Tax issues in Boston!
Dombrowski left Beantown with problems
The reverberations from Dave Dombrowski’s sudden but not totally unexpected dismissal as Red Sox GM last week are going to be felt for quite a while in Beantown. In a related way, it will also extend all the way to Tampa where Hal Steinbrenner can feel gratified the Yankees met his mandate of staying under the $197 million luxury tax threshold in 2017 — and are not subject to the enormous payroll challenges now facing his ancient rivals.
Though Red Sox owner John Henry never held a press conference to explain why he fired Dombrowski — who he personally hired in August 2015 after having previously worked with him from 1999-2002 in Miami when he owned the Marlins — but the reasons are multiple:
1) Dombrowski was estranged from everyone in the Red Sox front office, starting, from the get-go, with team president Sam Kennedy. Kennedy, who, under the terms of Dombrowski’s contract, could have no say and nothing to do with the baseball operations. At the end, Dombrowski isolated himself with only his two aides, assistant GM Frank Wren and consultant Tony La Russa.
2) Though he accomplished what Henry hired him for — winning the world championship last year — he did it by managing to exceed an unlimited budget and at the expense of the player development system. In 2019, the Red Sox have exceeded the luxury tax threshold, which according to the Associated Press equates to a tax bill of $13.05 million. Moreover, at $242 million, they were within $4 million of the third highest threshold which, if surpassed, would have cost them a 75 percent tax on all the dollars of their overage, plus the loss of 10 spots in next June’s draft. It was for that reason Dombrowski had no money to address the Red Sox bullpen, the
prime culprit in their fall this year with the most blown saves and highest percentage of blown saves in baseball. The Red Sox are obligated to pay $213 million alone to three pitchers — David Price, Chris Sale and Nate Eovaldi — and no one could understand why Dombrowski rushed to give Sale, with his suspect shoulder, that five-year, $145 million extension last winter without at least waiting to see him pitch in spring training.
In order for the Red Sox to get out from under these enormous tax bills, they are going to need to do what Steinbrenner did in ’17 and that’s get under the luxury tax threshold — which next year will be $208 million — in order to re-set their tax rate to 20 percent. This is the big challenge for Dombrowski’s successor and, from what I’m hearing from multiple sources, that person may well turn out to be the man, who in 2004 ended the Red Sox’s 86-year World Series famine: Theo Epstein. Word is, with the Cubs now in a bit of decline after ending their 108year World Series drought in 2016, Epstein is looking for a new challenge and ready to turn the Cubs baseball operations over to his longtime top aide Jed Hoyer. Even after his departure from Boston, Epstein has remained a John Henry favorite, in addition to having also gone to high school with Kennedy.
Lopping some $34 million off the Red Sox’s payroll while keeping the club competitive is not going to be easy for anyone. They lose $21 million with Rick Porcello’s expiring contract but that’s somewhat offset by Xander Bogaerts going from $12 million to $20 million next year with his new contract. There has been industry talk of J.D. Martinez opting out of his contract, but there isn’t a team in baseball that would pay Martinez, a DH, the $23.75 million he’s owed next year. So good luck, Sox, on that one.
And then there is the matter of Mookie Betts, coming into his free agent walk year and showing no indication of wanting to sign a new deal with the Red Sox. Betts won a record $20 million in arbitration last winter, but if he insists on going free agent, the Red Sox might be better off trading him and trimming another $20-plus million in salary rather than settling for draft pick compensation.
In the meantime, there’s still no money to address the bullpen or replace Porcello in the rotation. Whoever comes in to replace Dombrowski is facing a 3-4 year rebuilding process, maybe longer if Sale and Eovaldi continue to have injury issues, as there is nothing coming in the near term from the farm system.
Although the Yankees may not have near the payroll tax problems as the Red Sox, they still will start out next year over the $208 million threshold, assuming they re-sign Didi Gregorious, and it would seem highly unlikely Steinbrenner would approve the $100 million-plus investiture it’s going to take to sign Gerrit Cole — especially when he looks at the $57 million owed next year to three outfielders: Giancarlo Stanton, Jacoby Ellsbury and Aaron Hicks, who are always hurt and have hardly played (or not at all in Ellsbury’s case) this year. Instead, the plan for now is to fill the holes in the rotation for 2020 from within, with close scrutiny in the waning weeks of the season on the “comeback kids” Luis Severino and Jordan Montgomery — and next spring on Deivi Garcia, Clarke Schmidt and Jonathan Loaisiga.