If you haven’t heard by now, the Washington Wizards are looking to trade their core group. The team is currently 9-14 and Adrian Wojnarowski reported that the team is open to trading its stars Bradley Beal and John Wall. Finding a deal for Beal won’t be that difficult, but finding a deal for Wall will be a tall task. Wall signed a super-max contract extension in the summer of 2017. Starting next season, Wall is owed approximately $170 million over the next four seasons. Because his play has been less than stellar this year, and he doesn’t appear to be in the best shape, executives question whether he is playing up to his contract. To make matters worse, Wall has a 15% trade kicker. What does this exactly mean?
Put simply, if Wall is traded, then the Wizards must pay him 15% of the remaining guaranteed value of his contract (cash) at the time of the trade.
As an aside, you may be asking why the trade kicker counts for this season when it was only in the contract extension? Article XXIV, Section 2(a)(iv) of the CBA allows the last season of Wall’s contract to include the trade kicker provision that was in the extension he signed. It states that “[a] Contract that does not contain a trade bonus when signed cannot be amended to add one, except that (emphasis added): (A) if the Contract is extended… the Contract may be amended simultaneously to provide for a trade bonus that will be payable only the first time that the Contract is traded following the signing of the Extension (and not as a result of any subsequent trade).” Thus, in this instance his current contract would include the trade kicker.
Let’s assume he is traded half way through the season, we’d calculate his remaining contract value for this season, and then add it to the rest of his guaranteed salary. We do not count the option year for this calculation. The only time an option year is counted is if it’s been exercised at the time of the trade. Oddly enough, ETOs do count for purposes of a trade bonus. We would then multiply that figure by 15%. See how the numbers play out below:
2018-2019 = $9,584,900 x .15 = $1,437,735
2019-2020 = $37,800,000 x .15 = $5,670,000
2020-2021 = $40,824,000 x .15 = $6,123,600
2021-2022 = $43,848,000 x .15 = $6,577,200
Thus, the value of his trade kicker midway through this season is $19,808,535. This value is then applied as a cap hit to each season in proportion to the amount of his contract that is guaranteed. Luckily his salary his 100% guaranteed each season, so his cap charges would look like so.
2018-2019 = $19,164,800 + $4,952,134 = $24,121,934
2019-2020 = $37,800,000 + $4,952,134 = $42,752,134
2020-2021 = $40,824,000 + $4,952,134 = $45,776,134
2021-2022 = $43,848,000 + $4,952,134 = $48,800,134
Article II, Section 7(f) of the CBA states that a trade bonus cannot cause the player’s salary for the salary cap year in which the trade occurs to exceed his maximum salary. John Wall’s maximum salary this season is 30% of the salary cap ($30,560,700), so since the cap charge would not take his 2018-2019 salary above that max, his full trade bonus is permissible.
Thus, the value he would recoup on his trade bonus is the full $19,808,535, with the Wizards paying him a full lump sum and the cap charges allocated evenly over four seasons. This is a tough pill for the Wizards to swallow.
There may be a solution to this problem. What happens if the team waits to trade him until after July 1, 2019? If the team waits, then his trade kicker value would be $0. How’s this?
The answer is simple. Wall signed a super-max extension providing for 35% of the salary cap next season. Thus, on July 1, 2019 the new salary cap number is set and Wall would receive 35% of that amount. Since he would be receiving the maximum amount allowed by the cap, any increase in his salary from a trade kicker would place him over the max. Thus, his trade bonus would be amended down toward $0 per the CBA. It makes sense because when the contract was signed there was no way of knowing how much 35% of the salary cap in 2019-2020 would be because it hadn’t been set yet. Thus, the numbers we see now are projections of how much he’ll make in the first year with the 8% increases following thereafter. If Wall had negotiated for anything less than 35% of the contract in the first season of the extended term, then he’d still have some value left from his trade bonus.
Zach Lowe highlighted this issue in an article he wrote detailing the Wizards situation. It’s a unique situation because the letter of the law seems to go against the spirit of the trade bonus, so it will be interesting to see how the league will handle this situation. I should note that Paul George, Russell Westbrook, and LeBron James have 15% trade kickers in effect for this season, but they will all be voided since those players are already making the max.
The Wizards have their hands tied in terms of options and it may be best for them to wait until the value of the trade kicker diminishes significantly next season before trading him. Wall could waive his trade kicker if he is desperate enough to get out, buts that not likely. The most likely scenario is that he is traded in July of 2019.