The Winter Meetings

It should be a busy week ahead

Good Morning,

It’s a crisp 29 degrees in New York this morning, so what better time to start thinking deeply about baseball again. And like relatives and in-laws coming together around the holidays, MLB general managers and player agents will lock themselves together in a hotel in San Diego for the Winter Meetings, beginning on Sunday.

We already had a few signings yesterday, with the Rays stealing Zach Eflin from the Phillies and the Tigers bringing back Matthew Boyd. The hot stove is reaching a boil, and we are back to cover it all.

Before we get into the newsletter, a few housekeeping items.

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Second, and related to the survey, we are excited about a new feature called Substack Chat. You can download the Substack app on either iOS or Android (as of yesterday) and use it to both read our newsletter and participate in chats that we will be hosting from time-to-time. I have tried a few of these with other newsletters and they are actually pretty fun. With everything going on with Twitter, it’s nice to have an alternative for people to come together and talk about their favorite baseball team.

The Winter Meetings are finally upon us. That means Mets fans could receive some early Christmas and Hanukkah presents over the next few days. To get you ready for it all, I will discuss what a budget means when you are owned by the richest owner in sports.

It’s the time of year when everyone is spending. That’s what the holidays are all about, right?

Ok, maybe not. But for Mets fans, Steve Cohen has raised the expectations. Like Clark Griswold putting a down payment on a swimming bool based on his expected holiday bonus, fans are already counting on their favorite free agent star to join the Mets’ 2023 lineup. There will be disappointment if this offseason translates into the equivalent of being enrolled into the “Jelly of the Month” club.

General manager Billy Eppler met with the media yesterday and offered little clue about his plans. But we all know where the Mets need to improve. They need to solidify their rotation, both at the top and back-end. They need to figure out what they are going to do at the DH position. They need more arms in the bullpen. And they must decide if Brandon Nimmo is worth the price it will take to bring him back to Queens. Among a few other things.

Before we discuss specifics, I thought today was a good day to have a high-level conversation about payroll. While it seems the Mets have unlimited resources, perhaps they are a bit more constrained than many think.

How much will the Mets spend on payroll this season?

While there are luxury tax and draft penalties associated with spending, there is no hard salary cap in baseball. Steve Cohen is like Joey Chestnut in front of a pile of hot dogs. Beyond what is natural to normal people, there is nothing stopping him from indulging to a ridiculous limit. But just like Mr Chestnut eventually stops eating hot dogs, at some point Uncle Stevie will stop spending on payroll each season.

In a recent podcast with Joel Sherman and Jon Heyman, Cohen acknowledged he doesn't operate in a bubble; he is part of a league with 29 other owners. He won't be shy about spending more than other teams, but he's not going to spend $100 million more than the Dodgers or Yankees.

via The Show

As the roster stands today, the Mets are projected to have a luxury tax payroll around $246 million. This includes Edwin Díaz’s new contract, Carlos Carrasco’s picked-up option, arbitration estimates for several players and the buyout amounts for Taijuan Walker, Mychal Givens and Chris Bassitt. It also includes the final year of Robinson Canó’s dead money.

At $246 million, it puts the Mets north of the initial tax threshold of $233 million before they even get into the serious offseason business of trying to re-sign Jacob deGrom and/or Brandon Nimmo, or look to improve the roster through external options.

If we assume deGrom is destined to return on a deal that pays him Max-Scherzer-type money (over $40 million per season), the payroll could quickly balloon to $286+ million, hurdling the luxury tax threshold that starts to become progressively costly in taxes and draft pick compensation.

It would also only leave them ~$14 million of breathing room before they reach that $300 million mark.

In other words, either Steve Cohen is ready to take a Tony Montana assault rifle to the luxury tax system, and do so immediately after a contentious lockout that instituted a tax level directly intended to curb his spending, or… re-signing deGrom would mean the Mets would have to be judicious in spending elsewhere, perhaps forcing them to move out some salary in trade in order to add salary somewhere else.

When asked yesterday if the Mets have the financial flexibility to sign both deGrom and Nimmo, Eppler balked at answering, “I’m not going to comment on that or go deep on that,’’ he said. “I’d like to keep what available resources we have as close to the vest as possible.”

Still, we can all do the math. If the Mets want to stay around $300 million in 2023 payroll, they might have to get creative.

I know what you are all thinking… Trade James McCann! That sounds like a great idea until you realize the Mets would have to attach something of value for another team to consider taking back his contract. If the Mets really want to open up additional payroll, they would probably need to trade a more desirable piece, like Mark Canha. Naturally, they are only going to do that if they add the proper mix of players to make up for his loss.

What about long term?

So far, all of this is focusing on the payroll for one season. A better way to manage payroll is over a rolling period of time. And two years from now, in 2024, with Canó’s salary finally off the books, the Mets will gain some breathing room. That is, depending on how much multi-year salary they add this offseason.

Ideally, the Mets wouldn’t spend grossly over the fourth tax level in every single season. As repeat tax offenders, penalties become stiffer. And as Cohen alluded to in his interview with Heyman and Sherman, a payroll that is continuously out of whack with your competition is proof that you aren’t doing a very good job at building a winning organization.

This is why signing players to short-term, high AAV deals becomes desirable. It allows the player to get paid a handsome amount, while keeping a team’s long-term payroll flexible. The Mets did this with Max Scherzer. They could do it again with Jacob deGrom or Justin Verlander.

What are the penalties for overspending anyway?

Per the latest CBA, clubs that are $40 million or more above the tax threshold shall have their highest selection in the next Rule 4 Draft moved back 10 places unless the pick falls in the top six. In that case, the team would have its second-highest selection moved back 10 places instead.

