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Asked and Answered: Salary Cap Effects of Nikola Mirotic’s Arrival

Photo by 401(K) 2012 via flickr

Photo by 401(K) 2012 via flickr

Reader Christian Baber asked…

I saw reports today that Chicago is nearing a deal with Nikola Mirotic. My question(s): Does Mirotic still count as an unsigned draft pick and therefore would remain eligible to be traded 30 days after signing his contract? Also, how does that buyout situation affect another team’s payroll and cap situation should they trade for him? Does that sign-and-trade hard cap the receiving team just like any other?

The Chicago Bulls drafted European forward Nikola Mirotic in 2011, but we’ve yet to see him play in the NBA. Amidst all of the free agency buzz going on during the first week of July, we learned that we might finally see Mirotic play in a Bulls uniform during the 2014-2015 season.

Normally, the talk surrounding this news would be how Mirotic’s sharp shooting could help a Bulls team in desperate need of offensive help. However, as the Bulls are pursuing Carmelo Anthony, much of the chatter about Mirotic is how his arrival would affect Chicago’s cap situation.

Mirotic recently came to a buyout agreement with Real Madrid worth $3 million. The Bulls have paid $600,000 of the buyout, none of which will count against the team’s cap. However, if the team does end up paying any of the $2.4 million difference, it will count towards the team’s cap in the form of a signing bonus.

For a team already worried about how it will afford Melo, every dollar counts. The Knicks and Lakers will likely have a max deal waiting for Melo, so telling Melo’s people they have to change their offer because of Mirotic probably wouldn’t be a good look.

If the Bulls do end up paying more buyout money and management decides to create cap room instead of lowering its offer, it could be the end of a useful rotation player such as Mike Dunleavy. Melo saw what happened when a team gutted its roster for him a few years ago in New York, and he may have learned a lesson.

As CBA expert Larry Guru points out, an NBA team has the option to negotiate with their draft pick as if he was a free agent, with cap space or exceptions, three years after he was drafted. Mirotic was drafted three years ago, and since he did not play college ball, he is eligible for this rule. However, if this is done, Mirotic must be payed at least 120% of the applicable rookie scale amount.

See how this can chip into Chicago’s chances of both keeping its roster in tact and attracting Melo? The financial situation was shaky before the Mirotic news, and while Chicago would surely love to have him on its roster, the timing could make things awfully difficult.

There is the possibility of trading Mirotic. The Bulls could deal Mirotic before he signs a contract with the team, although Mirotic has reportedly already received assurance that this will not happen. However, if the Bulls changed their minds and believed that this was the best way to create space and keep their roster in tact, this is a possibility to clear room for Melo.

The Bulls retain the rights to Mirotic for a year following his buyout with Real Madrid. In this manner, although it has been more than three years and he can sign for more than the rookie scale, Mirotic is still treated as a draft pick. Just like Doug McDermott, the Bulls don’t have to worry about another team swooping in and signing Mirotic to a contract.

Mirotic is still a draft pick, and thus, can be traded after 30 days upon signing a deal. This is important hypothetically, but as we noted above, Mirotic has reportedly already received word from the Bulls that he will not be dealt following his buyout with Real Madrid.

It’s not a good PR move to stash a player for three years and trade him after telling him you won’t do so, but hey, it could happen. If it helps you net the likes of Melo or another star, it has to come into the conversation.

If he is indeed traded, a team could hypothetically have to worry about buyout money hitting the cap if they end up having to foot part of the $2.4 million difference. I would think that these details would likely be ironed out by the time a team could complete a trade for Mirotic, but things can certainly change.

In the event that Mirotic is traded, he cannot be dealt to a team that will be over the “apron” when the deal is completed, which represents $4 million over the tax level. We don’t know what Mirotic will sign for, nor do we know if Melo will settle for less than a maximum contract. This makes looking into hypotheticals tough, but it’s important to keep in mind for both a potential Melo signing or a Kevin Love trade.

So, there you have it. Simple, right?

If the whole world, myself included, wasn’t obsessing over where LeBron and Melo will end up, we could simply appreciate the fact that another talented player is coming to the league from overseas.

The timing makes things interesting, and it’ll be fun to see how the Bulls handle the Mirotic situation.

Mark Evans

Mark is an accountant for PwC and a sad Boston Celtics fan. You can follow/tweet at him @JrMarkyMark

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