Stretch exception means bad contracts could proliferate under new CBA

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The hot topic right now in the NBA is the amnesty provision of the new collective bargaining agreement.

The next thing to take a closer look at is the stretch exception, which is a mechanism that is designed to give relief to teams that make mistakes once the new collective bargaining agreement goes into effect. (The stretch exception does NOT apply to contracts signed under the old CBA).

Here is the exact wording regarding the stretch exception from the memo that was sent to teams by the league office. Sam Amick of SI.com obtained a copy and posted it online.

“For new contracts, salary of waived players to be “stretched” for cash purposes such that the player’s remaining protected compensation would be paid over twice the number of remaining contract years plus 1 year.

“In lieu of the usual cap treatment, the waiving tam may elect to have the waived player’s salary follow the stretched cash allocation, except that stretching a waived player’s salary for cap purposes is not permitted where the portion of total team salary attributable to all waived players in any future season would exceed an agreed upon percentage of the salary cap in effect during the season in which a player is waived.”

That second paragraph basically means there will be limits to prevent teams from abusing the stretch exception.

But as a practical matter, what I see happening is teams overpaying for marginal players, knowing that they can dump a guy owed $10 million in the final year of his contract if it is only going to count as $3.33 million against the cap in the ensuing three years.

For example, let’s say there are two teams bidding for the services of Kris Humphries, who is a free agent in more ways than one. 

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.

It should make for some funny money flying around on Dec. 9 when free agency and training camps open simultaneously.

 

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  1. So will they actually stretch out the payments that they will make to the players, or is this strictly for the books?

    • Whenever any new player is waived, their payments will automatically be stretched out in the manner described above.

      The owners may choose whether the cap hit stretches or not.

      So, the answer is both, with slightly different conditions.

  2. Chris, do some research before posting wrong information so that you can generate traffic. Players signed under this new CBA are not eligible to be used as an amnesty clause casualty. Only players with deal prior to this CBA can be waived under the stretch deal. Your Humphries example is pure garbage.

    • This is the stretch exception, not the amnesty clause. The stretch exception is usable ONLY for players signed during this new CBA. As such, you should probably do some research before you post wrong information and accuse people of traffic peddling.

  3. oh yeah, don’t forget that expiring deals in the $9m range are apparently tradeable for all-stars in their primes. So expiring contracts are probably still going to be just as valuable.

  4. same reason they’d overpay him in the first place – they want him now and there’s competition. this makes the end of contracts more palatable for teams that want the flexibility.

    i don’t think this makes the situation worse, though. GMs have been on “win now” benders for awhile now and this just makes it less likely that a mediocre team stays capped out after the offending GM gets fired.

  5. Why would teams just give away money like that? Pay a guy who’s not going to play that last year?

    • I’m guessing you do it in the off-season before that last year starts. Then, you can use that extra $7 mil created in cap space to go sign someone else you like better in FA.

      ie, instead of paying $10 mil to Humphries for 1 season, you stretch it to $3 mil/yr over 3 years and waive him.

      Then, you can go and sign another player to a 3 yr, $21 mil contract in FA, and have it fit under your cap.

Trackbacks

  1. [...] game has devolved rapidly and it comes with a hefty contract. But might the Celtics consider using the stretch exception in his case? It would allow them to cut Wallace and spread the money owed over 7 years. [...]

  2. [...] Gerald Wallace is a shell of himself and has a hefty contract. But might the Celtics consider using the stretch exception in his case? It would allow them to cut Wallace and spread the money owed over 7 years. [...]

  3. [...] 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 [...]

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