In addition, luxury-tax-paying teams receive less compensation for losing qualified free agents. For instance, the Mets would receive a draft pick after the fourth round instead of following the Competitive Balance Round B for losing deGrom, Nimmo or Bassitt. In fact, last season they received the 75th overall pick for losing Noah Syndergaard to the Angels instead of the 137th overall pick had they been a tax-paying team the previous season.

As a luxury-tax-paying team, the Mets would also forfeit additional draft compensation for signing a qualified free agent from another team. For example, if the Mets signed someone like Carlos Rodón or Trea Turner or Willson Contreras, they would lose their second- and fifth-highest selections in the 2023 Draft, as well as $1 million from their international bonus pool for the upcoming signing period. If they somehow signed multiple players who rejected their qualifying offer, they would forfeit even more picks. Conversely, they would only lose their second-highest selection and $500,000 in international bonus pool money as a non-tax-paying team.

Putting it all together

If the Mets continue to be a high-tax-paying team, it will cost Mr. Cohen more and more money, as the financial penalties become stiffer until they reset below the initial tax threshold. That might not matter.

From a draft standpoint, if they continue to spend well into the tax, they will lose 10 places in the first round and roughly 60 spots in potential draft pick compensation for losing qualified free agents. They would also lose an extra draft pick and $500,000 in international bonus pool money for signing other team’s qualified free agents. This could all eventually catch up to them as they try to build a farm system that can feed a perennial contender.

To reset the tax penalties, the Mets would eventually need to have a season in which their payroll drops below $240 million (+/- $5 million over the next few seasons), which would make long-term contracts signed today, such as Diaz's, relatively more costly in the future, at a time which might coincide with a decline in that player’s production.

Again, short-term, high AAV is the secret sauce. It allows Cohen to flex his financial muscles in a given year, or two, but keeps the payroll fluid and provides flexibility in future roster construction, as well as maintaining the possibility to reset the tax penalties when the timing is right.

So while the Mets have seemingly unlimited resources to sign free agents this offseason, in reality, that means they can hand Jacob deGrom a blank check and make a few other small-to-mid-market moves. It might not sound over-the-moon exciting, but remember, many teams wouldn’t be able to afford to keep deGrom at all, let alone keep him and add more talent.

Of course, with Steve Cohen calling the shots, who knows if he decides to speed past all of the guard rails and just spend whatever he wants.

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It will be a busy week at the Winter Meetings. Here are some other noteworthy events to keep an eye on.

🗓️ On Sunday, the Contemporary Baseball Era Players Committee will meet and vote on eight players for the Hall-of-Fame. The results will be announced on MLB Network at 8pm EST on Sunday. The committee will consider a polarizing list of candidates, including Albert Belle, Barry Bonds, Roger Clemens, Don Mattingly, Fred McGriff, Dale Murphy, Rafael Palmeiro and Curt Schilling. A player must receive at least 75% of the vote to earn induction into the Hall of Fame.

🗓️ On Monday, the All-MLB Team will be announced. Voting is already complete. We are just waiting on the results. The Mets had eight players on the ballot, including Pete Alonso, Jeff McNeil, Francisco Lindor, Daniel Vogelbach, Starling Marte, Brandon Nimmo, Max Scherzer and Edwin Díaz.

🗓️ On Tuesday, the inaugural draft lottery will take place. As a half-measure towards discouraging tanking, MLB will use a lottery system for the top six picks in the draft. All 18 non-playoff teams technically have a chance at the number one pick. The three worst teams — the Nationals, A’s and Pirates — have the highest odds at the top pick at 16.5%.

We should also learn that Edwin Díaz has been named National League Reliever of the Year on Tuesday.

🗓️ On Wednesday, it’s the Rule 5 Draft. The most interesting player left unprotected by the Mets is outfielder and defensive standout Jake Mangum. We will discuss this more next week.

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🔗 Behind the Mets’ negotiations with Edwin Díaz, by Will Sammon, The Athletic ($): “By the time the Astros were posing for pictures at Minute Maid Park, the Mets and Díaz’s representation had reached the stage of hashing out the final details of an agreement. But Wolfe’s response to Eppler was, ‘OK, hang on one second …’ Um, what? For a moment the line went silent. Unbeknownst to Eppler, Wolfe was adding Díaz to the call. Throughout the negotiations process, Díaz had been waiting to tell Eppler, in his own words, how he felt as things were nearing the finish line. ‘All right, Billy, let’s do this,” Díaz said over the phone upon joining the call from Puerto Rico. “Let’s roll. Let’s go win a World Series now.’”

🔗 Signing Jacob deGom chance for Steve Cohen the owner to satisfy Steve Cohen the fan, by Mike Vaccaro, NY Post: “In a salary cap sport, on a team with miserly ownership, maybe even thinking about the Met-for-life element would be 100 percent foolish. But this is baseball. And this is Steve Cohen.”

🔗 'Team Harrelson' helping Mets legend fight Alzheimer's, by Bill Ladson, MLB: “After learning that he had Alzheimer’s Disease in 2016, former Major League shortstop Bud Harrelson, best known for his four decades as a Mets shortstop, third-base coach and manager, decided to go public about his illness. He wanted people to know what he was going through and not feel alone if they, too, were affected by the disease.”

And we close this one out with this date in Mets history….

MetsRewind @metsrewind

December 2, 1991: @Mets sign free agent Bobby Bonilla to a 5yr., $29m deal. Bonilla had two stints with the Mets (1992-1995 and 1999). In 515 games, he batted .270 with 95 HR and 295 RBI. [insert contract joke here] #LGM #MetsRewind

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