Major League Baseball’s owners and players announced a tentative agreement on a new five-year collective bargaining agreement on Wednesday evening. Assuming that the agreement is ratified, the rules of offseason engagement will now be clear, which in turn means that the business of roster-building for 2017 can begin in earnest.
Through the month of November, the Red Sox and many other clubs had been in wait-and-see mode regarding offseason maneuvers. Before adding players, they first wanted to know the potential consequences of any signings before setting a definitive course on their primary needs, chiefly a bat to help offset the loss of David Ortiz and a setup reliever in the bullpen.
In particular, the Sox needed to know where the luxury tax threshold might be set in the new CBA as well as whether the loss of a draft pick would remain a potential consequence of signing free agents who received a qualifying offer from their former clubs after the 2016 season. Significant changes to baseball’s operating rules on either front could have had implications for the types of players whom the Sox might pursue this winter.
The luxury tax threshold for payrolls did indeed rise in the new agreement, but the increase was relatively modest. According to the Associated Press, the number at which teams will start getting taxed will rise from $189 million in 2016 to $195 million in 2017. The Red Sox exceeded both figures with their 2016 payroll.
Even without the addition of any players thus far this offseason, the Red Sox’ projected payroll for next year (as calculated for luxury tax purposes, including medical benefits payments, projected raises for arbitration-eligible players, and a reserve for in-season moves) is already north of $180 million, and perhaps closer to $190 million.
Meanwhile, the penalties for going past the threshold have become steeper in the new agreement. The Sox, who went over the luxury tax threshold in 2015, would be subject to a 50 percent penalty (up from 40 percent) for any expenditures beyond $195 million in 2017.
In other words, the new CBA provides the Red Sox with little additional freedom to spend without incurring a tax. Indeed, there appears to be something of a deterrent to aggressive spending as a result of the increased penalties in place.
Moreover, with the luxury tax threshold rising only to $197 million in 2018, the Sox’ preference to avoid longer-term deals for a middle-of-the-order addition likely will remain steadfast. Meanwhile, Jon Morosi of MLB Network reported that teams will still lose a first-round pick for signing a player who turned down a one-year, $17.2 million qualifying offer from his former team.
In short: A pre-eminent bat such as Edwin Encarnacion, who wants a deal of at least four years and will require a signing team to give up its first-round pick, is no more appealing to the Sox now than he was prior to the new agreement. The team’s focus in terms of bats likely will remain on the addition of players who might be amenable to shorter-term contracts (by dint of age or underperformance in 2016) like Carlos Beltran or Matt Holliday.
Moreover, given the increased penalties for teams that repeatedly exceed the luxury tax threshold, it wouldn’t be shocking to see the Sox move some payroll this winter with an eye on sneaking under the $195 million figure — something that, if accomplished, would reset the penalty scale in future offseasons, when the free-agent market is far more appealing than it is this year.
It’s worth noting, however, that the Red Sox already were operating on the assumption that they’d face such decisions. The current labor agreement, then, doesn’t have enormous ramifications for baseball rosters in 2017.
And, in a way, that’s a sensible outcome to a negotiation that featured two parties – players and owners – that recognized that baseball is in as healthy a place as it’s ever been. The game’s revenues likely climbed north of $10 billion in 2016. Players are thrilled with the steady rise of salaries across the game. Owners, who are pocketing a larger percentage of the game’s growing revenues than players, are rolling in cash. No one wanted to kill the proverbial goose laying the golden egg.
In such a climate, the biggest surprise was that it required a last-minute deal to preserve more than two decades of owner/player peace dating to the resolution of the landmark player strike of 1994-95. In this case, the appeal of business-as-usual was too great to risk even a brief disruption, a reality that led to a new agreement that did little to alter baseball’s landscape.
Alex Speier can be reached at firstname.lastname@example.org. Follow him on twitter at @alexspeier.