All we’ve really heard to this point when it comes to contract offers and demands is what won’t get a deal done. Players want too much, teams want to pay too little, a stalemate has ensued. Don’t worry, I’m not really here to talk big picture. If it’s a discussion of baseball’s decaying economic system you seek, I exhort you to leave for a while (please come back!) to examine Jeff Passan’s exhaustive examination of the topic.
All I’m trying to do here is determine what kind of figure(s) might actually get a deal done for Yu Darvish and/or Jake Arrieta. Lucky for me, the New York Post’s Joel Sherman has already done most of the heavy lifting. Before we dive into the specifics, though, let’s first lay out some generalizations about what veteran players seek in a free-agent deal.
Getting the most money over the longest period of time is obviously ideal, but the latter aspect is probably going to take precedence over the former. Which is to say that I think most players would rather take a little less money on average if that contract runs longer. Given the arrested development of the market this winter, that may factor even more heavily as players try to avoid having to go through this process again.
There’s also the matter of having both security and flexibility, which can be gained through contractual mechanisms that go beyond just time and money. I’m speaking, of course, about no-trade and opt-out clauses that allow a player more control over his future. It’s the latter that will come into player here, but not before we address one more matter.
When discussing the implications of a contract, we throw around “AAV” and just assume everyone knows what that really means. The calculation of a team’s payroll for competitive balance tax purposes is based on the average annual value of contracts, which can be vastly different from the actual payroll for that year. So front- or back-loading a deal doesn’t help a team from a CBT perspective, since the overall average of all the guaranteed money is what counts toward that threshold.
Ah, but there are ways to structure a deal such that it might be beneficial to both player and team, as Sherman lays out.
My concept would be to offer Darvish a six-year, $120 million deal that is structured this way: $30 million in each of the first two seasons, $20 million in the middle two and $10 million in the final two, with Darvish having opt-outs after Years 2 and 4.
Darvish has $120 million guaranteed. If he is healthy and pitching well, he can opt out after two years in which he averaged $30 million a season or four years in which he averaged $25 million.
The key for the Yankees in this structure is that for tax purposes, they would get charged $20 million in 2018 — the average value of $120 million spread over six seasons.
If Darvish, say, opted out after the 2019 season, the Yankees would be hit with what is termed a “true-up charge.” That is the difference between what Darvish was actually paid in 2018-19 ($60 million) and what the Yanks paid toward the tax ($40 million). But the key for the Yanks is that $20 million “true-up charge” is placed on their 2020 payroll. In 2018, Darvish’s salary for luxury-tax purposes remains $20 million, although he is paid $30 million.
The most discerning CBA connoisseurs among you may be raising your forefingers in objection and asking, “Wait, couldn’t such a structure be viewed as a way to knowingly and willfully circumvent the CBT?” Good catch, but Sherman says that both the commissioner’s office and MLBPA gave a thumbs-up to his proposal. And their thumbs are better than your fingers. No, not that finger, jerk.
It’d be a different story if the actual annual salaries dropped to $2 million or something and more or less assured that the player would bolt, but the case in point offers what could still be considered a sufficient wage for a starting pitcher in 2022-23. With that in mind, let’s finally turn our attention to one Jacob Joseph Arrieta and how the Cubs might be able to make something similar work with and for him.
Without rehashing all the know/assumed information, it’s been widely speculated that Arrieta wants six years and north of $150 million while the Cubs will go as high as $110 million over four years. But what if they were to stretch that to a fifth year and include opt-outs?
You can just lop the final year from the template Sherman laid out and give Arrieta $30 million in the first two years, $20 million in the middle two, and $10 million in the fifth. While the resultant $22 million AAV is $5.5 million less than Arrieta was seeking, it’s more than Darvish would be getting in that similar scenario. And those opt-outs ahead of the years in which his salary is set to drop would offer Arrieta the chance to recoup decreasing value should his performance dictate it.
The Cubs would maintain a few million under the tax threshold and would only pay a $16 million true-up should Arrieta exercise his first option or $12 million should he bounce after the second. And those would hit the bottom line in either 2020 or 2022, the latter of which could come under the rules of a decidedly different CBA. Or, you know, not at all if there’s serious labor unrest.
That’s important to note, since the Cubs and other teams could be looking at this current period of “fiscal responsibility” as precursor to a binge. The penalties imposed under the current CBA escalate for repeat offenders, so there’s at least a small measure of credence to the idea that teams are trying to reset the clocks this year. With only three subsequent seasons of the CBA, over which the threshold increases by $13 million, maybe they’re gearing up like college kids for Spring Break.
Is that wishful thinking? Recklessly stupid rationalizing? I’ve been accused of both and more in the past, so you’re not going to hurt my feelings if you think that’s where I’m coming from here. But maybe there’s at least a kernel of plausibility in this whole thing.
That said, I’d prefer Darvish over Arrieta if I was the one putting up the money or making the call. Come to think of it, it’s neither my money nor my call and I still prefer Darvish. I also like taking a new angle on what has become a stale conversation.