Next Contract Series: Austin Reaves
Austin Reaves has one of those NBA success stories you love to see. Reaves went undrafted out of Oklahoma at the 2021 NBA Draft before signing a two-way contract with the Los Angeles Lakers. Following Summer League and offseason workouts, the Lakers quickly signed Reaves to a two-year, standard contract before his first official NBA game.
It’s that two-year nature of the deal that has the Lakers in a complicated spot as far as keeping Reaves beyond this season.
When Los Angeles signed Reaves, they were only able to offer him a two-year deal at the minimum. That’s sees Reaves paid $1,563,518 for this season. The reason the deal was so short and so small is that the Lakers had no other avenues with which to give Reaves a larger or longer deal. Los Angeles had already committed most of their Taxpayer MLE to Kendrick Nunn. That left just a minimum deal for Reaves, and deals signed using the Minimum Exception can only be for two years in length.
Flipping forward to today, Reaves is an integral member of the Lakers rotation and Nunn was traded to the Washington Wizards. And in a few months, Reaves will become a restricted free agent.
And that restricted free agency comes with some complications for the Lakers, because Reaves is an Arenas free agent.
In 2003, Gilbert Arenas was a breakout star with the Golden State Warriors. As Arenas emerged, Golden State happened to be a fairly expensive team. When the Washington Wizards gave Arenas a big offer sheet as a restricted free agent, the Warriors were essentially powerless to match it. That meant, despite hitting on a second-round selection, Golden State lost Arenas for nothing.
The 2005 CBA rectified things (to a point) by creating the Gilbert Arenas Provision. This gives incumbent teams a far greater opportunity at retaining players who are now classified as Arenas restricted free agents.
In order for a player to be an Arenas free agent, they must be coming off their first or second year in the NBA and they must be given a qualifying offer and made a restricted free agent. When a player is an Arenas free agent, opposing teams can still offer whatever salary they are able to give, but the incumbent team is given an avenue to match the offer.
What happens in these offers is that the first-year salary for an Arenas free agent is limited to either the Non-Taxpayer Mid-Level Exception (NTMLE) or what a team can match using their Early Bird exception. It’s important to note that this only applies to players who are Early Bird free agents. If they are non-Bird, then the incumbent team is limited to using the NTMLE to match.
That results in what is often referred to as a “poison pill” structure for a contract. For example, here’s what a four-year, $80 million offer sheet to an Arenas free agent would look like this offseason in terms of salary structure:
- 2023-24: $11,368,000
- 2024-25: $11,936,400
- 2025-26: $27,724,010
- 2026-27: $28,971,590
- Total: four years, $80,000,000
If you think this deal looks different from most you are used to, you would be correct. The first two seasons are pretty standard. It’s the NTMLE amount, followed by a 5% raise. After that, it gets a little complicated. That’s where the “poison pill” descriptor comes into play, because of the huge jump in salary from Year 2 to Year 3.
How you determine the salaries for the last two season is you subtract the sum of Years 1 and 2 from the total salary. Then, you split the remainder over the final two seasons, with a 4.5% bump in salary from Year 3 to Year 4.
It’s the above process that makes an Arenas offer sheet a complicated one. The player still gets paid in full, but their team is allowed to match the offer by using the NTMLE (or Early Bird rights, if applicable) to do so. But there’s one more set of complications that matter here.
For the team signing the Arenas player to an offer sheet, the cap hits for them would be the average of the total salary over four years. Sticking with our four-year, $80 million example, the signing team would have cap hits of $20 million per season on their cap sheet.
The matching team is not only given the chance to match, but they are also given the ability to determine how they want the contract to hit their cap sheet, if they are under the cap when they match. They can use the actual salary structure as laid out above as the cap hit. Or the team can choose to use the average salary as the cap hit. If the team is over the cap and matches, they must use the structure where they match with the Early Bird exception or the NTMLE.
One final thing to note: If a team chooses to match, whatever version of cap hits they choose become that player’s cap hit for the life of the deal. This includes if they are traded to another team.
With all that in mind, let’s get back to Austin Reaves and his next contract.
The Veteran Extension
We’re only listing this to say that Austin Reaves is not extension-eligible. Reaves two-year contract is too short to eligible to be extended. Only a contract between three and six seasons in length, or a previously extended contract, can be extended.
Re-signing with the Lakers using the Early Bird Exception
The Lakers are pointing towards being an over-the-cap team this coming offseason. Instead of having $30 million or so in cap space, the pre-deadline trades LA made puts them in position to re-sign recently acquired players like D’Angelo Russell and Rui Hachimura, and Austin Reaves.
