Mike Trout, the CBT and why the link matters …

Every article or blog post or tweet regarding the Angels’ offseason strategy — whether it’s the pursuit of starting pitcher or the scenario at third base or the situation regarding Jerry Dipoto and Mike Scioscia — tends to be followed by a response very similar to this:

WHO CARES, JUST LOCK UP MIKE TROUT NOW!!!

It’s understandable, given the fact that Mike Trout is the unquestioned best player on the star-laden Angels and, at 22, may already be the best in all of baseball. The Angels, however, have not begun extension talks with Trout, sources confirmed, and were never expected to with arbitration still a full year away.

Why?

It’s all about the Competitive Balance Tax payroll.

Let me try to explain. There are two different types of payroll. There’s the actual team payroll, which is what the active players are making in that season. And then there’s the CBT payroll, which is the payroll Major League Baseball uses to tax teams that go over a certain threshold. For the Angels — and the Yankees, and all of the teams that spend big on their roster — the latter is the most important.

The CBT payroll is calculated as the average annual value of all player contracts on the 40-man roster, plus benefits.

So, for example: Albert Pujols is making $16 million in 2013, which counts towards the Angels’ payroll figure. With regards to the CBT, though, he’s making $24 million — the average annual value of the 10-year, $240 million contract he signed in December 2011.

How does this relate to Trout?

Well, let’s say the Angels sign him to a 10-year, $300 million deal (that’s just a number I’m throwing out, basically because it’s easy to divide — and perhaps because I’m thinking of Robinson Cano). Even if in that contract, Trout is making only $1 million in 2014, the figure for the CBT payroll would be the AAV of that: $30 million.

And by that point, you can forget about adding any pitching to the roster.

The CBT threshold — the number at which first-time offenders are charged a tax of 17.5 percent — is going up from $178 million to $189 million this offseason. That buys the Angels a little extra wiggle room, but they’re still awfully close to that figure. So close, in fact, that it’ll affect whether or not they extend the qualifying offer to Jason Vargas, a figure that’s close to $14 million and would allow the Angels to receive Draft-pick compensation if he signs elsewhere. If Vargas takes it, they’d basically already be over the luxury-tax threshold.

Here’s what’s in the books for the Angels in 2014 (the first number is what the player will make that season and the second is the AAV that counts towards the CBT payroll) …

Albert Pujols: $23M, $24M
Vernon Wells (to the Yankees): $18.6M, $18.6M
Josh Hamilton: $17.4M, $25M
C.J. Wilson: $16.5M, $15.5M
Jered Weaver: $16.2M, $17M
Howie Kendrick: $9.7M, $8.375M
Erick Aybar: $8.75M, $8.75M
Joe Blanton: $7.5M, $7.5M
Chris Iannetta: $4.975M, $5.18M
Sean Burnett: $3.875M, $4M

That adds up to $126.5 million in payroll commitments, and just under $134 million for the CBT. But we’re not done. Not even close. There’s also the pending arbitration cases for eight players: Peter Bourjos, Ernesto Frieri, Juan Gutierrez, Tommy Hanson, Kevin Jepsen, Chris Nelson, Mark Trumbo and Jerome Williams.

A rough — very rough — estimate for what that would amount to: $25M (though Hanson, Williams, Nelson and Gutierrez are all non-tender candidates).

Then there’s the 25 or so other players on the 40-man roster that you have to pay (a little more than $500K each), and then there’s the benefits and bonuses for all of them, which is a rough estimate of $10M. And that puts the Angels pretty close to that $189M figure.

If you add a Trout extension, to a payroll in which Wells will be the second-highest-paid player, then they’ll have to shed payroll.

So, the logical question is: What’s the rush?

Alden

* thanks to Cot’s Contracts for providing all the info

12 Comments

I think fans are just paranoid that the longer the Angels wait, the more likely Trout will jump ship for Philly or New York. If they let arbitration play out, do you think that will adversely affect Trout signing long-term?

With 20+ bWAR to his name before the age of 22, it’s certainly possible that Mike Trout could:
a) Get even better during his age 22-25 seasons, making $300 million or more a real possibility
b) Get tired of playing for a team with aging stars, tough playoff odds and little payroll flexibility (the Angels don’t reach < $100 million in guaranteed contracts on the books until 2017, Trout's last arbitration year)
c) Remember that he's a Philadelphia Phillies fan

So yeah, if I were an Angels fan, I'd worry that every day without a contract offer to Trout makes it slightly less likely that he'll be willing to negotiate when the time is right for the team's finances. That said, four plus years also gives the Angels plenty of time to develop players from the farm system, just as the Yankees and Phillies will need to do in order to attract free agent talent in the future given both teams are a mess.

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I think Trout questioning where he should buy a house would be a red flag for the Angels. They don’t have deal anything right now, but at least talk to the guy and let him know your intentions. Make him feel wanted and you wanting to make him the face of the organization. “Mike, here’s what were doing. We have to shed some payroll and make some changes. Our intent is to keep you long term and offer you a favorable contract. Give us some time to work things out and we can come to a deal that will benefit both of us.” Hmm..Then he’ll know where to buy a house.

Aaaaand then he gets a career ending injury, so guaranteeing him nothing for ever

The real issue is the entire team and fans are paying for two large contracts that Arte chose to sign to help the marketing of the team and not for strong baseball reasons. Don’t add another dumb decision to the mix by ignoring your best baseball talent and most marketable talent and give him any reason to chose to leave in 4 years. Pay the high salary for someone that is going to contribute to the Angels not for someones previous contribution to another team.

Translation: The bad deals to Hamilton and Pujols are killing Trout’s ability to get paid!
BD

Way to be on the books for Blanton, Iannetta and Wells. That is 31.28 million towards the CBT number. Then throw in another 25 million for Hamilton and you have handcuffed yourselves from locking up the best player in baseball.

If we’re close to $189M and extend Trout at, say, 10/200, isn’t that $3.5M in luxury tax for 2014? (Sure, $3.5M is a lot, but not if we avoid a year of Trout pining for the East Coast.)

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A consensus building here (http://the-mike-trout-sign-o-meter.com/) is that Trout will sign with the Yankees for 10 years and $290MM+. The Angels will find a way to not sign him.

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