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Friday, August 30
Updated: August 31, 8:32 AM ET
 
Q & A: How the labor deal works

By Jayson Stark
ESPN.com

NEW YORK -- It began two days after Luis Gonzalez's World Series Blooper Heard Round The Desert, when Bud Selig stepped to the podium and announced, "We will contract."

It ended on the Friday before Labor Day weekend, with empty buses waiting outside Fenway Park for four hours to haul the Red Sox to the airport, with players all across America trying to figure out whether to head for the ballpark, and, finally, with Selig and Don Fehr both speaking in a hotel ballroom, quoting the Beatles.

Their long and winding road to baseball's first peace-age labor deal took 10 painful months. And we'll never know how much damage that journey did to the sport for which they swore their love. But in the end, they got a deal without a war. And Fehr predicted that ultimately, "This settlement will repair (any damage) and enhance the game."

Anyone who truly cares about baseball hopes he's right about that, of course. But did this labor deal really solve the problems Selig moaned about for all those months? Did it really achieve that competitive-balance mantra the commish and his legions chanted so relentlessly?

Let's take a look.

Q: How many teams would have to pay the luxury tax if it were based on payrolls today?

A: You practically need Paul Volckers to help calculate all those payrolls, luxury-tax style. But best we can figure, it would affect three teams -- the Yankees, Rangers and Dodgers. The Red Sox would have been the fourth, but the Mariners apparently got them off the hook by miraculously claiming Jose Offerman on waivers.

Q: So after months of anguish and sabre-rattling, all this agreement really affected was three teams? How will that help competitive balance?

A: Hey, we're not Nostradaumus here. No one will really know for four years. But it seems clear some teams won't be affected as much as it might seem.

Luxury Tax Projections
The amount of luxury tax each team would pay under the tentative deal agreed to by players and owners if their payrolls remained at the same figures that are estimated for 2002.

There will be a tax on the portions of payrolls over $117 million in 2003, $120.5 million in 2004, $128 million in 2005, and $136.5 million in 2006.

The tax rate for first-time offenders will be 17.5 percent in 2003, 22.5 percent in 2004 and 2005, and no tax in 2006.

Second-time offenders will pay a 30 percent tax in 2004 and 2005, and 40 percent in 2006.

Third- and fourth-time offenders will pay a 40-percent tax.

Luxury taxes expire on the final day of the 2006 season, meaning that if the sides play under the status quo in 2007, there would be no tax:

2003
Team, payroll, tax
N.Y. Yankees, $171.1M, $9.5M
Texas, $131.4M, $2.5M
Los Angeles, $118.8M, $0.3M

2004
N.Y. Yankees, $171.1M, $15.2M
Texas, 131.4M, $3.3M

2005
N.Y. Yankees, $171.1M, $17.2M
Texas, $131.4M, $1.4M

2006
N.Y. Yankees, $171.1M, $14.0M
The Associated Press

The Rangers were obviously determined to cut payroll next year anyway, so it won't affect them much. And the Dodgers are barely over the threshold, so it would take just some minor roster tinkering to keep their tax bill to a minimum.

But the Yankees are a different story. Between the tax bill and revenue sharing, this deal may even hit the Yankees hard enough to inspire them to sue. And with players like Derek Jeter and Jason Giambi who have long-term contracts, the Yankees will be the team most affected.

Of course, Boss Steinbrenner might regard that as some kind of challenge. But maybe the foremost goal many clubs had in this negotiation was to make sure the Yankees couldn't play by different rules -- by adding and adding to their payroll. And this tax at least addresses that, particularly if the Yankees exceed the tax threshold year after year.

The Yankees were already on the hook for a $30-million revenue-sharing tab. Now add in the tax, and that figures to inflate to more than $50 million. Even Steinbrenner will shudder when that bill comes in the mail.

It won't stop the Yankees from being good. But it will affect what one AL executive called the Yankees' "gluttony factor."

They can't sign everybody or trade for every team's most eligible money-dumpee anymore. And that's good. Good for the game. And good because it means teams might finally stop blaming the Yankees for all their problems.

