Josh Smith: Stretch Provision, Waiver Procedure and Potential Suitors

The Detroit Pistons pulled the trigger on an unprecedented move Monday afternoon, waiving Josh Smith and his remaining 2 years, $27 million guaranteed after this season. Normally, the NBA waiver procedure is utilized on smaller scale, one year guaranteed contracts. Similarly, under the new CBA’s “stretch” provision, smaller contracts are “stretched” on team salary in accordance with the payout schedule, often times for a team to avoid tax repercussions, exemplified by the Memphis Grizzlies stretching Fab Melo and Jamaal Franklin to skirt the tax. However, it is a rarity that a team waives a player one year into his newly signed 4 year, $54 million contract. Thus, the following will explore the procedure and ramifications of the Pistons stretching Smith, as well as potential suitors for Smith’s services.

Stretch Provision

Since the request for waivers made by the Pistons was between September 1st and June 30th, the post termination salary for Smith’s current cap year (2014/15) is kept as is, and each subsequent season is aggregated and allotted evenly over two times the remaining years on the contract plus one season. Keep in mind, the stretch provision initially applies only to the payment schedule for the player, not team salary that concerns the salary cap. A team must within one business day provide the league with a written statement to stretch salary over the remaining years on team salary to mirror the payment schedule. It sounds like the Pistons have made this written statement (which is logical to minimize the cap hit), thus Smith’s team salary cap hits for the Pistons will be as follows (subject to set-off) :

2014/15: $13,500,000

2015/16: $5,400,000

2016/17: $5,400,000

2017/18: $5,400,000

2018/19: $5,400,000

2019/20: $5,400,000

Smith has two years remaining on his contract after this season totaling $27,000,000, thus $27,000,000 would be allocated equally over two times the remaining years of the deal, plus one, or 5 years, rendering each team salary cap hit an even $5,400,000.

*It is also pertinent to note but is not yet applicable that the Pistons could not utilize the stretch provision if total salaries owed to waived players in any future year exceeds 15% of the salary cap in the year the player is stretched.

Claiming Procedure

Unlike the amnesty waiver procedure where partial waiver requests can be honored, a claiming team in the traditional waiver procedure must submit a request for the full amount of Smith’s salary, meaning the remainder of this season’s $13,500,000 plus the full $27,000,000 over the next two. A team must also have the requisite cap room or exception amount to sign Smith, and currently only Philadelphia has the cap room to sign Smith outright (no team has a large enough exception to fit in Smith’s current season contract). Because of this, it is a mere certainty Smith will clear waivers, rendering the Pistons on the hook for the remaining contract subject to set-off.

Set-Off Amount

The set-off amount can only be officially calculated and known once Smith signs a new contract once he clears waivers, but for demonstrative purposes the Houston scenario via their enlarged bi-annual exception will be used.

The current year bi-annual exception amount is $2,077,000, which does not begin to pro-rate until January 10th. Thus, if Smith signed a one year $2,077,000 contract with the Rockets, the following would be the set-off calculation:

$2,077,000 – $816,482 (minimum salary of a one year veteran) /2 =$630,259

Thus, the Pistons would still have to pay Smith $12,869,741 this year, but his cap charge would be slightly reduced by $630,259. Smith would also earn a total of $14,946.741 this year, which is more than the $13,500,000 he was eligible to earn, when incorporating the set-off. If Smith signed with a team for the minimum, the set-off calculation would obviously be different.

The important takeaway here (outside of the set-off impact on Detroit’s team salary) is that Smith will likely seek the largest salary he can acquire on a one year contract so he can enter free agency in 2015 to secure a longer deal. Given that fact, it is now prudent to look at some potential destinations for Smith after he clears waivers.

Suitors

1.Houston

The Rockets, as exemplified above, have their full $2,077,000 bi-annual exception to use to sign Smith. They can also offer Smith a starting gig at the four and a pairing with close friend Dwight Howard. From a roster standpoint, the Rockets currently have a full 15 man roster, meaning they’d have to waive a player to be eligible to sign Smith. The likeliest candidates to be waived are newly acquired Alexey Shved and Tarik Black, the former who is a restricted FA this offseason and the latter who possesses a non-guaranteed deal.

