Signing Jaden Hardy to a 3-year contract is a win for the Dallas Mavericks

Yesterday, Stein confirmed that my guess about McGee and Hardy’s contract was indeed correct. I was only right because I trusted Marc Stein over Shams about Mavericks information.

But why did the Mavericks reduce their Tax MLE in order to sign Jaden Hardy to a three year instead of a two year deal? There are three main reasons that this three year deal is better than the standard two year deal:

1. Extra year at low cost
2. Full bird rights
3. Cap space friendly for 2024 & 2025

Let’s look at each of these on their own

Low cost for a third year of development

This is the most obvious reason. The Mavericks have Hardy at the minimum for his third year. This is locking in Hardy at the lowest possible cost. If Hardy shows any promise at all then he would have a better contract offer in the summer of 2024, as he’ll still be in his prime development years.

With that third season the Mavericks get to see another year of Hardy’s development before having to decide if he’s a long-term fit. This a big advantage. They also get to invest more time in his long-term development knowing they can put off the decision of whether to re-sign him one year farther down the line.

Full Bird Rights

If Hardy signed for two years then the Mavericks would only have early bird rights on Hardy in 2024. In some ways the artificial ceiling to their offer (around $13 million in the first year) could have been used the same way the Vet Extension limits allowed the Mavericks to lock-in Dorian Finney-Smith at a lower than market rate extension. This is evident by the max 15% trade kicker in Finney-Smith’s deal.

However, having full bird rights after an extra year of Hardy’s development is a preferable outcome. In the summer of 2025 the Mavericks will be able to offer any contract they desire.

Cap Space friendly for both 2024 & 2025

This is actual the reason I wanted to write this article. Many people (including Mavs MoneyBall’s Xavier Santos) are focused on cap space possibilities. If you are likewise honed in on cap space being the best route to obtain Luka’s co-star then you should really like Hardy’s 3-year deal. However I need to talk about a subject I haven’t yet explained on Mavs MoneyBall: cap holds.

When a player becomes a free agent they create a cap hold. This is an amount of money that remains on the team’s cap sheet until the player signs a contract or the team renounces rights to the player. This cap hold reserves that players spot on the roster. A team cannot use the cap space that the cap hold is blocking. So if you want to use that cap space for something else, you’d have to give up the ability to use the bird rights exception to re-sign that player. The amount of the cap hold relates to what kind of rights (non-bird, early bird, full bird rights) the team has on the player AND the final year’s salary of the contract the player just finished on. For now let’s just tackle cap holds for players with full bird rights.

The cap hold for players whose contracts are lower than the average salary and where the team has Full Bird Rights is normally 190% of their final season salary. If the player’s salary is above the average salary (10.79 million for 2022-23) then the cap hold for would be 150%.

Maxi Kleber’s contract ending this season is below the average salary so his cap hold will be 190%

2022-23 salary $9,000,000

2023 cap hold $17,100,000

For a player whose on a above the average like Christian Wood the 150% looks like this:

2022-23 salary - $14,317,459

2023 cap hold - $21,476,189

BUT for minimum salaried players the cap hold is only the minimum salary for what a 2-year player would get in the first year of a new contract. The projection for the 2 year veteran’s minimum in 2025-26 is $2,227,273.

Jaden Hardy’s salary and cap hold

2024-25 salary - $2,063,940

2025 cap hold - $2,227,273

The dreaded “Going over the cap” discussion

Many people think you can use cap space and then re-sign your own players by “going over the cap”. The reality is that this “maneuver” is only for low salary players who have earned big raises. And it especially work for players coming off minimum salary contracts.

Example - Mitchell Robinson and the Knicks

Mitchell Robinson has a low $1,836,090 cap hold because he is coming off a 4-year minimum contract. The Knicks are in position to take these 3 steps in order to maximize the advantage of his low cap hold.

1. Renounce all their free agents except Mitchell Robinson.
2. Use all the cap space to sign Jalen Brunson and Isaiah Hartenstein
3. Use Bird Rights on Robinson to re-sign him to his reported 4 year 60 million dollar deal using the measly $1,836,090 cap hold.

If you want the Mavericks to use cap space in 2024, Hardy will only count his salary against the Mavericks Cap Sheet $2,063,940.

In 2025, Hardy’s cap hold will be $2,227,272. If he has become a $10+ million dollar player the Mavericks can use the same 3 steps to use their 2025 cap space to chase a star. And then use the small cap hold to sign Hardy to any deal they want.

Predicting whether any of this will make a big difference is an in exact science, but it’s easy to say that this three year contract for Jaden Hardy is a win. The Mavericks reportedly identified Hardy as the 19th best player in the 2022 NBA Draft. Now the Mavericks have the ability to retain him long-term while preserving the option to go after free agents in 2024 and in 2025.