In 2015, the Cleveland Cavaliers signed a contract with forward Tristan Thompson worth $82 million over five years. However, after three seasons of mediocre performances and injuries, it became clear that his salary was weighing down the team’s finances. The Cavs decided to use the stretch provision in their negotiations with Thompson to alleviate some of this burden.
The stretch provision is a little-known aspect of NBA contracts that allows teams to spread out a player’s guaranteed salary over a longer period than originally agreed upon. While this may seem like an attractive option for teams looking to cut costs, it can have significant implications on both individual players’ earnings and team budgets overall.
To understand how the stretch provision works and its impact on salaries and luxury tax payments in the NBA, it is necessary to delve deeper into the intricacies of league regulations and collective bargaining agreements. This article aims to provide readers with an overview of these topics while also exploring real-world examples of how teams have utilized (or avoided) the stretch provision in recent years.
What is the Stretch Provision in NBA?
The NBA is a highly competitive and lucrative industry, where teams aim to secure the best players to achieve success on the court. However, signing top-tier talent comes at a cost, which can exceed team salary caps and result in financial penalties such as luxury taxes. This is where the Stretch Provision comes into play.
For example, consider a hypothetical scenario of a basketball team that has signed a player for $10 million per year with two years remaining on their contract. Unfortunately, this player is no longer performing at the level expected of them and is now considered expendable by the team management. Instead of paying out the remainder of his contract in full over two years (i.e., $20 million), they could use the Stretch Provision to reduce their immediate financial burden while still fulfilling their contractual obligations.
Using , let us explore the key features of the Stretch Provision:
- The provision allows teams to waive a player from their roster without having to pay all guaranteed money upfront.
- The waived amount can be stretched over multiple seasons up to twice the number of remaining seasons plus one.
- Teams are required to make payments towards these stretched amounts each season until it is fully paid off.
- Using this provision reduces cap hits for current and future seasons but increases long-term financial commitments.
To better understand how teams utilize this option, we can look at an illustrative table outlining notable examples of stretch provisions used in recent history:
|Player Name||Original Contract Amount||Remaining Years||Stretched Amount||Team|
|Meyers Leonard||$9.4 million/year||1 year||$6.3 million ($2.1M/yr)||Miami Heat|
|Joakim Noah||$18 million/year||2 years||$12.8 million ($6.4M/yr)||New York Knicks|
|Ryan Anderson||$20.4 million/year||2 years||$15.6 million ($5.2M/yr)||Houston Rockets|
As shown in the table, teams can use the Stretch Provision to minimize their immediate financial burden and gain greater flexibility with regards to salary cap management.
How Does the Stretch Provision Work? This is the next question we will explore in detail.
How Does the Stretch Provision Work?
Recall from the previous section that the stretch provision in NBA allows a team to waive a player and spread his remaining salary over a longer period. To illustrate how it works, let’s consider an example.
Suppose Player X has two years left on his contract with Team Y and is owed $20 million for each year. If Team Y decides to use the stretch provision on him, they can waive him and stretch his salary over five years instead of two. This means that instead of paying Player X $40 million over two years, they will pay him $8 million per year for five years.
Now that we understand what the stretch provision is and how it works, let’s delve into some key points about its impact:
- The stretch provision can help teams lower their luxury tax bill: As mentioned earlier, one of the main reasons why teams use the stretch provision is to avoid going over the salary cap or luxury tax threshold. By stretching a player’s salary over several seasons, teams can reduce their annual payroll and remain under these limits.
- The stretch provision comes at a cost: While using the stretch provision may provide short-term financial relief for a team, it also has long-term consequences. Stretching a player’s contract means that he will continue to count against the team’s books even after he leaves. Furthermore, if another team signs this waived player during those stretched out seasons (after being waived), then both salaries would be counted towards this season’s total.
- Not all contracts are eligible for stretching: Only players who have more than one season remaining on their contracts are eligible for stretching. Additionally, only contracts signed under current CBA rules are subject to stretching provisions.
- Teams have until August 31st to use the Stretch Provision: If a team wants to use the stretch provision on a player whose contract meets eligibility criteria mentioned above but don’t want them counting fully against their cap figure in upcoming season(s), they must do so before August 31st of that season.
