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|
|26-40||15 MiLB Players||$7.35M|
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 Swisher. Carlos 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.