Posted by Corey Seidman, Fri, March 09, 2012 05:45 PM | Comments: 34
Signings, Statistical Analysis
I’ve wanted to address this for several weeks because as more and more Phillies fans begin to understand the concept of Major League Baseball’s luxury tax, more and more tend to misunderstand it.
The luxury tax this season is $178 million, same as it was last season. It will be $178 million in 2013. In 2014, it increases to $189 million.
The luxury tax is not a salary cap. Ruben Amaro and the Phillies are not obligated to keep their payroll under $178 million. They would very much like to, because the first time you exceed it, you pay 22.5 cents for every dollar over the tax threshold.
So, for example, if the Phillies exceed the threshold this season by $3 million (spending $181MM) they would be on the hook for an additional $675,000 of “dead money.”
Yeah, $675,000. Just a little bit more than they paid Pete Orr last year.
As much as a team like the Phillies would want to stay under the tax threshold so as not to set a precedent, do you really see $675,000 or a number similar to it standing in the way of keeping all of Cole Hamels, Hunter Pence and Shane Victorino?
I ask because that seems to be the growing sentiment. Maybe it’s because fans misunderstand the luxury tax as a salary cap, maybe it’s because the Phillies were perceived as cheap for so many years, or maybe it’s just because it’s easy to regurgitate what you hear people say.
But seriously… pay $675,000, or let a key member of the team walk. Which option do you think a major market GM in a sports-crazed, win-now city would choose?
This topic is especially appropriate since the tax threshold increases by $11 million the season after next. The season the Phils have the best chance of going over would be next year, when you still have players you need to pay and the tax threshold hasn’t yet increased.
In a perfect world, the Phillies extend Cole Hamels before he hits free agency this winter and find a common ground with Victorino either during the season or after it.
If they sign both, then pay Pence $15-16 million in his final year of arbitration next season, and also pick up Carlos Ruiz‘s 2013 option, they’d owe roughly $150 million to 10 players. They’d need 15-to-20 more major-league ready players and have about $28 million free.
But 8-10 of those 15-20 players can come from the low-cost, team-controlled guys like Mayberry, Brown, Worley, Stutes, Herndon, Schwimer, De Fratus, Aumont, etc.
Add in those cheapies and you have about $23 million under the tax for 7-10 players.
Will the Phillies cut it close this season, next season and the one after? Yes. But they won’t wake up and start spending $215 million like the Yankees, who have exceeded the threshold every year since 2003 and, because of which, pay a whopping 40% for every dollar over… 40% on almost $40 million.
The Yankees have spent $200 million on luxury tax penalties alone since 2004, or about $25 million per season.
And we’re talking about $675,000. $25 million vs. $675,000.
A goal is to stay under. A larger goal is to keep fans happy and keep the most competitive product possible on the field. Amaro wants to avoid it like you or I want to avoid a speeding ticket on the way to work when we’re 15 minutes late. It would be great if we could get there on time going 65, but if it takes 88 miles per hour to be in by 9:00, well, that’s just the cost of business.
Pin It 34 CommentsPosts: 0 Erik
Very eloquent. I say go over. The $$$ over will be brought in from playoff revenue. And maybe they can off-set the $$$ with the new TV contract
Reply to this PostFlag commentPosted: 06:16 PM on March 9, 2012Posts: 0 George
88 MPH could get you killed, too. It’s not always the “cost of business.”
The vehemence with which the front office has stated their desire not to reach LT levels, and the fact that they basically dumped the relatively cheap Valdez might indicate that there’s more at work here than just $675,000. It’s a small amount, maybe, but might not be so small if you don’t happen to have that much.
Reply to this PostFlag commentPosted: 06:59 PM on March 9, 2012Posts: 0 George
The vehemence I’ve cited is based not so much on the actual words, but the number of times they’ve been said. And Valdez certainly hasn’t been the only effort to cut costs. Blanton has been mentioned as a trade candidate and Amaro delayed re-signing Rollins as long as possible. Many of the new players (Willis, Pierre, for instance) were signed at bargain rates with no guarantees. There’s also been the prolonged Hamels extension matter.
