Thinking about now and then
Morning Dose: Monday, December 30
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Today, I want to talk about the art of balancing payroll in a luxury-tax environment.
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Something we talked about on our most recent podcast that deserves added attention and visualization is the Mets’ long-term payroll outlook.
As the calendar turns over to 2025, the Mets currently have a projected luxury-tax payroll around $270 million, which is $30 million above the initial tax threshold, placing them within $10 million of being taxed nearly double for every additional dollar spent.
Remember, the tax penalties are stiffer for repeat offenders. The Mets, as third-time repeaters, must pay a 50% surcharge for exceeding the tax line at different intervals, along with draft penalties. Steve Cohen is paying out of his ears to build a World Series roster.
If we look beyond 2025, we don’t find much breathing room in the near term. In fact, depending on arbitration situations, the Mets are already hovering above the tax line in 2026.
📊 To help understand this reality, the graphic below provides a simplified look at year-to-year payroll obligations, grouping players in color depending on the length of their contract. I also included a baseline amount for CBA-related costs (player benefits and the arbitration bonus pool), as well as another $20 million for arbitration estimates, which, in reality, will fluctuate from year-to-year.
Inflection point: The 2026 offseason becomes the next key inflection point. That’s when the current CBA expires, creating the possibility that the luxury-tax rules could change, perhaps becoming stricter in a new deal.
As Evan Drellich of The Athletic recently reported:
Owners are indeed considering a cap proposal, according to people briefed on their conversations who were not authorized to speak publicly. But it would also be surprising if they weren’t. More notable is that, for a few reasons, owners could be energized to pursue a cap in a way they have not for a generation.
Drellich further explains that the future of local television rights — perhaps being pooled together similar to the NFL — could create an impetus for owners to agree to a different structure.
🤔 What this means: It means David Stearns must consider the possibility that any long-term deal he signs today could become a heavier burden in the future. Cohen has shown a willingness to spend around $400 million in payroll, including luxury taxes. At this point, he is comfortable running his baseball team at a loss. How long will that last?
What if luxury-tax penalties become more punitive in a new CBA?
What if there is some kind of hard cap?
Instead of pushing towards a $300 million payroll in the future, the top teams might be restricted to spending closer to $250 million.
Cautious approach: This explains why, outside of Soto, the front office might feel more comfortable improving the roster on short-term, high AAV deals for 2025 and 2026 instead of investing long-term on players like Pete Alonso or Alex Bregman or another starting pitcher.
It was reported over the weekend the Mets showed interest in Teoscar Hernández before he re-signed with the Dodgers. Despite the added cost of a qualifying offer, they were reportedly prepared to offer him a two-year deal.
While there was no realistic chance of actually signing Teo for two years, it’s clear why the front office would want to show Scott Boras that they are serious about finding players whom offer similar production as Alonso on a shorter pact.
Adding Alonso: In fact, if we update the chart from above by adding Alonso on a 6-year, $150 million deal, we get this:
As you can see, any dream of dipping below the tax threshold in the next three seasons would be gone (keeping the tax penalties the most punitive). And by 2028, which is before Soto even turns 30, Stearns could find himself 70% towards a potential stricter tax line in a new CBA before even accounting for adding new talent to the roster between now and then.
Are the Mets a championship team surrounding a prime Soto with a 33-year-old Alonso, 34-year-old Lindor and 35-year-old Nimmo? Who would catch the ball on that team?
Last year, Pete Alonso, hitting .240 with a .329 on-base and 34 home runs, was valued at 2.1 WAR by FanGraphs.
Did you know of the 127 positional players worth at least 2.1 WAR in 2024, only 11 were over the age of 32?
Only 12.5% of the positional players who have suited up since the turn of the century (2000) have accumulated at least 4.0 WAR after turning 33.
Youth movement: Obviously, this highlights the importance of Mark Vientos, Francisco Álvarez and any of the other young up-and-coming prospects, especially on the pitching side, to become significant contributors moving forward.
These players need runway to prove they can be long-term contributors. That means leaving spots open in the lineup, which potentially saves free-agent dollars now and in the future.
⏰ Timing is everything: Soto received a record-breaking contract because he is a unique free agent who is young enough to provide prime value for at least the next 5-6 years.
For Cohen to make good on his progress to build a perennial championship team around Soto, the front office needs to balance the roster with youth and maturity.
You can see this concept in the graphic below. It shows how the longest contracts on the Mets’ books mature over the next several years, using Álvarez and Vientos to represent youth, while showing how the timing of adding another free agent overlaps with these players.
Most free agents enter the market around the age of 30. Therefore, you are often stuck paying them into their mid-thirties, as the Mets would be forced to on a long-term deal for Alonso.
🔻 The best way to get around this predicament is by searching for bridge deals that allow the Mets to dip heavy into free agency again in 2028.
The idea is to time free-agent contracts properly so when you reach the back-end of Lindor and Nimmo’s deals (when they are 35+), a new free agent (or two), still only 29 or 30, is just beginning their contract.
And when that player reaches the age of 34-35, you add another 29-30 year old piece, and on it goes.
In short, the best way to win now and in the future is to invest heavily in the right core players, the players that naturally require long-term deals, such as Soto and Lindor, without falling into the trap of signing non-core talent to core-length contracts, such as Nimmo or Alonso, while developing the farm so the actual core players can be complemented by youth, adding maturity (veterans) on either short-term, high AAV deals, or longer-term deals that start when the most expensive contracts are nearing their end.
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◾️ The Nationals have reportedly come to terms with first baseman/DH Josh Bell on a one-year, $6 million deal. Strike another name off the first-base market.
◾️ In a swap of two former top-100 prospects, the Cubs acquired utility man Vidal Bruján from the Marlins in exchange for first baseman Matt Mervis.
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A lot of tinkering on such an unimportant industry. Why is everyone so afraid of the free market? Bunch of commies!
JB…my wishlist item for next year: could you do an update on the piece from 2023 (I think) going in depth on the competing development plans around Citi Field? I found it fascinating. Might be the only one though!