Where Does Klay Thompson’s Extension Leave Golden State Financially?

Nov 2, 2014; Portland, OR, USA; Golden State Warriors guard Klay Thompson (11) and guard Andre Iguodala (9) high five during the fourth quarter against the Portland Trail Blazers at the Moda Center. Mandatory Credit: Craig Mitchelldyer-USA TODAY Sports

The Player: Klay Thompson

The Team: Golden State Warriors

The Contract: 4 years, roughly $70 million, according to ESPN’s Marc Stein

How does it affect the cap situation?

This season, Thompson’s extension has no bearing on Golden State’s cap situation, as it doesn’t take effect until 2015-16. He’ll remain on the books this year for roughly $3.075 million, per Basketball Insiders.

According to Grantland’s Zach Lowe, Thompson’s deal is not a four-year max deal, despite previous reports indicating otherwise. He explained the details in a column Wednesday:

Had Thompson signed a true max contract, we wouldn’t know his precise salary, since we don’t know the salary-cap figure for the 2015-16 season — the first in Thompson’s fat new deal. The league has projected the 2015-16 cap at about $66.5 million, and under that cap number, a Year 1 maximum salary for Thompson would come in at about $15.5 million. But if the cap shot up higher than that, Thompson’s salary under a true max contract would shoot up with it.

The Warriors have protected themselves from such a scenario by giving Thompson almost the exact dollar-for-dollar equivalent of a max contract under the $66.5 million cap scenario — but doing so outside the confines of a maximum contract, per several sources familiar with the matter. In other words: Thompson’s contract sticks at four years and $69 million regardless of what happens to the 2015-16 cap between now and the start of next season.

Assuming his 2015-16 salary does come in at $15.5 million, he Dubs will be far over the projected salary cap of $66.3 million. Even if the NBA decides to smooth the windfall from the new television deal and increases the 2015-16 cap to somewhere in the ballpark of $70 million, Golden State will still be far over the limit. Currently, the Warriors have roughly $77.5 million in guaranteed salaries for 2015-16, per Basketball Insiders, not counting Brandon Rush’s $1.3 million player option or Draymond Green’s $1.2 million qualifying offer.


How does it affect the luxury tax?

This is where it starts to get interesting for Golden State. If the Warriors issue the qualifying offer to Green and Rush picks up his 2015-16 player option, they’ll be at roughly $79.95 million, leaving little room before bumping into the estimated tax line of $80.7 million.

Even if the cap and luxury-tax threshold rise beyond the projected amount, the Warriors likely won’t be able to use their mid-level exception without rising into luxury-tax territory once Thompson’s extension kicks in. Depending on where the tax line ultimately falls, the Dubs could also be limited to a taxpayer mid-level exception, which is for teams that will be above the apron ($4 million past the luxury-tax line) after using the exception.

In short, Thompson’s extension all but guarantees Golden State will be among the taxpayers if they use their mid-level exception without making significant alterations to the current roster.


What’s next?

Finding a taker for David Lee or Andre Iguodala, ideally. Offloading the $15.5 million Lee is due in 2015-16 would put Golden State below the projected salary-cap line, which would free them up to exercise their team option on Marreese Speights ($3.8 million) and sign a few other complementary pieces. The Warriors have long sought to move Lee, and with his contract coming off the books following the 2015-16 season, a rebuilding team with copious amounts of cap space (dialing Sam Hinkie on Line 1) could be enticed to absorb Lee’s salary so long as a future draft pick or tantalizing young player came along with it.

The Warriors could also explore potential Andre Iguodala trades, but his salary decreases in each of the next two seasons ($11.7 million in 2015-16, $11.1 million the following year), which makes him a more valuable chip to retain. Failing to trade either player likely means losing Green in restricted free agency next summer, as the Dubs would have to plunge far into the luxury tax to re-sign him with Lee and Iguodala both on the books.