Why the Trail Blazers and Other NBA Teams Don’t Just Waive Bad Contracts

The Portland Trail Blazers need talent and they need to save money. They’re north of the NBA luxury tax line, south of contention. In the midst of this dilemma, a couple contracts stick out like sore thumbs. If the Blazers could quietly drop 2-3 players off the roster, they’d end up with a lower bill and a little more flexibility to make improvements. Can they do it? That’s the subject of today’s Blazer’s Edge Mailbag question.

Good Afternoon, Dave,

If a team decides to buyout a player or players, do they still count against the team’s cap until their contract expires? Say for example that Portland cannot find a team with cap space to absorb a contract like Evan Turner’s or Meyers Leonard’s. Couldn’t Paul Allen buy each player out of their contract, thereby opening a roster spot and removing their salary from counting against Portland’s cap?

It would seem to me that since so little teams this summer had cap space to spare, Paul Allen could have bought out Evan Turner, Mo Harkless, and Meyers Leonard from their contracts, in order to create the necessary cap space to re-sign players like Ed Davis and Shabazz Napier, or perhaps be able to financially compete with a small amount of teams for marquee free agents.

While this wouldn’t necessarily save the Blazers any money since they’d still be paying their players their due, that money is still pocket change to a guy like Paul Allen. Is there a specific rule in place that does not allow teams with owners as wealthy as Paul Allen to do such a thing?

Thank you,

ApolloDuckPirate

A team can indeed buy out the remainder of a player’s contract. (This will probably happen to Carmelo Anthony about ten seconds from now.) Unfortunately, doing so does not absolve them of the cap obligation associated with the contract. In almost every case, the team that releases the player ends up paying the majority of their contract, which still counts against the cap.

Here’s how it works.

When a team waives a player, that player then goes on “waivers”. That status lasts 48 hours. From there, one of three things can happen.

Sometimes another team claims the player off of waivers within 48 hours. In this case, the claiming team assumes the player’s entire contract. The original team is off the hook completely and dances a little jig. This is rare, because there’s a much cheaper way for other teams to get the newly-released player.

After the 48 hours passes, the player becomes an unrestricted free agent. He can sign with anyone who wants him.

• His former contract is still guaranteed and he still receives all his money no matter what.
• The NBA Collective Bargaining Agreement stipulates that teams can always sign a player for a league-minimum salary, even if they’re over the salary cap line or the luxury tax threshold. It’s like a special cap exception. If they have a roster spot open, the most capped-up teams in the league are allowed to add another player, as long as that player accepts a league-minimum salary.
• The old, guaranteed contract and the player’s contract with the new team do not stack. Instead the player’s old contract (and the old team’s obligation) is reduced—or offset—by the amount of the new contract. We’re fudging a bit here, but it’s easiest to think of it this way: if the player was owed $12 million per year on the old contract and he he signs a new one for $2 million per year, he does not get $14 million. He gets the same $12 million: the new team pays $2 million, which goes against their cap, and the old team pays $10 million, which stays on their cap even though the player is no longer with them.

This explains why few players get claimed off of waivers.

• Why would the new team want to pay the expensive guaranteed contract when they could wait 48 hours, then sign the same player to a dirt-cheap minimum contract, leaving the old team to foot the rest of the bill?
• Why would a player hold out for a bigger-than-minimum new contract when he makes the same amount of money no matter how much the new team offers? Especially since...
• The minimum-salary cap loophole allows the waived player to sign with any NBA team, not just teams that have enough open cap space to absorb his old contract, so the newly-released player can join his dream franchise if they’ll have him.

So let’s say the Blazers waived a couple of the players you mentioned, Meyers Leonard and Evan Turner. Together they’re owed around $58.4 million over the next two years. Unless other teams went bat-guano crazy and claimed them off of waivers, the entire league would wait 48 hours for them to clear waivers, then a couple teams would sign them to league-minimum deals. Those minimum deals would total $8.6 million combined for the next two years. The Trail Blazers would still end up paying $49.8 million in combined salary. That amount would still count against their cap over two years. Turner would be playing for the Lakers, Leonard for Detroit, and the Blazers would be paying the bill.

I don’t know for sure, but I imagine 99 out of 100 pitches that include $50 million of dead money counting against the cap, end with a slamming door and a pink slip for the General Manger who suggested it.

Portland could modify that dead money burden using the “stretch provision” which would the money owed to Turner and/or Leonard over two years and parse it out over five years instead. This would lessen the financial and cap obligations in the immediate future, extending it over a longer period.

If the Blazers waived and stretched Meyers Leonard, they’d be close to squeaking under the luxury tax threshold this year. Leonard is slated to make $10.6 and $11.3 million over the next two seasons. Stretched over five years, the obligation would be $4.4 million per year, yielding a savings of $6.2 million this year. If the Blazers are less than $6.2 million over the tax line, stretching Meyers would allow them to limbo under and avoid paying tax penalties.

The problem is, stretching a player doesn’t lessen the overall obligation, it just lets you pay for it over a longer time. That’s attractive in the short term, but later on—when a player who left half a decade ago is still eating up cap space—the sparkle fades. Recently the Blazers stretched Andre Nicholson and Anderson Varejao after acquiring them in trades, then stretched Festus Ezeli after deciding they didn’t want to keep him anymore. They’re still paying all three contracts right now, and all three count against the cap. Those dead contracts total $4.8 million. Ed Davis signed with the Brooklyn Nets for $4.4 million...money which the Blazers might have been able to pay Davis if they didn’t stretch those old deals.

Waiving and/or stretching their big-contract players wouldn’t be practical or smart for anything except immediate tax penalty savings. Those savings would not allow them to sign a single extra player now. (They wouldn’t be under the cap, just the tax threshold). They would come at the expense of future flexibility, as the stretched contracts ate cap space for five years.

If they can’t trade those players to generate cap space or new talent, it’ll be smarter for them to let the contracts run their natural course, then start fresh when they expire. In the end, there’s no easy way for teams to wiggle out of albatross contracts. Whether they waive and stretch or just eat the deals, they’re going to pay for the deals they signed one way or another.

Feel free to send your Mailbag questions to blazersub@gmail.com!

—Dave / @davedeckard / @blazersedge / blazersub@gmail.com