AngelsWin Today: 2022 Angelswin.com Primer Series: Financials

[AngelsWin.com]

2021 Marked 50 Years of Angels Baseball - Time to Throw a Fancy Party?

So, before we dive into the numbers, we need to have a discussion about the approved payroll number that Angels owner Arte Moreno provides to General Manager (GM) Perry Minasian.

As the Orange County Register’s Jeff Fletcher reminded me recently, that number Moreno provides is not transparent, it could include or not include player salaries, player benefits, Minor League player salaries, non-guaranteed salaries, the cost of a Pepsi or Coca-Cola out of the clubhouse vending machine, yacht fuel, etc. The point is that we, as fans, do not know, so determining how much payroll the Angels have available for the upcoming season is not entirely clear.

The current 2017-2021 Collective Bargaining Agreement (CBA), clearly states the following regarding ‘Actual Club Payroll’:

This definition simply means that player benefits (part (a)) plus player salaries (part (b)) plus any player salaries outrighted to a Minor League club (part (c)), constitute ‘Actual Club Payroll’.

In principle, you would think that Arte’s official payroll number he gives to his GM, for each season, would include these three core components dictated in the CBA, but we have no idea if Moreno is accounting for player benefits or outright assignments, outside of that guidance, or if it is included. There is just no way to know.

So, based on that, Angelswin.com will, here in this Series, report the accounting, per the CBA, by adding player benefits to ‘Actual Club Payroll’, which will simply be player salaries plus player benefits (we have no outright assignments, currently, to add). Additionally, we will place a second column for the calculation of Average Annual Value (AAV), which will determine the payroll number used for the Competitive Balance Tax (CBT, also known as the ‘Luxury Tax’) total, based on the Halos current 26-man roster plus Minor League salaries and pre-arbitration call-ups, minus the following impending free agents (Note: One or more of these names could be re-signed):

1. Kurt Suzuki

2. Dylan Bundy

3. Steve Cishek

4. Alex Cobb

5. AJ Ramos

6. Dexter Fowler

7. Juan Lagares

8. Jose Iglesias

Below is that approximation, which includes the recent free agent signing of Noah Syndergaard and, also, reliever Aaron Loup:

First of all, the arbitration numbers for Max Stassi, Mike Mayers, Tyler Wade, and Phil Gosselin (in italics), were obtained from the MLBTradeRumors.com Projected Arbitration Salaries for 2022 article. Although these numbers are estimates, this annual series has proven consistently accurate. It should also be noted that the Angels do not have to tender an arbitration offer, they can simply release one or more of these four names, letting the player in question enter free agency.

Secondly, the Halos have no players on outright assignments, nor do they owe money to a player that is no longer on the team (thankfully, Pujols’ contract is off the books).

Finally, the author has made the following financial assumptions:

• League minimum salary for 2022 is $600,000

• Player Benefits are $16,000,000

• Estimated Minor League salaries are $2,435,000

• Estimated salaries for 40-man roster players are $3,000,000

To make things easier, moving forward, Angelswin.com will presume that the ‘Actual Club Payroll’ number, will consist only of player salaries, nothing else, despite the fact we reported it correctly, per the 2017-2021 CBA. This contradicts the language in the CBA, but without better information, such as knowing what components constitute Moreno’s payroll number, we are grasping at straws.

So, instead of $169,550,000, per CBA accounting, we will use the base player salaries, totaling $153,550,000 as our starting point for determining how much Minasian has to spend the remainder of this offseason. Bottom line is that we will compare projected total salaries to our best-guess estimate of Moreno’s official payroll number he gives to Minasian.

Last year, the team ended the season with an actual team payroll of $182M and an AAV of just under $200M. Based on historical spending, expect team owner Arte Moreno to maintain a robust actual payroll that stays under the CBT threshold. Presuming a new Collective Bargaining Agreement (CBA) maintains an ever-increasing CBT threshold (this could definitely change), actual team payroll should correspondingly increase from $182M in 2021 to $185M-$195M in 2022.

For the purposes of the 2022 Angelswin.com Primer Series, we will assume Arte Moreno authorizes an actual team payroll of $190M for the 2022 season. This number could go up or down, but represents an educated estimate despite what could be an unusually aggressive offseason.

Based on that historically-based assumption, and taking our projected total player salaries and estimate of $190M to spend, this leaves approximately $36.45M in actual team payroll operating space for General Manager (GM) Perry Minasian to work with for the remainder of 2022. When you take into consideration that the Angels will likely keep a reserve of payroll available, leading into the Trade Deadline, this number likely drops a few million, to $27M, give or take.

