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Thursday, February 08, 2018

For Future Considerations

Boston’s offer on the table to J.D. Martinez is $125 million for 5 years, according to “source”. (Yeah, thanks, Boston Herald.) But what are the penalties under the new CBA, and is Boston likely to incur them, if they make that deal? In short: hefty, and yes.

Let’s do a little level-setting. Under the new CBA the penalties increase depending on how far over the threshold a team goes, and on how many consecutive years they exceed it. The lowest penalty is a 20% tax on any amount exceeding the threshold. The highest penalty is a 95% tax on any amount $40 million higher than the threshold, plus having next year’s first round pick getting pushed back 10 slots. Page 124 of this PDF has the details.

So let’s look at 2018. The threshold is at $197 million this year. On the first $20 million over that threshold Boston would be taxed at 20%, given that they did not exceed the threshold last year. On the next $20 million they would be taxed at 32%; and on any amounts above that they would be taxed at 62.5%.

If I did the math correctly (using amounts at Cot’s and soxprospects) the Red Sox have $123.75 million in prior contract obligations (using AAV, not 2018 amounts) spread across 14 players, another $38.15 million to 10 players who were eligible for arbitration, and another $8.72 million in minimum contracts to the other 16 players who will be on the 40 man roster. There’s another $7.31 million in player benefits that get lumped in with salary for the sake of these calculations. That puts the Actual Club Payroll - the term they use for “payroll for the sake of the CBT” - around $178 million, well below the threshold… if they don’t sign anyone else after today. If they go $125m/5y with JDM, they would be just around $202.4 million (booting one minimum contract player off the roster). Not bad! They’d be around $5 million above the threshold, and would pay $1 million in tax.

Did I say “not bad”? Well…

In 2019 they will have 15 players reaching arbitration. Fun fact: after the 2013 championship they had 15 arb-eligible players… in 4 seasons combined. That’s a crazy big number for one year. They had ten this year, and that’s a crazy big number. Fifteen is insane.

How big will the salary impact be for them? There are two ways to look at this. First, on average, players in arb years see a 100% increase in salary. On that basis we should expect these players to be paid $82 million next year. Second, if we assume each of them averages a $3 million raise that would be a $45 million raise on their current salary of $41 million, or a 2019 commitment of $86 million. Let’s say $82 million because it’s lower and this is getting depressing.

What makes it even more depressing is that they will have 8 players reaching free agency, but those players are making around $3 million on average this year. Replace them with minimum contracts, and there’s not much in savings. Tally up everything and we’re sitting at $225 million. The threshold next year is $206 million, and the tax rate for a 2nd-year offender is 30%, so that’s another $5.7 million in tax. Again, this is without signing anyone except Martinez. If someone leaves, they’re replaced with a minimum salary player.

It can’t get worse, can it? Yes and no.

In 2020 they lose some expensive players to free agency, bringing those obligations down to $70 million (for 3 players: Pedroia, Price, and JDM). Again they have 15 arb-eligible players, with Bogaerts, Holt, and Thornburg (free agents) being replaced by Benintendi, Hernandez, and Marrero. And absent any signings they’ll have 22 players on the 40-man roster making the minimum. Seems like the roster is slipping, right? Should be cheaper, right? It is: $203 million. The threshold is at $208 million, so no penalties! They can even afford to sign a player for $5 million. Woooo!

That roster has the final year before free agency for Betts, Bradley, Vazquez, Leon, Wright, Workman, and Smith. And they’ll have already lost Sale, Bogaerts, Porcello, Moreland, Thornburg, Holt, and Hanley, each of whom has been replaced by someone at the minimum. Kimbrel, Kelly, and Pomeranz would be long gone. $203 million buys… not them.

So if they want to replace any of these players, what happens?

Let’s say they throw another $30 million in salary out there in 2019. Re-sign Kimbrel, bring in someone else, sign one of their current players to a long-term extension… Whatever. They will be paying around $20 million in tax for 2019, around $14 million more than without the extra salary. Oh, and they get the draft pick penalty that year. And $13 million in tax in 2020.

What if they do that, and throw another $25 million out there in 2020? That adds another $13 million in tax on the 2020 heap, and tacks on another year of the draft pick penalty. So just in the next three years, the addition of Martinez in 2018 and two more significant salary allocations in each of the subsequent years will add close to $47 million in tax and push the first round draft picks to the second round for 2 of the 3 years. What happens after that? Well, by then everything we know about the current roster would be different – except J.D. Martinez, of course. So let’s just ignore beyond three years for my own sanity.

So what happens if they do all that, but don’t sign Martinez? The total tax bill is $11 million (none this year), and they keep the draft picks right where they are.

And finally, what happens if they do all that, and sign Martinez, but at $30 million AAV? Tax is $57 million, and they get the two-year draft pick hit.