To summarize, the stretch provision is a tool used by NBA teams to manage their salary cap and luxury tax obligations. While it can provide short-term relief, its use comes at a long-term cost. Understanding when and how to use this provision requires careful consideration of a team’s financial goals and overall strategy.
|Season||Player X Salary|
When is the Stretch Provision Used? We’ll answer that in the next section.
When is the Stretch Provision Used?
After understanding how the stretch provision works, it’s important to know when NBA teams use this tool. Take for instance a hypothetical scenario where the Boston Celtics signed a player to a four-year $40 million contract extension in 2019. After two seasons, it becomes clear that the player is not living up to expectations and has become dispensable. The team could waive him and be on the hook for his remaining salary or they could utilize the stretch provision.
The first reason why an NBA team would use the stretch provision is to create immediate cap relief. By stretching a player’s remaining guaranteed money over twice as many years plus one, a team can significantly reduce their current cap hit. This allows them more financial flexibility to pursue other players via free agency or trades.
Another reason why teams might choose to use this option is if they are dealing with luxury tax issues. As previously explained, each NBA team has a soft and hard cap limit. If a team exceeds the hard cap threshold, then they are subject to paying luxury taxes on any additional spending above that level. Utilizing the stretch provision helps alleviate some of those penalties by reducing salaries owed in future years.
A third consideration for using the stretch provision is roster management. Sometimes teams have too many players under contract and need to make room for incoming talent or veterans during playoff runs. Waiving and stretching unneeded players makes room for these new signings without having significant impacts on future salary caps.
Finally, utilizing this tool may help retain assets in potential trades down the line. Teams will often trade away draft picks or young promising players in exchange for established stars who come with hefty contracts. However, if a star doesn’t pan out according to plan, being able to quickly release them while still retaining some of their value through stretched payments can make all the difference.
To illustrate further how impactful utilizing this tool can be for an NBA franchise, consider this table:
|Player Name||Guaranteed Money||Stretch Provision Years|
|Player A||$10 million||3 years|
|Player B||$20 million||5 years|
In this example, by waiving and stretching both players over the number of years indicated in the table, a team can create significant cap space for themselves. As you can see, utilizing this option creates financial relief for teams who need it most.
What are the benefits of using the stretch provision? Find out in our next section on how NBA franchises utilize this tool to their advantage.
What are the Benefits of Using the Stretch Provision?
After a team decides to use the stretch provision, they can spread out the remaining salary that they owe a player over several years. For example, a player owed $10 million for two years could be stretched into being paid $2 million per year over five years. To illustrate this concept further, let’s consider an example of how the stretch provision was used in the past.
In 2019, Timofey Mozgov had been traded twice but never played a game due to injuries and age-related decline. He still had one year left on his contract with the Orlando Magic worth $16 million. The Magic decided to waive him using the stretch provision so that instead of paying him all at once, they would pay him $5.6 million annually over three years while having only $5.6 million count against their cap each year.
There are many benefits to using the stretch provision . First and foremost is its ability to free up immediate cap space by reducing or eliminating dead money from waived players’ contracts. This additional flexibility allows teams to sign new players or re-sign existing ones without going over the luxury tax threshold.
Secondly, it can help mitigate financial losses when cutting underperforming or injured players who have guaranteed contracts since teams will not need to take significant hits on their current payroll or future caps.
Thirdly, it provides options for rebuilding teams looking to create long-term financial stability by spreading out payments and avoiding costly mistakes in player evaluations.
Finally, it enables small-market franchises to compete more effectively with larger-market rivals by providing them with greater flexibility and control over their finances.
A table below shows some NBA teams who have utilized the Stretch Provision feature along with respective amounts involved:
|Team||Player Name||Original Contract Amount||Stretched amount|
|Orlando Magic||Timofey Mozgov||$$16M/1yr||$$5.6M/3yrs|
|Brooklyn Nets||Deron Williams||$$43M/2yrs||$$5.5M/5yrs|
|Atlanta Hawks||Jamal Crawford||$$14M/2yrs||$$4.7M/3yrs|
The stretch provision is an important tool for NBA teams to manage their finances and create more flexibility in roster building and player evaluation . By mitigating financial risks, it allows teams to remain competitive while also creating opportunities for long-term stability.
What are the drawbacks of using the stretch provision? Let’s explore this further in the next section.
What are the Drawbacks of Using the Stretch Provision?
