On Tilman Fertitta’s acquisition of the Houston Rockets: Concurring in part and dissenting in part

Having not lived in Houston since 1995, I don’t have a particularly strong opinion of the current owner of the Rockets or the kind of knowledge of his business dealings that Justin brought to his analysis of what’s gone on with the team this season, although my family did used to frequent and enjoy both Saltgrass and Joe’s Crab Shack when I was living there. Justin’s analysis is a must-read here, and thanks to him and our founder Rahat for kicking off an in-depth conversation on this topic that, up to and after the trade deadline, has been at the forefront for most Rockets fans.

While the Rockets’ moves this season and up to the trade deadline can certainly be viewed with a skepticism of the new owner, and a narrative can be built that the new owner might be a cheapskate, more context is required. Justin is right that skepticism is warranted, and only time will tell whether penny-pinching will be the order of the day in Houston. But what’s more important is the context of this current NBA season, and the luxury tax repeater rules that are relatively new to the league.

First off: the Rockets are not as good this season as they were last season. Yes, that’s obvious, but it needs to be said in the context of fans clamoring for improvements to the team at all costs. Last season was an unexpected alignment of stars for the Rockets that saw them take perhaps the greatest team of all time to the brink in the playoffs – and would likely have seen them upset the greatest team of all time if not for the untimely Chris Paul injury. For convenience’s sake in comparing teams, we’ll use 538’s CARMELO and projections system. At the All-Star break last year, the Rockets were evaluated as the best team in the NBA and projected as the team most likely to win the NBA title. This year? That system has the injury-riddled Rockets ranked 18th in the NBA. Even factoring in injuries, 538 projects a full-strength Rockets team as the 5th-best team, and significantly behind the Warriors and Thunder in the West.

For the Rockets to truly be contenders this season, they need to benefit from a number of factors that seem implausible at the moment. Everyone needs to get healthy and playing at a much higher level than when they were at full strength early in the season. They can run a world-historic offense out there all they want; it’s not going to matter if they aren’t playing defense, as has been the case for much of the season.

Evaluating the Rockets’ trade deadline moves, we have to ask: are the Rockets better today than they were before they made these moves, and did they make these moves merely to move under the luxury tax threshhold?

The answer to both of these questions is likely yes – and it still might not reflect much on the question of Fertitta’s budget-consciousness. Here’s the thing about the luxury tax and, particularly, the repeater tax that was first implemented in the 2014-2015 season: these taxes work. No NBA team has ever paid the repeater tax, though we only have limited evidence since it’s relatively new. But we have additional evidence by way of Major League Baseball, which has seen the repeater tax successfully rein in the spending of the most infamously deep-pocketed franchises in American sports. The threat of the repeater tax forced the New York Yankees under the luxury tax threshhold in 2017 for the first time ever, and saw the similarly big-spending Boston Red Sox and Los Angeles Dodgers duck under the tax threshhold in recent years in order to reset their repeater tax penalties.

Demanding that the new Houston Rockets owner immediately start the repeater tax clock in a year in which they have never consistently performed like a championship-caliber team would be demanding a level of profligacy that would make Fertitta one of the most extravagant owners in any sport. Only two teams in the NBA are threatening the repeater tax this year – Golden State and Oklahoma City, who are both on their second year in a row over the luxury tax line. It will remain to be seen if those teams will continue over the tax – and indications are that at least one of those two will be the first team to pay a repeater tax – but paying the luxury tax for a team with an outside shot at best of contending is not where this team or any team wants to be.

There are two good counterarguments: first, we are witnessing an absolutely transcendent season from one of the best players of all time in James Harden, and refusing to go into the tax to get him help is an act of dereliction for a sports owner. I totally get it. But this Rockets team at full strength is still an outside shot to even give the Warriors a run for their money in the playoffs. Adding a 4th or 5th option and hitting the luxury tax again is unlikely to be a major improvement on those chances.

The other is that Tilman Fertitta and other members of the new Rockets ownership and management have beat their chests about not being afraid to spend money into the luxury tax in order to contend. Putting aside what I already put out there – this team has not played like a contender this season, so starting the repeater tax clock isn’t a good idea – Fertitta would be far from the first owner to talk a bigger game to the media than willing to actually put money into action. The Rockets are not a historically big-spending team, and I’m willing to let some boisterousness upon initial acquisition slide. Should ownership be as honest as possible with fans? Yes, of course. But this isn’t a particularly big ownership sin.

The Rockets have only paid the luxury tax twice since its inception and have flitted on the margins of contention that entire time. So while the deadline moves may have been with an eye to getting under the tax, getting under the tax is still likely the right move. Spending just for the sake of spending leads nowhere good – look at the history of the Knicks, or the Nets, or the Lakers or the Wizards with John Wall’s contract, or countless other places. Surveying the landscape, it’s possible that the Rockets could have added salary at the deadline and improved the team more than just landing Iman Shumpert. But in a year in which they aren’t going to be even close to favorites to reach the NBA Finals, it might be better to preserve future flexibility, hope for a miracle this year, and hope for a Kevin Durant departure from Golden State to open up more avenues of contention in future years.

I’ll be more than willing to eat crow if it turns out in future seasons that the mandate in Houston is to shed salary and waste James Harden’s prime rather than try to add meaningful pieces to upgrade the talent around the Rockets star. But these moves, in this season, make sense. The Rockets simply have not played like title contenders this year, and despite that, Rockets general manager Daryl Morey was able to both improve the team and shed salary at the deadline. That’s an incredible feat. While this year’s trade deadline might foreshadow more penny-pinching on the part of the new Rockets owner, patience is the order of the day, not wishcasting for an immediate contender.

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