BY J.A. SCHWARTZ
The San Francisco Giants had called a press conference. They were set to introduce the new face of their franchise, Carlos Correa. After agreeing to a 13-year, $350 million deal with the shortstop, the Giants front office invited Correa and his agent, Scott Boras, out to San Francisco to show off their blockbuster acquisition.
After finishing second to the Yankees for the services of their previous priority Aaron Judge (who took a nine-year, $360 million deal from the Yankees instead of a similar bid from the Giants), President of Baseball Operations Farhan Zaidi was anticipating the spectacle to come, replete with cameras, a smiling Correa holding up a Giants jersey, and the palpable ascension of that elusive element of hope for his club. Less than twelve hours later, Boras had steered his client to the other New York behemoth, and Steve Cohen (while vacationing in Hawaii) authorized his Mets to add Correa, offering a 12-year, $315 million contract. The Giants were once again left standing alone at the altar.
The Giants postponed the press conference due to “a difference of opinion over Carlos’ physical examination,” as Zaidi explained in the aftermath. The Giants doctors couldn’t agree on some aspect of that physical (the Giants-and Boras-have not been specific about what part of Correa’s physical led to the concern, citing the player’s right to medical confidentiality), and when Boras applied pressure to execute the transaction, he was met with further requests for time to consider the issue. The agent pivoted, engaging with the two most ardent Correa suitors, the Mets and his former team, Minnesota, and within hours, had his client agreeing to the stunning deal with the Mets after the Twins could not justify increasing their last offer.
Cohen was succinct in his assessment of the deal. “We needed one more thing, and this is it.”
Carlos Correa’s gamble to sign a one year deal with the Minnesota Twins before the 2022 season paid off handsomely. The 28-year old shortstop just received a 12-year contract worth $315 million dollars to join the New York Mets.
During the negotiations for the collective bargaining agreement that governs the relationship between MLB owners and players, the lead negotiators from each side were battling over numerous aspects of the contract that would help define the parameters of competitive balance, a hot button issue. The owners themselves wanted protection against a “rogue element” from within their ranks who, in the service of improving his or her roster, would spend recklessly on player salaries.
The name for the highest level of the “Competitive Balance Tax” is referred to among industry insiders as “The Steve Cohen Tax”, after the New York Mets owner who announced his intention to spend aggressively to build a championship club in New York after purchasing the Mets for $2.4 billion in early 2021. A threshold had been established for the 2022 season, with the least punitive penalties (taxes) applied to those franchises whose payrolls exceeded $230 million, with increasing revenue penalties for those who exceeded $250, $270 and $290 million levels. A single franchise, the New York Mets, exceeded the “Cohen Tax barrier”, spending $299 million on their 2022 roster, costing them an additional $30 million in luxury tax fines for their financial largesse. In 2023, the ambitious Mets owner vowed to disregard the “Cohen Tax” completely and has acted accordingly thus far this winter.
Since the season ended, Cohen’s Mets have spent $806 million in new player contracts, signing (to date) nine free agents to augment a roster that tallied 101 wins in 2022. Their payroll, at the moment, sits at $384 million for the 2023 season, the highest in the history of the game.
The “luxury tax” that Cohen and the Mets will incur due to that bloated figure is approximately $111 million, which is more than ten teams will invest in their entire payrolls for the coming campaign. The total cash outlay for the 2023 version of the Mets, including the tax, will approach $500 million. The Dodgers paid roughly $350 million for their club in 2022.
The price of fielding a winning team in the major leagues is spinning out of control, but nobody in New York is complaining. Seeing the contracts and salaries offered to free agents this winter must make the owners in Pittsburgh, Oakland and Tampa Bay feel helpless, knowing they’ll never be able (or willing) to compete for elite talent in the game from a financial standpoint. The gap between the highest spending teams and the lowest is widening rapidly, and even the best intentions of the owners to put a check on their own spending via the Competitive Balance Tax has proven to be an ineffective deterrent to those clubs hell-bent on winning titles.
The massive contract frenzy isn’t limited to the Mets. The Yankees made headlines by re-signing Aaron Judge, the 2022 AL MVP, to a nine-year $360 million deal, and then found room to add ace starter Carlos Rodon on a six-year, $162 million pact. All told, the Yankees have spent over half a billion dollars themselves on new contracts this winter, yet they can’t seem to make enough of a splash to push Cohen’s Mets off the back pages of the New York dailies. The San Diego Padres, who ranked 25th in the majors in payroll ($50 million) as recently as 2018, have invested heavily in expensive talent over the past three seasons, and finished 2022 over the lowest luxury tax threshold for the second straight season.
