Dead money looks bad, but more NBA teams are smartly using it to stretch salary cap

Josh Smith will collect $5.4 million this year from the Pistons while playing for the Clippers. AP Photo/Kin Cheung

"Boy Scout, he is not."

That's what then-Detroit Pistons president Joe Dumars said the day he signed Josh Smith to a four-year, $54 million deal in July 2013.

"I think that's exactly what this team needs right now," Dumars continued.

A month later, Larry Sanders signed a four-year, $44 million extension with the Milwaukee Bucks. When it was announced, Sanders made a promise:

"Words cannot explain my gratitude for the Bucks organization and the faith in me as a leader and a worker. I won't let you down, Mil-town," Sanders said.

The summer before, in 2012, similar platitudes flowed as the Nets gave Deron Williams a five-year, $98 million deal that was celebrated in a ceremony in front of 1,000 fans on the steps of Brooklyn Borough Hall. The same week, Michael Beasley said he was working so hard on his game he didn't have time to get into trouble when he signed a three-year, $18 million contract with the Phoenix Suns.

Not everything in life works out as planned. This season, those four players will be paid a total of more than $13 million from teams they no longer play for. It's all part of a wave of dead money that is showing up on NBA teams' books in a new way.

Smith, now with the Clippers on a one-year deal, will get $5.4 million a year from the Pistons through 2020. Williams has joined the Mavericks but will get $5.5 million from the Nets each year for the next five years. Sanders, who negotiated a buyout from the Bucks in February and walked away from the NBA at age 26, will get $1.9 million a year through 2022. Beasley doesn't have a job in the NBA but will get nearly $800,000 from the Suns this season.

All of these are part of a new transaction that will probably only increase in frequency the next few years. As part of the 2011 collective bargaining agreement, teams were allowed to release a player and "stretch" his remaining salary over the course of several seasons to ease the cap hit.

The point was to allow teams that had made mistakes partially out of salary-cap jail. Without it, the Pistons never would have just outright released Smith last December, a move that helped turn their season around.

This provision wasn't frequently used until the past year but is quickly becoming more prevalent. Ten players were "stretched" dating to the summer of 2014. The Clippers alone waived and stretched three players -- Carlos Delfino, Jordan Farmar and Miroslav Raduljica -- last season. Among them, they'll be getting $1.4 million in Clippers checks each of the next three years.

"The stretch provision was something that was really being underutilized until pretty recently. I don't think some teams understood how it could be used as a benefit," a Western Conference general manager said. "I think we'll see it more in the future because with the salary cap going up, it will be easier to fit into your planning."

The stretch provision may be new, but the concept of dead money, just purging a player from the roster and swallowing the money, isn't.

On Nov. 16, Dallas center JaVale McGee is scheduled to earn a $12,000 game check from the Mavericks for a game in Philadelphia. He'll also collect $110,000 for that night's work from the opponent as part of his $12 million salary the 76ers are eating this season.

The 76ers took McGee and the rest of his contract to get a future first-round pick from the Denver Nuggets last winter and then waived the 7-footer after he played in six games for them. Philadelphia added to its pile of dead money when it waived Gerald Wallace in September, two months after trading for him, and swallowed the $10.1 million he is owed. The 76ers started this season with more than $25 million in dead money on their books, with McGee and Wallace each being paid more than any player actually on the roster.

Gilbert Arenas hasn't played for the Orlando Magic since 2011 -- or in the NBA since 2012 -- but he will get $12 million from them this season as part of a $64 million buyout. Getting him off their books allowed the Magic to kick-start a rebuilding project.

In 2005, the Mavericks released Michael Finley and ate the final three years and $52 million of his contract using what was known as the amnesty provision, saving them tens of millions in luxury taxes. Because of a clause in his contract, the Mavericks paid Finley off in annual installments over the next decade.

Finley would also earn an additional $9 million over three years playing for the San Antonio Spurs.

"There are times when these situations end up working out for both sides. Sometimes you have to move past the money and try to take advantage of other opportunities," said longtime agent Steve Kauffman, who has represented players, coaches and executives. "These sorts of things happen every day in the business world; it can be common sense."

Sometimes that's true. The Memphis Grizzlies are paying Fab Melo a handsome $437,080 to not play for them in the upcoming season. In fact, he never played a second for them. He played in only six games, for the Boston Celtics, in his NBA career. Yet it's the third consecutive year the Grizzlies are writing that check.

In the summer of 2013, Memphis traded for Melo and then cut him with the stretch provision two weeks later. It was part of a complex transaction that saved the Grizzlies $1.6 million from their salary cap and kept them out of the luxury tax that season. It also eventually freed them to make a late-season pickup of Beno Udrih, which helped them make the playoffs. In the Grizzlies' eyes, it was a home run transaction even if it looks rather ugly on their salary sheet now to the untrained observer.

Indeed, dead money can be common sense.