This is where it’s fortunate that the Lakers have Early Bird rights for Reaves. While not as flexible as full Bird rights, Early Bird rights give LA a good chance to re-sign Reaves to a reasonable salary.
This is what the maximum contract the Lakers can give Reaves projects at, should they use his Early Bird Rights:
- 2023-24: $11,331,600
- 2024-25: $12,238,000
- 2025-26: $13,144,656
- 2026-27: $14,051,184
- Total: four years, $50,765,568
Early Bird rights allows for a team to give the player a first-year salary of 105% of the average salary from the prior season. From there, the player can receive up to 8% raises. A contract using Early Bird rights must be for a minimum of two years, and can be for up to four years.
Signing with another team as a restricted free agent
This is where the Arenas Provision comes into play. We used $80 million as our example to explain the Arenas Provision, but that’s probably a little rich for Austin Reaves. But could an average salary of $15 million, for a total of $60 million, be in play? We’ve seen shooters get paid handsomely in the past. Shooters who can do a little more? Those guys always get paid.
If Reaves got a $60 million offer sheet over four years, here’s how that could look given the Arenas Provision:
- 2023-24: $11,368,000
- 2024-25: $11,936,400
- 2025-26: $17,944,059
- 2026-27: $18,751,542
- Total: four years, $60,000,000
Remember: This is the actual salary structure. The Lakers could choose to match this structure using the NTMLE and assume the above as cap hits each season.
For the team signing Reaves to an offer sheet, they would assume the average-salary structure above as the cap hits for each season. That would look like this:
- 2023-24: $15,000,000
- 2024-25: $15,000,000
- 2025-26: $15,000,000
- 2026-27: $15,000,000
- Total: four years, $60,000,000
(Note: The Lakers could also use Early Bird rights to match the salary structure for Reaves. That structure would look a lot like the one laid out under the Early Bird section, but with a similar bump from Year 2 to Year 3 in an Arenas offer sheet match.)
The Lakers are in a spot where a team can make them swallow hard to keep Austin Reaves. Matching first-year salary at roughly $11.3 million isn’t really an issue. That’s fair value for Reaves. The second-year salary on a 5% bump really isn’t a difficult decision either.
It’s that Year 3 bump, followed by Year 4, where it could get unwieldy.
If you match, and assume the actual structure as the Lakers, you keep your tax bill down for this season and next. With big money committed to LeBron James and Anthony Davis, and several key free agents to sign, Los Angeles is very likely to be a tax team for at least the next two seasons.
Then, in Years 3 and 4, you’ve got Reaves on a salary potentially approaching as much as $18 to $19 million. And those could be the first years of a post-James and Davis Lakers team. That could be money the Lakers might not really want on the books, especially if they are resetting their roster.
Before we get there, it’s important to ask, is Austin Reaves even worth $15 million AAV?
He’ll be 25 before next season, so he’s not exactly a young prospect. But Reaves is pretty good. And it’s not just the Lakers limelight pumping him up either.
This season, Reaves has averaged 11.3 points on 51/39/86 shooting splits. And he’s not just a three-point shooter who happens to get to the free throw line once and a while, either. Reaves is averaging 3.3 free throw attempts per game. That’s pretty good for a reserve guard.
Reaves is also a solid defender, decent rebounder for his position and a good passer. At an AAV of $15 million, he’d rank as the 25th highest-paid shooting guard in the NBA next season. That would put him right between Lu Dort and former Laker Kentavious Caldwell-Pope. He’d also be just behind Luke Kennard, Kevin Huerter, teammate Malik Beasley (if his option is picked up), and just ahead of Gary Harris, former teammate Talen Horton-Tucker (a one-time Arenas guy himself) and Terance Mann.
That $15 million AAV neighborhood feels about right for Reaves. With even a slightly bigger role, he’s probably producing at a level similar to most of his contemporaries in that salary range.
If you add it all up, the Los Angeles Lakers can keep Austin Reaves. Nothing should really prevent that from happening. After very questionably losing Alex Caruso two summers ago, and then trading Talen Horton-Tucker ahead of this season, it would be good to see the Lakers lock in and keep a guard they developed.
If another team wants to play a staring contest with Los Angeles, they better be prepared to come with a big enough offer to make the Lakers blink. We’re talking something probably approaching the $75-$80 million range.
From the Lakers side, they should try to get things locked up before an offer sheet even comes. That would allow Los Angeles to keep Reaves under their own terms without having to deal with matching an offer sheet. After a couple of years of somewhat of a drain of in-house, younger talent, it’s important that the Lakers do what they can to keep Reaves.