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An updated breakdown of the Denver Nuggets salary cap situation after the Paul Millsap signing

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Time to get into the financials

NBA: Playoffs-Washington Wizards at Atlanta Hawks Brett Davis-USA TODAY Sports

The Denver Nuggets are signing Paul Millsap. Huzzah, pheasants and ale for all! Denver’s signing of the marquee free agent marks the biggest signing from outside the organization in over a decade, and arguably ever (though I would not make that argument). It’s also one of the most expensive the Nuggets have ever handed out. In terms of per year, no Nugget has ever received as much as Denver will pay Millsap and in terms of total guaranteed only Kenyon Martin’s infamous 7 year, $92 million tops Paul’s deal. Because Denver was well under the salary cap, they don’t have to send out any players who are currently under contract to absorb Millsap’s deal. However, this is the NBA collective bargaining agreement, a tedious document filled with rules, exceptions to the rules, conditions, additions, munitions and superstitions (some of those may not actually be in the CBA). So naturally, it’s not quite as simple as it seems.

Current Cap Situation

Player 2017-18 2018-19 2019-20 2020-21
Player 2017-18 2018-19 2019-20 2020-21
Paul Millsap $30,000,000 $30,000,000 $30,000,000
Danilo Gallinari $22,575,000
Kenneth Faried $12,921,348 $13,764,045
Wilson Chandler $12,016,854 $12,800,562
Darrell Arthur $7,464,912 $7,464,912
Jameer Nelson $4,736,050
Will Barton $3,533,333
Emmanuel Mudiay $3,381,480 $4,294,480 $5,758,898
Jamal Murray $3,355,320 $3,499,800 $4,444,746 $5,960,404
Mason Plumlee $5,822,500
Juancho Hernangomez $2,076,840 $2,166,360 $3,321,030 $4,642,800
Gary Harris $2,550,055
Malik Beasley $1,700,640 $1,773,840 $2,731,714 $3,895,424
Nikola Jokic $1,471,382 $1,475,500
Trey Lyles $2,441,400 $3,364,249 $3,706,357
Tyler Lydon $1,579,440
Mike Miller $3,500,000
Roy Hibbert $6,000,000
Guaranteed Total $87,649,614
Inclusive Totals $121,126,554 $80,603,748 $49,962,745 $14,498,628
Cap Space -$22,096,554

First a few quick notes on the table. Italics represents either a qualifying offer (QO) or a cap hold. Mason Plumlee’s number is his cap hold, not his QO. As his cap hold is higher than the QO, that is the one that gets calculated. Tyler Lydon similarly is reflecting his cap hold because he has not signed his rookie deal. If you want to get into the nitty gritty of why those numbers are what they are I will send you to Larry Coon’s CBA FAQ rather than spend 500 words explaining it.

The main take away from the cap as it stands right now is this: the Nuggets cannot sign Paul Millsap. WHAT?! How can this be you say, what is this rug that’s been pulled out from under me? Simply put, Danilo Gallinari’s cap hold prevents the Nuggets from signing Millsap for his $30 million per season deal because it takes up too much of the cap. Loophole you ask? Of course there is, this is the NBA salary cap. The Nuggets and Millsap have VERBALLY agreed to a deal but because of a league wide moratorium on roster moves, the Nuggets can not officially sign him until Thursday. What does it mean? Denver has until Thursday to either renounce Gallinari’s bird rights, release his cap hold (a move they will have to do regardless) and let him walk or they must move other salaries to be able to fit Gallo under the cap. Denver cannot renounce Gallo to make room to sign Millsap and then exceed the cap to re-sign Gallo, that’s kind of the whole point of renouncing a player. If they renounce him, which they have to do to sign Millsap unless they can work a sign and trade deal with the Atlanta Hawks, then the Nuggets have to have enough space under the cap to re-sign Gallo just like they would any other free agent.

