2024 Mets Payroll Primer

Morning Dose: Monday, December 18

Dec 18, 2023

☕️ Good Morning:

Today we will break down the Mets’ luxury tax payroll.

So grab an extra cup of coffee for your morning accounting dose of Mets Fix!

Happening now: Yoshinobu Yamamoto is like an engaged man on a wild bachelor party. He knows he is about to enter a lifelong contract with a new team — some reports suggest he could sign a 12- or 14-year contract — so he has decided to live it up before tying the knot.

He’s having dinner with the Cohens, before rendezvousing with their crosstown rivals. He’s talking to the Phillies, accepting offers from the Red Sox and Giants. The world is his oyster. But the clock will eventually strike midnight on his partying ways.

Yamamoto has until January 4th to make a decision, and it appears he is going to ride close to the deadline to squeeze every last drop out of these negotiations.

Cautious approach: Over the weekend, Will Sammon of The Athletic offered a hint into the Mets’ current thinking around their payroll, suggesting they will not pursue high-priced free agents outside of Yoshinobu Yamamoto. Sammon elaborated:

Given the amount of money that potentially comes off the Mets’ books, some familiar with the Mets’ thinking say New York has an eye toward next winter when they have major payroll flexibility. The Mets’ 2025 payroll projects to be $119 million, as things stand, so it’s possible for them to reset under the tax completely if they want.

In light of this report and where we stand in the offseason, I thought it was a good time to break out my favorite issue of the year: the 2024 Mets’ Payroll Primer.

You will learn where the Mets payroll currently stands.
You will also learn why their 2025 payroll is a bit higher than some might realize.

🔻 Assumptions

Before we get into the numbers, a few assumptions:

I will focus on the “Luxury Tax” Payroll which is different than the payroll used for cash-flow purposes (the amount the players are actually paid each season). The guaranteed salaries shown in my estimates represent the Average Annual Value (AAV) of those contracts.
The luxury tax payroll is always a projection until the end of the year. Only time will tell how much the Mets will actually spend on players throughout the course of the season. This is why the league calculates each team’s luxury tax or “Competitive Balance Tax” figure in early December. In a competitive season, the luxury tax payroll will almost always increase from the offseason projection.
Please keep in mind that not all contract details are made public, so there is a lot of guesswork involved when estimating payroll from afar. Any luxury tax number you see, including this one, is simply an estimate. And that’s why you should expect to see numbers that are slightly different from each other, depending on the source.

💰 Luxury Tax Payroll

The table below provides my best estimate of the Mets’ Luxury Tax Payroll over the next three seasons, given their current roster.

🔹 Key takeaways for the 2024 season:

The Mets’ current payroll has already surpassed the third tax threshold, thanks in large part to $60+ million in cash considerations. As third-time tax offenders, their current payroll of $289 million would carry a tax charge of $33.8 million.
If they spend an additional $8 million, they would cross the fourth threshold that carries a 110% tax on every dollar spent above $297 million.

🔹 Key takeaways for the 2025 season:

It will still be difficult for the Mets to reset their tax penalties if we assume they will eventually extend Pete Alonso. Adding $30 million to the books would leave the Mets with only ~$22 million in breathing room before the initial tax threshold. Obviously, if they add both Yamamoto and Alonso to the books, they would already be in the tax.
In other outlets, you will see much lower projections for the Mets’ 2025 payroll because most publications only account for guaranteed salaries, leaving out arbitration estimates, split contracts, player benefits and the pre-arb bonus pool payment.
Justin Verlander is a wild card. If he fails to pitch 140 innings in 2024, the Mets would save themselves $17.5 million.

Now let’s discuss the nitty gritty details for how I came up with the numbers displayed in the table.

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💵 Guaranteed Salaries

Players on guaranteed salaries are shown at the top of the table. Again, these values represent the Average Annual Value (AAV) of their respective contracts. Most of them are straight-forward, you can find the AAV by simply dividing the guaranteed dollars by the guaranteed seasons. The exceptions are detailed below and in the “deferred compensation” section.

🔹 Brooks Raley was acquired in a trade with Tampa in December 2022. The Mets exercised his club option this past November.

