The Rockets Cap Situation, or How the Team Could Clear Space for Dwight Howard and Deron Williams

Through 22 games, the Rockets have shown enough promise to make some observers think they could challenge for a playoff berth in the always-strong Western Conference. However, with their moves in the past year, the Rockets appear to have much bigger ambitions on their mind, most notably in the free agency class of 2012.

Nobody is saying that the Rockets have a good shot at Dwight Howard or Deron Williams, but with the Rockets creating cap flexibility much like other teams in the league, they can position themselves to bring both in if the other parties are willing.

The Rockets are not the only ones who have been intentional in recent years to rid themselves of long-term deals to lower their cap obligations in future years; their in-state rivals, the Mavericks, have done so as well, letting Tyson Chandler go and trading for Lamar Odom and his expiring contract, among other moves.

Here's what Mark Cuban had to say in an email to ESPNDallas's Tim McMahon:

The reality is that in the new system, cap room will have far more value than it had in the past. I realize that everyone is all freaked out about how and where free agents and future free agents are going, but it's not just about getting one guy.

In the past, it was different. If we had a problem, I could fix any mistake by having Donnie find a trade and just taking on more money. That is how we got Jet, the Matrix, JKidd, Tyson. It was always about taking on more money. That trick doesn't work any more for teams over the tax. So we have to change our approach. By getting back under the cap, we have a ton of flexibility not only for free agent signings but also trades. If we can get the right guy(s) via free agency, great. If we do it via trade, great. We have that much more flexibility to make moves.

McMahon's entire post is worth reading, this is just a sampling of what Cuban had to say. After the jump, we'll look at a number of avenues Daryl Morey could explore over the coming months.

For the purposes of this article, I will include a link to a spreadsheet I've compiled. It details the Rockets' current salary obligations over the next four years on the first tab and includes the obligations the Rockets would assume in the two scenarios I will be discussing on the other two tabs. The spreadsheet can be found here. In the spreadsheet, I assume that Dalembert's option will be declined future obligations, but the 3rd and 4th year options will be accepted on Chandler Parsons, Chase Budinger, and Marcus Morris' deals.

A Look at the Current Situation

Barring any trades, the Rockets will enter the summer of 2012 with at least seven players under contract, Kevin Martin, Luis Scola, Kyle Lowry, Patrick Patterson, Marcus Morris, Chase Budinger, and Chandler Parsons. Samuel Dalembert's contract has a team option for $6.7 million which the Rockets will likely opt to accept, but the Rockets could waive him and pay $1.5 million as a buyout if they opt to maximize their cap space.

These seven players will command about $35.5 million in salary for 2012-13 (including the $1.5 million buyout for Dalembert). This leaves well over $20 million in cap space for the summer.

However, after including Donatas Motiejunas' cap hold, the projected cap hold for the Rockets' 2012 1st round pick, and minimum salary holds, that number shrinks to $16.978 million, or just under the amount needed for one max contract.

With some cap maneuvers, the Rockets could clear enough for a max deal, but there's little doubt that Dwight Howard won't going to be choosing Houston to play with Kevin Martin, Luis Scola, and Kyle Lowry when he could be playing with Dirk Nowitzki and Deron Williams in Dallas.

Still, the Rockets current positioning is a vast improvement from where they were five years ago. As Mark Cuban said in his email to Tim McMahon, cap space has so much more value than it did in the past. If you need any more evidence for this, look at the Rockets this off-season. Even though they were armed with under $10 million in cap space, the Rockets nearly consummated a deal that would've landed them both Pau Gasol and Nene, a move that would've put them among the West's contenders.

Even after basketball reasons made that dream impossible, the Rockets were still able to outbid the Heat and others for the services of Samuel Dalembert, a center playing as well as anyone not named Bynum or Gasol in the Western Conference.

If the Rockets do indeed strike out on the big names, there will be plenty of ways to use that $17 million. A talented class of restricted free agents give the Rockets a chance to land a disenfranchised young player in a sign-and-trade, or they could look to take on salary via trade.

