I don't believe this part to be true. I think this is more an afterthought now that Hill is gone.
I think the FO went sour on Hill for a couple of reasons: One, because I think they discussed his willingness to re-sign before they made the trade, and then felt betrayed after they offered him a **** ton of money and he declined.
Two, I think they were annoyed with him not trying to play through his injuries in the playoffs. Don't know for sure about this, but that's my hunch.
To be fair to Hill, I think he knew Haywood likely wasn't coming back, so I think it's understandable why he didn't sign the extension. In the end, he hurt himself financially and ended up on a bad team, so that ought to satisfy fans who are bitter. Depending on how the next 3 years go, he may have done the Jazz a big favor as well.