Alex Rodriguez’s contract is the albatross that keeps on giving, with five years and $114M still to go after this season. To make matters worse, the deal also includes five homerun-based historical bonuses that could begin to rear their ugly heads as soon as this season. With the Yankees looking to tighten up the payroll in the coming years, we’ve been assuming those bonuses would create a headache at some point. That may not be the case, however. Courtesy of Jayson Stark…
Officials of both MLB and the union confirmed to Rumblings that baseball has now banned future personal-service deals and all milestone bonuses. Rob Manfred, MLB’s executive vice president for economics and league affairs, said both issues had become a growing concern. So once the offseason signing dust had cleared, owners and players agreed that it was time to step in and spread word that contracts containing those perks would no longer be approved.
So what’s the big deal, you ask? The closer you hone in on this, the more obvious it becomes why these arrangements raised eyebrows.
The “milestones” payouts, for instance, appear to violate baseball’s longtime ban on bonuses for virtually all statistical achievements. A-Rod’s 2007 contract with the New York Yankees disguised his bonuses as “marketing” money. But “the more they looked at it,” said a source who was briefed on MLB’s thinking, “the more they realized what it was. … He was getting paid to achieve those milestones.”
Finally, there’s one objection the commissioner’s office would seem to have to both of those creative wrinkles: Because those payouts are not regarded as guaranteed money, teams potentially could use them to avoid luxury-tax bills. And why do we suspect Bud Selig just totally hates it when that happens?
Unless I’m misinterpreting Stark’s article, A-Rod’s homerun milestone bonuses will not count towards the luxury tax. Signing bonuses, awards bonuses, and playing time bonuses do count towards the tax, but apparently not milestone bonuses. Alex will get $6M each for his 660th, 714th, 755th, 762nd, and 763rd career homers. He’s at 631 career dingers right now.
Obviously, this is pretty significant news as far as the 2014 payroll plan is concerned. The Yankees are aiming to get under the $189M luxury tax threshold that season, and now they don’t have to worry about A-Rod reaching one (or more) of those milestones and eating up payroll space in a given year. That $189M was really $183M or even $177M because they had to leave some payroll space in case Alex earned some of his bonuses, but now it doesn’t matter. Again, it’s pretty significant and good news. Six million bucks may only be ~3% of the payroll, but it sure does buy on a big league roster.