Now, we'll look at a pair of scenarios where they could clear even more cap space.

Scola Amnestied

In this scenario, the Rockets would waive Scola under the amnesty provision and "stretch" Samuel Dalembert's buyout over 3 years, leaving them with just over $25 million in salary obligations and some $32 million in cap space. After factoring in the aforementioned cap holds, the Rockets are left with $27.4 million in cap space.

With the max salary for veteran free agents just over $17 million (30% of the projected $58.04 million cap), the Rockets wouldn't come close to having the space for Dwight Howard. They would however have enough room that they could sign anyone to a max deal and bring in quality players around them.

If the Rockets chose to amnesty Scola but were unable to convince one of the "Big Two" to come to Houston, they could then bring back Courtney Lee, Goran Dragic, and Samuel Dalembert and still have plenty of room to make a run at other quality free agents. Factoring in Lee and Dragic's cap holds and Dalembert's option money, the Rockets would have about $13.03 million to spend on restricted free agents that include Roy Hibbert, Brook Lopez, Omer Asik, Ryan Anderson, Nic Batum, and Eric Gordon or unrestricted guys like Kirk Hinrich, Ray Allen, Landry Fields, or Gerald Wallace.

Essentially, the Rockets could bring back the entire rotation from 2011-12 except for Scola, and add a very good piece to the puzzle. With Patrick Patterson starting to match Scola's on-court contributions, nobody would argue that a lineup of Lowry-Martin-Gerald Wallace-Patterson-Dalembert with Dragic, Lee, Parsons, Morris, Motiejunas and another veteran big man off the bench wouldn't be a very good team in the West. Obviously, the Rockets could flirt with locking themselves into the middle of the road, but that squad would still be one of the younger ones in the league.

But wait, there's more. Here's the part you've been waiting for: how the Rockets could land Dwight Howard and Deron Williams. Prepare for some speculation

Good-bye to Kevin Martin and Luis Scola

In this final part, the Rockets are going for it all. With the front office thinking that the team isn't going anywhere without dramatic changes, they shocking decide to trade Kevin Martin at the deadline for an expiring contract and some future draft picks (and maybe a young player or two), and amnesty Scola in the off-season.

Finally, the Rockets find themselves with some very serious money to play with. I will assume that the Rockets bring Courtney Lee back to start at the shooting guard position. With his cap hold added to the previously discussed cap holds, the Rockets have just $24.27 million committed in 2012-13, leaving them $34.76 million in cap space, just enough to land Deron Williams and Dwight Howard on matching max contracts.

The rest of the roster will be populated by 2nd round draft picks (the Rockets own their own and Minnesota's in 2012) and minimum salary veterans if the Rockets sign both Deron Williams and Dwight Howard, but no Rockets fans would be complaining. A lineup of D. Williams-Lee-Parsons-Patterson-Howard with Lowry, Budinger, Morris, Motiejunas, a mid-first rounder, and a veteran big or two could become a perennial championship contender.

So yes, it's possible to land both Dwight Howard and Deron Williams while holding onto Patrick Patterson, Kyle Lowry, Courtney Lee and others in the process. But, before you get too excited, it is a near-impossibility for a number of reasons.

Firstly, it would require Daryl Morey to make an extremely gutsy call to move Martin for expiring deals and I'm sure that would appear fairly unpalatable to the TS% loving Morey. Secondly, and more importantly, there have been no indications that Dwight Howard or Deron Williams want to spend more than two games per year in Houston.

Perhaps the alleged tampering from Kevin McHale last summer helped the Rockets' cause with Dwight Howard, but for now we'll have to file these ramblings away in the "wishful thinking" category.

If you want a source for Rockets salary info, hoopshype.com and hoopsworld.com are great places to look, but I will be updating the spreadsheet as the Rockets make moves over the coming months so feel free to check that periodically.