FanPost

Who will be hurt by the new CBA's Signing Bonus Pools?

The Signing Bonus Pool system contained in MLB's new CBA has been much discussed since its announcement last Tuesday. In particular, there has been some hand-wringing around here over the possibility that the new CBA will stifle the Royals' ability to stockpile minor league prospects by offering over-slot bonuses in the early rounds of the draft. The Royals and Pirates have been widely cited as the two teams most likely to be affected by the new rules, largely because the Royals and Pirates have be widely credited as the most aggresive teams in offering over-slot signing bonuses. The logic of that last point, however, is based mostly on the raw dollar-figures offered to draftees. But the Royals and Pirates have been cellar-dwelling for quite a while now, meaning they consistently hold some very early picks in the draft. If draft position is taken into account, are the Royals and Pirates really that aggressive with over-slot bonuses?

In order to answer that question, I decided to apply the Signing Bonus Pool retroactively so see who would have been "over-slot" in the last five drafts (i.e. 2007-2011) under the new system. This required a little bit of conjecture, since the actual slot amounts for the 2012 draft have not been made public. Some details have been reported, however, and I've based my numbers on the available tidbits. First, we know that the effective "slot" for every pick after the tenth round is $100,000 because that detail is in the published summary of the CBA itself. We also know, via Jon Heyman, the amounts allocated for the first through sixth, as well as the thirtieth pick. For present purposes, it is sufficient to note that the first pick will be assigned a bonus of $7.2M and the thirtieth will be allowed $1.6M. Finally, we know that clubs spent a total of $228 million in bonuses last year, and Jim Callis reports that the total pool for all teams in the new CBA is expected to be in that neighborhood. (If all of these details are true, BTW, the Signing Bonus Pool will actually be quite generous compared to the slot recommendations that have come out of the Commissioner's Office for the last several years.)

In order to predict the actual "slot values," we just need a rational allocation that starts out at $7.2M, drops to $1.6M around the thirtieth pick, and levels off at $100,000 somewhere around the 300th pick (i.e. the end of the tenth round) and produces a total of bonuses in the neighborhood of $200M. The following formula produces an exponential curve that fits the bill pretty nicely:

bonus_slot_allocation = ($8,600,000 * overall_draft_rank ^-0.305) - $1,400,000

Once you have that in place, you can calculate the individual slot values and add up the individual slots to determine a team's Signing Bonus Pool. We also know the draft order from each of the last five drafts, as well as what each team actually spent in bonuses over the last five years. (These numbers, however, do not include money allocated to big league contracts... more on that later). It would be fun to do this exercise for each year individually, but I didn't find actual signing bonus numbers for individual years. As a result, I'm going to analyze the five years from 2007-2011 as a block using the Baseball America numbers linked above.

Combining all of this information, I calculate that, under 2012 rules, the Rays would have had the highest total Signing Bonus Pool over the last five years, at $55,156,000. (Remember how they seemed to have every pick in the draft last year? Those picks add up). At the other end of the spectrum are the Yankees, who spent a good chunk of the last half-decade giving up their early picks by signing everyone else's Class-A Free Agents. As a result, the 2012 CBA rules would have limited the Yankees to spending a mere $24,598,400 in bonuses on draftees over the same timeframe. Everyone else falls somewhere in between those two poles (the Royals "cap" for the last five years would have been $41,655,700).

Comparing these numbers to the actual amounts paid out by each team in signing bonuses reveals that only 7 of MLB's 30 teams actually exceeded their total Signing Bonus Pool for the past five years. Here are those seven teams sorted in descending order of the percentage by which they exceeded their signing bonus allotment.

Calculated Five-Year Bonus Pool

Actual Bonuses

(2007-2011)

Amount "Over"

Overage Percentage

Yankees

$24,598,400

$33,699,000

$9,100,600

37.0%

Red Sox

$36,165,800

$44,097,250

$7,931,450

21.9%

Tigers

$28,200,600

$31,269,200

$3,068,600

10.9%

Royals

$41,655,700

$45,204,900

$3,549,200

8.5%

Indians

$30,635,000

$33,179,300

$2,544,300

8.3%

Orioles

$38,474,600

$41,219,700

$2,745,100

7.1%

Pirates

$48,712,100

$52,057,400

$3,345,300

6.9%

As you can see, the Yankees (not the Royals or Pirates) topped the list by spending a staggering 37% more than they would have been allocated. If they "overspend" that much in any future year, the overage will be taxed at 100%, and they have to give up their first round pick in each of the next two drafts. The Red Sox, at an also quite impressive 21.9% over, would be in the same boat.

You probably already know this, but it is still worth pointing out that, from 2007 to 2011, those were the two biggest-revenue teams in the game (Yankees: $320.8M, Sox: $258M).

The Tigers came in third, spending 10.9% over the pool amount. That would result in a 100% tax in their overage and the loss of both a first round and second round pick in a subsequent draft. The four remaining teams (including the Royals and Pirates) fall in the 5-10% range that would result in a 75% tax and the loss of one draft pick. And the Royals are actually the highest ranked "low-revenue" team on this list.

Obviously, teams are likely to alter their behavior once the new rules are applied, but looking at how those rules would have applied retroactively suggests that the currently-popular narrative that the Royals and Pirates are MLB’s signing bonus "big-spenders" might not be quite accurate. Both teams do make the list of "over-spenders," but neither is the most aggressive on the list. And, in fact, high-revenue franchises claimed the top three spots.

Finally, it should be noted that Major League contracts given to draftees (which are forbidden in the new CBA) are not accounted for in this data. That's a bit of a tricky issue, since ML contracts can be structured in different ways, and it gets dicey trying to account for the value of things like team options, etc. For intance, the Yankees gave Andrew Brackman (30th overall, 2007) a $3.35M signing bonus, but also gave him $4.5M guaranteed in a ML contract that also had options that could have taken the deal up to a total of $13M if they hadn't granted him free agency this offseason. As a result, I decided for the sake of simplicity to leave ML contracts out of this post. It should be noted, however, that if I had done so (and regardless of the method I used to value those contracts), the Nationals would surely have made this list with numbers similar to the Yanks and Sox. (However you slice it, the MLB portions of the deals for Harper and Strasburg total in excess of $10M). The Tigers' numbers would also jump into that same range because of the contract given to Porcello. The Rays and Mariners have also given out some significant ML contracts (Price, Ackley, Hultzen), but neither of those teams would have made this list, even if those amounts were included in the calculation.

We'll have to see how the new CBA plays out, of course. I have no doubt that Scott Boras is combing the terms of the agreement for loopholes at this very moment. But I also think it's a dramatic over-simplification to say that these new rules will hurt only small-market or low-revenue teams. The CBA also includes some new features that will benefit those teams. The overage tax, if collected, will go to low-revenue teams and the "Competitive Balance Lottery" will distribute some extra picks to low-revenue and small-market teams (and, perhaps more imporantly, it looks to me like those extra picks will have a significant effect on the Signing Bonus Pool itself, since picks in the 30-50 range will have to have a slot allocation in the $1M range). And, the dual points of the whole Signing Bonus Pool system are to lower the cost of signing bonuses overall while encouraging the teams with the highest picks to actually draft (and sign) the best available talent.

As I commented in the first thread on this topic, there are a lot of moving parts to understand in the CBA. Running these numbers helped me pin one of those parts down long enough to get a good look at it.

This FanPost was written by a member of the Royals Review community. It does not necessarily reflect the views of the editors and writers of this site.

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