Source: Walsh, Dolan to meet soon

Donnie Walsh is scheduled to meet with Madison Square Garden executive chairman James Dolan within the next few days to settle the team president's future with the franchise, according to a person with knowledge of the situation.

Walsh's contract has a team option for the 2011-12 season that must be picked up by Saturday to lock in the final year. If the deadline passes without the option picked up, the contract doesn't expire until June 30 and an extension can still be negotiated before then.

According to another source, Dolan has not yet discussed the plan with Walsh, but multiple sources said that if Dolan only had interest in bringing Walsh back for one more year, the option year already would have been exercised. It is believed that Dolan likely will offer a multiyear arrangement to Walsh to ensure stability in the franchise. A report by CBSSports.com on Sunday cited a Garden source saying Dolan was preparing to offer Walsh a two-year contract extension.

A Garden spokesman declined to comment on the report. Walsh did not return calls for comment.

There is little doubt around 2 Penn Plaza that Dolan wants to bring Walsh back to continue to run the franchise, which in his short tenure has gone from a perennial loser that was millions over the salary cap to a playoff team with two star players and cap flexibility.

"Jim values what Donnie Walsh has done," one source with knowledge of the situation told Newsday. But there are several issues that Dolan and Walsh need to address, starting with how long the 70-year-old will continue to run the franchise and how to transition into his retirement.

One source said that a potential scenario, should Walsh prefer to return home to Indianapolis (where his wife, Judy, has remained while he works in New York), is a multiyear deal to keep him in the organization as a consultant.

Then, of course, Dolan would have to find a qualified replacement or consider promoting assistant GM Allan Houston, who would benefit in having Walsh around as an adviser.

The Dolan family owns controlling interests in the Knicks, MSG and Cablevision. Cablevision owns Newsday.