Rockets reportedly plan to spend taxpayer Mid-Level Exception

The Rockets reportedly plan to spend the full taxpayer Mid-Level Exception, worth ~$5.7 million, and would like a “Capela lite” big man.

Led by new GM Rafael Stone, the Houston Rockets reportedly plan to spend their taxpayer Mid-Level Exception (MLE) this offseason as they seek to upgrade the roster around James Harden and Russell Westbrook.

This year’s precise taxpayer MLE level has yet to be finalized, but it was at approximately $5.7 million last season. There’s a larger non-taxpayer MLE available to teams at roughly $9.2 million, but it implements a hard salary cap that cannot be exceeded under any circumstances. Thus, using the taxpayer MLE offers the most flexibility for all scenarios.

For teams like the Rockets who are above the NBA’s salary cap, the MLE is the top financial tool available for upgrading their roster.

ESPN reporter Tim MacMahon, who regularly covers the Rockets, said this on Brian Windhorst’s latest The Hoop Collective podcast:

They do plan to spend the $5.7 million. That’s their Mid-Level Exception without hard-capping themselves. Now, I was told last year that they planned on spending their Mid-Level, and the year before. So, it’s one of those… believe it when you see it. But, that’s what they’re saying.

The other thing is, they would like to have a [Clint] Capela-lite type of center on the roster. Not necessarily in the starting lineup, but on the roster, they want to at least have the ability to play different styles. Not just the all small, all the time. I was told that was the plan last year, when they made the Covington trade [at the February deadline]. They thought they could backfill that spot. The name that was brought up to me was Nerlens Noel. They thought they could get a deal done with OKC at the deadline to get Noel. That didn’t happen. They had other deals that also fell through.

Noel has been a productive player in OKC the last couple years on a minimum [contract]. He can catch lobs, he can switch defensively, and he can give them a different look as a guy coming off that bench.

The Rockets did spend a portion of their MLE last offseason to give a three-year contract to promising young forward Danuel House Jr., who was very unlikely to accept a minimum offer. Because House had only signed with Houston during the 2018-19 season, they did not have any financial tool (such as Bird rights) outside of an exception to retain him. So while the MLE was largely used, it didn’t bring in a roster upgrade.

But this offseason, none of Houston’s internal free agents without Bird rights have anywhere near the market value that House did in 2019.

Thus, if Stone truly has the approval of owner Tilman Fertitta to spend that taxpayer MLE, Houston should be able to bring in a capable role player worthy of rotation minutes next season. Spending the MLE would likely push the Rockets into luxury tax territory, which they’ve yet to pay since Fertitta officially became owner in October 2017.

Luxury tax levels for 2020-21 have yet to be set, with negotiations still ongoing due to unexpected revenue losses from COVID-19.

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