Giants, agent see different sides of stalled market
The Giants are trying to trim payroll to avoid paying luxury taxes, and they aren’t alone. Several other traditionally large payroll teams, notably the Yankees and Dodgers, are cutting back for the same reason.
While fans root for major upgrades from last year’s 98-loss team, the Giants continue to conduct business with the $197 million luxury tax threshold in mind, citing the long-term benefits to keep the payroll below the threshold for the first time in four years.
A renowned player agent suggested in a Chronicle interview that fans who have packed AT&T Park deserve more from a team with immense resources.
Scott Boras, who represents several elite free agents still unsigned in a depressed market, said the luxury tax — or competitive-balance tax — is part of what he terms a “noncompetitive cancer,” adding the system is “upside down, and we need to eradicate it.”
Boras rattled off several examples of how the Giants are handsomely profiting and suggested they needn’t let the threshold interfere with their intention of catching up with the competition in the National League West, which had three playoff teams last year.
“I think people have the right to know the economics of the team,” said Boras, also noting the Giants have paid off the stadium mortgage and will construct the lucrative Mission Rock complex in parking lot A. “They’re certainly one of the best economically run teams in the game. They have the ability to pay.”
According to Boras’ research into finances of the 30 teams, the Giants made an estimated $274 million in revenues exceeding their player payroll last season, far more than the figure in 2008: $116 million.
The figures are reached in part by subtracting payrolls listed by Baseball Prospectus from teams’ revenues estimated by Forbes, which often are disputed by Major League Baseball — Boras’ figures don’t account for expenses beyond payroll, including staffing, travel, minor-league operations, revenue sharing, insurance, benefits and stadium upkeep, for starters.
Last year, Forbes estimated the Giants’ franchise value at $2.65 billion, fifth highest in the majors, up from $494 million in 2008. Other team values show similar spikes, and Boras said while revenues grow, payrolls are being stunted by the CBT and other factors.
“In other words, (the Giants) are making $160 million more than 10 years ago,” Boras said, “and the franchise is worth (five times) more.”
Boras represents the top hitter on the market, corner outfielder J.D. Martinez, in whom the Giants had legitimate interest at one point, before they traded for third baseman Evan Longoria and outfielder Andrew McCutchen, and signed outfielder Austin Jackson for two years and $6 million.
One reason the Giants say they’re ruling out elite free agents (including Martinez) is future roster flexibility. They have eight players under longterm contracts who’ll annually make between $12 million and $22 million: Buster Posey, Brandon Crawford, Brandon Belt, Johnny Cueto, Jeff Samardzija, Madison Bumgarner, Mark Melancon and Longoria.
The Giants’ 2017 payroll was fifth highest in the majors. “You’re not just talking about CBT when you’re talking about free agents, you’re talking multiyear commitments,” general manager Bobby Evans said. “Given the number of long-term commitments we already have, that makes it not our focus.”
Executive VP of baseball operations Brian Sabean said future payrolls and CBTs must be weighed when constructing the 2018 roster.
“You have to have viable or significant choices. At this time, we don’t know that we have that in hand,” said Sabean, who credited Evans for being able to “adjust this roster and give it a face-lift and still stay under the threshold at this point.”
Martinez, 30, hit .303 with 45 homers and 104 RBIs in 119 games with Detroit and Arizona, posting the majors’ highest slugging percentage and second-highest OPS. Plus, he’s known to crush lefties.
Boras sees Martinez as a perfect fit with many teams, including the Giants, who were last in the majors in home runs, slugging percentage and OPS and lacked protection for Posey.
Boras said Martinez, unlike many free-agent hitters over the years, has been open to signing with San Francisco. The Giants ultimately didn’t value him at his reported initial asking price, seven years and upward of $30 million a year.
The Giants weighed, among other things, his age and longterm defensive ability as a right fielder. Instead, they acquired Longoria, McCutchen and Jackson, whose combined average annual salaries (counting cash received in the two trades) are below Martinez’s $30 million asking price.
As Boras notes, there’s a side benefit to signing Martinez. Because he wasn’t given a qualifying offer by the Diamondbacks — it was disallowed because he was traded during the season — a team can sign him without forfeiting draft picks.
“He is a rare combination of need and draft-pick protection,” Boras said.
The Red Sox and Diamondbacks are said to be most interested in Martinez, and the largest reported offer was for five years by Boston.
For the Giants, Martinez’s contract would put them above the $197 million threshold, which would trigger a 50 percent tax on every dollar over the threshold as a four-time offender.
Plus, if the Giants wanted to sign a player who got a qualifying offer after next season — Bryce Harper, anyone? — they’d lose draft picks and international slot money. And they wouldn’t be compensated as much if they lost a free agent to whom they gave a qualifying offer, such as McCutchen.
At this point, the Giants prefer to spend their budgeted dollars solely on players, not taxes. Evans said staying below the CBT is a target, not a mandate.
At one point, it seemed the Giants could exceed the threshold had they traded for Miami outfielder Giancarlo Stanton, who will make $295 million over 10 years. Still, the Giants would have moved Denard Span in the deal, and the Marlins were willing to eat part of the contract and save the Giants millions per year, so staying under the threshold still would have been possible.
As it turned out, Stanton exercised his no-trade clause to reject the Giants, and he’s now with the Yankees.
Boras compared Martinez’s numbers with Stanton’s and pointed out that in the past three years, Martinez was superior in average, hits, runs, homers, RBIs and OPS.
Stanton played 45 fewer games and is two years younger, though Stanton’s contract ends when he’s 37, which would be Martinez’s age at the end of a seven-year deal.
As for the “noncompetitive cancer,” Boras counts as many as 11 teams “tanking,” virtually conceding in 2018 to get in a beneficial draft position and gain larger international draft pools, a strategy the Astros and Cubs used before winning the past two World Series.
Though Boras points fingers at the owners and system, the players’ union also signed off on the collective bargaining agreement, which expires in January 2021. No one’s accusing owners of colluding yet, but Dodgers closer Kenley Jansen said players might consider going on strike.
Players are fed up that more than 100 free agents remain unsigned and believe owners are treating the threshold like a salary cap despite the fact that baseball is a $10 billion industry and each team is receiving $50 million from the sale of MLB Advanced Media to Disney.
The union expressed concern to MLB that the rebuilding Marlins and Pirates, who dealt their top players this winter, aren’t using their revenue-sharing checks to improve their teams. The commissioner’s office responded by saying there have been no violations.
Further escalating friction stems from the possibility that Commissioner Rob Manfred unilaterally will implement pace-of-play rules after the union rejected his latest proposal to move games along.
Boras said the current system affects the integrity of the game. He counts three teams trending toward tanking in the NL East, which gives the second-place team an unfair advantage to claim a wild card because of the abundance of division games.
“We have to understand more teams are pursuing the No. 1 draft pick than are pursuing the World Series,” said Boras, echoing a sentiment from Mariners GM Jerry Dipoto.
“When you take away the number of teams getting below the luxury tax, which diminishes their effort to win a World Series, and teams pursuing the No. 1 draft pick by being noncompetitive, you have a significant noncompetitive cancer in the game.”
The Giants open spring training in two weeks.