In all honesty, I think they will need to throw around a lot more money than what I’ve outlined here if they are to stay competitive. They have a young, talented roster that is about to get very expensive, and they don’t have Mookie 2.0 to replace Mookie 1.0 at league minimum. They don’t even really have Will Middlebrooks 2.0. But if we take as a given that they need to spend in 2019 and 2020, then their options with JDM sum up as follows:

1. Don’t sign JDM at all. Some tax, no draft pick impacts.
2. Sign JDM at $25m AAV: +$75m salary, +$36m total tax, worse picks x2.
3. Sign JDM at $30m AAV: +$90m salary, +$46m total tax, worse picks x2. whatever impacts happen beyond 2020.

So when we think of J.D. Martinez, we should be asking two questions:

a. Of all the roles they need to fill in the next couple of years, is his role (likely DH) a priority to fill from the free agent market?
b. Is he worth roughly a 50% tax, plus worse draft picks?

I think you can make a compelling argument in the affirmative for the first question, if you focus on winning now. Keeping the roster together becomes untenable in 2019, unrealistic in 2020, and unpossible beyond that. The major hole to fill seems to be a power-bat DH, so if you want to win now that’s the priority. Still, I really don’t think you can make the case on the second question. He’s on the scale of $38-$45 million per year counting the tax hit, and stomping on draft picks along the way. One way he wouldn’t cost as much is if they sign him and then don’t spend on other players for the next few years. J.D. Martinez really isn’t the kind of player I’d do that for.

villageidiom Posted: February 08, 2018 at 01:10 AM | 18 comment(s) Login to Bookmark
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   1. Bad Fish Posted: February 08, 2018 at 10:51 PM (#5622355)
VI, thanks for this excellent and in-depth analysis of the out-year financial constraints facing the RS. I made a similar, although much, much less nuanced observation in an earlier discussion. Your analysis shows why, under the current salary-cap restrictions, these multi-year $20M-$30M contracts are untenable. Even a team like the RS, who have been big spending and have never really shown much concern about spending money are thrust into a position of financial conservancy. As you have pointed out they have a lot of team and cost controlled talent, so it isn't even like their current situation is completely predicated on FA money.

I actually like the business side of baseball and how it influences the on-field product. There is a lot of creativity that goes into the construction of a winning team. The reality is, WAR does not cost $8M per win or whatever the current-tool price is, because it runs headlong into the reality of your analysis, and teams, even big spending teams are not going to degrade their out-year player development machine that creates the cheap filler.

For better or worse, we are stuck with this team, I hope they stay good.
   2. Nasty Nate Posted: February 09, 2018 at 09:30 AM (#5622432)
b. Is he worth roughly a 50% tax, plus worse draft picks?
I'm not sure if this is the right question. I have been under the assumption that they would be blowing past the luxury threshold, either this season or next - and that going over (for at least a few years) was just the reality of being a high-payroll team. If my assumption is correct, I don't think we should count the penalties against the specific contract that happened to push them over the threshold. It should be counted proportionately against all their contracts.
   3. John DiFool2 Posted: February 09, 2018 at 09:57 AM (#5622455)
They don’t even really have Will Middlebrooks 2.0.

[cough]Michael Chavis[/cough]
   4. Lassus Posted: February 09, 2018 at 11:32 AM (#5622531)
Hey there, OT, but if anyone here cares, I am (allegedly) moving and have a 2003 Beckett Marlins bobblehead I can't drag around anymore. First one to email me at orlandolassus AT yahoo can have it mailed to them, free of charge. Not mine, but this is the one.
   5. jacksone (AKA It's OK...) Posted: February 09, 2018 at 11:36 AM (#5622535)
they don’t have Mookie 2.0 to replace Mookie 1.0 at league minimum

Keep in mind when projecting forward to 2020 or 2021, the Sox didn't really have Mookie 1.0 until his promotion tour in 2014. He was the #7 Sox prospect going into the year (62 overall per MLB Top 100, just behind Swihart). The midseason rankings had him moved up to #1 in the org, #14 overall, but still with only a projected 65 overall rating.

The Sox may very well have the next Mookie on the team, but it's not someone you'd expect, say Cole Brannen or Danny Diaz.
   6. The Well-Tempered Javier Vasquez (loungehead) Posted: February 10, 2018 at 12:50 PM (#5622974)
There seems to be some divide on opt-outs, but I tend to like them from a team perspective. There's loss of certainty, but if they're paying primarily for the earlier years of the contract, why not give another team a chance to pay for the added decline?

