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.