Tag: stretch exception

Kris Humphries

NBA “stretch provision” may mean more bad contracts

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We kind of refer to this as the Eddy Curry Rule.

In the NBA labor deal is what is called the “stretch provision,” which will help teams get rid of underperforming players on big deals. It can only be used on new contracts but here is how it works: If you want to get rid of a player you can buy him out then stretch out his contract on your books for double the length of the deal plus one year. For example, if a player is owed $20 million over two seasons and he gets waived, the team can stretch him out so his deal so on the official salary cap ledger he only costs them $4 million a season for five seasons.

But that is going to lead to some funky bidding, suggests Chris Sheridan at Sheridanhoops.com. He uses the upcoming free agency of Kris Humphries as an example.

Team A is willing to give Humphries a three-year contract starting at $8 million. With 4.5 percent annual raises, Hump would have an offer of $25.08 million sitting on the table.

But Team B really needs someone to do the dirty work under the boards. So they make Humphries the same offer but with a fourth year added on, fully guaranteed at $9.08 million. Now, Hump is looking at a $34.16 million deal. Which one do you think he’s going to take? Team B’s, of course.

Then, after three years, if Humphries is a $9 million burden on Team B’s 2014-15 cap, they can waive him using the stretch exception, and he will count against the cap for only $3 million per season over the next three seasons.

Teams are going to figure out how to game the system, and this is one way it will happen. And it is easier for larger market teams to have a few of those bought out, stretched out deals (and replace them with new, productive players) than it will be for smaller market teams that can’t go into the luxury tax realm as easily.

With things like the stretch provision and shorter contracts, teams can make the bad decisions of their GMs go away more quickly. The thing is, it leaves those same GMs with more decisions to make — there will be more roster turnover every season and more player personnel moves to be made. For bad GMs that means more chances to screw up, for the best GMs it means more chances to shine. As it was before, good drafting and management will be what wins in the NBA.

If the current structure holds, the new NBA will look much like the old one, just smaller

Washington Wizards v Chicago Bulls

The New York Times reported Saturday on several crucial details of the new CBA deal that’s currently being discussed. Basically, if the structure holds once either side gets its collective head out of its backside, these are the provisions that are already agreed upon. So if the players cave and give in to 50/50 or the owners elect for their first ever serious concession (fat chance of either), or if both sides would just agree to a 51-52 percent band on revenue, these are the elements that would be included in the NBA.

Go read the entire thing, then come back here. Don’t worry, I’ll wait. I’ve got nothing else to do with a lockout Sunday.

Back? OK, great. Let’s begin with contract length.

Under the old deal, players re-signing with their old team for the max (or re-signing and then getting traded, as in the case of the Triad last summer) would receive a five-year deal with an option for a sixth. That’s been tightened to a five-year deal. I’m assuming that means a four-year deal with a player option for a fifth, but you never know. If you don’t return to your home and instead take the adventurous route, you’ll then be seeing a four-year deal. That’s pretty huge. Consider that the Bulls’ acquisition of Carlos Boozer would mean he’s only on the books for another three years, meaning he’s trade bait in two instead of another three. Contract lengths is a huge provision due to that being the best way for players to guarantee financial stability. The players giving up a year on these is no small element. It means less guaranteed money.

If you’ve been paying attention, you likely know all about the amnesty clause already. But the Times’ report that says the team can exercise it at any point during the life of the CBA is gigantic. Example? You know that fancy new extension Tony Parker agreed to this year? Consider that if Tim Duncan retires at the end of his current contract and Manu decides to head back home after Duncan retires, forfeiting his final year through retirement, Parker will still be on the books for $25 million guaranteed over another two seasons. The amnesty clause mans that teams can finish up their run with their current core, then cut ties and rebuild. And if you want a totally insane scenario? Consider that the Heat could look at the 2012 free agency class and elect to amnesty Chris Bosh, freeing up money to spend on Deron Williams, Chris Paul, or Dwight Howard. That’s not going to happen, but it’s a nice example of what could happen. The Bulls freeing up Boozer once his production plummets in a few years is another example. Getting to hold on to that amnesty is a really big deal.

The stretch exception is more clearly defined, as outlined by the Times‘ Howard Beck:

Stretch exception: Teams will be permitted to stretch out payments to waived players, spreading out the cap hit, over several seasons. The payment schedule will be set by doubling the years left on the contract and adding one. (Thus a team waiving a player with two years left could pay him over five years.)

via N.B.A. Deal Is Close, but Last Hurdle Is a Big One – NYTimes.com.

If you’re keeping score, and if I’m doing the math right, if the Magic were to amnesty Gilbert Arenas and then stretch exception Hedo Turkoglu, his nearly $23 million guaranteed (he has a non-guaranteed $12 million salary in 2013-2014) salary over the next two years would be extended over the next five (2+2+1: it’s like that movie “Clue”). So instead of paying and getting hit with over $11 million each of the next two seasons, the Magic would be paying less than the projected mid-level exception of $5 million in salary and cap hit to get rid of Turkoglu. This kind of flexibility would do much of the same work the amnesty will do in terms of helping teams recover faster.

There are other details on the MLE and the structure of raises, but in reality, the biggest remaining piece of news is the luxury tax. The Times reports that the two sides have agreed on the tax structure. The basic tax for being over the threshold rises to $1.50 for every dollar over the line, then progressively higher as the amount over the threshold rises. It’s a pretty decent solution, allowing teams to spend if they want (for example, the Los Angeles Lakers can more than afford to pay the 3-to-1 dollar tax with their new television deal. There will still be payers, just not as many and you’ll have to really want to.

It’s an exciting set of provisions which could help make teams better over the course of the next six or seven years, depending on the length of the deal. Of course, the management in those teams will still have to make better decisions, the players will still have to play, and we have to a friggin’ deal first. Other than that, gold, Jerry, gold!