The Metropolitan: Mets Payroll Primer
Honoring Martin Luther King Jr.
Reading MLB’s Collective Bargaining Agreement (CBA) is like reading Infinite Jest: every sentence is too long, and a lot of guys claim they understand it even though not many do. While I won’t pretend to know how fractals explain the structure of David Foster Wallace’s writing, I will try my best to shed some light on the basics of the CBA in relation to the Mets, their 2021 payroll, and the competitive balance tax. Here is your primer.
Just tell me how much money the Mets can still spend
$32.2 MILLION. While it’s impossible to be exact in estimating team payroll, we can still try our best to come up with a number. Based on my calculations, I believe the Mets have roughly $30-$35MM to spend before hitting the initial luxury tax threshold of $210 million. How did I come up with this number and why is it different than whatever your favorite Mets blogger says it is? I will explain the detail in a bit, but first let’s discuss a few basic concepts.
What is the Competitive Balance Tax?
The competitive balance tax is like an electric fence to keep owners from running into the middle of the street and getting hit by an expensive car. It causes a shock if you hit it, but it’s not an actual barrier that can’t be crossed. While it is advertised as a way to keep the sport competitive — so teams like the Yankees (and now Mets) can’t spend into infinity while teams like the Pirates pinch their pennies — it is really designed to save owners from themselves. By creating an artificial salary cap, they can justify not spending more money and the league can keep player salaries down.
You have probably seen people refer to the Mets’ actual payroll versus their luxury tax payroll. This is because the amount a player makes in salary in a particular season is not necessarily the same amount being charged to the team in calculating their tax payroll. The reason for this is a concept called Average Annual Value (AAV), which in simple terms divides the guaranteed salary on a contract by the number of guaranteed seasons. If a player makes $10MM in 2020 and $20MM in 2021, their AAV is $15 million and that is what is counted on their luxury tax payroll for both 2020 and 2021. This prevents teams from getting cute in how they allocate salary over multi-year deals to avoid tax penalties.
Teams are charged a tax penalty for exceeding various luxury tax thresholds based on the number of consecutive seasons they spend above the tax. First time offenders, which is what the Mets would be if they pass the tax line this season, are charged 20% for every dollar they spend above $210 million, with a surcharge raising the penalty to 32% for every dollar above $230 million, and 62.5% for every dollar above $250 million. Those numbers jump approximately 10% and 20% across the board for second and third time tax payers, respectively.
So what does this all mean for the Mets?
The Mets are approximately $32 million below the initial $210 million tax line. Let’s say they decide to do what most fans are hoping they will do and sign George Springer for 5-years, $125 million and Brad Hand for 2-years, $18 million. And let’s include ~$8 million in additional spending to bring them $10 million over the initial luxury tax threshold.
As you can see in the graphic above, exceeding the tax by $10 million would cost Steve Cohen, who reportedly earned $1.6 billion last year in the middle of a pandemic, a grand total of $2 million in tax penalties, which if you put in relative terms to a person earning $100,000, it would be less than the cost of bringing a family of four to a Mets game at Citi Field and sitting in the upper deck.
Even if the Mets exceed the tax again in 2022 — which I will need to explain their long-term salary commitments in a separate newsletter since this one is getting long — the penalty is still relatively peanuts to an owner like Mr. Cohen.
Ok, you piqued my interest, give me the dirty details
If you’ve read this far, my writing about the CBA and the competitive balance tax and average annual value hasn’t scared you away, so let’s take this relationship to the next level and share all of the dirty details that led me to my payroll projection on the Mets.
Hopefully, the table above is pretty self-explanatory. But here are a few added notes:
NOT SHOWN IN THE TABLE: $15.5 million estimate for player benefits and a minor league minimum salary placeholder for 3 open roster spots.
SPLIT CONTRACTS: Some players earn a different salary depending on the amount of time they spend in the majors versus the minors. I make some reasonable guesses on split contracts.
MINIMUM SALARIES: Because I am an economist by trade, I spend my Friday nights searching Consumer Price Indices to find the relevant 1.26% cost-of-living increase players on minimum salaries or pre-arbitration deals should earn, which is reflected in my salary estimates.
