Nikola Jokic’s free agency presented a unique conundrum for the Nuggets

This story was originally published in February, 2018.

The Denver Nuggets should have no question that Nikola Jokic is worth a five-year, $146 million maximum contract coming off his rookie deal. The only issue was when that contract should come. The answer, reportedly, is this season, but it could have been next season under different circumstances.

Let us explain.

Jokic was a second-round pick in 2014, and he joined the Nuggets a year later on a contract fairly typically for a second-round pick. The first three years of Jokic’s contract (totaling $4 million) were guaranteed, and Denver also had a club option on the fourth season at $1.6 million.

Within a season and a half, Denver realized it had a star on its hands.

So there was no question that when that contract comes up, Denver would gleefully pay whatever it takes to keep its best player and continue to build a good, young team around Jokic, Jamal Murray, and Gary Harris.

The question was whether that would happen in 2018 with no risk of losing Jokic, or if it would have happened in 2019 with some risk. The answer, ultimately, is the former, according to Yahoo! Sports’ Shams Charania.

Had the Nuggets instead picked up Jokic’s cheap option for the 2018-19 season, due to league rules Jokic would have become an unrestricted free agent in July, 2019. That would have meant that he could sign with any club in the NBA and Denver would not have the right to match.

This is a key difference between first- and second-round picks. Those drafted in the first round can typically only become restricted free agents after four years in the league and unrestricted free agents after five seasons. (The exception comes when teams decline club options at some point in a first-round pick’s rookie deal.) Those drafted in the second round can become restricted free agents after one, two, or three years in the league (depending on the contract) and unrestricted free agents the year after.

Because Jokic is a second-round pick, the Nuggets had the option to reject the club option for 2018-19 this summer, which they took. Jokic then became a restricted free agent on July 1. The Nuggets would then maintain the right to match any offer sheet he signs, if he doesn’t first sign a max contract with the Nuggets as expected.

Doing this ensured the Nuggets did not lose Jokic.

So what’s the downside?

Declining the club option to pay him sooner is a huge strain on Denver’s 2018-19 salary cap sheet. That could force GM Tim Connelly to cut elsewhere, hurting the team’s trajectory at a critical point.

Since he’s a restricted free agent this summer, Jokic is eligible for a contract with a starting salary around $25 million and a total salary of $146 million over five years. The Nuggets already have $105 million worth of salaries committed for 2018-19 before accounting for Jokic. The cap is currently projected to be $101 million, with a luxury tax threshold of $121 million.

As you can see, signing Jokic to a max deal this summer puts the Nuggets over the tax threshold! Denver is not typically a team willing to pay the tax, and this would limit the Nuggets’ ability to add other free agents.

There are a couple of player options that could have opened up some breathing room for Denver, but didn’t. Wilson Chandler, a full-time starter, had a $12.8 million option. Darrell Arthur, who seldom plays, could opt in for $7.4 million. Given how tight the market is expected to be, both ultimately did. Had Chandler opted out, they would have come in just under the tax for next season, depending on what they do with their first-round draft pick.

Being above the tax in the summer is not the end of the world. Denver could wait until the trade deadline get back under, much as the Blazers did this season by unloading Noah Vonleh at the last minute. But for a team in a cluttered middle tier of the Western Conference, being tapped out financially with this roster isn’t ideal — and that’s before the big-money extension Murray will earn down the line.

That made the option of waiting until 2019 to pay Jokic a little more appealing. If the Nuggets had picked Jokic’s option up this summer, they would have possessed some room to add to the roster to make a real push in the West in 2018-19. Because they’d know Jokic’s payday is just around the corner, they’d have needed to remain sober in adding salary. But it could have provideed some flexibility at a critical moment.

In the end, the downside risk of losing Jokic in unrestricted free agency in 2019 — or angering his camp by delaying his payday — wasn’t worth the benefit here. The Nuggets were right to decline Jokic’s option this summer and give him the max. You don’t tinker when you have a star: You keep them secure.

But it’s not without some pain in the short term to do so, and you wonder if the timing here won’t prevent the Nuggets from reaching the heights they seek.