Looking Beyond 2012

On Wednesday, I discussed the Red Sox current payroll situation, and explained the club’s motives for avoiding long-term commitments with big named free agents this winter.  With the team having already exceeded the luxury tax threshold in 2010 and 2011, they’re at risk of receiving a 40% tax on every dollar spent beyond $178M this year.  (It’s all but a guarantee that they exceed that total.)  Making the situation even more dire, the maximum tax increases to 50% starting in 2014.  If the Red Sox are going to put themselves in a position where they can avoid such a hefty penalty, it’s probably best to start now.  By falling below the tax threshold even for one season, they can essentially set the clock back to zero; thus allowing the Red Sox to avoid the stiffest of penalities should they breach the threshold again before the Collective Bargaining Agreement expires in 2016.

So how do they do that?  Well, let’s consider one of our examples from the other day.  Updating things a little bit to compensate for our most recent acquisitions, the Red Sox have already committed roughly $132M in guaranteed contracts against the luxury tax.  Once we add in the estimated $41M in arbitration and pre-arbitration contracts, that brings their payroll to around $173M for 2012.  To keep our calculations for 2013 somewhat simple, let’s assume Ben & Co, sign Hiroki Kuroda ($12M) and Cody Ross ($6M) to one year deals, and trade Josh Reddick and other minor leaguers to Oakland for Andrew Bailey ($2.5M) to fill out the roster.  This brings the luxury tax payroll to around $192M for 2012.  What could the Red Sox potentially look like in 2013?

Pos Player Proj Tax Salary
C Jarrod Saltalamacchia $4.00M
1B Adrian Gonzalez $22.00M
2B Dustin Pedroia $6.75M
3B Will Middlebrooks $0.49M
SS Free Agent/Trade  
LF Carl Crawford $20.42M
CF Jacoby Ellsbury $13.50M
RF Free Agent/Trade  
DH Kevin Youkilis $10.70M
C/1B/DH Ryan Lavarnway $0.49M
2B/3B/SS Nick Punto $1.50M
IF/OF Mike Aviles $1.30M
OF Ryan Kalish $0.49M
SP1 Jon Lester $6.00M
SP2 Josh Beckett $17.00M
SP3 Clay Buchholz $7.49M
SP4 Daniel Bard $4.50M
SP5 John Lackey $13.8M
RP1 Andrew Bailey $4.50M
RP2 Mark Melancon $1.25M
RP3 Alfredo Aceves $2.50M
RP4 Alex Wilson $0.49M
RP5 Matt Albers $1.35M
RP6 Felix Doubront $0.49M
RP7 Franklin Morales $1.00M
26-40 15 MiLB Players $7.35M

Total

$149.36M

In this scenario, I have David Ortiz, Marco Scutaro, Hiroki Kuroda, Cody Ross, and Kelly Shoppach all leaving as free agents; Kevin Youkilis getting his option for 2013 exercised and moving to DH; and Will Middlebrooks taking over at third base.  Assuming my salary estimations are correct, this would put the Red Sox luxury tax payroll at about $150M (give or take $5M); thus leaving them approximately $28M under the tax threshold to spend on a shortstop, right fielder, and potentially another reliever or two.* Another thing you’ll notice is I didn’t include Jose Iglesias as the club’s starting shortstop.  I did this for two reasons:  (1) I don’t see the Red Sox going with a rookie tandem on the left side of their infield, and (2) I project Iglesias as a career utility infielder rather than a starting shortstop.

* Of course, this could change if David Ortiz agrees to a two year deal, which could either add another $11-12M to the payroll, or result in Youkilis’s option not being picked up. 

Looking forward to the 2012-2013 offseason, the Red Sox could have some interesting free agent options at shortstop to consider.  Stephen Drew is easily the class of this group, but will likely command a contract in excess of the one his older brother signed prior to the 2007 season.  Erick Aybar and Jhonny Peralta both have valuable, yet completely different skill sets they bring to the table.  Aybar would probably be the cheaper, safer choice.  The remaining three options (Jason Bartlett, Alex Gonzalez, and Marco Scutaro), though likely cheap, should be considered nothing more than a utility player option to a club with serious championship aspirations.

In right field, the selection isn’t nearly as interesting.  The perpetually overrated Andre Ethier will probably turn some heads, but he’s likely to be as overpriced as the frequently underappreciated Nick SwisherCarlos Quentin is another name that will probably be attached to the Red Sox (it is already), but he’s less than ideal defensively in RF.  Considering he’ll be 30 at the time, he’s precisely the type of player to whom the Red Sox should avoid giving contracts.  Torii Hunter and Ichiro Suzuki could also become available, but the Red Sox will probably only consider signing them to a one year deal at a relative bargain.  This seems unlikely.  As a result, they could look to the trade market in hopes of acquiring a player along the lines of Corey Hart, Nick Markakis, or perhaps Nelson Cruz, if the price was right.

Still, before the Red Sox run out and sign/trade players to long-term contracts for the 2013 seasons, they’ll need to consider the effects those deals might have on the 2013-2014 offseason.  Assuming the Red Sox pick up Jon Lester’s option (and I don’t see why they wouldn’t), the club would have $94.65M committed to seven players in 2014, and that’s before factoring in the deal Jacoby Ellsbury’s likely to command.   Provided Ellsbury puts together two more solid seasons, he could end up commanding a contract similar to or greater than the 8 year $160M contract Matt Kemp just signed with the Dodgers.  That’s a pretty significant investment, especially when you consider salary is inflating at a rate much greater than the luxury tax is growing.  Then, once you factor in that Jarrod Saltalamacchia and (potentially) Jon Lester could become free agents at the same time, you can start to see why the Red Sox need to remain prudent with regards to their luxury tax situation.  If the Red Sox can’t get under the threshold for either the 2012 or 2013 season, they’ll be in a poor position to re-sign Ellsbury as they’ll be subject to a 50% tax on every dollar spent over $189M.  Clearly, that’s not a position they want to be in.

