The Houston Rockets continue to take calls on trades involving stars Russell Westbrook and James Harden, but according to Kelly Iko and David Aldridge of The Athletic, their interest in such moves go beyond basketball. Owner Tilman Fertitta "is hellbent on reducing payroll and getting the Rockets out of the luxury tax business for the foreseeable future," according to Aldridge and Iko.
That makes plenty of sense in light of both Fertitta's history as owner of the Rockets and what is known about his personal financial situation. The Rockets have not once paid the luxury tax under Fertitta. They have, in fact, taken a number of aggressive steps in the opposite direction to avoid it despite having a contending roster. In the summer of 2018, they let starting small forward Trevor Ariza leave for nothing on a one-year deal after coming a game away from the NBA Finals. At the 2019 trade deadline, they gave away a first-round pick to get off of the final season of Brandon Knight's deal while also frantically cutting salary, including James Ennis, to duck under the tax line. There were theoretical ways for the Rockets to add more money at the 2020 trade deadline as well, but they chose not to.
Fertitta's own finances may contribute to that thriftiness. Fertitta had less than $300 million in cash when he purchased the Rockets, according to Forbes, but used a somewhat unusual deal structure to secure the team. In addition to assuming some debt and taking out a loan from previous owner Leslie Alexander, he sold over $1.4 billion in bonds to finance the purchase. That left him very heavily leveraged, and the coronavirus made matters significantly worse.
Fertitta's fortune was made in the restaurant and casino business. Neither industry is doing particularly well during the pandemic. Fertitta took out a $300 million loan at a steep 13 percent interest rate to keep his business afloat in April, according to the Houston Chronicle. The Rockets, like the rest of the NBA, lost a good deal of revenue last season when the league was forced to shut down in March. They will lose more next season, when arenas will, at best, be only partially filled. Most projections have the league losing somewhere between 30-40 percent of its revenue, and while the league will recoup some losses in the form of increased escrow withholdings out of player salaries (up to 18 percent from the usual 10), owners are going to take the brunt of the hit here.
Strangely enough, Houston's first major trade of the offseason actually saw them taking on some money. Robert Covington is set to make around $12.1 million next season, but Trevor Ariza is owed $12.8 million, while the No. 16 pick in the NBA Draft is expected to make around $3.1 million. That figure is based on the industry standard of paying first-round picks 120 percent of their scale figure. That is the maximum allowable percentage. If the Rockets truly wanted to get stingy, though, they could draft a prospect willing to take a lower percentage (as low as 80) in order to save money.
The Harden and Westbrook situations are obviously more pressing. Both are guaranteed over $132 million over the next three seasons. Eric Gordon signed a three-year extension last summer that hasn't even kicked in yet. They are not currently over the tax line, but filling out their roster would likely take them there. If they want to duck it, trading some combination of those three players is their best bet.
Would that also be their best basketball decision? That's a matter of debate and depends on what they get back in the deal. Still, the idea that the Rockets might be prioritizing finances over maximizing the return on their best trade asset should concern Houston fans. Star trades rarely yield satisfying returns. Star trades motivated by money have even less chance of doing so.