Where We Stand: A Simple Breakdown Of The Rockets' Salary Cap Situation

New to the NBA's complicated salary cap structure? Confused as to where the Rockets stand financially? No problem: ESPN's Rahat Huq is here to guest post on the Rockets' cap situation.

Rahat Huq of ESPN's TrueHoop Network Rockets blog Red94.net provides his basic thoughts on the Rockets and their salary cap situation.

(Note: This post was written before the Rockets made their offer to Brad Miller on Thursday, July 15).

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The news came out on Wednesday that the Houston Rockets would match the offer Kyle Lowry signed with the Cleveland Cavaliers. At the time of writing, reports slate the deal at $24million over 4 years with a team option on the fourth year.

So where do the Rockets stand now with regard to their finances?

Earlier this month, the league released its salary cap figure for the 2010-2011 season. In an unexpected surprise, the cap actually went up from last season to 58.044million.

The mid-level exception is now at 5.765million and the luxury tax threshold is at 70.307million. I explained the nuances of the tax in an article last January, but for our purposes here, the rationale behind its imposition was to establish a level playing field by penalizing high-spending teams.

After signing Patrick Patterson, matching the offer on Lowry, picking up the option on Chuck Hayes ($2.33million) and getting the news that Yao Ming would not opt out of his contract ($17.69million), the Rockets are now on the books for $67.27million in guaranteed salaries for 2010-2011. (If the current reports are true, Lowry's first year will net him roughly $5.75million. Patterson is slated to earn $1.52million.)

Two other items of imminent uncertainty surround Luis Scola and center Brad Miller. Like Lowry, the Rockets have extended a qualifying offer to Scola and have the right to match any offer he receives. Also like Lowry, the Rockets are likely to let the market dictate Luis' price range. The team will most probably offer its bi-annual exception (worth $2.08million) to Miller.

While there were numerous reports last week that the team had been shopping Scola in various sign™ proposals, it's almost certain now that they will choose to retain him after having lost out in the Bosh sweepstakes.

It is difficult to predict how much Scola could net. Of the teams with cap space, only the Nets have a need at the ‘4.' While Luis is past 30, his production is undeniable. As I did not foresee Lowry earning almost $6million, it would not be far-fetched to assume that Scola will sign an offer (that is subsequently matched) for at least $8million/annually. For our purposes here, we will slate Scola at $8million/annually.

If also adding Brad Miller, the team would have $77.35million in guaranteed salaries for next season, and would be $7.05million above the tax line. Because teams are penalized one dollar for every dollar by which they exceed the tax threshold, the aforementioned lineup would cost Les Alexander $84.4million.

Without Miller, keeping Scola, the team would cost Les Alexander $80.24million - $75.27million in guaranteed salaries with a tax penalty of $4.97million.

From there, one might ask if the team will make use of its mid-level exception. I wouldn't count on it. Had they nabbed Bosh, I could have seen it, but since they didn't, with such a hefty bill already, I don't think there will be an "all-in" mentality. (A player worth the league average would cost the club almost $12million.)

Still, it appears that for the first time, Les Alexander will be paying the luxury tax.

From this point onward - armed with a shopping cart of assets, enjoying the prospect of possible flexibility next summer, yet facing the uncertainty of a new collective bargaining agreement - it will be interesting to see how the Rockets' plans unfold. For now, they seem to be committing some serious cash to bringing back their key contributors. 

Many thanks to Rahat for his post. For more on the Rockets from SB Nation, head over to The Dream Shake and follow SB Nation Houston and TDS on Twitter.

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