We tend to think of team payroll in terms of a vacuum; that the decisions teams make this year won’t effect next year or the years beyond.  That’s not the case.  The decision the Red Sox make this winter will have a direct impact on the club’s ability to field a competitive team in the future.  By remaining prudent and focusing in on signing value players now, they’ll be in a much better position to not only retain their core over the long haul, but also develop players that will help them replenish on the cheap going forward.  While they might not be making sexy moves this winter, they’re doing what’s best to maintain long term success.  We just need to be patient, and trust the process.

Categories: Boston Red Sox David Ortiz Jacoby Ellsbury Jon Lester Kevin Youkilis Luxury Tax

After being slapped with a restraining order for stealing Nick Cafardo's mail, I was forced into retirement for a brief period of time. As fun as it was to lounge around the community pool and play shuffleboard with noted internet columnist, Murray Chass, I quickly felt a yearning to write again. Now in my second tenure with Fire Brand, I have set lofty goals of achieving world domination, ending the plight of the hipsters, and becoming BFFs with Mike Trout. I am fluent in two languages (Sarcasm and English, in that order); have an intimate relationship with M&Ms; firmly believe that Lucille is the best character on Arrested Development; and spend my spare time trolling select members of the Boston media. You can follow me on Twitter @Chip_Buck.

10 Responses to “Looking Beyond 2012” Subscribe

  1. Walt in Maryland December 16, 2011 at 10:45 AM #

    Interesting analysis. I agree that Middlebrooks OR Iglesias will be starting for the Sox in 2013, but not both.

    However, if they're able to reach a 2-year- agreement with Ortiz that lowers the AAV of his contract — very important when they're so close to the threshold — then Youkilis' option will be declined.

    Also, I see no way Cody Ross gets $6 million from the Sox or anyone else.

    • TroyPatterson December 16, 2011 at 11:04 AM #

      I don't think there is any chance they decline Youk's option, but a trade after taking the option is possible. Unless he is injured again then all bets are off, but even while injured Youk has never been worth less than 3.6 WAR except in 2006.

      A $13 million dollar option with a $1 millon buyout is a no brainer to keep him here.

  2. marcos December 16, 2011 at 12:01 PM #

    i dont get it. If the red sox are going to exceed their pay roll anyway what kept them from investing on willigham or cuddyer or even Beltran???

    • ChipBuck December 16, 2011 at 2:42 PM #

      You're talking about 2012. I'm talking about 2013 and 2014. Going with one year deals now will put them in a good position to stay under the threshold in 2013; thus resetting the luxury tax for the Red Sox in 2014.

  3. Gerry December 16, 2011 at 12:32 PM #

    Iglesias and Middlebrooks will continue to play side by side at AAA until they make the jump. Both are rather phenomenal, athletic defenders who will sew up the left side tight. As long as Iglesias continues to improve with the bat and Middlebrooks his plate discipline, there will be every reason (including $$) to bring them up together. Agree about Cody Ross. CHLin is a superior defender with a promising RHB who, with Reddick or Kalish fill out a superior OF in 2012-13. Onepullback
    of Acevas, Doubront, Tazawa, Wilson would make a fine #5. So, IMO,
    a team that is already this good, with so many good to excellent talents
    from high-a to AAA,doesnt need Ross, Kuroda of west coast fame,
    Peralta or any other pricey players at this time. The Sox already have
    plenty so its time to go young and trust the kids, get this mfy budget under control, and beat that tax threshold. To this end the Melancon, Punto, Shoppach deals are, as you say, very smart moves.

  4. Mr Punch December 16, 2011 at 1:14 PM #

    I basically agree with Gerry. If the Sox are going to avoid the tax anytime soon, while saddled with Lackey and Crawford as well as a number of more productive but very expensive contracts, they're going to have to go young. The numbers just won't work otherwise, barring a huge rise in the cap or an NBA-type amnesty. This is a complete change of approach, but the big contracts they took on in 2010-11 necessitate that.

  5. Cory December 16, 2011 at 11:20 PM #

    Chip, do you think there is any chance of a trade involving Andre Ethier Chad Billingsley for Kevin Youkilis and let's say Brentz (or Reddick or Kalish) and Ranaudo?

    It's no secret Dodgers need some or at least more production out of Loney. They get a great fielding 1B, a solid OFer, and pitcher. We get our answer for the back end of the rotation and RF.

    What do you think?

    • ChipBuck December 17, 2011 at 7:31 AM #

      I've always liked Billingsley a lot more than most people. He's one of those pitchers that has great stuff that's never been able to put it all together. You feel it'll happen someday, but you don't know when. It's certainly possible, but I can't imagine the Red Sox doing anything more than a straight up Billingsley-Youkilis deal. Youk is an incredibly productive player, even as he heads into his age 33 season. He has a reasonable salary for 2012 and his option for 2013 seems like a no brainer. Billingsley is probably a 185 inning pitcher rather than a 200 inning pitcher which lowers his value slightly. A straight up deal seems about right. The Sox would probably have to eat some of the salary to make it work for Dodgers, given their financial situation.

      • Cory December 17, 2011 at 4:46 PM #

        Sounds great. I mean this would mean that Youk would have to stay healthy enough early on to gain back his trade value.

        I think Bills would be a great fit.

  6. Jay December 19, 2011 at 2:24 PM #

    It sickens me that Lackey makes twice what Lester does in 2013