David Zalubowski/Associated Press

The Denver Nuggets will reportedly decline their team option on Nikola Jokic as the first step toward negotiating a larger extension, according to Shams Charania of Yahoo Sports.

With Denver's move, the center will become a restricted free agent, and the two sides are expected to reach an agreement on a max contract of $146.5 million over five years.

Jokic's 2018-19 option is worth $1.6 million.

While exercising the option would allow the Nuggets to keep a top player at minimal cost, it would hurt the team's chances of re-signing him as an unrestricted free agent in 2019.

Nick Kosmider of The Athletic broke down the situation in May:

Nuggets president of basketball operations Tim Connelly has made it clear he has every intention of locking in the 23-year-old on a long-term deal.

"Nikola's going to be here for a long, long time," Connelly told reporters Thursday. "I think whatever we do, we're going to ensure he's here as long as possible."

Jokic was one of the top big men in the NBA last season, averaging 18.5 points, 10.7 rebounds and 6.1 assists per game, all of which were career highs. He also led the Nuggets in each category as the team finished one game out of a playoff spot.

Although his salary has been relatively low to this point as a second-round pick in the 2014 draft, he is headed toward a major raise next season.