Here's how the Heat can sign Carmelo Anthony

Jeff Zelevansky

It won't be easy for the Miami Heat to go from the current Big Three to a Carmelo Anthony-enhanced Big Four. But, with some creativity and a willingness from all four stars to make it work, it could happen.

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The rumor that Carmelo Anthony wants to join Miami's Big Three raises many questions, but none more urgent than: how the hell can they actually do this? One would think that a team with three stars in a salary-cap league wouldn't have the capacity to add a fourth.

But there is a way that Miami can fit Anthony in alongside LeBron James, Chris Bosh and Dwyane Wade while still adhering to the NBA's complicated soft salary cap rules. It requires each player to take a larger pay cut than the Big Three did in 2010 and it may leave next year's Heat with a shallow roster beyond the Big Four, but it can be done. This is how.

(All salary data is taken from Mark Deeks' fantastic Sham Sports site. Also, while there is so much public knowledge about the cap and individual player and team salaries, the specifics of certain maneuvers and actual dollar value may not be exactly the same as presented. Thus, take all numbers as precise estimates rather than fact).

STEP 1: Decide who remains under contract

The Miami Heat only have one player who is certainly under contract next year: Norris Cole at just over $2 million. Udonis Haslem and Chris Andersen each have player options for $4.6 million and $1.5 million, respectively. Under normal circumstances, Haslem would opt in because he's not getting much on the open market and Birdman would opt out because he's worth more than his current salary, but Miami could convince each to take as little as possible to fit the four superstars in. Or, they could let them go and replace them (more on that later).

Norris Cole, Photo credit: Steve Mitchell-USA TODAY Sports

Miami also has just over $800,000 committed to Justin Hamilton's likely non-guaranteed contract and owns the 26th pick in the 2014 NBA Draft, which will come with a salary of about $1 million depending on the final cap level. Miami could decide to release Hamilton and trade the No. 26 pick to get even more breathing room, or they could keep both because they are cheap players that can fill out the roster.

Thus, Miami's existing commitments beyond the Big Three could be as low as about $2 million or as high as about $9 million. The salary cap is projected to rise to $63.2 million, with the luxury tax kicking in at $77 million. That gives Miami boatloads of cap space, at least in theory.

STEP 2: Deal with cap holds

Having so many free agents is both a blessing and a curse. The curse comes in the form of cap holds, which closes a loophole that allows teams to exceed the cap, then go back and sign their own free agents. Deeks has an excellent description on his site:

Your team's free agents have what is called a "cap hold." This is an amount of money that is charged to your team's salary cap number, even though the player isn't under contract. This is a deliberate ploy that exists to close a loophole; if cap holds didn't exist, it's theoretically possible for a team to have its entire roster become free agents at the same time, have their entire cap to spend on other team's free agents, and then use Bird rights to re-sign their own ones afterwards. And that would be disingenuous. This way, your free agents eat into your cap room, forcing you to prioritise a bit better. And the players below have cap holds (also known as "free agent amounts") that have not yet been renounced, making them technically interesting. Technically.

The best real-life analogy to a cap hold is a security deposit. You put down money that only gets charged if you trash the hotel room or apartment or whatever, but it serves as a check to make sure that you take care of business while you're there. Thus, a team's salary commitments are more accurate when you factor in cap holds instead of just committed salary for non-free agents.

Cap hold values depend on the player, but they are almost always for a significant amount more than a player's previous-year salary. And, because they have so many free agents, the Heat also have a shitload of cap holds:

  • Chris Bosh: $20 million.
  • LeBron James: $20 million.
  • Dwyane Wade: $19.6 million.
  • Udonis Haslem (if he opts out): $8.2 million.
  • Mario Chalmers: $7.6 million.
  • Shane Battier: $6.2 million.
  • Ray Allen: $4.2 million.
  • James Jones: $2.8 million
  • Toney Douglas: $1.9 million.
  • Chris Andersen (if he opts out): $915,000.
  • Michael Beasley: $915,000.
  • Rashard Lewis: $915,000.
  • Greg Oden: $915,000.
In addition to that, teams are charged a cap hold of about $500,000 for every roster spot below the minimum of 12. If Miami has only one player under contract, that means adding another $5.5 million to their security deposit.

There are two ways to remove cap holds. One is to actually sign the players to new contracts. As soon as a contract is completed, the player's new salary replaces the cap hold on the balance sheet. Since many of Miami's players will surely sign deals worth significantly less than their cap holds, this is one way to create space.

At the absolute most, James, Wade, Bosh and Anthony must take 60-70 percent of that number to make this all work.

The other is to do what's known as "renouncing" the player. This removes the player's cap hold, but prevents that team from using the Larry Bird Exception to go over the cap and sign him. Miami must instead use only their available exceptions -- cap space, the room mid-level exception (for just under $3 million each for a maximum of two years), and the minimum.

