Exploring the insurance calculus of big-money deals.
The Blue Jays' signing of Jose Bautista last week set off a frenzy of analysis in which authors attempted to determine whether or not his projected performance would live up to the value of his new contract. This is a common analytical template, as it allows the writer to determine whether the deal was more beneficial to the team or the player. From the standpoint of the player, as long as the performance-to-currency translation is sound, the calculation generally works. However, there are factors beyond the reported salary that influence whether or not the deal benefited the team. One of these factors is disability insurance. Granted, the amounts of the insurance premiums paid to take out a policy on a player are not common knowledge, but it is important to understand that a team is likely to pay more than meets the eye, and that the insurance introduces a new level of risk.
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The tax rates in various major-league cities can have a significant impact on player salaries.
A couple of weeks ago I discussed “the jock tax” in this space, which is the nickname given to the tax liability incurred by non-residents on income earned away from their home state. The moniker is derived from the simple fact that athletes are much more vulnerable to this tax due to their big salaries and schedules being in the open.
The Cubs didn't necessarily need to empty their farm to acquire another starter.
When news broke last week that the Cubs had acquired Matt Garza from the Rays I sarcastically suggested that the NL Central was all but locked up. Garza is certainly a quality pitcher, but the deal in which he, Fernando Perez, and Zachary Rosscup were sent to the Cubs in exchange for Chris Archer, Brandon Guyer, Robinson Chirinos, Hak-Ju Lee, and Sum Fuld struck me as being one-sided, and not from a talent perspective. No, I considered the deal to favor one side based on the idea of a team recognizing its situation and acting accordingly. The Rays, looking to cut costs, capitalized on the thin nature of the free-agent market by surrendering a better pitcher than was available. Garza was not going to be a key component to their success, and the emergence of Jeremy Hellickson provided a surplus of starters. The Cubs, however, struggled with more than their rotation over the last few seasons yet felt compelled to trade four of their top prospects for a mid-rotation starter. Many have chimed in on which team “won” the deal, but what isn’t being discussed enough is the rationale of the Cubs in a transaction like this and whether their goals could have been achieved by other means.
How are players taxed based upon residency, where their home team plays, and where they play on the road?
When the Cliff Lee saga reached its apex last month, a new type of article began to sprout up across the web. Instead of analyzing how Lee projected to perform and comparing his worth to the offers from the Rangers and Yankees, some writersbegan to calculatewhich offer would actually prove more favorable given the tax rates of the cities and states involved. Based on the tax codes of different jurisdictions it stood to reason that Lee might actually be able to take home more net compensation in an offer that, on the surface, looked to pay less in salary than another. I found this type of analysis intriguing since, by day, I am an accountant for a mid-sized firm in the Philadelphia suburbs. Naturally, articles that marry my two careers are right up my alley, but given the general confusion that arose from many of these pieces, I felt it prudent to do some research of my own and provide a primer of sorts on what is known as the “jock tax,” as well as some key components of how players are taxed.
A look at the return on investments for relievers given multi-year deals versus one-year contracts.
One of the most interesting aspects of baseball transactions is that every move carries a certain level of risk. Without perfect information akin to an extreme level of accurate prognostication, teams can never be 100 percent certain how a player will perform. The best investment is a player who will produce at a very high level, but who comes as close to guaranteeing that high level of production as possible. Albert Pujols personifies this idea, as a bad season for him still involves above-average defense and a TAv north of .310. I will say right now, with as much confidence as I have in my mind and body, that Pujols will hit, at worst, .310/.370/.530 next season. He has proven himself capable of production far beyond that slash line and is as close to a sure thing as we have.
With Cliff Lee now added to the staff, where does the 2011 Phillies rotation rank all-time?
As Kevin Goldsteinnoted, Monday, December 14, 2010 may go down as one of the 10 best baseball nights in the history of Twitter. The night had it all: accounts successfully replicating those of very reliable sources to pull a prank, subsequently sending everyone and their followers into a veritable frenzy, the cream of the free-agent crop signing a lucrative contract, the revelation of a mystery team akin to a turn in a wrestling story line, and practically anyone that cares about baseball emotionally invested in every twist and turn. When the dust settled, Cliff Lee had agreed in principle to sign with the Philadelphia Phillies, a year to the day after Ruben Amaro Jr. acquired Roy Halladay and 363 days after Amaro traded Lee to the Mariners in a companion deal that drew the ire of every Phillies fan. The news was shocking, as it had seemed for weeks that Lee’s decision would boil down to the Yankees or Rangers. After all, both were contending teams making big offers.