Now the more complicated stuff…
DELLIN BETANCES would make for a great exam question for a CBA student because there are several nuances to consider in calculating his AAV. He also provides a perfect example to explain the concepts we have talked about in this primer.
While we know AAV is calculated by dividing guaranteed salary by the number of guaranteed seasons, it becomes tricky when you introduce option years. Do you consider an option season guaranteed or not? The CBA handles this by saying that if the base salary of a player option is more than 50% guaranteed, it is not considered a guaranteed season.
When the Mets signed Betances, he had $10.5 million guaranteed in his contract between his $5.3MM signing bonus, $2.2MM salary in 2020 and $3MM buyout amount from his player option in 2021. Since his 2021 salary ($6MM total) was not more than 50% guaranteed, as explained above, it is considered a guaranteed season so the Mets were able to split the $10.5MM amount between 2020 and 2021. It’s no coincidence Betances’ buyout amount was exactly 50%. The Mets wanted to gain some immediate luxury-tax savings. Had his buyout been $3.1 million, it would have made 2021 a non-guaranteed season, and the Mets would have had the full $10.3MM charged in in 2020.
Still with me? Ok, moving along…
Once Betances reached the pro-rated 40-game mark in 2020, his 2021 option increased $800,000. He then exercised that option to earn a total of $6.8MM in 2021. So how much goes agains the 2021 luxury tax payroll? Since the Mets were already charged an extra $3MM in 2020 for his buyout amount, only $3.8MM ($6.8 - $3.0) will count in 2021.
To make things even more complicated, Betances has a conditional player option in 2022 that guarantees based on the number of games he appears in this upcoming season. He needs to reach 50 games for any guaranteed amount to trigger; and if he does, the Mets would be charged an extra $500,000 (and $1MM if he pitches at least 60 games) in 2021 which would subsequently get credited to their 2022 payroll if Betances ultimately earns and accepts the option.
While it seems like we are shuffling money around, it’s all quite logical if you think about it like this: at some point, the Mets must be on the hook in accounting for every guaranteed dollar of their payroll. Betances has $14.3MM guaranteed between 2020-2021, so the only question is how that amount is allocated between the two seasons, which I explained above. [Special thanks to Christopher Soto who DM’d with me late on a Friday night as we exchanged CBA excerpts to feel confident about Betances’ 2021 number].
FINALLY, ROBINSON CANO. As if adding Steve Cohen’s routing number to the team finances wasn’t enough, the Mets also gained a temporary reprieve from Robinson Cano’s massive contract when he was suspended a second time for using performance enhancing drugs.
Since Cano forfeits his $24 million salary this season, that means $20.25MM comes off the Mets’ books in terms of the luxury tax payroll. Many assumed the $3.75MM due from the Mariners would also be forfeited, but Tim Healey (Newsday) reported that Seattle would still make their obligated payment to the Mets as per the original trade agreement.
WHY? When Cano was traded, the Mariners agreed to pay $20MM of his remaining contract: $5 million up front and then $3.75MM spread between 2019-2022. In other words, the Mariners aren’t really paying for Cano’s 2021 salary, as much as they are paying for $20MM in cash consideration as part of the original trade to offset a portion of Cano’s total contract value. So they still take a hit against their luxury tax payroll while giving the Mets a credit.
And there you have it. Hopefully, unlike Infinite Jest, you made it to the end. Please don’t hesitate to reply to this email or reach out on Twitter with any questions. And keep reading for MLB headlines and some recommended reading.
MORNING BRIEFING
Below are the additional sections that were sent in the original email newsletter this morning. We later move the analysis section to the top of this page for linking purposes.
⏰ Catch me up on what I missed over the weekend…
💰 ARBITRATION: The Mets came to terms with all of their arbitration eligible players before the Friday deadline except JD Davis.
What does this mean? It simply means they will go to an arbitration hearing to settle a roughly $300,000 difference in Davis’ asking price and what the Mets are willing to pay him.
How did the Mets do? New York was able to secure deals for ~$3MM less than MLB Trade Rumors projections. They paid a little more for Lindor, but under projection for almost everyone else.
