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Rosenthal: Now's best time for Angels to add payroll, pay luxury tax
Message to Los Angeles Angels owner Arte Moreno: You're eventually going to blow past the $189 million luxury-tax threshold. So, you might as well start this offseason.
Moreno's desire to stay under threshold has figured prominently into the Angels' offseason restructuring, factoring into trades, non-tenders and other decisions.
Well, according to sources, the team's wiggle room is down to between $13 million and $15 million, depending on how much players earn in performance bonuses.
The average salary for Japanese right-hander Masahiro Tanaka certainly would push the Angels past the threshold, and the average for free-agent righty Matt Garza might, too (remember, luxury-tax calculations are based on average salary, not single-season salaries).
Exceeding the threshold would not cost the Angels too badly in 2014 — the penalty for a first-time offender is only 17.5 percent, meaning the Angels would pay a mere $1.75 million if they went $10 million over, or $3.5 million if they went $20 million over.
Future years, though, could be a problem, as pointed out by monkeywithahalo.com. As the Yankees can attest, a team pays a 30 percent tax the second time it exceeds the threshold, a 40 percent tax the third time and a 50 percent tax the fourth time.
The Angels will shed two major tax commitments after this season — $18.6 million to outfielder Vernon Wells and $7.5 million to right-hander Joe Blanton. But the math will get tricky if the team signs outfielder Mike Trout to a contract extension.
A 10-year, $300 million deal for Trout — and we're just throwing that number out there — would count $30 million per season against the threshold. Albert Pujols already counts for $24 million per season through 2021 and Josh Hamilton $25 million per season through '17.
So if the Angels gave Trout $300 million, they would have three players absorb more than 40 percent of their luxury-tax payroll for the next three seasons. Throw in Tanaka at $20 million-plus per season, and that's four players absorbing more than 50 percent of the luxury-tax number.
The current labor agreement expires in '16, and the thresholds presumably will be higher in the next deal. But with Trout, the clock is ticking for the Angels in more ways than one.
The sooner the team extends Trout, the better for long-term luxury-tax purposes. Trout is not eligible for arbitration until after next season, so his low pre-arb salary for 2014 would lower his average salary in an extension, an average that only would grow if the Angels waited to sign him.
Short term, the Angels might be better off going year by year — Trout’s arbitration salaries would be lower than his average annual value in an extension. The problem with such a strategy, of course, is that it would enable Trout to become a free agent after '17.
One way or another, the Angels figure to start paying the tax soon. Might as well start now, when the team would benefit from the addition of one more starting pitcher.
What else is that annual $150 million in local TV revenue for?
FEWER EXTENSIONS, MORE TRADES?
Center fielder Jacoby Ellsbury signed for $153 million despite missing significant time with injuries in 2010 and '12.
Outfielder Curtis Granderson got $60 million despite appearing in only 61 games last season, catcher Brian McCann $85 million just one year removed from shoulder surgery, shortstop Jhonny Peralta $53 million despite a recent PED suspension.
Barring a worst-case, career-threatening injury, position players still can earn more as free agents than they would by signing club-friendly extensions. Heck, even physically questionable pitchers such as right-hander Tim Hudson and lefty Scott Kazmir fared decently in this market.
Pitchers still figure to be more inclined to accept extensions, protecting themselves against major injury. Then again, the temptation for a Clayton Kershaw, Max Scherzer or Jon Lester to hit the open market is perhaps greater than ever, considering the amount of money in the game.
Kershaw, Scherzer and Lester all are entering their walk years. Of the three, only Scherzer has been a trade candidate, and the Tigers appeared to close that option when they moved righty Doug Fister. But two pitchers under their clubs' control for two more seasons — the Rays' David Price and Cubs' Jeff Samardzija — remain trade possibilities. At least one more, the Nationals’ Jordan Zimmermann, could join them.
The pattern seems clear: Teams will explore other options as players resist extensions, leading to increased trade activity.
The Rays maintain too low a payroll to sign Price long term, but Samardzija and Zimmermann could prove to be examples of players who simply did not want extensions. Scott Boras clients routinely fit that description, which is why the Orioles have considered moving catcher Matt Wieters, who is under club control for two more years.
Rival teams have inquired on Castro, according to major league sources. If the Astros cannot sign him to an extension, he could become the team's best trade chip. The 'Stros also could move him to first base.
FIXING DRAFT-PICK COMPENSATION
It's still too early to judge the effect of draft-pick compensation on this year's free-agent class. But representatives on the players' side are frustrated by the impact of qualifying offers on a select group of players, and changes seem inevitable in the next labor agreement.
Five free agents who received qualifying offers remain on the open market — right-handers Ervin Santana and Ubaldo Jimenez, outfielder Nelson Cruz, shortstop Stephen Drew and first baseman/designated hitter Kendrys Morales.
