Warriors were to not pick up any options, or trade players (Barnes is the only real candidate) for future picks to gain flexibility in 2015, they are still without any meaningful cap space.

If the Warriors do want to generate cap space, they will have to trade one of Curry, Lee, Bogut, Iguodala (and likely Livingston), while not picking up any of the players with team options. This is the point where it does start getting interesting, and the Warriors do have options.

Trading David Lee and Livingston would generate max space to sign a potential free agent or 2-3 mid-tier ones.

Trade Bogut and Livingston, the Warriors would generate slightly less space ($18.5 million) but still plenty of money to pursue some free agent targets to remake the roster:

The Warriors also have to think of the cap-hold for their 2015 draft pick, which won’t be determined till their draft position is known (the likely cap hold would be around $2 million).

Each of these scenarios’ requires thinking 3 to 4 moves ahead. The Warriors would likely have to attach the 2015 pick to David Lee’s $15.5 million expiring for a future pick. Perhaps pick up Barnes option and trade him with Livingston to a team who is bullish on Barnes’ potential for a future asset. And having a free agent target they are confident they can get to sign immediately on July 10, 2015.

The Houston Rockets attempted to pull off a similar coup with Chris Bosh, ultimately backfiring and leaving them with a gutted roster. There are no guarantees with free agents. Still, the Warriors would not even have the ability to do any of this if they are to extend Thompson early. The odds of pulling off the prerequisite moves, and then finding the meaningful free agent target that can impact the roster are slim. But they are near zero if the Warriors decide to just go ahead and extend Thompson now. After being able to generate cap-space by dealing Biedrins and Jefferson (much larger albatross contracts than anything the Warriors currently have on their books) to sign Iguodala, I wouldn’t doubt Myer’s ability to pull it off if the right free agent target indicates Golden State is their first choice.

In a league with so much fluidity in player movement, giving up that flexibility can come at the price of missing on a future opportunity. Right now there does not appear to be any major free agent targets in summer of 2015 who will want to leave their current employers. That said, in summer of 2012, no one thought Dwight Howard would walk away from the Lakers 12 months later. And with players like Kevin Love, Marc Gasol, LaMarcus Aldridge eligible for free agency in July of 2015, it’s worth the Warriors while to keep the window open, however small it may be, just on the off chance.

There is the advantage to signing Thompson early. Doing right by the player and his agent for future good will. A lot of players do play better when they are ‘taken care of’. A clear mind and feeling of having the organizations faith can go a far way in getting the best out of a person. There is also the consideration of a season long distraction. After dealing with Mark Jackson questions for an entire season, do the Warriors want every bad game to be a referendum on if Thompson’s contract status is affecting his play?

So the question becomes, do the Warriors value the future flexibility next summer, however small it may be, or do they want Thompson to not worry about his contract situation with no outside distractions?

Sources:
Larry Coon CBA
USA Today
Grantland
Shamsports