For the purposes of the 2022 Angelswin.com Primer Series, we will assume the Los Angeles Angels have $27M remaining, to spend, in free agency (FA) or trade. It should be noted, again, that if the Angels do not retain one or more of their remaining four arbitration-eligible players, that number could increase to as high as $31.7M.

There are, however, some potential, mitigating monetary factors to consider, regarding this upcoming offseason, that should be discussed.

The first item is the aforementioned, potential, new CBA. The current CBA is set to expire December 1st, 2021. MLB and the players union are currently negotiating to either implement a new CBA or, more remotely, extend the current CBA. If they cannot reach a consensus on either of those two options, baseball could come to a standstill, possibly resulting in an owner and/or labor strike. Both sides probably want to avoid the latter, but there have been some contentious negotiations and discussions, so nothing is promised.

Notably this debate has accelerated a lot of offseason transactions prior to the CBA expiration date, rather than delaying them after a new basic agreement has been settled. This aggressive set of transactions feels both player- and club-driven, because the former want to lock-in something for 2022, even if the season is abbreviated due to a player strike, and the latter are, collectively, flush with available payroll, necessitating the need to spend, even if a strike occurs for a lengthy period of time, as a result of a breakdown in talks.

One part of these negotiations, that was leaked to the media and could impact the Halos offseason, is the idea of lowering the CBT threshold to $180M and raising the penalty tax for exceeding it and creating a minimum team spending floor.

It is the former that may throw a wrench into the Los Angeles Angels financial planning and spending because if the current CBT threshold moves from $210M down to the suggested, proposed, $180M level, that will further constrain team spending, based on Arte Moreno’s penchant for not exceeding the Luxury Tax. If that new Luxury Tax threshold is implemented, and staying under is what Arte directs, Perry Minasian will likely have no more than a maximum of $5M to allocate the remainder of the offseason, presuming the aforementioned Trade Deadline reserve, as noted above.

This is now the point where we bring up the second mitigating factor in this payroll calculus. In recent weeks, Mike Trout, Shohei Ohtani, and Manager Joe Maddon have made remarks about the need for the team to spend and improve the Angels odds to win next season. It should be very concerning to Arte Moreno that the two best players on the team have so vocally expressed their opinion on the state of the franchise. If this issue is not addressed it could lead to Shohei Ohtani leaving the team for FA after the 2023 season, which, quite frankly, would be an unmitigated disaster. Additionally, Mike Trout could grow frustrated and ask to be traded, too, which would also be an unmitigated disaster. This may force Arte Moreno to take more drastic financial action this offseason.

If you assume that any new or extended CBA retains the softer Luxury Tax penalties for teams that go over the CBT threshold for no more than two years (the penalties increase significantly on the third year and beyond, currently), now may be the time (and the author has been wrong about this in previous seasons) that Arte Moreno decides to open up a no-more-than, 2-year increased financial window for the Halos.

In fact, if a new CBA is implemented and the aforementioned lower CBT threshold ($180M) is instituted, Moreno will likely have no choice but to go over it, if he wants to avoid player morale issues. Additionally, Arte and Minasian may have an inside track on CBA negotiations where, for example, they feel the current CBA may be extended an additional year or two while negotiations proceed toward a new CBA.

Once the CBA situation works itself out, we, the fans, will know more, but this offseason may prove to be a pivotal point in franchise history, forcing Arte to go big or risk losing one or both of the teams greatest superstars, not only in the history of the Los Angeles Angels franchise, but in Major League Baseball history, as well. Collectively, it is doubtful that anyone in the Angels organization or the fans want this to happen, but history is chock full of stupid decisions, like Babe Ruth to the Yankees.

It is because of these two, potential, mitigating factors that our assumed team payroll of $190M might be the wrong number. Presuming, again, that the relative structure of the CBT base tax surcharge levels do not change and the Base Tax Threshold is the same as 2021 ($210M), Moreno could (and again, historically, he has never even sniffed this) authorize a major increase to Actual Club Payroll, up to a maximum of $210M or, if he gets truly ambitious and jumps into the 1st Surcharge Rate, a maximum of $230M, based on how aggressive he feels.

Also, to be clear, IF Arte does this, he will likely clearly instruct Minasian to bring the team back below the CBT threshold by the end of 2023, in order to avoid the truly severe surcharge rates that are detailed in the currently implemented CBA (and may change in a new CBA!), which means that any significant expenditures in FA, or for trade acquisitions, would likely be for no more than two years in length. Ultimately, the front office has better visibility to ongoing CBA negotiations, but it will be interesting to see what the new CBA offers and the related impacts to every team across MLB, particularly the Halos.

