NEW YORK (AP) — The Los Angeles Dodgers, Latin American teenagers and Cubans approaching their mid-20s were losers in baseball’s new labor contract, which includes stiffer penalties for high-spending teams and a hard cap on signing bonuses for international amateurs.
The Oakland Athletics also came up short, with the team’s ability to receive revenue-sharing money to be trimmed in stages and eliminated in 2020.
Mid-tier free agents were winners, with management agreeing teams will no longer forfeit first-round draft picks for signing players who turn down qualifying offers. But top-tier free agents could wind up as losers if potential bidders back off because of the steeper tax for exceeding the payroll threshold.
Players and owners agreed to the five-year deal Wednesday, subject to ratification, and details were provided by several people familiar with the negotiations who spoke on condition of anonymity because the sides had not yet released specifics.
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The luxury tax threshold, which was $178 million in 2011 and $189 million this year, will rise to $210 million by 2021. That represents an 18 percent rise over a decade, well below the rate of increase in baseball’s revenue.
And the highest tax bracket will rise, with two levels of new surtaxes.
The Dodgers’ luxury-tax payroll this year was about $256 million, down from a record $297 million last year, leaving them on track to owe a tax of approximately $34 million — a 50 percent rate assesses on the amount over the threshold.
If the new rules were fully implemented this year, they would pay $41,825,000: a base tax of $30.5 million (50 percent of the amount above $195 million), a surtax of $2.4 million (12 percent of the $20 million-$40 million amount over the threshold) and a second surtax of $8,925,000 (42.5 percent of the amount above $40 million).
However, the new rules transition in next year and don’t have a full impact until 2018.
While management failed to gain the international draft it wanted, players did agree to a hard cap on international signings, which eliminates deals such as Yoan Moncada’s $31.5 million signing bonus with Boston in 2015. The signing pool limit will be $4.75 million for the signing period that begins July 2. The pool rises to $5.25 million for teams with competitive balance round A draft picks and $5.75 million for clubs with round B selections.
Eight teams have spent more than $4.75 million in the current signing season, led by San Diego at $34.6 million (plus a $31.3 million tax) and Atlanta at $15.6 million (plus an $11.1 million tax). Because of the new limits, teams that had tentative deals in place with 15-year-old Latin players that were set to be finalized next summer could be forced to back out.
Players who left Cuba also are impacted by the changes. Under the old rules, Cubans didn’t count against a team’s signing bonus pool if they were at least 23 and played in a professional league for at least five seasons. Because of that, Lourdes Gourriel waited until after his 23rd birthday last month to finalize a $22 million, seven-year contract with Toronto.
Under the new deal, the age is raised to 25 — which would reduce the amount spent on Cubans who are younger.
Oakland has been a special case when it comes to baseball’s revenue-sharing plan. The old collective bargaining agreement disqualified teams in the 15 largest markets from receiving revenue sharing funds but also stated the A’s will remain eligible as long as their ballpark situation was unresolved. The new deal cuts the team’s revenue share receipts to 75 percent next year, 50 percent in 2018 and 25 percent in 2019 before eliminating it entirely.
Draft pick compensation is another change. Free agents such as Dexter Fowler and Daniel Murphy found their markets limited last offseason after turning down qualifying offers. Clubs did not want to lose their first-round draft pick and the union said remedying that situation was a high priority.
Going forward, a player can receive a qualifying offer only once in his career. Depending on whether it receives revenue sharing or pays luxury tax, a team would lose its third-highest pick, its second- and fifth-highest selections or its second-highest pick.