(Remember: there is a soft salary cap that can be exceeded with certain exceptions and a luxury tax that can also be exceeded, but with financial penalties. There is no hard salary cap).

Again, with some of these players, that might not matter. Rashard Lewis, at this point in his career, is likely a minimum salary player anyway, for example. Same for James Jones and, if he opts out, Udonis Haslem. With other players, though, it may effectively mean setting them free for good. Mario Chalmers, despite his poor Finals to date, will almost certainly get offers that exceed Miami's exceptions if he is renounced.

Step 3: Time the signings correctly

This is a critical step because the Heat can only sign Anthony if they have functional cap space. That is, they have removed enough cap holds to create the room under the $63.2 million salary cap to give Anthony a competitive first-year offer. There are several ways to do this. Here is one:

  1. Renounce every free agent other than James, Bosh and Wade. That puts the Heat at about $67 million in commitments when you count the Big Three's cap holds and all the roster minimum charges.
  2. Re-sign each of the Big Three first: As noted, each of them will have to make financial concessions. How big would those concessions be? By my calculations -- and remember that the actual dollar numbers may be slightly different than listed publicly -- if the three take the equivalent of $14 million each in their first year, there would be about $14.5 million of cap space left for Anthony to take. The $14 million each replaces their massive cap holds, plus three of the roster charges go away, leaving eight.
  3. Sign Anthony outright to a first-year salary of around $14 million: This would have to be a four-year contract, whereas Bosh, LeBron and Wade could all take five-year deals because they were never renounced. But it's doable and it leaves Miami with this cap sheet.

Another option would be to renounce everyone and use the remaining cap space to sign all four players in whatever order Miami chooses. This is what ESPN Insider Amin Elhassan spells out. The downside to that: Wade, James and LeBron can only get a maximum of four years on their contracts.

In either case, all four key players will be taking a decent amount less than they could get elsewhere. Based on the rising salary cap, the first year of the maximum salary for players with more than 10 years of experience will likely be well over $20 million. At the absolute most, James, Wade, Bosh and Anthony must take 60-70 percent of that number to make this all work. There is no state income tax in Florida, which will lessen the difference, and each player has been well paid throughout his career and can make up some of the difference with endorsements. Still, that's quite a few million dollars left on the table.

Note that these figures assume Miami clears literally every player from its roster. They must go down if the Heat convince Andersen to opt in, don't convince Haslem to opt out and/or actually use their first-round pick.

Step 4: Fill out the team
Everything that happened above has worked out great, except for the fact that Miami still has only five players under contract. The roster minimum during the season is 13, so there's still much work to be done.

One of the consequences of the zest to build the Big Four is that the Heat relinquish a number of ways to help this effort. Because they must dip below the cap to sign Anthony, they lose the ability to use the full mid-level exception, worth about $5.15 million in year one last year and more this year. Instead, they receive the Room Mid-Level Exception (more commonly known as simply the Room Exception), worth just under $3 million for a maximum of two years. This was not the case in 2010, when Miami, operating under the old CBA, still held the full mid-level exception after signing the Big Three. The Room Exception can be split, but it cannot be combined with any other exceptions.

Otherwise, Miami can only use the veteran's minimum to fill out its roster. That would give the Heat one of the more hilarious cap sheets in the league: four players making a lot of money (even still), one making 60 percent of the average salary and eight making the least they possibly can.

It's hard for even a great team like the Heat to find useful complimentary pieces with so few additional resources. One way to account for this is for James, Bosh, Wade and Anthony to take even less money, preserving enough cap space to sign another player. If each takes the equivalent of $1.5 million less in the first year, that may give Miami $6 million to sign a mid-tier free agent like Shaun Livingston, Trevor Ariza or even Spencer Hawes. But the Big 4 will have already sacrificed so much that it's tough to ask them to sacrifice more. Since there's a limit to the percentage of raises (or cuts) over the course of a contract, that also means the Big Four will take less over the course of their deals. In other words: LeBron can't backload his contract so he makes $5 million next year and $25 million the year after, for example.

Thus, next year's Heat will surely be a shallow team if they sign Anthony. The room exception will yield a useful contributor, and Miami could perhaps convince players like Allen and Andersen to take the minimum with the unspoken promise of rewarding them down the road. But there are so few mechanisms to acquire additional talent that the 2014-15 Heat may be even shallower beyond their stars than the 2010-11 edition that the Mavericks defeated in the Finals. Much like the first Heat's first cycle, it may take a couple years to find complimentary pieces to fill out the roster.

Nevertheless, it can be done with some sacrifices. Pat Riley has set up his roster to take advantage of this year's free-agent frenzy. If Carmelo Anthony wants to come to Miami, and if he is willing to take less money than he could to do it, the Heat could actually pull this off.

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