(Correction made to the Thunder's current salary figure)
The NBA has officially announced the salary cap and luxury tax thresholds for the 2014-15 season:
The National Basketball Association announced Wednesday that the salary cap has increased by 7.5 percent to an all-time high of $63.065 million for the 2014-15 season. The tax level for the 2014-15 season increased by 7.1 percent to $76.829 million.
These official numbers aren't far off the NBA"s last projections, which were $63.2 million and $77.0 million for the salary cap and luxury tax respectively (April 18). With that said, these thresholds might be set a little lower than teams expected – the NBA's projections tend to be conservative, but in this case, the projections ended up slightly greater than the actual threshold.
Still, the near 7% increases this season represent the rapidly increasing cap and tax levels that teams have expected not only for next season, but in years beyond. The salary cap and luxury tax are tied into the NBA's Basketball Related Income (BRI), and as the league forecasts a greater overall profit from broadcast rights, ticket sales and sponsorships, the cap and tax rises too. A similar rise is expected next season and in seasons to come, especially after the NBA's current national TV deal with ESPN/ABC and TNT expire after the 2015-16 season and they'll sign a new contract that's expected to be much more lucrative.
For now, the Oklahoma City Thunder currently rest above the salary cap but below the luxury tax with a salary figure of $73,092,126. That leaves OKC with $3,736,874 under the luxury tax, enough room to use part of the Mid-Level Exception ($5.305 million next season) with a bit of further flexibility available if they withdraw Grant Jerrett's qualifying offer and/or waive Hasheem Thabeet and/or Sebastian Telfair's unguaranteed contracts (both slightly over $1 million).
The greatest obstacle facing the Thunder this season is the decreasing value of the MLE, as teams are recognizing the leaps ahead in the salary cap and luxury tax. In a vacuum, many of the contracts agreed to already this offseason seem a bit on the high end, but the market is inflating along with the cap and tax levels and the price for free agents is rising as teams are more willing to "overpay" with greater cap flexibility ahead of them. Three years, $21 million for Jodie Meeks, anyone?
The MLE isn't directly tied to the BRI like the cap and tax are, and it increases at a preset rate that isn't quite proportional to the increases in the cap and tax. It's still enough for the Thunder to target the players they want (Pau Gasol, Mike Miller), but the higher going rates for free agents overall does restrict the Thunder's flexibility some when operating against teams using cap space instead of the MLE.
For example, it would've been a reasonable guess to say before free agency that the Thunder could have had Jodie Meeks within the MLE, but fast forward to the present and here we are with Meeks making nearly two million more annually than the Thunder could have offered on a contract with the Detroit Pistons. It's sure to be a factor in the team's pursuit of Gasol, who would already be sacrificing money to accept the MLE but will now be getting even higher offers from other teams when his agent points to Marcin Gortat's $60 million/five-year contract and Spencer Hawes' $23 million/four-year contract, both signed this offseason, for extra leverage in negotiations.
Going forward, the Thunder will also have Reggie Jackson's extension (he's eligible this offseason) to bear in mind. The extension would kick in after next season, and the Thunder could get a bargain if they lock him up now versus on the open market later on, especially with the market for free agents rising so quickly. Restricted free agent Gordon Hayward signed a max offer sheet with the Charlotte Hornets worth about $63 million over four years that the Utah Jazz plan to match, and it's easy to imagine that the Jazz could have kept him for much less if they had managed to secure a deal last year. As a general rule, third-year extensions for players on their rookie-scale contracts tend to have better value for teams than contracts signed when those players hit restricted free agency.
Everything the Thunder do now is with the lurking free agency of Kevin Durant in the summer of 2016 (and Russell Westbrook and Serge Ibaka in 2017) in the back of their mind. The new national TV deal would kick in around then and cause the value of everything – salary cap, luxury tax, maximum contracts – to skyrocket, and making sure they can retain their stars is the most important thing for the Thunder. They should have plenty of cap flexibility then if they continue to build their roster around players on rookie-scale contracts, but they also have to be careful about splurging on expensive long-term contracts now if it clogs the cap at all when Durant is a free agent.
If a team pushes the price up on, say, Mike Miller enough that the Thunder would have to pay him $5 million in Durant's FA year, it's not worth it. They already have to be careful with Jackson's contract extension and the rookie-scale contracts of Jeremy Lamb and Perry Jones III also expire the same year as Durant's deal, giving the Thunder a couple of things to juggle. It's likely why the Thunder have taken a cautious approach to this year's free agency, allowing other teams to spend on Thabo Sefolosha (Atlanta Hawks) and C.J. Miles (Indiana Pacers) first and sniffing the scraps afterward.
Players like Marvin Williams, Brandon Rush, Vince Carter and Anthony Morrow still remain on the market among some others, and they should come cheaper after the first round of teams with money to spend pass by. As LeBron James and Carmelo Anthony make their decisions, teams will turn their attention to the likes of Luol Deng and Paul Pierce, and then whoever's remaining will compete with the Thunder for the leftovers. In this inflated market, the best way to get bang for your buck is to be patient, and the Thunder are still waiting to make their first real free agent signing.