You just can’t tell me that the front office is not doing everything imaginable to avoid going over the tax, and I’m pretty sure there’s a reason for that. Maybe they’re just being cheap. Maybe they want to have flexibility for mid-season upgrades, or maybe they just don’t have the money.
The LT may not be a salary cap technically, but it might indeed be a cap in the minds of those who have to foot the bill.
Reply to this PostFlag commentPosted: 08:55 AM on March 10, 2012Posts: 0 Rockman 62
“Maybe they’re just being cheap”
The Phillies have the second highest payroll in baseball. Please explain how they are being cheap? By the way, the Yankees are the only team to exceed the luxury tax more than once. Do you realize that every time a team exceeds the cap the penalty grows? The penalty can grow to as much as 40% of the contract value over the threshold. $20 million over the threshold can mean $28 million in actual dollars.
Flag commentPosted: 06:20 AM on March 13, 2012Posts: 0 bacardipr05
Oh god this article just reminded on Americas fascination with been on time…Which I am hardly ever on time…
Reply to this PostFlag commentPosted: 07:11 PM on March 9, 2012Posts: 0 Corey Seidman
@George – There hasn’t been vehemence. “We’d like to avoid exceeding the tax threshold” is as far as anything I’ve read or heard Amaro say.
The Valdez thing is a good point, but he’s a redundant player anyway. Trading Valdez while having capable utility IFs on the roster is a little bit different than letting Pence/Vic walk to save $675k
Reply to this PostFlag commentPosted: 07:28 PM on March 9, 2012Posts: 1 evolutionary
Thank you so much for this. I’m so sick of hearing armchair GMs rattle on about this.
Reply to this PostFlag commentPosted: 07:54 PM on March 9, 2012Posts: 1378 Chuck A.
If you have to spend an additional $675,000 to keep Cole Hamels….if there is no other way….then, yeah, you do it. As much as you know it will/could hurt.
But I’ve mentioned before about that “precedent” that would be set. Once you set it there is no turning back. The economics of baseball have changed quite a bit in this town in the past 5 or so years. Set the precedent and those economics have the potential of being turned upside down.
Reply to this PostFlag commentPosted: 08:13 PM on March 9, 2012Posts: 0 jim
of all mentioned, let victorino go..we have a dearth of outfielders..a few who can play center..mayberry, pierre for example. still for a tax of 675,000…you gotta sign pence and hamels.
Reply to this PostFlag commentPosted: 08:23 PM on March 9, 2012Posts: 0 Rockman 62
dearth [durth]~ noun meaning an inadequate supply; scarcity; lack: There is a dearth of good engineers.
Is this what you mean by “we have a dearth of outfielders”??
Reply to this PostFlag commentPosted: 07:31 AM on March 10, 2012Posts: 1911 Lefty
Corey, Is there also something about not being allowed to share in revenue with other teams as an additional penalty if they go over?
I thought I read it somewhere, not sure- maybe they already don’t get that.
Or does anyone else know?
Reply to this PostFlag commentPosted: 09:26 PM on March 9, 2012Posts: 36 Tom
I think once the Phils are able to get out from under Comcast control and have their own channel, i.e. YES for the Yanks and NESN for the Red Sox, the additional revenue that they will no longer have to share with Comcast will make the LT less scary to the team’s bottom line!! Now that’s what you call a run-on sentence!!
Reply to this PostFlag commentPosted: 09:41 PM on March 9, 2012Posts: 0 Jeff Dowder
The Phillies aren’t starting their own channel.
Reply to this PostFlag commentPosted: 05:14 AM on March 10, 2012Posts: 0 Nik
If Amaro is able to keep all 3 of Hamels Pence and Victorino, he’s a magician. If he’s also able to sign a 3rd baseman after this season, he should run for mayor.
