April 1999Boston Baseball: Offseason Developments Affecting Red Sox Nation

Offseason Developments Affecting Red Sox Nation

If you were hibernating during the off-season, here’s some of what you missed:

1998 Sox pay luxury tax of $2,184,734. Although the final 1998 salary rolls showed the Sox in sixth place, for luxury tax purposes Boston’s payroll was second only to Baltimore’s.

The difference relates to the accounting treatment of multiyear contracts. For example, Pedro Martinez signed a six-year, $72.5 million contract before the 1998 season. For most purposes his 1998 compensation is computed as $7,575,000: his $7 million 1998 salary, plus $75,000 in earned bonuses and $500,000 as the pro-rated annual share of his $3 million signing bonus. But to keep teams from evading the luxury tax by back-loading most of a player’s salary into seasons after the tax expires, for luxury tax purposes MLB divides Martinez’s guaranteed dollars by the length of his contract. This yields an annual value of over $12 million/year, $4.5 million more than the Sox actually paid Pedro in 1998.

The same phenomenon affects Nomar Garciaparra’s contract. Because Nomar signed a long-term deal before becoming eligible for salary arbitration, his salary will rise from $600,000 in 1998 to $8,600,000 in 2002. Although he actually earned $1,075,000 last year ($600,000 salary, $400,000 pro-rated share of his signing bonus, $75,000 in earned bonuses), Garciaparra’s contract was valued at $4.5 million for luxury tax purposes.

Forbes values Sox at $230,000,000. The December 14, 1998 issue of Forbes concluded that the Red Sox were MLB’s ninth most valuable franchise, worth more than the New York Mets or either Chicago club. To no one’s surprise, the Yankees topped the list at $362 million, with the Orioles ($323 million) and Indians ($322 million) close behind. The Twins ($94 million) and Expos ($87 million) brought up the rear. Forbes estimated the Sox’ 1997 revenues at $92.1 million, eighth in the majors, with a profit of $7.7 million. The Colorado Rockies were MLB’s most profitable club in 1997, earning $38.1 million.

Harrington named co-chair of new economic study committee. Days after the Dodgers signed Kevin Brown to a record $105 million contract, Commissioner Selig created a new “Blue Ribbon Task Force on Baseball Economics.” John Harrington and Rockies owner Jerry McMorris will co-chair the task force, which includes representatives of 14 clubs and four outsiders: former Senate majority leader George Mitchell (once a leading candidate for Commissioner), former Federal Reserve chairman Paul Volcker (owners’ representative on a similar committee in 1992), columnist George Will (who, in a flagrant conflict of interest, sits on the boards of both the Orioles and Padres), and Richard Levin, the president of Yale University, who as a consultant to the owners developed their 1989 salary cap proposal.

Expect a hand-wringing, “small markets can’t compete” report with no lasting impact. The free-spending Yankees, Dodgers, Mets, Orioles, Braves and Diamondbacks were left off the committee, but their voices will be heard loud and clear when MLB debates the committee’s recommendations. Moreover, once the owners decide what they want to do, they still have to persuade the Players Association.

Sox disadvantaged by new twist in interleague play. This year’s interleague schedule includes an extra three-game series against a “traditional rival.” This gives Baltimore receives three more games against the hapless Phillies, while Toronto earns another series against the Expos -- and Boston gets to see more of the Atlanta Braves. If the Sox miss the playoffs by one game, blame the schedule.

In fact, quirks in the interleague schedule may already have determined a postseason berth. Last year the Cubs defeated the Giants in a one-game playoff to earn the NL wild-card, after both clubs wound up 89-73. The Mets finished one game back. During the regular season, however, the Mets played 16 games against the AL East, baseball’s strongest division (.538 winning percentage), while the Giants played 13 against the AL West (.499) and the Cubs faced 13 AL Central opponents (.465). If all three clubs had played equally difficult interleague schedules, the Cubs would likely have missed the playoffs.

MLB’s chief operating officer embarrassed by side deal with Clemens. While pressuring the Toronto Blue Jays to trade him, Roger Clemens revealed that at the time he signed with Toronto, he entered into a secret side agreement with Jays president Paul Beeston. This agreement gave Clemens the right to demand a trade whenever he thought the Jays were no longer competitive. Since MLB’s rules have long declared such secret agreements unenforceable, Beeston, who is now MLB’s #2 man behind Bud Selig, was profoundly embarrassed by this revelation. Not as embarrassed as the Sox will be if Clemens starts the All-Star Game in a Yankee uniform, though...

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