Getting Gallo or Hill

Player 2017-18 2018-19 2019-20 2020-21
Player 2017-18 2018-19 2019-20 2020-21
Paul Millsap $30,000,000 $30,000,000 $30,000,000
Kenneth Faried $12,921,348 $13,764,045
Wilson Chandler $12,016,854 $12,800,562
Darrell Arthur $7,464,912 $7,464,912
Jameer Nelson $4,736,050
Will Barton $3,533,333
Emmanuel Mudiay $3,381,480 $4,294,480 $5,758,898
Jamal Murray $3,355,320 $3,499,800 $4,444,746 $5,960,404
Mason Plumlee $5,822,500
Juancho Hernangomez $2,076,840 $2,166,360 $3,321,030 $4,642,800
Gary Harris $2,550,055
Malik Beasley $1,700,640 $1,773,840 $2,731,714 $3,895,424
Nikola Jokic $1,471,382 $1,475,500
Trey Lyles $2,441,400 $3,364,249 $3,706,357
Tyler Lydon $1,579,440
Guaranteed Total $89,229,054
Inclusive Totals $95,051,554 $80,603,748 $94,962,745 $14,498,628
Cap Space $9,800,946

Simply clearing off the cap holds of Gallo and Roy Hibbert does not clear enoguh space for the Nuggets to make one of the two follow up moves that they have been connected with. These moves are either re-signing Gallo or signing free agent point guard George Hill. As you can see, clearing out the Gallo and Hibbert cap holds leaves the Nuggets about $9.8 million under the cap after adding in the Millsap deal. While it’d be nice to get either Gallo or Hill for that price, it ain’t happening. Each of those players can command somewhere in the $17-$20 million range. So, the Nuggets need to trade away at least one player without taking salary in return (or at least the net savings needs to be right around $10 million).

There are two ways Denver can do this that would seem to make the most sense, depending on whether its Gallo or Hill they covet most (and no, without unloading multiple contracts Denver cannot get BOTH Gallo and Hill). If the Nuggets are targeting Hill which, given there are a lot of rumors swirling around Gallo to the Los Angleles Clippers and the Nuggets sought out a meeting with Hill in free agency right as it began, seems to be the more likely then a sign and trade with the Clippers for Gallo may be an option. The problem is that the Clippers are capped out and also need to dump salary to fit Gallo. Essentially for LA and Denver to both get what they want the Nuggets need to send out a guy like Darrell Arthur or Wilson Chandler while the Clippers need to send out a guy like Jamal Crawford or Austin Rivers. No matter what combo of players you use, Denver and LA would be asking a third team to take on over $20 million in salary to facilitate their deal, which is probably unlikely. The three team deal with the Clippers is far more likely if Denver strikes out on Hill and Gallo decides he prefers LA to the Nuggets. This would mean Denver would get no players or salary relief in return for Gallo going to LA, just one big fat trade exception.

The next way the Nuggets can obtain either Hill or re-sign Gallo is by doing a sign and trade with the Hawks. Atlanta is going to lose Millsap for nothing without a sign and trade so if they can return some assets that’s a good thing. However, they have to be the right assets. Trust me, Atlanta has no interest in taking back Arthur’s shaky knees and $7 million plus a year contract. They want young players and rotation pieces on good deals. The loss of Millsap’s cap hold and the earlier dumping of Dwight Howard give Atlanta plenty of space to operate under the cap so salary matching isn’t an issue for either side in any deal. Perhaps Atlanta would be interested in a return of Kenneth Faried, whose starting role just got taken by Millsap, and Emmanuel Mudiay, the former #7 overall pick who hasn’t panned out and would be left out of the rotation if Hill is signed. Faried is on a very fair value contract for a starter at around $13 million per and Mudiay still offers plenty of upside and potential at 21 years old that gets GMs salivating. The deal would also clear out over $16 million in salary for the Nuggets, which is enough to sign Hill and restricted free agent Mason Plumlee without hitting the luxury tax threshold.

