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Schmeelk: How Knicks Can Avoid Poison-Pill 3rd Year Of Lin Contract

(credit: Nathaniel S. Butler/NBAE via Getty Images)

(credit: Nathaniel S. Butler/NBAE via Getty Images)

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By John Schmeelk
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As the clock ticks down to the Knicks’ Jeremy Lin deadline, they need to consider an option that seriously reduces the risk of paying such a mammoth luxury tax bill in 2014-2015.

The new CBA included a provision to make it much easier for teams to release players with bad contracts. It’s called the stretch provision. Here it is right out of Larry Coon’s invaluable CBA FAQ that can be found here: cbafaq.com.

Otherwise (if the contract or extension was signed under the current CBA), the remaining guaranteed salary is paid over twice the number of remaining years, plus one, per the Stretch provision:

  • If the player’s salary payments are spread-out using the Stretch provision, the team may elect to stretch the salary cap charge to match2. For example, if two seasons remain on the player’s contract when he is waived, and the payment is spread-out over five years per the Stretch provision, then the team may elect to spread-out the salary cap hit over those same five years.

In other words, the Knicks will have the option after the 2013-2014 season to waive Jeremy Lin, take his third-year $15 million salary and spread it out with its cap hit over the following three seasons. In each of those three seasons, the Knicks would have $5 million of dead money on the cap. Doing that would all but eliminate the insane luxury tax payment the Knicks would have to endure in 2014-2015, which is supposedly stopping them from re-signing Lin.

Obviously, this isn’t an ideal plan or scenario. The Knicks wouldn’t be resigning Lin with the idea of waiving him after 2013. Instead, this is simply a way out if Lin turns out to be nothing more than a backup quality point guard. Having dead money on the cap for three seasons is obviously a bad thing, but it’s nothing the franchise couldn’t survive.

If Lin, on the other hand, turns out to be a star, the same stretch provision could be used on any number of other players on the roster (Novak, Kidd, Felton, Camby) to reduce the impact of the luxury tax penalty. Odds are that one or more of those players will either be rendered ineffective by age or performance by that time, so waiving them won’t cost the franchise much on the court.

Or, of course, Dolan could just write the big check.

We just don’t know where the team will be in three years. What we know now is that the Knicks would lose a young point guard with a ton of potential for no compensation if they choose not to match Houston’s offer sheet for Jeremy Lin. If the Knicks do match, they have options to avoid the financial penalties the luxury tax might impose on the franchise. It is simply another reason for the Knicks to match the Rockets’ offer, as insane as it might be. The Knicks now have an out if Lin turns out to be a bust. The risk of matching is much smaller than anyone is willing to admit.

The Knicks must be aware of this scenario. If they aren’t, shame on Glen Grunwald and the rest of the front office. This potential escape makes the decision to retain Lin an even easier one. There’s no basketball reason to let him walk. If they don’t re-sign Lin, they simply lose him and can’t replace him with anyone. That money can’t be used elsewhere. There is absolutely no benefit. Matching won’t affect the team’s cap, and with the stretch provision option, the Knicks can avoid the luxury tax hit to a large extent as well.

With this in mind, if the Knicks don’t resign Lin, it can only be seen as personal. James Dolan and the rest of the front office must be so angry that he went back to Houston and renegotiated the three-year deal that they just don’t want him as part of the team anymore. That would be immature, childish and foolish.

Then again, these are James Dolan’s Knicks.

I’ll continue to provide coverage of NBA free agency on Twitter; follow me @Schmeelk.

Do you think the Knicks have to bring back Lin with the stretch provision in mind? Be heard in the comments below…