If the Rockets were to utilize their bi-annual exception, they would be hard-capped at the “apron”, or $80,829,000, meaning the could not exceed that figure until July 1st of next season. However, given the Rockets current team salary is only $74,202,229, they have the flexibility to sign Smith and still have some wiggle room under the hard cap to make roster moves.

2.Dallas

The Mavericks only have the veteran minimum to offer Smith via the minimum exception, having already used their full cap room midlevel exception on signing Jameer Nelson this offseason. Thus, the max offer Dallas could make is a prorated down $1,448,490, that on a one-year rest of season contract would only count $915,243 towards the cap. Dallas does have the Rondo connection to use towards Smith as bait, and the team desperately needs depth at the backup four spot, but given that Dallas can only offer the minimum coupled with no starting positions available, there might be more enticing offers.

3.LA Clippers

The Clippers, similar to the Mavericks, only have the a minimum contract to offer Smith via the minimum exception having already used their full non-taxpayer midlevel exception on Spencer Haews and full bi-annual exception on Jordan Farmar. Thus, LA’s best offer to Smith would be a one-year prorated down $1,448,490 contract that counts only $915,243 towards the cap. However, the Clippers are currently only $788,256 under the hard cap (having been implicated by using the bi-annual exception and full non-taxpayer midlevel). Thus, they’d have to waive Jared Cunningham’s non-guaranteed salary in order to sign Smith and retain their small amount of flexibility under the hard cap.

The fit on the Clippers for Smith is also not ideal. While the Clippers could use even average perimeter defenders at this juncture, what they need is more of a floor-spacing “three & D” wing defender, which Smith is not. Inserting Smith at the three spot to a lineup containing Griffin and Jordan would not aid LA’s offensive spacing issues.

4.Sacramento Kings

The Kings are in the same boat with the Clippers and Mavericks, having only the minimum to offer Smith via the minimum exception in the form of a one year prorated own $1,448,490 contract that counts only $915,243 towards the cap, having already used their full non-taxpayer midlevel on signing Collison and Moreland and their full bi-annual exception on signing Sessions. The Kings from a roster and team salary perspective have an open roster spot to sign Smith and do not face any immediate hard cap or luxury tax concerns with a total current team salary of $71,460,415.

That being said, there are clearly more appealing suitors from Smith’s perspective than the Kings, whose only real selling point would been either an increased salary or the ability to pair Smith with a player likely Rondo. While the Kings are rumored to be kicking the tires on a Deron Williams trade, as currently constituted, the Kings do not provide the surrounding talent, contender status or salary to be true players for Smith if other, more enticing destinations throw their respective hats into the ring.

5.Miami Heat

While Miami appears to be in the same salary predicament as the Mavericks, Clippers, and Kings in only being able to offer a one year prorated down $1,448,490 contract that counts only $915,243 towards the cap via the minimum exception, that could change if Miami is granted a disabled player exception for Josh McRoberts. McRoberts recently had surgery to repair his meniscus, and if league doctors determine McRoberts cannot play through the following June 15th, the Heat could apply for and receive a disabled player exception for McRoberts. The amount total would be the lesser of the non-taxpayer midlevel exception or 50% of McRoberts’ salary, thus in this instance, $2,652,500. That figure would exceed the Rockets’ bi-annual exception offer as well as of course any minimum offer.

The only issue with the DPE is at times it takes some time to receive the exception once applied for, thus Smith could already clear waivers and sign with a new team (a process that could take as little as 48 hours from being waived) by the time Miami is eligible to use the exception. The Heat do have the veteran core (Wade,Bosh, Deng), starting four position and the opportunity to play in the East which could appeal to Smith, but they’d likely need that exception granted to be a player here. The Heat would also need to waive a player, having 4 partially guaranteed/non-guaranteed contracts to choose from to waive, most likely being Andre Dawkins who possesses no guaranteed money.

Prediction

Overall, factoring in money, contender status, starting status, and player familiarity, Houston seems like the odds on favorite to secure Smith’s services once he clears waivers in roughly 45 hours. However, teams such as Dallas and the LA Clippers pose as respective threats to vie for Smith’s services.

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