I understand that the CBA is expiring and the luxury tax system is up for grabs. For the purposes of this thread assume the luxury tax stays as it is currently calculated even if the total amount goes up.
For those that may read this but don’t know Major League Baseball, the current collective bargaining agreement contains a soft salary cap. The total player payroll amount is set each year. Teams can go over the cap but then they are “taxed” on the amount they go over. The penalty is the amount they go over plus a further penalty depending on how many years in a row they go over.
For this hypothetical let’s use Freddie Freeman. He will be a free agent (free man?) at the end of the season. I think it’s reasonable that he will be worth about $27 million a year for 5 years. At 32 a 6 year contract is pushing it but may happen.
So here is the question. The Braves are paying him $22 million a year. Let’s say they feel they can’t pay more than 25 a year. Other teams are willing to pay more. The Braves sweeten the pot by saying the day he retires they will give Freeman a 1% ownership stake in the team. Right now it looks like a face value of about $20 million but with the potential of becoming more valuable in the future and also the chance at yearly revenue.
Can something like that be done? How will that count against the cap?
This was something that was brought up with Pujols and the Cardinals back after the 2011 season.
Schedule A Rule 4.c of the Uniform Players Contract in the current Collective Bargaining Agreement prohibits any player from owning interest in the team.
They could do some crazy stuff like Mets did with Bobby Bonilla who signed for 29 million in 1991, and is getting paid until 2035. Link
I don’t know if such a contract is still an option under the current CBA. But teams have been creative in how they spread contract impacts and payroll.
He wouldn’t. In the hypothetical it is promised to him but does not happen until he retires. There is nothing saying former players can’t own teams (see Derek Jeter).
But was his ownership part of a contract agreement while he was a player? That’s the situation in the OP.
ETA: I think these are two totally different situations. One where a player buys a stake after the career is over and the other where a player is given an ownership stake as a type of compensation.
You stated a current player is not allowed to be an owner. Does the CBA specifically say anything about future ownership? Because whether it was obtain as compensation or through a purchase, in both cases the current player has no ownership stake yet. The CBA may say future ownership can not be offered as compensation but that’s not what you said.
The rule states players shall have no direct or indirect stock or interest in the club. I’ll let the lawyers argue over whether that allows for deferred compensation or not.
But that was long before the luxury tax or any other cap. I don’t know why the Mets thought paying him that much money over time was a good idea for a buyout but it had nothing to do with sneaking under a cap.
From a financial perspective, it was a good idea for the Wilpons because they were making 18% with Bernie Madoff. That part didn’t pay off very well…
From a baseball perspective, it opened up the books to sign Mike Hampton, who contributed heavily in 2000, when they went to the World Series. And when Hampton left as a free agent, they got 2 compensatory draft picks, one of which turned out to be David Wright.
Certainly. But it comes up often enough as if it were some massive front office blunder, when in reality it is far more nuanced.
Deferred ownership is functionally equivalent to a future option to buy at a highly discounted price. Owning an option to buy part of the club in X years is undoubtedly an ‘interest’ in the club.
Since there wasn’t a cap they didn’t really free up any money. That’s usually reserved for making cap space. There was nothing stopping them from paying Hampton more. Instead of giving Bonilla a $5 million buyout for the last year of his contract they will be paying him over $30 million over time. That helped no one but Bonilla.
Just because there wasn’t a cap doesn’t mean actual budgets don’t exist. If $5 million now doesn’t mean anything, then neither does $30m 10 years from now.
The Wilpons were notoriously cheap but this proves they weren’t particularly smart. Of course they had a budget and it was way too low for a team that made that much money.
They made the World Series the very next year, and the deal ended up letting them draft the greatest infielder in franchise history - I don’t know if “dumb” works here.
Which could have still happened while giving Bonilla the buyout upfront. Any spending limits were self induced. So the same exact thing would have played out with Hampton but they would have saved $30 million.
Yes, I’m familiar with the concept of a “budget”. When I have $10,000 in my checking account, but only budget $200/week for groceries, I understand that limiting myself to ribeye instead of filet mignon is a self-imposed situation. The Mets had the 7th highest payroll in 1999. An extra $5.9m puts them at 3rd. Could they afford it? Probably - I don’t really know. Neither do you. But I’m also familiar with the concept of the time value of money, and that the Bonilla deal costs far less than $30m to the 1999 New York office. About $11.25m at a reasonable 8% return. Now, the Wilpons thought they were getting an absurd 18% from Madoff, and that’s a different story. But like I said - teams do this all the time. Even teams that aren’t within any reasonable spitting distance of the luxury tax. And they do it because they have to operate under self-imposed spending limits, just like other businesses.