With that said, and maybe this is just incredibly stupid spitballing, but what if the Sox offered JD Martinez something along the lines of 6 / $135 - structured as $25MM/year for the first 5, $10MM for year 6 - with opt-outs after years 1-4? They get slightly reduced AAV over the currently-assumed offer (should cover an arb raise for someone, at least), JDM gets a chance to test the market in subsequent years, and if he elects to not do so, the Sox get a cheaper option at the tail end to mitigate decline and/or injury. Does that hypothetical contract seem in any way realistic? Does it benefit one side over the other by a large margin?
   7. Nasty Nate Posted: February 10, 2018 at 02:28 PM (#5622980)
I think that's generally plausible, but possibly more player-friendly than the Sox would want. I am basically guessing, but I don't think they'd go for that deal unless either there were fewer opt-outs, or the guaranteed money was less (or heavily back-loaded).
   8. Jose is an Absurd Sultan Posted: February 14, 2018 at 08:23 AM (#5624733)
I have reached the point of not giving a damn what JD Martinez does just so long as he makes a ####### decision. I think he's a guy who would be a lot of fun to root for, I'm a Sox fan and right-handed sluggers are in my DNA, but man enough is enough.
   9. Nasty Nate Posted: February 19, 2018 at 01:01 PM (#5626910)
What about a very unlikely Martinez alternative: Jonathan Lucroy? Give some starts at C, some at 1B, and some at DH.
   10. jacksone (AKA It's OK...) Posted: February 19, 2018 at 01:45 PM (#5626942)
What about a very unlikely Martinez alternative: Jonathan Lucroy? Give some starts at C, some at 1B, and some at DH.

Eh...Lucroy is a higher-floor, lower-ceiling, less athletic Swihart. I could see bringing him in if the Sox were going to dump Leon, but I'm thinking they like Leon's <$2M contract more than Lucroy's potential.

As an aside, obviously teams use multiple catchers during the course of a season, but how often do C's play at any other positions? I seem to read that a lot here, 'so-and-so was a C while coming up, so even though he hasn't caught in 3 years, I still think it'd be a good idea to give him 20 games behind the plate.' I could just be imagining the frequency, as this irks me, just trying to gauge how much others notice this. And this is not to bash Nasty, as Lucroy IS a C and has played 1B. I am thinking more about someone like Schwarber.
   11. Nasty Nate Posted: February 19, 2018 at 04:30 PM (#5627065)
Heyman tweeted something today about the Sox and Martinez getting closer to a deal. Maybe Boras ordered him to put that out as a way to flush out last-chance final offers from the D-Backs and any mystery teams.
   12. Jose is an Absurd Sultan Posted: February 19, 2018 at 05:33 PM (#5627116)
It seems to be done. 5/110 per Gomez with a 2 year opt out.
   13. Jose is an Absurd Sultan Posted: February 19, 2018 at 05:52 PM (#5627130)
Heyman says it’s $50 million for the first two years and 60 for the next 3.
   14. Toby Posted: February 19, 2018 at 07:05 PM (#5627152)
Our long national nightmare is over.
   15. Textbook Editor Posted: February 19, 2018 at 08:55 PM (#5627190)
So... they'll be over the cap in 2018, and likely will be in 2019, though I suppose the sincere hope is that he rakes for 2 years and opts out, fixing some of the problem the original post points to in 2020 and 2021.

It'll be interesting how Hanley fits into all of this--presumably he won't come anywhere close to his vesting PA now--but they have a lot of pieces and I guess that's not a terrible thing. Nunez--if healthy--papers over a lot of IF cracks. So assuming 14 position player slots you have:

Martinez (DH)

And a bench of:

Leon OR Swihart

It does leave you wondering... A shoe has to drop here. I can't see them trading JBJ, but I suppose if you did that you'd put Martinez in LF, Benintendi in CF and keep Betts in RF? To be honest it worries me a little we think Martinez will be just fine as a full-time DH, but maybe the plan will be to rest the OF guys each at least once a week and to use Martinez in LF for those 3 starts (while Ramirez DHs those starts) and to DH the other 3-4 games per week... I don't know.

I also half-suspect a guy like Holt could be traded. He's somewhat redundant given the other IF options in Pawtucket, but I don't think he'd bring much in return.

Of course the whole Leon/Swihart thing will be something to watch as well; I can't see them carrying both (unless they really clear out some space by cutting/trading Hanley and/or trading JBJ/Holt).

It'll be interesting to see how this plays out.
   16. Nasty Nate Posted: February 19, 2018 at 09:11 PM (#5627197)
maybe the plan will be to rest the OF guys each at least once a week and to use Martinez in LF for those 3 starts (while Ramirez DHs those starts) and to DH the other 3-4 games per week... I don't know.
I think that's the basic idea. Although Mookie won't be sitting once a week.
   17. Nasty Nate Posted: February 20, 2018 at 09:49 AM (#5627276)
So the Sox will be over the luxury tax threshold for the foreseeable future, right? (Assuming Price doesn't have a Pedro-esque season leading to an opt-out)

Does that mean it's time to free Rusney Castillo?
   18. Chip Posted: February 20, 2018 at 02:48 PM (#5627544)
Brentz to the Pirates for cash to clear a 40-man spot for Martinez.

(EDIT: I see Jose already mentioned this in the roster topic.)

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