Smith Will Decline Option But Plans to Return to Knicks

J.R. Smith will decline his Knicks contract option Tuesday, but with the intent of re-signing under more lucrative terms, according to a person with knowledge of the situation.

Smith’s option for next season is worth $2.4 million. As a free agent, he would be eligible for a 20 percent raise, to about $2.8 million, and he could earn up to $12.2 million over four years (including 4.5 percent raises). Alternatively, Smith could re-sign for one year, earn his ”early-Bird” rights and qualify for a salary of at least $5.3 million in 2013-14. Either way, opting out makes financial sense for Smith, a 26-year-old swingman.

Under N.B.A. rules, Smith will qualify for a ”non-Bird” free agent contract. Therefore, the Knicks will not need to use their midlevel exception to re-sign him unless he demands more than $2.8 million. Nor will re-signing Smith have any effect on the Knicks’ ability to re-sign Jeremy Lin, Steve Novak or Landry Fields.

There is some risk for the Knicks once Smith declines the option. Rival teams could offer a much higher salary, either with salary cap room or by using the midlevel exception, which starts at $5 million.

Smith averaged 12.5 points, 3.9 rebounds and 2.4 assists for the Knicks after joining them in February, after a stint in China. He was the Knicks’ third leading scorer in the playoffs (12.2 points), but he shot a dismal 31.6 percent from the field in their first-round loss to the Miami Heat.

This is a more complete version of the story than the one that appeared in print.

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