The Padres advanced to the NLCS this past season, losing to the Phillies in five games, and owner Peter Seidler, the patron saint of the Friar Faithful, got his checkbook out again this winter. They’ve signed five free agents (Nick Martinez, Robert Suarez, Seth Lugo, Xander Bogaerts and Matt Carpenter) and now have a luxury tax payroll figure of approximately $267 million, exceeding the first two thresholds of the table with no signs of slowing down. All this spending is great for the players, but it begs the question: Is it good for baseball?
The seemingly limitless budgets of some of the bigger market franchises has been a boon for elite players, who must be thrilled at how this offseason has played out. Multiple contracts of more than a decade in length have already been offered and agreed to this winter, and there are now both position players and pitchers who will earn at least $40 million salaries in 2023 and beyond.
When the salary scale increases at the very upper end, every other player (at least those eligible for arbitration or free agency) should see their relative value increase as well. The phrase “a rising tide lifts all boats” may well apply in such a case, so when spending by baseball owners and GM’s building their rosters escalates, the players in the average-to-good category (vs. the truly elite) should also see a benefit from a compensation perspective.
The unprecedented levels of spending by clubs this winter also tickles the fancy of baseball fans around the country. Those partisans in New York, San Diego and Philadelphia may feel like they have more expensive presents under their trees than ever before, and it’s difficult to imagine that they might view that as anything but glorious.
It can be argued that baseball acolytes in smaller markets like Oakland, Pittsburgh and Cincinnati might feel doomed to watch the best and brightest stars on their roster depart to clubs with deeper pockets and the willingness to pay the going rate, relegating their teams to seasons without any hope of reasonably competing. Pirates, A’s and Reds fans are very familiar with that sentiment. However, those who cheer for teams in smaller markets need not resign themselves to a lifetime of competitive futility. A change in leadership and/or club ownership can have a dramatic impact on the ability of a franchise to invest in the product on the field.
Within the past five years, changes in the executive structures in Philadelphia, Texas, Detroit and San Diego have led those clubs towards new levels of spending and have already had positive impacts on the on-field performance for the Padres and the Phillies, who battled in the 2022 National League Championship Series. Even though the Tigers and Rangers haven’t seen their increased willingness to spend on new players translate into more wins, their leadership was willing to do so, forecasting that their additions would help guide them towards more success in the near future. Detroit added more than $200 million in free agent contracts to their books after the 2021 season, a figure that was dwarfed by the $561 million spent by the Rangers last offseason. Texas tacked on another $230 million upgrading their pitching staff this winter, making it clear they have every intention of pushing for a playoff berth in 2023.
When teams like the Mets can spend without regard for any of the structures built into baseball’s system that governs payrolls, does that assure them of success? You might be surprised to learn that since the 2001 season, the Mets, Yankees and Dodgers (three franchises who have had the highest payrolls in the game during that period) have won just two World Series: the Yankees in 2009 and the Dodgers in the truncated 2020 campaign.
Just last season, Houston won the World Series with the ninth highest payroll in the game, and the postseason included three teams (Seattle, 21st, Tampa Bay, 23rd, and Cleveland, 27th) with budgets that were all nearly $100 million less than the top echelon of teams (led by the Mets at $294 million). In 2021, the Atlanta Braves won it all with a payroll that was only the 11th highest in the game. However, spending does seem to give teams a better chance to make the playoffs, even if there are outliers every season who manage to crash the dance with low payrolls (the Rays are notoriously excellent in this regard, earning multiple playoff berths in the past several years with bottom ten payrolls). In 2021, seven of the top ten spending teams made the postseason, and this past season, it was nine of the 12 highest payrolls in the new playoff bracket. What is also clear is that having a payroll in the bottom five almost always assures not being very competitive, and smaller market teams tend to cycle through periods where they are rebuilding and carry very meager financial obligations as they try to repopulate their roster from their minor league system.
The Mets and Cohen have obliterated the record for the most expensive free agent spree in history this offseason (and we’re still three months from Opening Day!). Their payroll will almost certainly be nearly $100 million more than their nearest competitor. Their tax obligations will exceed the payrolls of a third of the league (and those teams who stay beneath the luxury thresholds will be receiving a portion of those proceeds). Recent history has shown that the teams with the biggest payrolls rarely win the World Series. Can Cohen buy a title? He’s certainly doing everything in his power to do just that, and his rabid fan base reveres him for the brazen audacity of his efforts.