This CBA discussion will be important for long-term financials as well. Upton’s contract comes off the books after 2022, leaving some room for a longer-term free agent signing, internal extension candidate, or higher-salaried trade target. However, all of the pre-arbitration players on the current 40-man roster and those yet to be added, will begin to significantly impact payroll starting in 2025, based on probable Major League service time accumulated.

Now, certainly, Minasian can and will trade players away and manage the total payroll number, possibly moving guys like Barria, Suarez, or Junk, for instance, so this is likely not a major concern, but 2025 and 2026 will be significant arbitration seasons. So, expect the Angels to retain their major stars while selectively moving other pieces in trade, to keep overall payroll steady, as they continue to build and maintain a contending team. This future payroll management could prove even more important if the CBT threshold is lowered in the next CBA.

Oh and before I forget the other 800-pound elephant in the room, there is the fast-approaching decision to sign Shohei Ohtani to an extension contract, which, based on his recent comments about wanting to win, may or may not materialize if the Halos don’t get good, really fast. It should be noted that the front office can fit an Ohtani extension into long-term payroll and, when you consider the total value he brings, should be an absolute no-brainer proposition for Minasian.

Perhaps, building a contender around a young Shohei, is a third mitigating factor that will push Arte to break the bank or it may turn out to be his greatest mistake as owner of the team, only time will tell. Angelswin.com’s educated guess is that the Angels front office will aggressively pursue an Ohtani extension, it is the only prudent and sane thing to do.

As always, the financial ball is in Arte’s hand, and, for better or worse, the financial and baseball decisions made this offseason will echo for years to come.

View the full article

[ettin]

Special thanks to @Jeff Fletcher and @Hubs for answering some questions to iron out some kinks in the Financials.

Back to rewriting the Rotation section of the Primer Series.... 

[Jeff Fletcher]

On 11/28/2021 at 6:22 PM, AngelsWin.com said:

The point is that we, as fans, do not know, so determining how much payroll the Angels have available for the upcoming season is not entirely clear.

You could have stopped here.  

[failos]

On 11/28/2021 at 6:22 PM, AngelsWin.com said:

2021 Marked 50 Years of Angels Baseball - Time to Throw a Fancy Party?

*60 years

[ettin]

1 hour ago, failos said:

*60 years

Oops! I'm not good at math. However, 60 years is even more reason to celebrate!

New update with Lorenzen:

Approximately $20M left to spend, give or take.

EDIT: Adjusted after reporting shows Lorenzen making $6.75M.

Edited December 1, 2021 by ettin

[greginpsca]

I don't think payroll will go up more then a million or two over last year.  Anything above that, i'll believe it when i see it.  I do have a gut feeling that there is a trade happening before Spring Training, so i expect some movement on the 40 man roster. But in the end, i will be surprised if payroll hits above $185m.

[arch stanton]

3 hours ago, ettin said:

Oops! I'm not good at math. However, 60 years is even more reason to celebrate!

New update with Lorenzen:

Approximately $20M left to spend, give or take.

EDIT: Adjusted after reporting shows Lorenzen making $6.75M.

I love it when engineers tell me they can't do math

[ettin]

2 hours ago, greginpsca said:

I don't think payroll will go up more then a million or two over last year.  Anything above that, i'll believe it when i see it.  I do have a gut feeling that there is a trade happening before Spring Training, so i expect some movement on the 40 man roster. But in the end, i will be surprised if payroll hits above $185m.

Quite possible Greg. I went higher simply because the tone coming out of the front office sounded more aggressive. Iglesias could very well be the last move the Angels make, possibly.

[ettin]

1 hour ago, arch stanton said:

I love it when engineers tell me they can't do math

I actually told @failos, but yeah I got burnt!

[failos]

4 minutes ago, ettin said:

I actually told @failos, but yeah I got burnt!

It’s ok. I’m an engineer who makes math flubs here and there (but not at work).

[greginpsca]

18 hours ago, ettin said:

Quite possible Greg. I went higher simply because the tone coming out of the front office sounded more aggressive. Iglesias could very well be the last move the Angels make, possibly.

Looks like after signing Iglesias they are sitting just about where i thought they would be.  Any improvements to the team going forward, i think comes through trades.  It would sure be nice if we could miraculously dump Upton's contract. Hell, even part of it.

[ettin]

Update with Iglesias signing and Selman DFA:

Approximately $10M left in open payroll with an approximate $10M margin reserve and assumption that Player Benefits are not included in an estimated Moreno payroll number of $190M team Actual Club Payroll. Enough for a trade, still, and/or a late offseason signing of a target of opportunity that did not sign pre-lockout.

Notably that approximate open payroll could still land a frontline starter, in trade, such as Luis Castillo, Tyler Glasnow, Shane Bieber, Tyler Mahle, Sonny Gray, et. al., presuming the Angels matchup with one of those team in players/prospects.