Trying to determine the value of three NL West pitchers and their potential impact for next season.
At the beginning of the year, a Blockbuster Video near my house was closing down and held a liquidation sale for about a week or two. Movies, video games, posters, and even the stands that hold the movies were up for grabs, and it became common to see customers exit the store with 10 or more items in their bag. After a bit of skepticism with regards to the types of movies that would be on sale, I ventured over for the first of my three visits. My skepticism was well-founded, as the movies that remained were not award-worthy by any stretch. Still, they were so inexpensive that I couldn’t help but walk away with a small stash. Traitor for $1? Sure, why not?
There is no risk in the Diamondbacks listening to trade offers for Justin Upton or the Yankees having Derek Jeter test the market.
The Arizona Diamondbacks made plenty of noise a couple of weeks ago when it surfaced that young outfielder Justin Upton could be made available in a trade. The rumor carried shock value and made plenty of fans wonder if the front office had gone senile. Trade Upton? Seriously? After touting Joe Saunders as a key component of the return on Dan Haren, this is the next move to instill confidence? Regardless of personal feelings on the matter, the rumor turned out to be more than mere gossip; it became evident that a wide array of suitors had inquired on what it would take to pry the potential superstar from the hands of newly appointed GM Kevin Towers. The short answer: it would take a heck of a lot for that to happen.
Past performance only tells part of a player's story if not put into the proper context.
With the hot stove about to heat up and the offseason in full bloom, we are entering the time of the year where the majority of baseball articles written attempt to assess the value of a trade or a free-agent acquisition. Those articles dominate the web because the actual game of baseball is in its hibernation state and, frankly, little is more exciting than following which players are signing where, or who might be traded to whom. When conducting these evaluations it has become common practice to compare the production of the player, measured in dollars produced for the team, to the actual salary he was paid. As long as the revenue estimator is sound in logic and development, this is a fine way to begin an evaluation of a transaction, though the method is frequently used as the be-all, end-all in determining whether or not to make fun of a general manager.
Looking for those whose accomplishments in the American League in 2010 flew under the radar.
Last week we built a lineup of National League players who performed really well last season while flying under the radar. The players either put up fantastic numbers without much publicity, improved mightily on their prior campaigns, or in some cases, were overshadowed by players on their own team. For instance, Drew Stubbs would start in center field for the NL’s sneaky good squad because teammate Jay Bruce received the hefty majority of accolades in the Reds outfield. Brad Lidge made the team as a reliever not only because he pitched well, but also because he improved by around 10 wins per WXRL. Today our focus shifts to the American League, and here are the players best fitting the above descriptions in the junior circuit:
Taking a peek at the players who were stealthily good in the NL in 2010.
With Major League Baseball about to enter its official awards season, I thought it would be interesting to take a look back at some players who will not be regaled with hardware but who performed admirably under the radar. These players were sneakily effective, eliciting “he was that good” reactions much more frequently than confident head nods upon glancing at their end-of-season statistics. In some cases, the players derived much of their success in the field while others managed to put together all-around great campaigns while lacking publicity. Others might not have performed at a star level but finished with noteworthy numbers relative to their production a year ago.
Looking at free-agent pitchers who will potentially be forced sign minor-league contracts.
Yesterday we took a look at several batters who may be forced to sign a minor-league contract this winter to have a chance at playing in the major leagues next season. The minor-league contract is a safeguard from a financial standpoint for the teams, as they can stash away players that might contribute in the future without using a spot on the 40-man roster. Additionally, teams do not have to commit to the much higher salaries players in the major leagues receive. Should one of these signees make the team, he would of course be paid at the higher rate, but because of the level of uncertainty surrounding the player’s health or talent, minor-league deals have become quite prevalent over the last several years.