Installing a Solid Floor

Baseballs offseason is broken and a part of the fix may be a salary floor, how it could work. We looked at how the Competitive Balance Tax tries to act as a de facto salary cap if you haven’t read it look at the primer here. With penalties being levied against teams spending too much one has to wonder, why isn’t there a floor that teams have to reach? With the prospects of another work stoppage in baseball looming and the last two free agency periods not doing ANYTHING to make things better, there has to be a way to balance the scales. There are many issues that face the MLBPA and the owners but this may be a way to help free agent salaries and not age out as fast. Front offices are seeing the value in bringing up their own homegrown talent up instead of signing high priced free agents. It is also taking guys too long to sign, that’s bad for players, bad for coaches, bad for GM’s, agents, and most of all fans. I think we all are a bit fatigued with the Manny and Bryce saga so far. So maybe making teams spend a certain amount would appease all parties.

 

Baseball most certainly would not be the only league with a cap floor, it’s actually the only league without one. The NFL has a floor set to 90 percent of the cap, the NBA is set to 89 percent of the cap, those are the highest floors and the ones that are percentages of the upper cap limit. The NHL adopted a floor that was originally 55 percent but has since been adjusted to a set 16 million dollars under the cap.

 

Now that we know a cap floor is possible and seemingly works, the issues that seem to plague baseball free agency aren’t spoken about in other leagues. How would a floor be integrated into baseball that again doesn’t have a hard cap? How would a team be able to rebuild in the way made popular by the Cubs, Astros, and currently the White Sox? What if an owner is in financial trouble or a team stops drawing fans, and who are we to decide what an owner does with his money? There are many questions and intricacies to address but let’s try to solve them anyway.

 

First things first, why do we need a floor?

 

As stated above a cap floor would act as a minimum to the amount of spending each ownership group is expected to contribute to the players via salary to the players. Major League baseball works under a revenue-sharing plan where at its base level the bigger market (rich) teams share an amount of revenue with the smaller market (less rich) teams, but that system works best when teams actually spend the money they receive from revenue sharing. That’s the problem, Joe Sheehan reported that the Pirates are guaranteed 60 million dollars in revenue from the national broadcast contract revenue, that’s before opening a gate, selling a single hot dog or beer. It seems a little unfair that they will then receive some revenue sharing money and their projected 2019 payroll from player salaries are 68 million. There was an outcry about the Pirates going into last season about the Pirates whose payroll was just over 91 million AFTER they went on their trade deadline shopping spree. The Rays and White Sox were LOWER than the Pirates, and the Oakland A’s already have revenue sharing penalties levied against them in this CBA from not spending.  

 

So what should the floor be?

 

I tried many different percentages while keeping in mind that not every team is worth the 4 billion dollars that the Yankees are. According to Forbes 2018 team valuations the Rays are worth the least at 900 million dollars, the Sox if your wondering is estimated to be worth 1.5 billion ranking 14th. I looked at the last 5 years of team salary information on Spotrac.com, where you can find salary information for all sports. I then moved it to a spreadsheet and started tinkering. I wanted a number that was concrete and didn’t leave the need for guessing, ie the average salary, as that can be swayed by one team spending. So I looked to the CBA, let’s find some numbers that are written in ink and won’t be changed, the competitive tax threshold. So what percent should I use, it has to be something that gets us over the baseline national media revenue but not so high as to price small market teams out, for the owner’s baseball is still a for-profit business after all. I settled at 50 percent of the competitive balance tax threshold, for 2018 that would be 98.5 million dollars, 2019 would have us at a minimum of 103 million as the CBT threshold is 206 million.

 

What are the penalties and when do they kick in?

 

I propose that if a team falls under the cap floor for more than two consecutive seasons, you lose 50 percent of your portion of the revenue sharing that next year, and rises each subsequent year. There has to be more than revenue sharing penalty so let’s penalize the nonspending teams with draft capital too. After a team falls short for the third consecutive year their highest draft pick falls 10 slots and skips the supplemental round. Each subsequent year after that you drop 10 more spots. I laid out a chart below.

 

Year under floor After 2nd year After 3rd year After 4th year After 5th year After 6th year After 7th year
Revenue Sharing Lost 50 % 60 % 70 % 80 % 90 % 100 %
Draft Pick Loss 10 spots 10 spots 10 spots 10 spots 10 spots

 

To reset your cap floor penalty you must be over the floor for as many years as you were under the floor. For example looking back at the past five years, only four teams would have incurred a penalty. The Rays and the aforementioned Oakland Athletics have been under the floor for the last five years. The Brewers spent 3 years under the floor, 2015 – 2017, so the only penalty they would incur is a loss of 50 percent of their revenue sharing money. They were over the floor in 2018 and to completely reset they would need two more years over the floor while incurring no penalties in the reset period.  The Marlins are a team that was under the floor from 2014 to 2016, got over the proposed floor in 2017, then fell under again in 2018. So their penalty picks up as if it is the 4th consecutive season. They need to be above the floor for four consecutive years to reset their penalty.

 

Team 2018 Payroll 2017 Payroll 2016 Payroll 2015 Payroll 2014 Payroll
CBT Threshold 197,000,000 195,000,000 195,000,000 189,000,000 189,000,000
50 % Floor 98,500,000 97,500,000 97,500,000 94,500,000 94,500,000
Miami Marlins 91,817,860 110,765,599 77,715,306 63,590,525 50,671,396
Milwaukee Brewers 108,982,016 68,945,179 62,161,191 94,010,873 110,577,046
Oakland Athletics 80,315,288 73,477,080 82,879,088 80,376,830 93,518,412
Tampa Bay Rays 68,810,167 76,311,205 63,908,549 73,582,652 76,821,046

 

Like I said at the top, baseball’s financial system is broken. This is merely an outline of a possible system, are there kinks in the system, I’m sure. Am I missing something maybe? Should I be spending Derek Jeter’s money? No, but someone has to and in this current financial landscape of baseball and labor relations there has to be an answer and this could be part of one. This guarantees money that is being given to smaller market teams by the larger market ones is spent not hoarded. This could also improve the revenue split between the players and the owners as at the start of this current CBA it was close to a half and half split, it is now about 58 percent towards the owners. The owners got a revenue boost from the recent resigning of a national broadcast deal and the sale of one-third of the BAMtech stake to Disney corporation for 1 billion dollars, split between all to the owners, before the 2018 season.

 

As we gear up for spring training here at SoxSided you should follow us on Twitter @SidedSox, like our facebook page, and if you would like to Email us and ask questions, comment, or give us an idea of what you would like to see more or less of SoxSided@gmail.com. Thanks as always for reading.

 

Mort

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