From John Hollinger at ESPN....
"Sources say Knicks GM Glen Grunwald was infuriated by the Rockets' manipulation of the rules. When Lin's offer sheet arrived at the team's offices in New York City, staffers insisted that it needed to go to Grunwald personally.
But Grunwald wasn't in New York -- he was in Las Vegas attending the NBA Summer League. The same sources say Grunwald then dodged the delivery for a day and a half, finally accepting it on Saturday. Since league rules say the clock doesn't start on an offer sheet until it is received by the player's prior team, this gave the Knicks until Tuesday night to decide whether to keep Lin on the Knicks and accept the luxury-tax consequences.
In the meantime the Knicks traded for Felton -- presumably as a replacement for Lin to pair with new signee Jason Kidd -- and let it be known that they have decided not to match Houston's offer.
So are the Knicks serious, or is this just an outburst before they settle down, match the offer and bring Lin back to the Big Apple?
Logic dictates that it's actually the latter.
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Howard Smith/US Presswire
Lin's worth even more to the Knicks off the court than he is on.
Sure, the prospect of paying a fortune in additional luxury tax has to make the Knicks stop and think. But Lin is a moneymaking machine. Lin puts people in seats, both at home and on the road, and he is a merchandising bonanza. The stock of Knicks parent company MSG is up 20 percent since Linsanity began, with Nate Silver of the New York Times reporting that MSG's market capitalization has gained $600 million since that fateful day last February when Lin took over as the Knicks' starting point guard.
So what happens to MSG if the Knicks fail to retain Lin? Silver continued, saying, "as of late Monday morning, on the mere possibility that Lin might not be re-signed, MSG stock had lost about $50 million in market value." This was on a rumor -- imagine what the company's losses will be if losing Lin becomes a reality.
So if Lin plays up to his potential, he should more than make up for what it costs the Knicks to keep him. But what if Lin doesn't pan out? What if his 26-game sample proves to be an illusion, and he ends up as yet another flash in the pan? Will the Knicks be stuck with an enormous tax bill for an unproductive player?
If worse comes to worst, another new rule can help the team out. The "stretch provision" allows a team to waive a player and extend his salary payments over twice the number of remaining seasons, plus one. So if Lin is waived with one season remaining on his contract, he would be paid his salary over three years.
Here's the important part -- teams also may elect to stretch a waived player's salary-cap hit over the same number of years. So if Lin proves to be a disaster over the next two seasons, the Knicks can waive him, stretch the payment of his $14.8 million salary over three years, and reduce his salary-cap amount to about $4.9 million in each season. This would reduce the team's tax bill significantly. If the Knicks are right at the tax line, a $4.9 million salary would translate to a $7.35 million tax bill. This is much more palatable.
In sum, Lin will continue to be a financial bonanza if he keeps playing up to his potential. If he ends up being a bust, the Knicks have the means to mitigate the damage. The potential upside is well worth the risk.
So logic dictates that sometime before midnight Tuesday night, the Knicks will inform the league that they are matching the Rockets' offer, and Jeremy Lin will remain a member of the Knicks.
As much as keeping Lin will cost them, losing him will cost more."