The new Collective Bargaining Agreement brought changes to the draft and the international markets, with the big changes being harsh penalties for teams who go over their allotted draft or international bonus pools. On the international market, if a team goes over their allocated pool, they would receive harsh penalties the following year, including a tax and the loss in the ability to sign expensive international free agents.
Ben Badler brought up an interesting way that some teams could exploit the CBA. There’s a chance that MLB could move to an international draft next year. If that happens, Badler notes that the penalties for going over the pool switch to the following.
**0-5 percent over pool: 75 percent tax on the pool overage.
**5-10 percent over pool: 75 percent tax on the pool overage. Team loses first-round pick in the 2014 international draft.
**10-15 percent over pool: 100 percent tax on the pool overage. Team loses first-round and second-round pick in the 2014 international draft.
**15 percent or more over pool: 100 percent tax on the pool overage. Team loses first-round and second-round picks in both the 2014 and 2015 international drafts.
The Pirates have $2,426,000 to spend in 2013-2014 on international free agents. It wouldn’t take much to go over that 15 percent mark. They’d only have to spend $2,789,900 or more to reach the maximum penalty, which would be a 100 percent tax and the loss of first and second round picks in the next two drafts.
Badler notes that contending teams could benefit from ignoring the penalties this year. He points out the Yankees and Rangers as examples of teams who probably won’t have a shot at top prospects if there’s a draft in 2014. Therefore, giving up top picks in that draft won’t hurt as much if they’re getting multiple top players this year.
The Pirates are contending right now, although we won’t know where they’ll end up by the time the international signing period starts. The international signing period begins July 2nd. The final standings obviously won’t come for a long time after that. So we won’t know if the Pirates will have a low pick when it comes time to sign players. If they feel strong about their chances of finishing with a winning record, and a pick that is 20th or later, then this might be a strategy to consider. Here are the things to consider.
**If they have a low pick, they’d be trading a pick around number 20-30 and a pick around number 50-60 in 2014. However, they’d also be trading the first and second round picks in 2015, so they’d need to be contending that year as well to make it worthwhile. Then they’d have to sign four 1st-2nd round talents this year to break even, in addition to guys who would be their “first and second round picks” this year. So they’d need to sign at least six top guys to make this worth it.
**There’s the cost to consider. If they’re signing six top guys, they’re going to be competing with a lot of other teams. Not only will you have to pay a lot of money, you’ll also have to pay tax on the overage. Let’s say they spend $6 M total. In reality that’s about $9.5 M total, since they’d be taxed on the overage.
**This year’s international class is considered weak, which is one reason why Tampa Bay spent big last year and gave up the right to sign anyone over $250,000 this year. It might be hard to find players this year who would be better than the 1st and 2nd round picks in 2014 and 2015, and at twice the price.
**The Pirates traditionally don’t spend on the top international free agents. Instead, they go for a “quantity of quality” approach. I say that because even though they go for quantity, the guys they’ve gone for have also been quality. Starling Marte signed for $85,000. Gregory Polanco signed for $75,000. Alen Hanson signed for $150,000. Dilson Herrera’s $220,000 looks huge compared to those guys. If they did go with this approach, they’d be putting all of their money toward a few big name players, and missing out on their bread and butter.
For the above reasons, I’m not sure it would benefit the Pirates to go all in during the 2013-14 signing period. However, Badler did mention the possibility that the international draft could include draft pick trading. That could be a route that the Pirates would want to take. They can draft the guys like Hanson, Polanco, and Herrera in the middle rounds, while still having the luxury of adding a top international free agent or two in the first round. The downside to an international draft would be that on the open market they could make Hanson and Polanco a priority in the same year, and get them both for very little. In a draft they might lose one or both of those guys.
It’s going to be interesting to see how things play out. First, it will be interesting to see whether there is a draft (the deadline for MLB to decide is June 1st). If there is a draft, it will be interesting to see what the rules are, and how teams could exploit those rules.
