The New CBA is… Friendly to the Yankees?

Well, certain parts of it could be, anyway. Some of the biggest financial ramifications for the Yankees come in the form of the Competitive Balance (aka Luxury) Tax provisions. The luxury tax functions so that teams who spend more on payroll than the “threshold amount” laid out in the CBA pay a steep tax on the difference between their payroll and this threshold. The threshold in 2011 was $178M, meaning that the Yankees, with a $202.7M payroll, paid the luxury tax on the $24.7M difference. At a rate of 40% (for being “repeat offenders”) the Yankees paid a total of $9.88M in tax. Under the new CBA, the threshold will remain at $178M in 2012 and 2013. The threshold will rise to $189M for 2014-2016. However, the tax rate will increase, and the Yankees will now pay a 50% rate rather than the previous 40%. But while the tax rate will go up, the increased threshold in 2014 could mean that the Yankees end up paying less in luxury tax provided that their payroll remains steady around the $205M mark. In fact, so long as the Yankees keep their payroll under $208.7M, they will pay less under the 50% rate in 2014 than they did in 2011 under the 40% rate. Also (and this is a long-shot), should the Yankees payroll fall below the threshold at any point, their tax rate the next time they exceed it will be a mere 17.5%. Of course, the chances of that happening are slim.

Another huge provision of the new CBA that won’t necessarily benefit the Yankees (but certainly won’t hurt them as much as it will hurt other teams) is the slotting system in amateur draft compensation. The CBA stops short of instituting a hard-slotting system, but the punitive nature of the financial penalties for exceeding the recommended signing bonuses all but creates a hard-slotting system. According to the new CBA, “Clubs that exceed their Signing Bonus Pools will be subject to penalties as follows:”

Excess of Pool Penalty (Tax on Overage/Draft Picks)

  • • 0-5% (75% tax on overage)
  • • 5-10% (75% tax on overage and loss of 1st round pick)
  • • 10-15% (100% tax on overage and loss of 1st and 2nd round picks)
  • • 15%+ (100% tax on overage and loss of 1st round picks in next two drafts)

The Signing Bonus Pool for a given team will range in size from $4.5M-11.5M, depending on how many draft picks a club has. For low-payroll teams like the Rays, Royals, etc. that rely on the amateur draft and development of young talent to be competitive, these financial penalties will have a huge negative impact. Not to mention the impact it will have on recruiting talent when multi-sport prospects are faced with the choice between MLB and the NFL or NBA, and realize they can get a larger contract outside of baseball. Overall, the draft compensation provision looks to be bad for baseball.

Below are other notable changes implemented by the new CBA, in short form:

  •  A second Wild Card will be added to the playoffs no later than 2013, and possibly as early as next season.
  • Daily interleague play will begin in 2013.
  • Active roster limits will be expanded to 26 players for certain doubleheaders.
  • Players, managers, and coaches will no longer be able to use smokeless tobacco products during interviews and appearances. Also, when fans are allowed in the ballparks, tobacco products must be “concealed.”
  • A new protective helmet will be mandatory for all players beginning in 2013, and is designed to protect players from pitches up to 100 MPH.
  • Beginning next season players will be subject to HGH blood testing, but only for “reasonable cause” during the regular season. Players may be subject to unannounced testing during the offseason.
  • Players who are selected to the All-Star Game will be required to participate in ASG festivities unless they are injured or are given explict permission from the Commissioner excusing them from the event. (This is kind of a shame, because from a blogging standpoint the revolving door of All-Stars in 2011 was a lot of fun.)
  • Instant replay might be expanded to included fair/foul balls and “trap” plays, provided that the World Umpire’s Association doesn’t veto it.
  • And finally, there will now be a “Social Media policy” that governs all players. Seriously.

Of course, the above provisions are just the tip of the iceberg, and the true impact of the CBA will be felt long into the future. For full terms of the 2012-2016 CBA, check out Maury Brown’s rundown over at The Biz of Baseball.

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