After learning about the potential benefits of using the stretch provision, it is important to consider its drawbacks. While this salary cap maneuver can provide immediate relief for teams in luxury tax trouble, it also comes with long-term consequences that should not be overlooked.
For example, suppose a team decides to use the stretch provision on a player who has three years and $30 million left on their contract. In that case, they would waive the player and spread out his remaining salary over five years instead of three, reducing his annual cap hit from $10 million to $6 million. This move frees up more cap space immediately but creates dead money on the team’s books in future seasons.
One major drawback of using the stretch provision is that it hinders a team’s ability to sign top-tier free agents in future seasons. The dead money created by stretching a player reduces a team’s available cap space and limits their flexibility when negotiating contracts with other players. Additionally, if a waived player signs with another team for less than what he was owed under his original contract, his former team is responsible for paying him the difference – further limiting their financial resources.
Another downside of utilizing the stretch provision is that it can damage relationships between players and management. Waiving a player through this method often means forcing them into an unwanted situation where they must seek employment elsewhere while still receiving deferred payment from their previous employer.
Despite these drawbacks, many teams have found success using the stretch provision as part of their overall roster-building strategy- . Here are some examples:
- The Golden State Warriors used the stretch provision on Shaun Livingston during the 2019 offseason to create additional cap space after acquiring D’Angelo Russell in a sign-and-trade deal.
- The Oklahoma City Thunder stretched Kyle Singler’s contract in 2018 to avoid going into the luxury tax threshold.
- The Brooklyn Nets utilized this tactic twice – first with Deron Williams in 2015 and then with Timofey Mozgov in 2018 – to clear cap space for future free agent signings.
To better understand the impact of using the stretch provision, let’s examine a hypothetical scenario. Suppose a team signs a player to a four-year, $40 million contract but decides to waive him after two years using this method. In doing so, they would save approximately $6.7 million per year in cap space over the next two seasons but be saddled with $13.3 million in dead money for the following two years.
As shown in the table below, these savings come at a cost:
|Year||Original Cap Hit||Stretch Provision Cap Hit|
|1||$10 million||$10 million|
|2||$10 million||$10 million|
|3||$10 million||$6.67 million|
|4||$10 million||$6.67 million|
In conclusion, while the stretch provision can provide short-term relief for teams facing luxury tax penalties or looking to create additional cap space, it should not be viewed as a cure-all solution. Teams must carefully consider its long-term consequences before utilizing it as part of their roster-building strategy- . Next, we will explore real-world examples of how NBA teams have used this salary cap maneuver successfully in recent years.
Real-World Examples of the Stretch Provision in NBA
After highlighting the potential drawbacks of using the stretch provision, it is essential to examine real-world examples of its application in NBA teams. One such example is Timofey Mozgov’s contract with the Los Angeles Lakers.
Mozgov signed a four-year deal worth $64 million with the Lakers in 2016. However, he failed to live up to expectations and was eventually traded to the Brooklyn Nets after just one season. The Lakers then decided to use the stretch provision on his remaining salary, spreading it out over five years instead of two.
The decision to use the stretch provision allowed the Lakers to reduce their luxury tax bill for that year by $16 million. However, they ended up paying Mozgov for an additional three seasons and had less cap space available during those years due to his stretched salary.
This scenario highlights both the advantages and disadvantages of using the stretch provision. To further illustrate this point, here are some pros and cons:
- Can save a team significant amounts of money towards tax payments.
- Provides more financial flexibility in future seasons.
- Allows a team to move on from a player who has not lived up to expectations without being entirely burdened by their contract.
- Can be useful when trying to sign or re-sign other players while still remaining under the salary cap.
- Will result in paying a player for several seasons beyond their tenure with the team.
- Could limit options during future free agency periods if too much money is owed via stretched contracts.
- Affects overall team chemistry as players may feel undervalued if teammates’ salaries are stretched over multiple seasons.
- May limit a team’s ability to make trades involving players whose salaries have been stretched.
To provide additional context surrounding how frequently NBA teams use this tactic, let us take a look at some data compiled between 2011 and 2020:
|Year||Number of Players Stretched|
As we can see, the use of stretch provisions has been steadily increasing over the past decade. However, it is crucial to note that not all teams employ this tactic regularly.
In summary, while using the stretch provision can provide financial relief for NBA teams in some cases, it also presents several challenges and limitations. As such, each team must weigh its pros and cons carefully before deciding whether or not to utilize it with any given player’s contract.