Reply to this PostFlag commentPosted: 10:11 PM on March 9, 2012Posts: 0 Mazinman
When I went to the Phillies first real Spring Training game against the Yankees a funny thing happened. They introduced the Phillies management and they all got a nice round of applause especially Ruben Amaro.I think management realizes that they have a extraordinary amount of good will from the Philly fans and I do not believe they would risk damaging that for less than a million. After all it is that good will that translates into sell out after sell out.
Reply to this PostFlag commentPosted: 01:30 AM on March 10, 2012Posts: 0 brooks
What translates into the hottest ticket in town is winning. Once the Phils stop winning like they have, we will cease seeing the sellouts.
We appreciate the management as long as the Phils can take another NL Eastern Division flag home at the EOS.
There probably wont be such fair weather for the first part of this year – aging stars & immovable strategies vs improving teams with younger, hungrier players and managers like Davey Johnson are to be dealt with.
I think the season will be a blast. When Howard comes back, if he’s not in a zone, the Phils may struggle for the entire season. If he is tuned in, the Phils take their 6th straight division flag home with them and possibly more.
Posts: 0 Corey Seidman
To be honest Brooks, I don’t know when the sellout streak will end. You’d figure it’ll continue for as long as they’re an elite NL team, which should be a while with the amount of money the Phils can now spend.
It’d take a very painful season/losing streak to lessen fan interest. I could see the sellout streak (at least in terms of announced attendance) easily lasting another four seasons.
Reply to this PostFlag commentPosted: 06:02 AM on March 10, 2012Posts: 0 brooks
The definition of an elite team, being in the wild card race? The Phils were in the hunt since was it 03 but did not start the sell out streak until a few years later.
The point I was attempting to make is that hero worship is not to be ignored. This town needs someone – in 09 it was Raul (first half!), 07 it was Jimmy, 06 Ryan and for a few more years it was Ryan, then Cole, Doc, Lee and through most of those times, Utley too – to rise and take over for a bit. Offensively the way the team is structured, I can see a handful of games where 1 to 4 runs is the norm and unless the pitching is outstanding, some painful losing streaks to accompany that lull.
But as long as these guys are playing, I see Red at the end of the tunnel.
Reply to this PostFlag commentPosted: 06:24 AM on March 10, 2012Posts: 0 brooks
I was reading the other day that Papelbon had a sit down interview with Angelo Cataldi.
Why didn’t anyone give him some advance notice?
This was probably the first of 3 interviews that Paps might grant to WIP, at least the morning clown. Once (sorry, if) Papelbon starts to struggle Angelo will be the first to grab a tomato.
Reply to this PostFlag commentPosted: 06:29 AM on March 10, 2012Posts: 0 Jeff Dowder
I remember the days when WIP refused to even talk about baseball. It was all Eagles, 24 hours a day, 12 months a year.
Reply to this PostFlag commentPosted: 10:51 AM on March 10, 2012Posts: 0 TheDipsy
I believe that the Phillies will have their own channel one day. They have the fan base and the pricing power in the merchandise to do it. Other teams don’t have that. Corey – from another thread – I wanted to trade for Matt Kemp because I thought the Dodgers were broke – apparently they weren’t.
The problem with payroll numbers – which I believe is inherent in “fandom” – is that, especially in this case of Philly, once you go over the “luxury tax”, which to me is no big deal if its a small amount for a season or two, fans will expect you to do it EVERY year – and possibly for big money. In this regard, I believe Don is absolutely correct. Fans are like Tea Partiers – once you give them something you can never take it away and thats why you should be hesitant to give them anything. Moreover, I also think Ruben uses the tax as his limit for what he will spend and thats very easy for him to do. I can’t really blame him because if you have to stop your payroll somewhere it might as well be right on the tax number so you can tell as much to your fans. I also believe he would go over it in the right circumstances.
Corey – your numbers make perfect sense to me as long as those “fill in” guys are OK. The best laid plans of mice and men. Regarding Victorino – I guess it all comes down to me believing that there are better ways to expend your assets than to dole out a hefty contract to an aging centerfielder with coming off of one really good season. Shane being a good soldier just doesn’t get me there on this one.
Good article.
