Paul George’s looming extension sets up fascinating, complicated course for Pacers
Forward Paul George’s five-year contract extension with the Pacers is all but complete, as Yahoo! Sports first reported. The sides may not be rock solid on some of the finer details, but the rhetoric from both is such that it seems only a matter of time before pen meets paper. George himself is already discussing the deal in the past tense, and Pacers president Larry Bird saw promise while stressing the importance of a mutually acceptable contract:
“The number has to be a number we both like,” he said. “That’s what it’s all about. It’s all about money. He wants to be here. He’s told me that a million times. We want him here. Let’s just find a number that works for both.”
A similar divide has stalled negotiations between other NBA parties, but George’s confidence in the resolution of his rookie extension goes a long way. Still, it’s understandable that Bird, in particular, would fret over the financial specifics. While the 23-year-old is a considerable talent with the potential to warrant a lucrative deal, the Pacers are on the brink of a five-year investment that could run anywhere from $80 million to $101 million, depending on the salary cap in 2014-15 (when George’s new deal would kick in) and whether last season’s Most Improved Player ends up qualifying for what’s known as the “Derrick Rose Rule.”
The latter is likely the biggest variable in play, as George stands to earn significantly more in his new deal if he meets the Rose rule’s provisions this season. According to the collective bargaining agreement, a rookie-scale player eligible for an extension can sign a deal starting at 30 percent of the salary cap (as opposed to the standard 25 percent) if he meets any of the following criteria in his first four seasons:
• Named to the All-NBA first, second, or third team at least twice.
• Voted to start in the All-Star Game at least twice.
• Named the league’s MVP at least once.
George, who is entering his fourth season, doesn’t qualify yet, but he has the potential to meet the first criterion after being selected to the All-NBA third team last season. If he makes an All-NBA team again this season, his immediate earning potential would skyrocket. His extension wouldn’t necessarily jump from 25 percent of the cap (about $14.7 million, which is how much Wizards point guard John Wall will make under the first year of his extension) to 30 percent (about $17.5 million, per cap projections), but his first-year earnings could conceivably fall anywhere in that range.
That’s likely where George’s agent and the Pacers are still negotiating, leaving open the possibility that George could wind up with a non-max deal still larger than Wall’s “max” extension. Such is the benefit of qualifying for the Rose rule — a feat that just two players (the Bulls’ Rose and Clippers power forward Blake Griffin) have accomplished. George could realistically join them, as Bird and the Pacers well know. And as much as the team would surely like to express its commitment to a young player of George’s caliber, every potential dollar saved matters for reasons that go well beyond the team’s bottom-line interests.
George’s extension would have no bearing on the Pacers’ payroll or cap sheet for this season. But in the year after (2014-15), the first butterfly effect of George’s new deal is likely to manifest. Indiana is in a position to absorb a pay hike for George that could run upwards of $12 million, but likely only in exchange for the departure of a pertinent contributor. Once an extension for George is made official, retaining swingman Danny Granger* after this season would come at a significant — and likely prohibitive — cost. Franchises in other markets might be willing to wade deep into luxury-tax territory to field the best possible team, but the Pacers are too good without Granger — who played only five games last season, when Indiana went 49-32 and lost the Eastern Conference finals to Miami in seven games — for owner Herb Simon to suddenly buck years of tax-avoiding precedent for the sake of a dispensable free agent. That would allow George’s new contract to fit comfortably in the roughly equivalent space that Granger’s deal ($14 million for this season) now occupies, paving the way for a financially lateral transition.
Even more interesting, though, will be the Pacers’ charted course through the summer of 2015 and beyond. Two full seasons from now, Indiana will have about $55 million in committed salary for only five players — George, center Roy Hibbert, power forward David West, point guard George Hill and reserve center Ian Mahinmi — and possibly more if the Pacers re-sign shooting guard Lance Stephenson (who will make $1 million this season in the last year of his deal) in the interim. After factoring in cap holds for their 2015 free agents (Luis Scola, C.J. Watson, Chris Copeland Donald Sloan), the Pacers seem highly unlikely to have any cap room. That makes Granger’s potential departure after this season that much more painful. Consistent contenders typically spend to retain talent, as keeping players — even extraneous ones — on Bird Rights helps counterbalance their inability to make other kinds of moves. Indiana likely won’t have that option with Granger, leaving Bird and general manager Kevin Pritchard to piece together a supporting cast with minimal cap exceptions and the tax line looming.
That in itself would be a challenge. But the summer of 2015, in particular, also brings two glaring concerns:
1. The courtship of Hibbert. The 26-year-old big man’s contract expires after 2015-16, amping up the pressure to field a top-level team that season. If Indiana is not elite for whatever reason, Hibbert could sign elsewhere as a free agent in 2016 and leave the Pacers nothing but cap room.
2. The eventual replacement of West. Indiana’s productive, culture-setting forward will be 35 by 2015 and playing out the last year of his deal. Re-signing West is technically an option, but at some point the Pacers will have to investigate potential replacements. If one isn’t found by the time West’s contract expires, Indiana might risk Hibbert’s departing in free agency and West’s opting to leave with the Pacers unable (because of George’s rising salary and Hibbert’s cap hold/new contract) to functionally replace him. Another potential scenario would be an expensive recommitment (through the re-signing of both players) to a static core.
Inextricable from both scenarios is George’s potentially hefty salary. If he does manage to qualify for a 30 percent max extension and gets every penny possible from the Pacers, George stands to make $20-plus million a season just as Indiana needs its (now diminished) cap flexibility most. That isn’t to say that George isn’t worth the price, but his extension — coupled with Hibbert’s current salary (nearly $15 million annually over the next three seasons) and potentially greater earnings on his next deal — could set up the Pacers for a roster pinch in the seasons to come. Those two alone would make for a pricy pair, especially considering that the luxury-tax line might fit the Pacers’ spending with an artificial ceiling. If neither George nor Hibbert makes the kind of leap that can help cover for limitations elsewhere on the roster, Indiana could be in an oddly stagnant spot.
That’s not exactly a disaster, given that the Pacers stand to be among the better teams for the next few years, primarily because of the two-way play of George and Hibbert. Extending George is the right move for the health of the franchise, but the size of his deal could very well limit the Pacers’ capacity to supplement their roster down the line. Only then does the pressure to keep a contender intact run headfirst into the team’s desire to avoid the tax, leaving room for a compromise of either the franchise’s financial doctrine or its roster stability.
*Trading Granger would also be a challenge, as Indiana would have to land a deal to acquire both cheap talent and a sizable expiring contract to satisfy its own interests while abiding by league rules. The number of teams that could provide both of those things is fairly small, and the number that have those assets and an interest in Granger even smaller.