Raley’s original contract paid him $4.25 million in 2022, $4.5 million in 2023 with a $6.5 million club option for 2024 (including a $1.25 million buyout).
Based on the new rules of the CBA, a traded contract is recalculated to reflect the remaining actual dollars, which altered Raley’s AAV for tax accounting. Since he was traded between the 2022 and 2023 seasons, his contract was recalculated to be a 1-year, $5.75 million deal ($4.5MM + 1.25MM buyout).
By exercising his club option, Raley’s 2024 tax hit becomes $5.25 million by accounting for the amount the Mets are paying him ($4.5MM in 2023 and $6.5MM in 2024) net the amount they were already charged for taxes in 2023 ($5.75MM).

🔹 Kodai Senga can opt out of his contract after the 2025 season if he pitches 400 innings combined between 2023 and 2025, which is a real possibility after he tossed 166.1 over his first season.

⏰ Deferred Compensation

We talked about the concept of deferred compensation after Shohei Ohtani’s recent contract. There are two key points to remember when calculating the net present value of a deferred contract:

A player must defer salary without interest for the team to receive a luxury tax benefit.
The interest rate used to discount the contract is the “Federal mid-term rate” as defined in Section 1274(d) of the Internal Revenue Code for the October preceding that Contract Year. The rate remains fixed throughout the life of the contract.

The Mets have two players on the books with deferred compensation, reducing each of their AAV values.

🔹 Francisco Lindor signed a 10-year, $341 million extension in April 2021. The extension did not replace his 2021 salary, so it officially began in 2022. Without deferrals, his AAV would have been $34.1 million. However, he is deferring $50 million ($5 million in each season, without interest) to be paid from 2032 to 2041.

Since the Federal mid-term rate preceding his first Contract Year in 2022 was not known at the time of signing, the CBA stipulates using the rate preceding the month in which the terms were confirmed, which in this case was March 2021 (0.62%).
That incredibly low rate only brings the NPV down to $338,003,140, resulting in an AAV of $33.8 million.

🔹 Edwin Díaz signed a five-year, $102 million contract last offseason. Without deferrals, his AAV would have been $20.4 million. However, he deferred $26.5 million in salary (without interest) to be paid from 2034 to 2042.

Díaz’ contract includes two $18.6 million player options in 2026 and 2027, both of which must be decided upon after the 2025 season. They are considered guaranteed seasons since they do not include any buyout money.
If Díaz exercises his player options, the Mets have a $17.25 million option for 2028 with a $1 million buyout. Since this is a club option, it is not considered a guaranteed season, which is why Díaz’s salary is divided over five guaranteed years instead of six. The $1 million buyout gets treated as a signing bonus and is spread over the guaranteed years of the contract for tax purposes.
Since Díaz signed in November 2022, the Federal mid-term rate of 3.28% is used to discount his contract, resulting in an NPV of $93,191,927 and a reduced AAV of $18,638,385.

👩‍⚖️ Arbitration Estimates

The arbitration estimates are courtesy of MLB Trade Rumors, which has proven to be the most accurate model to predict arbitration salaries.

DJ Stewart avoided arbitration by agreeing to a one-year, $1.38 million deal.
I added arbitration estimates for 2025 and 2026 based on WAR projections for each player on the 40-man roster that is expected to significantly contribute over the next two seasons and will become or continue to be arbitration-eligible in the future.
The Mets could gain payroll flexibility by non-tendering arbitration-eligible players in 2025 or 2026. However, they would eventually need to replace those players on the open market, which could ultimately prove more costly.

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💸 Cash considerations

The Mets are carrying a lot of dead weight in 2024 after trading away Max Scherzer, Justin Verlander and James McCann, among others, while eating large sums of their remaining contracts. In order to account for cash considerations in trades, it is important to distinguish between the actual cash changing hands (i.e. the payment schedule between the two teams) and the amount that is charged as part of the luxury tax payroll.

🔹 James McCann originally signed a four-year, $40.6 million contract with the Mets, resulting in a $10.15 million AAV. However, when he was traded to the Orioles, he had two-years, $24 million remaining on that deal, boosting his AAV to $12 million for the Orioles.

