The San Francisco Giants, seeking their fourth World Series title in six years, have crossed a new payroll boundary and might continue to add salary before the Aug. 31 deadline for setting postseason rosters.
For the first time, the Giants are in position to exceed the luxury-tax threshold, according to major-league sources. Yet, the team continues to explore trades for hitters such as Phillies second baseman Chase Utley, sources say.
The threshold, introduced in the 2003-06 collective-bargaining agreement, is $189 million. The Giants were about $1.5 million over that figure, including player-benefit costs, before adding Reds right-hander Mike Leake on July 30. Absorbing the remaining $3.58 million on Leake’s contract put the team about $5 million over the limit, sources say. The Giants also pursued a more expensive pitcher, then-Phillies left-hander Cole Hamels, indicating that they were prepared to go even higher.
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If the Giants finish the season above the threshold, they will pay a 17.5 percent tax on the overage as a first-time offender. The penalty at their current payroll level would amount to less than $1 million, and the team likely would go back under the threshold next season, minimizing the overall impact.
Baseball, in calculating luxury-tax payrolls, assesses multi-year contracts according to their average annual values. Player-benefit costs historically add more than $10 million to the final payroll number.
The Giants will clear more than $35 million in luxury-tax payroll alone this offseason by shedding the contracts of second baseman Marco Scutaro and right-handers Tim Hudson and Tim Lincecum, though they may choose to re-sign Lincecum at a reduced rate.
In other words, exceeding the threshold this season would not be a major hindrance for the Giants. The financial penalty would be negligible, and the ability to go back under the threshold next season would enable the team to again be taxed as a first-time offender the next time it goes over the limit, assuming the luxury tax is part of the next CBA.
The Dodgers are in a much worse position with the luxury tax, not that their ownership seems to mind. The team, as a three-time offender, will pay a 40 percent tax for every dollar it spends above $189 million this season. The total penalty could exceed $45 million; the Dodgers’ luxury-tax payroll is now in the $300 million range.
The Giants will not spend anywhere close to as much as their division rivals, but even after the addition of Leake they remain in position to land a player such as Utley, who is owed slightly under $6.5 million for the rest of the season – less than $4.5 million in pro-rated salary and roster bonuses, plus a $2 million buyout.
The Phillies, as they have done in other trades, could include cash in an Utley deal, further reducing the acquiring team’s obligation in exchange for a better return.
Utley, 36, is earning $10 million in salary this season and will receive an additional $5 million if he does not go on the disabled list for a specified knee injury, according to a copy of his contract obtained by FOX Sports. (Utley recently was on the DL for more than six weeks, but the problem was with his ankle, not his knee.)
The Giants could have claimed Utley on revocable trade waivers earlier this week and effectively kept him away from the Dodgers and Cubs, two teams that rank behind San Francisco in the claiming order due to their superior records and remain logical suitors for the second baseman.
The Dodgers, in fact, lost second baseman Howie Kendrick to a strained left hamstring on Sunday, the day Utley was first eligible to be claimed; Kendrick, sources say, is expected to miss three to four weeks.
A rival executive, however, said it would have been “totally reckless” for the Giants to risk getting stuck then with Utley’s remaining $6.5 million obligation; Utley only came off the DL last Friday and at that time only was batting .179 with a .532 OPS (he is 7 for 17 since his return.)
No other team claimed Utley, who cleared waivers Tuesday and became eligible to be traded to any club, though his service time permits him to veto any trade. Utley, who grew up in Long Beach, Calif., attended UCLA and now lives in San Francisco, would seem particularly inclined to approve a deal to either the Dodgers or Giants, though he also could find the Cubs, Yankees and certain other clubs appealing.
According to sources, the Yankees are monitoring Utley, and – unlike most of the other clubs involved – could play him full-time at second base. The Dodgers might prefer to pursue pitching and go with a combination of Enrique Hernandez and Jose Peraza at second until Kendrick returns. The Cubs would welcome Utley’s veteran presence and left-handed bat, but if they played him full-time at second it would displace Chris Coghlan, their current No. 3 hitter. The Angels at this point want more of a utility infielder than an outright replacement for Johnny Giavotella.
The Giants, meanwhile, seem unsure of how high a priority to place on Utley; second baseman Joe Panik, suffering from lower back inflammation, likely will return, though it might not be until September. Giants center fielder Angel Pagan went on the DL with right patella tendinitis Tuesday, and left fielder Nori Aoki could be placed on the seven-day concussion DL on Thursday night. GM Bobby Evans said the team is “open-minded” about the players it might pursue.
Whether it’s Utley or some other addition, the Giants are prepared to push forward, even if it makes their luxury-tax payment even higher.