If indeed the Phillies have extended an offer of six years to Cole Hamels, as reported by numerous national outlets, a deal could be close. The sticking point, ever since spring training when the Phillies insisted on a Jered Weaver-type contract, has always been length.
John Boggs, Hamels' agent, has posited that his client be paid like an elite pitcher. In actuality, he was demanding the Phillies show a commitment worthy of an elite pitcher. They gave five years to a 32-year-old Cliff Lee and that immediately set the bar.
So, 11 days before a mythical deadline, the two sides may have finally reached common ground. The Phillies were always willing to pay Hamels an annual salary commensurate with their other aces, Roy Halladay and Lee. It will probably take something in the $24 million range yearly.
How would adding a salary like that affect the bigger picture? If anything, it increases the urgency to creep under the luxury tax threshold of $178 million in 2012. That would necessitate salary dumps like Shane Victorino, Placido Polanco and Joe Blanton.
More on that later.
If $24 million is Hamels' figure, the Phillies would commit $68 million to three pitchers in 2013 and approximately $137 million to 10 players for 2013. That is using average annual value (AAV) of contracts, the metric for accounting luxury tax commitments. (It is also assuming the Phillies exercise a $5 million team option on Carlos Ruiz.)
The Phillies have long maintained they do not want to pay a tax. (When Boston and New York are attempting to crawl under the limit, you know it's a big deal.) They avoided it by less than $1 million in 2011 and are most definitely over the $178 million limit in 2012. In addition to AAV for all uniformed players, there are other expenses that factor into the math. A boatload of injuries have forced the Phillies to sink a great deal of money into the disabled list in 2012. All of that goes toward luxury tax calculations.
If it's hard to see the Phillies staying under in 2012, it's nearly impossible to envision for 2013. The limit stays at the same level, $178 million, and Hamels would have a significant raise. (Even if the contract is backloaded in actual dollars, which it likely will be, the only important number is AAV.) Start at $178 million, subtract the typical $14 million in other expenses, then the $137 million for current commitments and that leaves $27 million for 15 (!) players. Heck, Hunter Pence could command about $14 million of that through arbitration.
But 2013 is the most logical season to surpass the luxury tax limit. If the Phillies can stay under in 2012, they would be taxed 17.5 percent in 2013 for every penny over and subject to fewer revenue sharing payouts. In 2014, the limit increases to $189 million. Once a team returns to non-offending status, the slate is wiped clean.
Penalties for repeat offenders, however, are punitive. If the Phillies go over in 2012, they are taxed at a 20 percent rate this year, then at 30 percent if over in 2013.
It's unclear how far above the threshold the Phillies currently are. The official calculations are not done by Major League Baseball until after the postseason. At opening day, The Inquirer roughly estimated a $184 million payroll for luxury tax purposes.
That's where salary dumps enter the picture. Victorino, Polanco and Blanton are impending free agents. It's unlikely any returns to Philadelphia. They are rental players in possible trades and would not command top prospects. So the Phillies could simply ask for salary relief from acquiring teams. Victorino's tax hit is $7.3 million, Polanco's is $6 million and Blanton's is $8 million. Prorated for two months, two of those players could save the Phillies almost $6 million in 2012 if dealt.
Save the money now, and there is less reluctance to be frugal in 2013. The wheels are put in motion with a Hamels contract. With 11 days, there appears to be real progress.
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