CSS Button No Image Css3Menu.com

Baseball Prospectus home
  
  
Click here to log in Click here for forgotten password Click here to subscribe

Premium and Super Premium Subscribers Get a 20% Discount at MLB.tv!

No Previous Article
No Next Article

May 9, 2003

The New CBA

First Thoughts

by Doug Pappas

Although the owners and players shook hands on a new collective bargaining agreement last August 30, the final version of the CBA was not published until this week. (It can be downloaded, in .PDF format, from this link.) The eight-month delay becomes easier to understand when one looks at the document. The table of contents alone runs 11 pages; counting the attachments, the CBA itself is 223 pages long.

Over the next few months I'll be writing a series of articles about the new CBA. These articles will walk through the document from beginning to end, translating the key points from legalese to English and discussing them in the context of past agreements.

Not quite yet, though. I'll be on vacation next week, with two transcontinental flights, two Pizza Feeds, three national parks, my first visit to Pac Bell Park, quality time with several friends from college, and at least 2,000 miles of driving to occupy me as I generate content for the other side of my Web site. For now I'll summarize three things I learned from a first pass through the CBA.

  1. For luxury tax purposes, Raul Mondesi is entirely a Yankee, Rey Ordonez is mostly a Met.

    Since last August, the CBA-related question I've heard most often is: "If Team A trades a player to Team B but agrees to pay part of his salary, who's charged with the salary for luxury tax purposes?" Article XXI, Section C, Subsection 2(b) provides the answer:

    "Beginning with Player assignments after September 30, 2002, an assignor Club that pays cash consideration to defray all or part of the salary obligation of the assignee Club for an assigned Player shall include such consideration in its Actual Club Payroll in the Contract Year in which the cash consideration is paid ... Any cash consideration that is, pursuant to the preceding sentence, included in the Actual Club Payroll of the payor Club shall be subtracted from the Actual Club Payroll of the payee Club in the same Contract Year in which it is added to the payor Club's Actual Club Payroll."

    Thus although Toronto is paying $6 million of the $13 million Raul Mondesi will earn this season, for luxury tax purposes the Yankees are charged with the full amount because they acquired Mondesi prior to September 30, 2002. But salary dumps during the 2002-03 off-season, such as the Mets' trading Rey Ordonez to Tampa Bay and picking up $4.25 million of his 2003 salary, count against the assigning club. With the Mets and Yankees both likely to owe luxury tax in 2003, the Yankees will pay an extra $1 million because they acquired Mondesi in mid-season, while waiting until after the 2002 season to dump St. Rey will cost the Mets more than $700,000.

  2. The luxury tax rate is even more complicated--and more carefully targeted at the Yankees--than previously reported.

    The new CBA renames the luxury tax the "Competitive Balance Tax." It really should be called the "Yankee Tax, or Stupidity Surcharge For Anyone Else Dumb Enough to Owe It." The tax threshold starts at $117 million in 2003. It rises to $120.5 million in 2004, $128 million in 2005 and $136.5 million in 2006. Thus a club under the 2003 threshold could increase its payroll by 3% in 2004 and 6% in 2005 and 2006 without crossing the tax threshold.

    The Yankees would have been over the 2003 threshold if they had simply maintained their payroll at its 2002 level. As you may have noticed, they didn't. The Yankees are virtually certain to be paying the tax every season. But look at how the tax is structured: While the Yankees pay a 40% tax in both 2005 and 2006, any club which keeps its 2005 payroll under $128 million can spend as much as it wants in 2006 without paying the tax.

    First year over the threshold:

    2003: 17.5% tax on the amount over the threshold
    2004 and 2005: 22.5% tax
    2006: No tax

    Second year over the threshold:

    2004-06: 30% tax, except that a club which exceeded the threshold for the second time in 2006, but did not also exceed the threshold in 2005, owes no tax.

    Third or fourth consecutive year over the threshold:

    2005-06: 40% tax

    Third non-consecutive year over the threshold:

    Club over the threshold in 2003, 2005 and 2006, but not 2004: 30% tax.
    Club over the threshold in 2003, 2004 and 2006, but not 2005: No tax.

  3. A worldwide draft is coming, if the parties can agree on the details.

    The current status of the proposed worldwide draft is buried in Attachment 24. This document, a letter from Rob Manfred of MLB to Donald Fehr, states that the parties have agreed in principle to expand the First-Year Player Draft to cover all eligible players worldwide, and have agreed that the draft should have between 20 and 38 rounds.

    All other details were referred to a special World-Wide Draft Subcommittee of MLB and MLBPA representatives--with the proviso that if the subcommittee can't agree on comprehensive rules to govern the new draft, the current rules will remain in effect.

    Open issues relating to the draft include the number of rounds; the age of draft eligibility for players from countries without organized high school baseball; and the desirability of maintaining or developing baseball academies in such countries. In addition, the subcommittee must decide whether bad teams should get proportionately more draft picks; whether clubs should be allowed to trade draft picks, or trade the negotiating rights to a drafted player; whether clubs who fail to sign a drafted player should receive some type of compensation; and whether the current system of compensation for clubs which lose free agents with draft picks should be maintained. (This compensation system remains unchanged in the Article dealing with free agency.)

    Members of the World-Wide Draft Subcommittee were to be appointed by October 15, 2002. The Attachment contains no deadline for the subcommittee to complete its work. Unless we hear from them soon, though, the 2003 draft will be held under the same rules which applied in 2002.

You'll be hearing from me soon. I'm planning to write one article a week about the CBA until all the important provisions have been covered. First things first, though: The desert, the Sierras and the open road are calling, and their collective voice is a helluva lot louder than a 223-page document that took eight months to create.

Catch the Doug Pappas World Tour as it rolls into California. SoCal Pizza Feed this Saturday, May 10. NoCal Pizza Feed Wednesday, May 14. Special guests, mystery guests, and more. Head here to sign up.

Related Content:  CBA,  Luxury Tax

0 comments have been left for this article.

No Previous Article
No Next Article

RECENTLY AT BASEBALL PROSPECTUS
Premium Article Minor League Update: Games of Tuesday, Augus...
Premium Article The Prospectus Hit List: Wednesday, August 2...
Fantasy Article Dynasty Dynamics: Progress Report: Prospect ...
Fantasy Article They Hold No Quarter: Third Basemen
Premium Article AFL 2014
The Lineup Card: Seven September Call-ups We...
Prospects Will Break Your Heart: Pain Don't ...

MORE FROM MAY 9, 2003
Premium Article Under The Knife: Viva La Revolucion!
Premium Article Prospectus Today: In Pythagoras We Trust
Premium Article Transaction Analysis: May 1-7, 2003
Prospectus Triple Play: Montreal Expos, San ...
Premium Article Prospectus Q&A: Roger Angell, Part I

MORE BY DOUG PAPPAS
2003-07-17 - On the Mendoza Line
2003-06-11 - The New CBA, Part II
2003-06-03 - The New CBA, Part I
2003-05-09 - The New CBA
2003-04-25 - Bye Bye, Bud?
2003-04-01 - Selig Yes, Zimbalist No
2003-03-31 - As Seen In The New York Times Magazine
More...


INCOMING ARTICLE LINKS
2006-07-07 - Premium Article Schrodinger's Bat: Thinking and Rethinking: ...
2005-08-15 - Premium Article The Next White Elephant?