Some of the NBA’s biggest stars were playing musical chairs this offseason.
Names that you know, like Klay Thompson, Paul George, Karl-Anthony Towns, and more, are finding themselves on new teams. Some of that is certainly voluntary. Thompson and George, for example, both left situations they preferred to be in because the money simply wasn’t there for them.
But for someone like Towns, there was no choice in the matter. The Timberwolves traded him to the Knicks for a bit of salary relief. The Nuggets similarly let Kentavious Caldwell-Pope leave to go to the Orlando Magic without sending him a truly competitive offer because it wanted to save a bit of cash.
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There’s a common denominator here, folks. It’s the money. And it’s always about the money. But, this year, more than ever before, teams are making decisions purely based on their financial circumstances with the implications on how it impacts their teams coming secondary.
The question is why are they doing this? The answer is quite simple. It’s the NBA’s new luxury tax tool, the “second apron.”
Let’s dive into what that is.
OK, I keep hearing about the second apron. What is it?
Simply put, the NBA’s second apron is a financial threshold included in the league’s new collective bargaining agreement that teams face dire consequences for crossing.
Every season, there are certain salary thresholds that the teams around the NBA must adhere to.
We’ve all heard of the salary cap. That’s the initial threshold NBA teams are supposed to spend. If a team is under the cap, they can use certain cap exceptions to spend a bit of money to go over it. Those exceptions include things like Bird Rights, the Mid-Level Exception and more.
NBA teams can use those exceptions to keep spending without penalty until they hit the luxury tax line. Once you hit that tax line, teams will begin to face penalties. You’ll lose access to certain exceptions and the ability to make certain deals. That’s the first “apron,” so to speak.
If a team crosses into that second apron, the tools to build out their teams become extremely limited.
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What do teams lose access to after spending into the second apron?
If a team goes beyond the second apron, they lose out on essential roster-building tactics that help teams fill out rosters around their stars.
Teams will lose:
- Complete access to the mid-level exception in free agency
- The ability to trade a first-round pick seven years into the future
- The ability to acquire players in return when the team chooses to sign-and-trade its own free agents elsewhere
- The ability to aggregate contracts in trades
- The ability to send straight cash out to teams in trades
On top of that, if a team is in the second apron twice in a four-year span, its draft pick will fall directly to the bottom of the first round of the NBA draft that season.
It completely freezes a team’s ability to build.
Wow. That’s a lot. What is the second apron threshold?
The NBA’s current salary cap sits at $140.6 million, according to Sportrac’s data.
The first apron threshold is at about $178.1 million and the second apron threshold is about $11 million over it at $189 million. The Celtics, Bucks, Timberwolves and Suns are the only teams currently sitting above the threshold heading into the season.
How has the second apron impacted teams so far?
There’s speculation out there that lots of teams this offseason who made moves — or declined to make moves! — in order to trim salary down to avoid the apron.
The Timberwolves aren’t below the threshold just yet, but the Karl-Anthony Towns trade saved $9 million in salary and $50 million in luxury tax payments. Julius Randle could also opt out of his deal in the offseason, which would end up saving the Wolves even more in the long-term.
Again, the Nuggets reportedly chose not to re-sign Kentavious Caldwell-Pope to a long-term deal mostly because doing so would’ve put the team into second-apron territory with a Jamal Murray contract extension looming.
Klay Thompson and Paul George’s deals reportedly played out similarly, with the Warriors and Clippers supposedly fearing massive luxury tax payments and second apron restrictions coming along with keeping their stars in-house.
The second apron has not only made team building harder but it’s also been the catalyst for a ton of player movement around the league this offseason. That’ll continue to be the case as teams figure out how to navigate all this.
Is this good or bad for the NBA?
Only time will tell us the answer to this question. There are valid arguments to be made on both sides.
On one hand, the second apron seems to penalize teams for acquiring and developing good players and keeping them in-house. The better a team is, the more expensive things will get. Championship contenders are going to have to make tough financial decisions each year.
At the same time, the apron should theoretically create the parity so many people have been looking for in the NBA for years now. No one team will be able to stack the decks for long without paying steep penalties for it. If that creates more contenders year in and year out, maybe that will get more fans interested in the long term.
It’s hard to know the results after just one offseason. But what’s clear so far is that teams are very, very afraid of this new threshold. That probably isn’t changing anytime soon.
