The Miami Heat find themselves $13 million over the $70 million luxury tax threshold, and while that's not good, it certainly could be worse.
With $83 million in guaranteed contracts this season, and $77 million next year, the Heat need to be smart with how they try to restructure current contracts and pursue veteran free agents.
Are the Heat in a good financial situation, or do they have room for growth in their front office?
Ahead is a breakdown of the Heat's financial outlook for the 2012-13 season and beyond.
All contract information was pulled from Spotrac.com.
Ahead is a breakdown of every player on the Miami Heat's roster heading into the 2012-13 season. For example, LeBron James will make $17.5 million this season while having four years and $79.3 million left on his overall contract—which is shown in parentheses as 4//$79.3M.
LeBron James: $17.5M for 2012-13 (4/$79.3M)
Chris Bosh: $17.5M for 2012-13 (4/$79.3M)
Dwyane Wade: $17M for 2012-13 (4/$77.1M)
Mike Miller: $5.8M for 2012-13 (3/$18.6M)
Udonis Haslem: $4M for 2012-13 (3/$13M)
Mario Chalmers: $4M for 2012-13 (2/$8M)
Joel Anthony: $3.75M for 2012-13 (3/$11.4M)
James Jones: $3.35M for 2012-13 (2/$4.9M)
Shane Battier: $3.14M for 2012-13 (2/$6.4M)
Ray Allen: $3.1M for 2012-13 (2/$6.1M)
Rashard Lewis: $1.4M for 2012-13 (2/$2.8M)
Norris Cole: $1.1M for 2012-13 (4/$7.7M)
Dexter Pittman: $.85M for 2012-13 (2/$1.9M)
Head Coach Erik Spoelstra: $2.75M for 2012-13 (2/$5.8M)
Two Open Roster Spots: Josh Harrelson, Terrel Harris, Jarvis Varnado, Mickell Gladness, Garrett Temple: $.94M for 2012-13 (1/$.94M)
Two final roster spots will be filled by players listed above for veteran minimums or rookie contracts.
Early Termination Option for 2013-14 Season: James Jones and Ray Allen.
Early Termination Option for 2014-15 Season: LeBron James, Chris Bosh, Dwyane Wade, Mike Miller and Udonis Haslem.
Team Option for 2013-14 Season: Mario Chalmers and Norris Cole
Qualifying Offer Year in 2013-14 Season: Dexter Pittman
Miller's 23-point performance on 87.5 percent shooting from beyond-the-arc in Game 5 of the 2012 NBA Finals was a great way for him to end the season. That performance helps fans forget just how truly mediocre of a player Miller has been over the past two years in Miami.
Over the past two years, Miller played in only 80 games and averaged just 5.9 points per game. While he's an emotionally-charged player coming off the bench, he's not deserving of $5.8 million he's getting paid next year, or the $18.6 million he's scheduled to earn over the next three years.
Last season, Jones averaged a measly 3.6 points per game with a 13.1 minute average. That's not deserving of anywhere near the $3.3 million they are paying him this upcoming season.
If Jones was a good leader for the Heat's second unit, the money wouldn't be such a problem. But more often than not, Jones is a hot-headed player who gets himself in more trouble than he's worth. With Ray Allen and Rashard Lewis joining the Heat, there's no way Jones' playing time will increase this season, and that's a major reason why he's overpaid.
Pittman got the chance of a lifetime when he started Game 3 of their playoff series against the Indiana Pacers. Unfortunately, he only lasted for three minutes and the only statistic he garnered was a personal foul.
All Pittman is known for is being a terribly unpolished player and being the guy that viciously elbowed Lance Stephenson in Game 4 of the Eastern Conference Semifinals. It's crazy when a player who makes less than $1 million dollars per year is considered overpaid. But there are a lot of young players out there who would give the Heat more production for what they are paying Pittman.
In an interview with Bleacher Report, Chalmers said that he's in the "front end" of the top 10 point guards in the NBA. While that's a pretty outlandish statement, Chalmers is a much better point guard than most give him credit for.
Not only did he put up an impressive 11.3 points, 3.9 assists and 3.7 rebounds per game average in the 2011-12 NBA postseason, he also has figured out how to fit in on a team with three legitimate NBA superstars—which isn't an easy thing to accomplish.
Chalmers is a gritty defender, an intelligent court general—at times—and most of all, he's a coachable player. Getting all of that for just four million per year isn't a terrible deal. There are a lot of other players in the NBA who are getting paid a lot more to do a lot less.
Haslem could easily be making more money with an NBA team not named the Miami Heat, but he chose loyalty over money and that makes him a truly special player. It also makes him one of the most underpaid players in the NBA and on the Heat.
All Haslem has done in his nine years with the Heat is put up a near double-double average with 9.5 points and eight rebounds per game. That's the kind of production that usually earns players close to double-figure contracts, and that's why the $4 million the Heat pay Haslem is such a great contract.
Being underpaid wouldn't be possible though if Haslem didn't want to be a member of the Heat franchise. He turned down more money to stay with the Heat. But that doesn't mean he isn't deserving of more money, because without him the Heat wouldn't have won the 2012 NBA title. He's the emotional glue that holds the team together.
