Phillies should be able to spend in short term

Saturday as the Phillies face Pittsburgh in their second game of the season. DAVID M WARREN / Staff
Saturday as the Phillies face Pittsburgh in their second game of the season. DAVID M WARREN / Staff (Cliff Lee will get the start)
Posted: April 07, 2012

PITTSBURGH - The $50 million closer yelled, slapped the right hand of the $9 million catcher and pointed at the $18 million third baseman. A win for the $60 million pitcher had been preserved, and another Phillies opening day was complete.

Life as spending kings of the National League produces a scene like such: The Phillies, lugging $38 million in 2012 salary on the disabled list, defeated a Pittsburgh Pirates team with a $54 million total payroll.

The Phillies will outspend every team in the NL once again, with the next-closest team being about $50 million shy of their payroll. But as player costs have risen and a new collective bargaining agreement changed certain rules, top Phillies officials have cautioned there is a limit, questioning their ability to retain coming free agents and willingness to make a midseason trade if necessary.

There are those who take a different perspective.

"For a team like the Phillies, it's a better setup," said Michael Weiner, the executive director of the Major League Baseball Players Association.

This winter, the payroll boundary often cited by Phillies executives was $178 million, or the current threshold for paying luxury tax. Using calculations from the opening-day roster, the Phillies currently sit above that mark with approximately $184 million in payroll as recognized by MLB.

The official payroll is not computed until the end of the season, so there is no guarantee the Phillies are penalized, but it's likely. The majority of payroll comes from the average annual value (AAV) of every contract on the 40-man roster plus medical benefits and performance bonuses.

If the Phillies do eclipse the $178 million barrier, they would be subjected to a tax of 20 percent on every penny over the limit. In addition, under the new CBA, teams that exceed the tax limit are not eligible for a refund from their revenue-sharing contributions.

Thus, the team has publicly stated its goal of $178 million. Yet in previous seasons, the Phillies have set spending barriers only to bypass them.

Weiner, whose job is to act in the best interest of the players, said the new system offers short-term incentives for teams such as the Yankees and Red Sox to lower payroll, because they have previously paid luxury tax and are subject to punitive penalties.

But for a team such as the Phillies, there is more incentive to spend right now, Weiner said. The tax rates are low, and the possible revenue-sharing rebate is marginal.

"If they do decide to bump over this year or next year when the threshold stays at $178 million, they are facing a lower tax rate," Weiner said. "When the threshold goes up in 2014, if they stay below, they can increase their payroll by $10 million and zero out. And they would have a lower tax rate and more revenue dollars to spend."

The new CBA offers amnesty for a taxed team that dips under the threshold for one season. So if the Phillies exceed $178 million in 2012 and 2013 but stay below the new limit of $189 million in 2014, the short-term financial penalties are not significant.

Revenue sharing forces each team to pay 31 percent of their local net revenue into a pool divided up and distributed among every team. But now, the top 15 biggest markets are no longer eligible for any revenue-sharing money.

Still, only four of the 15 largest markets benefited from revenue sharing under the old system. (The Phillies were not one.) And the rebate is being phased in; it's 25 percent in 2013, 50 percent in 2014, 75 percent in 2015 and 100 percent in 2016. Weiner suggested the rebate pool could initially be around $10 million, split among 12 or so teams. Later, the figures could rise.

In other words, during the first few seasons of the new system, the Phillies do not stand to risk a great deal in penalties. Team president David Montgomery has said on numerous occasions he views paying luxury tax as more than a one-year punishment. That will be true, especially if the Phillies cross the limit on an annual basis.

But last summer, as the Phillies approached it, assuming more salary via a trade was deemed acceptable.

"We do whatever it takes," Montgomery told The Inquirer four days before Hunter Pence was acquired. "If there's an opportunity, we'll make adjustments."

Of course, that adjustment was securing a payment of approximately $2 million from Houston as a part of the trade for Pence. That money, in addition to almost $11 million received from the Astros in the Roy Oswalt trade, allowed the Phillies to barely avoid exceeding the luxury tax threshold in 2011.

There are costs on the horizon; the obvious being Cole Hamels. The Phillies are confident in their ability to retain the lefthander. But also keeping Shane Victorino and Pence, two more players nearing free agency, will be difficult. The luxury tax limit, however, is not the restriction.

Ruben Amaro Jr. has brokered a major trade deadline deal in each of his three seasons as general manager. If that is again the case in 2012, the Phillies will reach financial territory never before achieved by any National League ball club.


Contact Matt Gelb at mgelb@phillynews.com or follow on Twitter @magelb.

|
|
|
|
|