For all the hand-wringing over the system, let's not forget that each of the five could have accepted the one-year $14.1 million qualifying offer; the new system took effect last offseason; players and agents saw the effect, and could have strategized accordingly.
Still, it's probably best to reserve full judgment.
Cruz, the leading right-handed power hitter in this class, still could command a decent multi-year contract. The markets for Santana and Jimenez have yet to develop due to the delay over Tanaka. Morales and Drew perhaps should have accepted qualifying offers, but that is not the style of their agent, Boras — and Drew, in particular, may escape relatively unscathed (see below).
Boras prefers his clients to establish their values on the open market, for better or worse. And lest anyone forget, he came out relatively OK last offseason with right-hander Kyle Lohse (three years, $33 million with the Brewers) and outfielder Michael Bourn (four years, $48 million with the Indians).
Yes, Lohse's deal seemed light, especially when compared to Edwin Jackson's four-year, $52 million contract. But the lack of draft-pick compensation with Jackson wasn't the only difference between him and Lohse; he also is five years younger.
In any case, the current system will be in place for two more offseasons before the labor agreement expires. Going forward, any number of fixes could make sense.
One idea: Guarantee that free agents would receive a qualifying offer only once. Acceptance then would become far more palatable — a player could take the big one-year salary, then be unrestricted the following offseason.
Another possibility: Alter or remove the pool money from the equation. Teams then would be more inclined to sign free agents who received qualifying offers; they still would lose a pick, but not the accompanying pool money, enabling them to retain financial flexibility in the draft.
A third alternative: Prevent teams from making qualifying offers to players beyond a certain age — say, 32. Teams generally do not hesitate to sacrifice picks for players in their primes. Older players such as Lohse are far more likely to be affected.
THE METS' LOGICAL NEXT STEP
A number of rival executives are asking: Why wouldn't the Mets sign Drew?
The Mets gave a four-year deal to Granderson, who turns 33 in March. Drew is two years younger, and 2½ years removed from right-ankle surgery.
The loss of a draft pick and accompanying pool money should barely be a consideration: The Mets' first-rounder is protected, they already have lost their second-rounder for Granderson and the pick they would sacrifice for Drew would be the 82nd overall.
The Mets again are talking up Ruben Tejada as a possible starter at short, but it's no secret they were down on him last season. Their top shortstop prospect, Gavin Cecchini, is not close to the majors. And strong up-the-middle defense should be a priority for a team building around young pitching.
The issue, as always, is price; the Mets prefer to sign Drew for two years rather than three, and probably at a lower salary than Boras desires. Then again, what are the Mets' options?
They likely would need to part with at least one prospect to acquire a shortstop such as the Diamondbacks' Didi Gregorius. The free-agent market next offseason should be deeper at shortstop, but will still be problematic.
BE PATIENT, JAYS FANS
The Blue Jays, quiet for much of the offseason, still figure to acquire one and possibly two starting pitchers once the logjam caused by Tanaka starts to resolve.
The Jays are a leading candidate to sign either Santana or Jimenez; they have two protected first-round picks, Nos. 9 and 11, and would sacrifice only a second-rounder and the accompanying pool money for one of those free-agent right-handers.
The team also remains involved in trade discussions for Samardzija and other starting pitchers; a rotation of, say, Santana, Samardzija, R.A. Dickey, Mark Buehrle and Brandon Morrow would be much more formidable than they Jays had last season.
Then again, if the Cubs cannot sign Samardzija to an extension, the Jays probably could not, either. Indeed, the Jays need not rush into anything. Samardzija still might be available in spring training or July. And other possibilities could arise; some team is bound to disappoint and trade off veterans, the way the White Sox did with Jake Peavy last season.
The Phillies' Cliff Lee and Cole Hamels both could be available before July 31, and the same goes for the Reds' Homer Bailey, Indians' Justin Masterson, Pirates' Francisco Liriano and Royals’ James Shields if their respective clubs somehow fall out of contention.
The Jays need to weigh the current price for Samardzija against what it will take to acquire other starters in spring training or after the season begins. The longer they wait, the better they can assess their prospects as well.
PUTZ ON THE MOVE?
Don't be surprised if the Diamondbacks trade right-hander J.J. Putz following their addition of former White Sox closer Addison Reed. Putz is signed for $7 million in 2014, and the D-backs most likely would be required to accept a comparable salary in return.
Yankees outfielder Ichiro Suzuki, earning $6.5 million, could be one possibility, though it is not known whether Yankees ownership would part with Suzuki or how he would adjust to a backup role.
Putz also could be part of a trade for a starter such as the Brewers' Yovani Gallardo if the D-backs fall short in other pursuits.