Retaining Paul George and OKC core could make Thunder first $300 million team
Oklahoma City find themselves staring down the barrel of a huge luxury tax bill next season. With OKC likely to offer Paul George a maximum contract, what are the luxury tax implications of keeping its core intact?
Oklahoma City has long coveted financial flexibility and has often avoided moves that send the franchise into luxury tax on consecutive seasons. That is all about to change. Following Russell Westbrook’s massive 5-year, $205 million(M) extension, the Thunder has $141.3M in salary on its books for 2018-19.
This includes player options for Paul George and Carmelo Anthony who can either leave or sign different deals. While it has been speculated OKC will incur a tax bill of $140M or more, it is entirely dependent on who opts in or out and if or what deal PG13 elects to sign. Let’s take a look at the various scenarios.
Honorary Mention:
Carmelo Anthony receives an honorary mention because he is likely to opt into this final year next season worth roughly $28M. Melo will be turning 34 next summer and it’s unlikely any franchise will offer an ageing superstar that sort of money. Athletically, its pretty clear that Melo has regressed. but he is still a professional scorer averaging around 25 points a night.
The Paul George Effect
PG13’s contract ultimately determines the size of Oklahoma City’s luxury tax next season. Whether he is actually interested in signing with the Thunder remains unknown. According to multiple media outlets, George is leaving for the Los Angeles Lakers regardless of what happens this season. The problem with that is Paul George has repeatedly stated he values winning over anything else and sadly, that isn’t happening in LA anytime soon, even if LeBron James ends up there.
Money Talks
When OKC acquired Paul George from the Indiana Pacers, they assumed his Bird Rights. This allows the Thunder to offer him more money and a longer deal than any other team. Lets take a look at his options.
George is entitled to a yearly salary equivalent to 30 percent of the cap. Since OKC possess his Bird Rights, they are able to offer him a 5-year, $176M deal. If PG13 was to leave for the Los Angeles Lakers, they could give him a 4-year, $130.3M contract. Granted Oklahoma City is hardly the glamour market LA is, but George would be leaving roughly $46M on the table.
Qualifying for a 10-Year Service Contract:
As the name suggests, a player must have at least 10-years of service in the NBA. This entitles a player to earn a yearly salary equivalent to 35 percent of the cap. When George hits free agency, he would’ve only been in the league for 8 years. In order for PG13 to qualify for 10-years of service, he can sign for 2-years at 30 percent of the cap.
The table below shows what he could get if he elected to sign a short 2-year deal then signed the veteran max with the Lakers.
Pay Roll and Luxury Tax in 2018-19:
Shams Charania of The Vertical recently reported the projected salary caps for the 2018-19 and 2019-2020 season.
Next season, OKC has roughly $94M allocated to just 10 players. Keep in mind, the figures below are estimations and the Thunder will have to sign additional players to round out its roster. Assuming Melo opts in, lets take a look at the luxury tax situation.
Paul George elects to just opt in:
In an unlikely scenario, George can opt in to his final year of his contract worth $20.7M. The Thunder’s payroll will total $141.3M, placing OKC $18.3M over the threshold. This equates to a minimum tax bill of $39.5M.
George signs a Max Extension with OKC:
This is the most likely scenario on the list. If PG13 signs a 5-year, $176M contract with OKC, their payroll will reach $156M. This pushes OKC $33M over the tax threshold and will incur a minimum tax bill of $100.7M.
He signs a 2-year short term contract:
This contract gives 2 years of guaranteed salary at 30 percent of the cap valued at $62M. At this price, Oklahoma City’s payroll reaches $151M and will be faced with a minimum tax bill of $76M.
An unlikely event..
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With the ‘banana boat’ rumour still in play, a case could be made that Melo opts out. If Anthony decides to decline his player option and Paul George signs a 5-year, $177.7M extension, OKC’s salary will reach $128M with a luxury tax penalty of $7.7M. George again can elect to take the shorter 2-year,$62M deal with the team’s salary sitting at $123.1M with a tax penalty of $1.5M.
Anthony opts in, PG13 leaves OKC:
In this case, Oklahoma City is looking at a team salary of $120.6M, lying around $2.4M below the luxury tax threshold.
Where does this put the Thunder?
If Sam Presti and Oklahoma City are true to their word, the franchise will be paying luxury tax unless both Paul George and Melo leave. Trading James Harden in 2012 and watching Kevin Durant walk out the door last year really hurt team morale. This offseason Presti has signaled they’re all in to win it. Presti is essentially buying two years worth of championship runs. And, if they’re going to keep this group together, OKC is rapidly closing in on a total salary bill north of $300M.