Reply to this PostFlag commentPosted: 08:52 AM on March 10, 2012Posts: 0 George
Good reasoning here. I’d be curious to see just what the right circumstances would be if fan expectations are so daunting that “you should be hesitant to give them anything,” and you wish to tell your fans that you’re smart enough to keep the budget under control. Those circumstances might arise really quickly should Hamels and Pence ask too much or when Polanco needs to be replaced, or Howard or Utley don’t come back 100%.
I also think you may be right about Vic. He’s a valuable player in terms of what center fielders are going for, but there are probably other, cheaper options; some of whom are already in the Phils’ system.
Reply to this PostFlag commentPosted: 09:24 AM on March 10, 2012Posts: 0 Jeff Dowder
This is why the Phillies won’t have their own network:
http://www.philly.com/philly/sports/TV-and–A-FAQ.html
It all makes perfect sense, and they’ll do just fine with their next Comcast deal without the headache of running a network.
Reply to this PostFlag commentPosted: 10:49 AM on March 10, 2012Posts: 0 TheDipsy
The Dipsy
Reply to this PostFlag commentPosted: 08:54 AM on March 10, 2012Posts: 1378 Chuck A.
Good thing you got that in.
Reply to this PostFlag commentPosted: 11:44 AM on March 10, 2012Posts: 1911 Lefty
Wow Dipsy, that may be your most astute comment ever. :-)
Reply to this PostFlag commentPosted: 01:24 PM on March 10, 2012Posts: 0 TheDipsy
Thanks Jeff. I just read that and its sounded to me like Montgomery left it open as a possibility, which is naturally something you would say when you are under contract with another network. Rule #1: If there is something a business can do to make more money, they will do it.
The Dipsy
Reply to this PostFlag commentPosted: 12:58 PM on March 10, 2012Posts: 0 Jeff Dowder
That’s not exactly what I read. For the Phillies to have their own network, they’d need content. That content goes well beyond just airing their own games. They would need programming 24 hours a day, all year long. Whether they produce their own programming or buy it, that costs money. Then they need to negotiate with Comcast to have them even carry their new network. That would be an interesting negotiation since Comcast itself runs CSN.
Comcast is the king of content and will pay a lot for Phillies rights…probably $100-$150 million a season. Maybe even more. Isn’t that much easier than starting a network from scratch? It’s so easy that it’s probably exactly what will happen.
Reply to this PostFlag commentPosted: 04:24 PM on March 10, 2012Posts: 0 George
Network advertising is supposed to pay for the content, and there’s probably plenty of corporations around to do that. If ad revenue didn’t exist, there wouldn’t be any T.V. stations at all.
The real problem is that in order to run a network, you need an entire staff of new people with T.V. experience, not just baseball smarts. It’d have to be an entirely new corporation with entirely different demands. I doubt if the Phils would want to go there.
Flag commentPosted: 04:50 PM on March 10, 2012Posts: 0 psujoe
Phillies will have no problem signing Hamels under the LT once the season starts. They should be able to fit 5/100 and 4/40 for Vic if they chose to and still have room.
Reply to this PostFlag commentPosted: 04:21 PM on March 10, 2012Posts: 0 George
Vic at 4/$40 million? Surely you’re joking! And Hamels will likely want more than 5/100.
Try Vic at 4 or 5/ 15 to 20, and Hamels at something like 6/22 or more. Then rethink whether the Phils can stay under the tax while signing both.
Reply to this PostFlag commentPosted: 04:56 PM on March 10, 2012Posts: 0 George
My dollar figures are YEARLY, not for the entire contract period. $20 million would be way high for Victorino, but he’ll probably ask for close to that to allow for negotiation downward.
Flag commentPosted: 05:02 PM on March 10, 2012Posts: 0 TheDipsy
Joe – I don’t think either ne of those guys are gonna sign at those numbers.
The Dipsy
Reply to this PostFlag commentPosted: 04:37 PM on March 10, 2012Posts: 0 psujoe
No way the Phillies should pay more than $11-12 a year for vic. 420 million? What’s elsbury and Granderson going to get $25 million a year?
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