Why 3 years or less was so important

Player 2017-18 2018-19 2019-20 2020-21
Player 2017-18 2018-19 2019-20 2020-21
Paul Millsap $30,000,000 $30,000,000 $30,000,000
George Hill $18,000,000 $18,000,000 $18,000,000
Wilson Chandler $12,016,854
Darrell Arthur $7,464,912 $7,464,912
Jameer Nelson $4,736,050
Will Barton $3,533,333
Jamal Murray $3,355,320 $3,499,800 $4,444,746 $5,960,404
Mason Plumlee $12,000,000 $12,000,000 $12,000,000
Juancho Hernangomez $2,076,840 $2,166,360 $3,321,030 $4,642,800
Gary Harris $2,550,055 $22,000,000 $22,000,000 $22,000,000
Malik Beasley $1,700,640 $1,773,840 $2,731,714 $3,895,424
Nikola Jokic $1,471,382 $25,000,000 $25,000,000 $25,000,000
Trey Lyles $2,441,400 $3,364,249
Tyler Lydon $1,316,200 $1,562,200 $1,825,600 $3,192,974
Monte Morris $815,615 $815,615
2018 1st round pick $1,500,000 $1,775,000 $2,075,000
2019 1st round pick $1,500,000 $1,775,000
2020 1st round pick $1,500,000
Guaranteed Total $71,346,786 $129,146,976 $122,598,090 $55,542,974
Inclusive Totals $103,478,601 $129,146,976 $122,598,090 $70,041,602
Cap Space -$4,448,601 -$29,146,976 -$17,598,090 $39,958,398

A lot is being made of the length of the contract that Millsap signed and it should be. Getting him on a three year deal was crucial, having a team option on the third year is icing on the cake. The table above takes some assumptions. Gary Harris and Nikola Jokic’s estimated extensions are reflected here, as well as Plumlee and Hill’s estimated contracts. We’ve assumed Hill and Plumlee will get a similar deal in terms of length and structure as Millsap, IE 2+1 with the final year being a team option. We also are assuming Plumlee is finding a less than robust market for his services (which seems to be the case given there has been ZERO rumors about him thus far) and the Nuggets get him back on an affordable $12 million per deal, but it could be more. Finally, we’re carrying a contract for 2nd round pick Monte Morris as well as assuming the Nuggets keep all of their own first round picks over the next three years.

The 2+1 contract the Nuggets gave Millsap (and hopefully give Plumlee and Hill) allows them the flexibility to retain their young talent when those players start coming off their rookie deals. Denver had an anomaly last year by having three first round picks and signing all of them. That creates a situation where in 2020 the Nuggets have three players, potentially all of whom will be looking for raises, coming off their books. With the way Millsap’s deal is structured, he’ll expire at the same time freeing up that money to re-up guys like Jamal Murray, Juancho Hernangomez and Malik Beasley. The team option on the third year means the Nuggets can get out ahead of this if things aren’t going well or if they want to go another direction in making a push towards Finals contention. They could extend any of Murray/Juancho/Beasley in 2019 and cut bait with Millsap if they want to hop back into the free agency market a year early. If they can get Plumlee and Hill on similar deals that gives them just that much more money to work with.

Again though, the important thing was not to give out 4 year deals which would have saddled Denver with what likely would have been the most expensive year of those deals while the Nuggets are simultaneously staring up to three contract extensions in the face. Even if the Nuggets let Murray/Juancho/Beasley hit free agency, all of them would be restricted free agents and if the Nuggets are juggling onerous contracts for over priced veterans it will be very easy for another team to swoop in and offer a front loaded deal to one of the Nuggets young guys and severely hamper Denver’s ability to retain them.

All in all, from a cap stand point the Nuggets got a great deal with Millsap. Some will balk at the dollar figure but Denver did not give Millsap the max in terms of dollars or years. For an all star caliber player, 30% of the total cap is solid value, not great, but not terrible either and fact of the matter was the team had to spend the money somewhere. The options available to the Nuggets were get a guy like Millsap and hit at or near the cap, re-up their existing guys who fell short last season and leave unused space under the cap or make little to no signings and miss the salary floor again meaning they’d pay out the difference between their total salaries and the floor to the players. The Nuggets also aren’t bad enough with Jokic and the rest of the young core to totally bomb out so punting on the season in order to secure a top 5 draft pick wasn’t really an option either. Signing Millsap the way the Nuggets did improves the roster, makes the team competitive in terms of postseason births, uses the cap space effectively and maintains their flexibility to keep together the young core they’re building. Without a doubt, Tim Connelly, Arturas Karnisovas and the rest of the Nuggets front office made a swish with the Millsap deal.

Shout out to Basketball Insiders for the cap data. Every time I questioned one of their numbers I dove into the CBA and was able to find what obscure rule made their numbers correct.