Sacramento Kings and Jason Terry have three options for next season

Jason Terry launches a three against the Sacramento Kings as a member of the Boston Celtics (Photo: Steven Chea)

Updated at 3:45pm, May 7

Veteran guard Jason Terry may never play a single minute in a Sacramento Kings uniform.  In fact, the 36-year-old may never play another game in the NBA.  After 15 seasons in the league, Terry has a difficult decision to make this summer regarding his future and the outcome of that decision may completely change the Kings’ offseason plans.

Terry has options and so do the Kings.

Will he return for a 16th season after struggling through knee injuries last season?  Will his body oblige if he does elect to return?  Does he want to play for a team that is still building toward the future?  Will he consider a medical retirement or work toward a buyout?

Like the Isaiah Thomas situation earlier this season, Terry’s future is a complex question that requires a comprehensive look through the lens of the NBA’s collective bargaining agreement.

Option 1: Terry returns to the Kings and plays out the final year of his contract.

How does this affect the Kings?  If Terry can return to form, provide veteran leadership and add scoring behind 21-year-old Ben McLemore, then he makes sense for the 2014-15 roster.  But there is no guarantee that he has anything left in the tank.  With one year remaining on his deal at a salary of $5.85 million, Terry’s expiring contract could be used as a trade piece at the trade deadline or provide cap relief for the Kings the following summer.

Option 2: Terry decides he wants to retire from the NBA.

How does this affect the Kings?  A voluntary retirement by Terry is the perfect situation for the Kings.  He would forgo his remaining $5.85 million salary and walk off into the sunset.  Terry couldn’t return to the NBA for one season, and even then, he would need to apply for reinstatement from the league.  Not only would Sacramento be off the hook for monies owed, but Terry wouldn’t count against the salary cap.  Don’t count on this scenario playing out, however. It’s extremely unlikely that Terry will give away nearly $6 million.

Option 3: The Kings buy out Terry’s remaining year on his contract.

How does this affect the Kings? This is where things get a little crazy.  If Pete D’Alessandro can work out a buyout and waive Terry, there are three different scenarios that can play out – all post-buyout negotiations, which may or may not include a reduction in salary.

First, a team could claim the veteran guard off waivers and assume his entire contract.  The Kings would throw a party if this scenario happened, but due to his age and salary, the potential for this situation playing out is virtually nil.

Secondly, Terry could clear waivers, but sign with another team.  In this scenario, the Kings would save a small amount of money, which is explained best by the great Larry Coon in his CBA FAQ.

If another team signs a player who has cleared waivers, the player’s original team is allowed to reduce the amount of money it still owes the player (and lower their team salary) by a commensurate amount. This is called the right of set-off. This is true if the player signs with any professional team — it does not have to be an NBA team. The amount the original team gets to set off is limited to one-half the difference between the player’s new salary and the minimum salary for a one-year veteran (if the player is a rookie, then the rookie minimum is used instead).

To break this down, the NBA minimum salary for a one-year veteran for the 2014-15 season is $816,482.  If Terry signs for the veteran’s minimum (reserved for a veteran with 10+ years of service), he would have a salary of $1,448,490 for next season.  Using the formula above, $1,448,490 – $816,482 = $632,008 ÷ 2 = $316,004.

In effect, the Kings would save roughly $316,004 if Terry continued his career under a predicted, league minimum salary for a different team next season.  If he signs elsewhere, it  reduces his overall cap figure for the Kings to $5,534,309.  The difference isn’t tremendous, but it is roughly half the salary of a rookie minimum contract for either a second-round pick (which the Kings do not have) or a rookie free agent signing.

The third possibility is that the Kings buy out Terry and he can’t find a new team to sign with.  In this scenario, the Kings would be responsible for the entirety of Terry’s $5.85 million contract.

But there is more.  If Terry is bought out and not claimed off waivers, Sacramento has the option to pay him out under the league’s “stretch provision”.

If the player is waived from July 1 to August 31, then his remaining salary is paid over twice the number of years remaining on his contract, plus one.

What this means, is that the Kings can choose to pay Terry over three seasons, cutting checks for $1.95 million in each of the 2014-15, 2015-16 and 2016-17 seasons.

Lastly,  there is a kicker that may prove incredibly important for the Kings.

If the player’s salary payments are spread-out using the Stretch provision, the team may elect to stretch the salary cap charge to match.

With the possibility of Rudy Gay, Isaiah Thomas and the Kings’ first-round selection eating up all of the team’s salary and pushing the team toward the NBA luxury tax, an extra $3.9 million in cap room may prove crucial this offseason.

Putting a percentage on how this all will play out is a fool’s errand.  It is doubtful that Terry will opt for retirement, but nothing else is off the table.  A healthy Terry may prove to be exactly what McLemore needs to grow into an NBA star.  Then again, the former super-sixth man may never suit up for Sacramento.

Regardless of how this situation plays out, this is the menu of options from which D’Alessandro and company will choose.

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About: James Ham

James Ham provides coverage through news analysis and in-depth interviews with Kings players and staff. James is also one of the producers behind the award-winning, independent documentary "Small Market, Big Heart". James graduated UC Davis with a degree in history and is happily married with two children.