2012 Draft: Working with the draft poolBy
The new Collective Bargaining Agreement has changed pretty much everything about the draft. The signing deadline moved up a month (which is a good thing), draftees can now only sign minor league contracts, and teams will be give a soft spending limit, a.k.a. the draft pool. As we found out on Monday, the Yankees will have $4,192,200 to spend on the first ten rounds of this year’s draft, which includes eleven total selections because of the compensation pick for failing to sign second rounder Sam Stafford last summer.
Aprroximately $4.2M for the first eleven players in the draft really isn’t all that much; the Yankees spent just over $5.03M on their top eleven selections last season without signing Stafford or tenth rounder Jonathan Gray. Like everyone else, they’re going to have to get a little bit firmer during negotiations to avoid the harsh penalties associated with exceeding the draft pool. That said, there are some creative ways to not necessarily circumvent the cap, but to maximize spending ability.
“Buying” More Cap Space
The draft pool is a soft cap; teams are allowed to spend more than allotted as long as they face the consequences…
- Exceed by 0-5% — 75% tax on overage
- Exceed by 5-10% — 75% tax on overage and forfeit next year’s first round pick
- Exceed by 10-15% — 100% tax on overage and forfeit next year’s first and second round picks
- Exceed by 15% or more — 100% tax on overage and forfeit first round pick in next two drafts
- Any tax money paid or draft picks surrendered is redistributed to clubs that did not go over their tax pool.
Based on the penalties, teams can essentially “buy” an extra 5% of draft pool money as long as they’re willing to pay the 75% tax. For the Yankees, this would mean increasing their draft pool from $4,192,200 to $4,401,810. That doesn’t sound like much, but an extra $209,610 can go a long way in the draft. The cost of “buying” that extra $209,610 would be $157,207.50 in tax. That’s $157,207.50 of real money, money the Yankees wouldn’t be able to use elsewhere. So while it’s easy to say they should “buy” the extra draft pool money, it’s not necessarily that cut and dry.
I don’t think any team would ever actually “punt” a high draft pick — meaning select a player with no intention of signing them — but the new Collective Bargaining Agreement protects against it anyway. If a team fails to sign a player taken in the top ten rounds, they lose the draft pool money associated with that pick and can not reallocate it elsewhere. You can’t just not sign a guy and give the money to other players. You can draft college seniors and given them small bonuses though, and use the savings elsewhere.
Seniors are usually afterthoughts on draft day. Sure, every once in a while there’s a college senior who is a legitimate prospect (Matt LaPorta and Adam Warren come to mind), but most of them are fringy prospects or organizational players. If they weren’t, they would have been drafted as a junior and offered a sizable bonus. Seniors are usually drafted late and given small signing bonuses, typically a few grand. The Yankees have drafted and signed seniors like Zach Arneson, Pat Venditte, and Matt Tracy for under $20k each in recent years.
Rather than wait until later in the draft to grab some seniors to fill out minor league rosters, a team could take one or two of them in the ninth or tenth round to save draft pool space. Signing them quickly for $25k or so puts more money in the player’s pocket than he would have gotten otherwise and frees up quite a bit of draft pool money to use on players drafted earlier. Slot money after the fifth round used to be a max of $150k, so signing two seniors in the ninth and tenth round for $25k each gives the club another $250k to use elsewhere, assuming that $150k remains in place. At some point this spring I’ll look at some college seniors that could be potentially useful both as prospects and draft pool pawns.
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The new spending limitations are going to change the draft pretty drastically. Players will be drafted based on pure talent more than anything else, which wasn’t always the case in the past. The best players will come off the board first, and that hurts a team that drafts late every year like the Yankees. If you’re a contending team, you’re punished instead of rewarded. Go figure.