Frothing Up The Salary Cap: How NBA Lockout Deal Will Turn Cap Manipulation Into An Art

Under a tentative stretch provision in the eventual NBA lockout deal, teams will be able to stretch salary cap hits over time. That won't always be the right tool to use, as the Knicks' chase for a 2012 free agent shows.

Last season, the fourth most highly-paid member of the Memphis Grizzlies was Marko Jaric, who left the NBA in December 2010. Memphis and Jaric reached an agreement for the Serb to leave, but that didn't take the guard off of the salary cap. Jamaal Tinsley had been bought out back in 2009, but he still remained on the Indiana Pacers' cap last season, with the sixth-highest hit on the books. Darius Miles played his last game for the Portland Trail Blazers in April 2006. He remained on their books for three more seasons.

This type of dead money is something you can expect to increase if the NBA lockout deal on the table ends up being adopted by the league and players' union.

The amnesty clause under negotiation won't actually contribute to the rising tide of dead money, because owners have negotiated a rule that would wipe waived players' salaries off of the cap. If the L.A. Lakers waive Luke Walton, for example, his salary would no longer appear on the team's cap sheet. It won't be a Jaric situation where the player is gone but the cap hit remains.

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The provision in what currently exists of the next collective bargaining agreement that will create dead money is the stretch exception. Sam Amick of detailed the latest iteration over the weekend.

This exception would allow teams to waive a player and stretch his pay (and salary cap hit) over an extended period of time. The agreed-upon formula is as such: double the number of years left on the player's deal, plus one (so Player X who has two seasons remaining on his deal would be paid over five seasons). It's unclear how often this would be available to teams, but it's likely to be at least once per season.

In the grand NBA tradition of naming rules after members of the New York Knicks whether or not is makes sense, we call this the Eddy Curry rule. The idea is that you can Jaric a player and get cap relief immediately ... at the cost of a longer period of dead money. For example, the Knicks wanted to clear as much space as possible in advance of 2010 free agency. Eddy Curry was due $10.5 million in 2009-10 and $11.5 million in 2010-11. Under the stretch provision, the Knicks could have waived Curry in 2009 and taking a cap hit of $22 million over five years ($4.4 million per season through 2014) or waived him in 2010, taking a cap hit of $11.5 million over three years ($3.8 million per season through 2013). 

The move would have helped the Knicks clear at least $7 million in extra space for 2010 free agency. Perhaps Donnie Walsh wouldn't have been forced to give up picks to lose Jared Jeffries. But look at the long-term effects: the stretch provision allows teams to froth up their cap sheet for years on end.

The Knicks currently want to shed payroll in advance of 2012 free agency, where Chris Paul, Deron Williams and Dwight Howard are expected to be on the market. Imagine the stretch provision existed in 2009 or 2010 and New York had used it on Curry. While it would have helped the Knicks clear space initially, the stretched-out cap hit becomes a burden later on. If New York had cut-and-stretched Curry in 2010, the team would go into 2012 free agency with an extra $3.8 million of unmovable slush on the cap. You can't trade a cap hit -- this is why teams are reluctant to cut unused players heading into a season on an expiring contract. By cutting a player, you hurt your own flexibility. That manifests in two ways with the stretch provision.

It will still make sense for some teams; if it had meant the difference between Dwyane Wade and Raymond Felton in 2010 (it didn't), it would have been smart for the Knicks to use it. If it didn't help upgrade the roster in a big way, it could have been a killer when you consider the 2012 ramifications. This will apply to many situations, and Amick's report that it will be available at least once a year to teams means that a few teams will pile up the froth. Contracts will be shorter in the new collective bargaining agreement, but cap hits will be longer if teams use the stretch provision regularly. You'll see more Jarics.

Every team has a designated cap expert. The good ones will become that much more valuable under the new collective bargaining agreement. Navigating the usage of the amnesty clause and the stretch provision will be a massive experiment in risk analysis, and teams have to be prepared ... whenever this lockout ends.


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