Since the Mets only paid McCann $16.6 million while being charged a total of $20.3 million between 2021 and 2022, they receive a net overcharge of $3.7 million, prorated as $1.85 million in 2021 and 2022.
Since the Mets exceeded the tax in 2022, they are allowed to defray tax obligations in 2023 by the amount of added taxes they paid as a result of the extra $1.85 million originally included in the 2022 calculations. That results in a tax savings of $1.48 million in 2023.
As part of the trade, the Mets also sent $19 million to the Orioles to be paid as $11 million in 2023 and $8 million in 2024. That is the actual cash amount changing hands; for tax purposes, the $19 million is charged is proportion to the total salary assigned in each contract year, resulting in $9.5 million for both 2023 and 2024.

🔹 Max Scherzer was traded on July 30, 2023 to the Texas Rangers for top prospect Luisangel Acuña. As part of the trade, the Mets sent $35,510,753 in cash to offset a large portion of Scherzer’s remaining salary.

At the time of the trade, Scherzer had $58,010,762 remaining on his contract ($14.7MM in 2023 and $43.3MM in 2024).
His AAV remains the same in 2024 at $43.3 million.
However, the Mets are responsible for $8,984,548 in 2023 and $26,526,105 in 2024 on the luxury tax payroll.

🔹 Justin Verlander was traded on August 1, 2023 to the Houston Astros for prospects Drew Gilbert and Ryan Clifford.

At the time of the trade, Verlander had $57,544,802 in remaining salary ($14.2MM in 2023 and $43.3MM in 2024).
His AAV remains the same in 2024 at $43.3 million.
However, the Mets are responsible for $8,772,332 in 2023 and $26,748,421 in 2024 on the luxury tax payroll.
Don’t forget: The Mets could also be on the hook for an additional $17.5 million in 2025 if Verlander triggers a conditional clause in his contract that pays him $35 million in 2025 if he pitches at least 140 innings in 2024.

🧾 Additional Accounting

After accounting for all of the guaranteed contracts, arbitration estimates and trade payments, there are a few additional charges that count towards the luxury-tax payroll, as detailed below.

🔹 Split Contracts: This is the hardest category to predict. Players on split contracts earn a different amount based on the amount of time they spend in the majors versus the minors.

The majority of these players earn either the minor-league minimum ($60,300 for first-time contracts, $120,600 for everyone else) or the major-league minimum ($740,000), with a few exceptions. We have seen some of these exceptions in recent days: the Mets signed Austin Adams to a split contract that pays $800,000 in the majors versus $180,000 in the minors; and Kyle Crick will earn $950,000 in the majors, $180,000 in the minors.
For a luxury tax estimate, I follow the logic developed with my colleagues at FanGraphs by assuming a team will require at least 33 player-seasons, factoring in IL time and call-ups, and thus the “Split Contracts” estimate is the value you get when subtracting the number of players on guaranteed or arbitration-eligible deals from 33 and multiplying that number by the league minimum salary of $740,000.

🔹 40-man Minors contracts: This simply accounts for the players on the 40-man roster earning a minor-league salary. Accounting for injury, I added 18 minor-league charges, using a split of minor-league minimum salaries for first-year (4) and non-first-year players (14).

🔹 Player Benefits: Using the amount owners contributed toward the Major League Baseball Players Benefit Plan ($207 million) in 2022, and assuming the benefit contributions related to workers’ comp, spring training allowances, moving and traveling expenses, the postseason players’ pool, scholarship funds and medical costs continue to rise at the 4% minimum rate set in the CBA, we find the 2024 player benefits cost to be ~$16.9 million.

🔹 Pre-Arb Pool: As part of the new CBA, each team is on the hook for $1.7 million toward’s the new pre-arbitration player pool that will be distributed to the top 100 players with less than three years of service time.

🙋 Questions?

If you have any questions about my calculations or my interpretation of the CBA, please reply to this email. Otherwise, I will post an updated payroll estimate as the roster evolves. As I noted at the top, these are just estimates and based on publicly-available information. There are also some CBA details that are open for some interpretation. But I believe the numbers presented in my overview are pretty close to reality.

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