No Truly Valuable Expiring Contracts
With LeBron James, Dwyane Wade and Chris Bosh's massive contracts taking up a total of $52 million per year, the Heat don't have a lot of room to keep players on their roster that have large enough contracts to fall into the "expiring contracts" range.
The Heat won't lose any contracts at the end of the 2012-13 season, but at the end of the 2013-14 season, Mario Chalmers ($4M), James Jones ($1.5M), Shane Battier ($3.7M), Ray Allen ($3.3M) and Rashard Lewis ($1.4M) will all come off the books.
That's a total of $13.9 million in expiring contracts at the end of the 2013-14 season—not including Joel Anthony, Mike Miller and Udonis Haslem's player options. That's not a ton of money they'll be getting rid of, especially when you consider that it's spread over five players.
No matter what contracts the Heat lose, they will likely still be over the $70.3 million contract at the start of the 2014-15 season because at that time, LeBron, Wade and Bosh will be making a combined $61.1 million.
There's just no way around the fact that the Heat don't have the luxury of having expiring contracts to use toward freeing up cap space or as trade assets.
The Heat's best hope is that Mike Miller decides to retire at the end of the season, which would free up $12.8 million over the two subsequent seasons.
If Norris Cole can continue to develop and mature, or the Heat decide they are better off with LeBron James running the point, they would be wise to throw Mario Chalmers on the trade block.
Chalmers is a player who certainly benefits from the star talent around him. But he's also being held back by the fact that he plays with LeBron, Wade and Bosh. He doesn't get the amount of offensive touches he deserves and he's forced into a different role with the Heat than he would on a team without as much star talent.
While he's a point guard by designation, Chalmers is a true combo guard and he'll never get the chance to display that in South Beach. At the end of the 2013-14 season, he will be a free agent and there's no doubt that he'll test the waters.
That's why the Heat would be wise to see what kind of value Chalmers holds on the trade block.
At worst, the Heat could trade Chalmers for expiring contracts that would free up cap space for the future. With LeBron, Wade and Bosh, the Heat's last worry should be trying to retain Chalmers. Instead, they need to figure out how to maximize his value before he becomes a free agent.
Assuming the Heat decide to exercise their team options on both Mario Chalmers and Norris Cole for the 2013-14 seasons, they will have $77M in guaranteed contracts when that season begins.
If that number stays the same, the Heat will only be $7M over the tax threshold, and that's not a bad place to be for a team with three of the best players in the game on their roster.
The main problem the Heat need to worry about is continuing to be repeat offender of the $70M salary cap. Going over the cap limit again will not only result in a tax penalty, but as ESPN's Henry Abbott reports, they will also be penalized more if they've gone over the cap for three out of the four previous seasons.
The 2013-14 season would be their third year over the cap limit, and that means additional taxes to pay out. While that's not a huge issue for Mickey Arison because of the money the Heat's star-studded roster brings in for the team, it's still going to make Arison's wallet a little bit lighter.
When all is said and done, the Heat won't be in a terrible place, financially speaking. If there's one thing they'll have to do though, it's sign veteran players to league minimums so that they can have legitimate talent to fill out their roster at a low cost.
With LeBron, Wade and Bosh luring talent into South Beach, that shouldn't be a problem.
Restructuring the Big Three's Contracts
LeBron, Wade and Bosh make enough money off the court to subsidize the value of their contracts with the Heat, and while they all still deserve to get paid a lot of money, they can all survive taking a pay cut.
Taking a pay cut isn't a necessity for the Heat's Big Three, but it would certainly help the Heat retain their elite talent while also giving them some flexibility to being players in free agency over the next few seasons.
At the end of the 2013-14 season, all three players will be in early termination options of their contracts. If they choose to not utilize that option and stay with the Heat, they will be owed a grand total of $128.8M over the next two seasons. That handicaps the Heat financially, and it's something their front office is going to have to consider in working for the long-term success of their franchise.
If LeBron and company are serious about establishing the next great dynasty in the NBA by winning more than two or three NBA titles in the next few seasons, they will have to seriously consider restructuring their contracts.
If they don't, the Heat won't be able to bring in enough quality talent to fill out their roster, and that would be a major obstacle for the Heat to overcome in the future.
The Miami Heat are in an interesting position regarding their financial well-being over the next few seasons.
On one hand, they are over the $70M luxury tax threshold—specifically $12M this upcoming season—which at first glance looks bad. But on the other hand, they aren't anywhere near being as over the limit as teams like the L.A. Lakers, who are $30M over.
So while they aren't in a great place, they aren't in that bad of a place either. With some restructuring of top-level contracts, the Heat will be in a good spot in the next two or three seasons. Without restructuring though, the Heat will have to pay quite a bit in taxes, and that's not good news for them.
Expect the Heat to be players in free agency over the next few seasons when it comes to veteran talent nearing the end of their careers—similar to what the Heat did this past offseason by signing Ray Allen and Rashard Lewis.
The Heat will be a smart team in free agency over the next few years, but they won't be active in pursuing the big names of free agency because they just don't have the cash to do so.