✍️ INTERNATIONAL SIGNINGS: Friday was also the beginning of the international free agency signing period. You can find a full list of their signings here. Some noteworthy signings are Dominican outfielder Johairo Cuevas and Venezuelan outfielder Gustavo Marquez, as well as right-handed pitchers Enderson Arevalo (Venezuela) and Aaron Martinez (Venezuela).
👀 SPRINGER WATCH: From Ken Rosenthal on Sunday: “Some in the industry are skeptical the Mets will want to pay Springer $25 million to $30 million a year when they are likely to sign Lindor to an extension with an even higher average annual value and also might want to extend outfielder Michael Conforto, who will play this season at 28 and is 3 1/2 years younger than Springer.”
MEANWHILE: Rosenthal confirms an earlier report that the Blue Jays have made a five-year offer for more than $100 million.
🤚SLEIGHT OF HAND: On Friday, Ken Rosenthal reported the Mets were close to signing free agent reliever Brad Hand. His report was confirmed by SNY’s Andy Martino. But Rosenthal quickly corrected his report to say, “Mets engaged on Hand and in discussions, but two other sources say my initial report is inaccurate and the two sides are not close to a deal at this time.”
THE LATEST: According to Jon Morosi, the Mets remain one of the finalists for Hand.
😢 RIP: Sean Dean, a Mets’ security worker from 2002-2018 passed away due to COVID complications. You can support his family here.
🍎 SO LONG: The Mets posted a farewell video for Amed Rosario.
HONORING MARTIN LUTHER KING JR.
King’s work had a major impact on Mets third baseman Ed Charles who experienced racism and segregation as a young man. After he retired from baseball, Charles had a modest apartment in Elmhurst. Two large framed photos hung on the wall in his living room: One was Martin Luther King Jr. and the other was the 1969 New York Mets…
King convinced Mets first baseman Donn Clendenon to attend Morehouse, a decision that served Clendenon well for years to come. In his biography published by the Society for American Baseball Research it was noted:
King fulfilled the big brother’s job—helping Clendenon adjust to the school over occasional dinners in the King home. Clendenon had an open invitation to drop by, and if Martin Jr. wasn’t there, he had the ear of Martin Sr. (Class of 1926); Martin Jr.’s wife, Coretta Scott King; or Martin’s influential sister Christine King.
Read the full story at Mets Rewind.
⚾️ MLB is still discussing the universal DH and expanded playoffs for the 2021 season, along with the return of 7-inning doubleheaders and starting a runner on second base in extra innings, per USA Today.
⚾️ Former A’s pitcher Dave Stewart has submitted a $115 million bid to buy Oakland’s share of the Coliseum site, per the San Francisco Chronicle.
⚾️ The Tri-City ValleyCats have sued Major League Baseball and the Houston Astros for their unilateral decision to end their affiliation with the minor league organization, per the Albany Times-Union.
⚾️ Free agent Corey Kluber signed with the Yankees on a one-year, $11 million deal, per USA Today.
⚾️ Track all of the arbitration deadline settlements and pending hearings here.
🔗 Check out Christopher Soto’s Mets payroll story for some additional information, via MetsMerized Online.
🔗 Mets, Yankees rivalry hotter than ever, by Mike Lupica, MLB.com: “You won't find the two-team New York division listed in the official standings of Major League Baseball. Winning it doesn’t put you on a fast track to the World Series. But it still exists, the way it did when the Dodgers played at Ebbets Field and Willie Mays was running down balls for the Giants in an outfield at the Polo Grounds so big it was like a borough of New York City all by itself.”
🔗 Honoring the Spirit of Martin Luther King Jr, David Conde, MetsMerized Online: “We have come a long way as a nation and as a sport, and as we continue to move forward, the greatest gift that we can share with the next generation is the life and courage of all the brave men and women that have fought for our freedoms especially Dr. Martin Luther King Jr. Happy Birthday to a Great American and a man that forever changed the landscape of our great nation: Dr. Martin Luther King Jr.”
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Good stuff but my eyeballs are soinning in my head over numbers. Need to explain when players are out-righted, waived or retire - why some of that money comes off the books and some doesnt. I assume a guarnteed contract means a teamis on the hook for the full thing - even injury ?