Q. How about the other big-market teams that fall just under the threshold? Will this tax be incentive enough for them to curb spending?

A: Too tough to generalize. In some cases, it will. In other cases, the escalating tax rates for repeat offenders like the Yankees and lower rates for one-time threshold-crossers is creative enough to allow a team to take a one-year shot at winning with minimal tax consequences.

But a look at some of the teams barely under the threshold makes it appear they can adjust and stay below it without much trouble.

The Red Sox lead their league in prospective free agents anyway. So at least early on, they can make sure they hover beneath the luxury-tax radar screen easily. Where it can hurt them down the road is in Manny Ramirez's contract (he's signed through 2008) -- and in finding the bucks to hang onto Pedro Martinez and Nomar Garciaparra when their free-agent boats finally sail.

But other clubs don't have those worries. The Diamondbacks can jettison $18.5 million this winter simply by letting aging, hurting free agents Jay Bell, Todd Stottlemyre and Armando Reynoso walk. No-brainer.

And the Braves have enough free agents to give them the payroll flexibility to dodge the tax man, though the cost might be losing Greg Maddux if he won't stay for less money.

So in the end, though, it's possible even fewer teams will be affected by the tax next year than would be this year. But remember, baseball COO Bob DuPuy said himself that the goal of the tax system was to inspire no teams to pay it -- by spending less. And that could happen, at least to some degree.

Q. Yeah, but on the other end of the deal, there was no minimum payroll. So what guarantee will fans have that revenue-sharing money will be spent on making teams better?

A: That's a question every fair-minded baseball fan should be asking today -- and for the next four years.

For months, we've heard that the only thing that really mattered in these negotiations was more competitive balance. But in the end, nothing in this agreement requires teams to spend more money tomorrow than they did yesterday.

That isn't all the owners' fault, though. The players -- fans of capitalism that they are -- have always opposed minimum payrolls to stay consistent with their opposition to maximum payrolls.

The owners proposed a minimum -- but one so low it would have affected virtually nobody. And in the end, they didn't even get that out of the deal.

So if Carl Pohlad wants to spend his revenue-sharing check on the Twins' Christmas party, nobody can stop him. But the spirit and sheer volume of revenue sharing involed in this deal does give the world an open invitation to scream if he does.

DuPuy reminded everyone Friday that the owners unanimously passed a resolution last winter stating that their "goal" was more competitive balance. And he predicted the combination of that resolution and bigger revenue-sharing checks would inspire teams to use their money to "become more competitive."

But what guarantee is there of that? Zilch. Nada. Zippo.

Q: So if a team isn't required to use its revenue-sharing money on players, why wouldn't it just stuff the money in its checking account?

A: Because now fans will know it isn't the system's fault and demand better behavior.

By the end of this agreement, the wealthy clubs will have given the middle and small-revenue teams close to $1 billion in revenue sharing along. That doesn't even count any money those clubs will get from the luxury-tax pot.

So let's take a look at how that money would start to add up. Take a team like the Royals. Let's estimate they'll get $20 million a year in revenue sharing in this deal. Add another $25 million in national TV, radio and licensing money. That's $45 million in their money market fund before they sell a ticket.

Then suppose they draw 1.7 million fans. That ought to generate another $50-55 million. We're now looking at a team with close to $100 million in revenue all of a sudden. If a team with that kind of income cuts payroll to the low $40 millions, how can it then turn around and blame it on the system?

How, in fact, can any small-market or mid-market team blame the system four years from now after taking in $1 billion in big-market welfare checks?

"I hope they don't," DuPuy said. "I hope what ends up happening is that no team has an inherent advantage in developing better players or running their team better ... and that every club comes to spring training knowing that if things go right, they have a shot to get to the playoffs and the World Series. That's the objective of this deal."

In the end, though, it was all laid out there between the lines of the agreement, not in them. And that's a potential danger zone we should all keep our eyes on verrrry carefully.

Q: This deal provides for no contraction through 2006, but says the union can't fight it in 2007. Does that mean contraction is inevitable in 2007?

A: No way. All it means is that the players agreed they won't file any grievances to stop it. That doesn't prevent exactly what happened in Minnesota this year. Leasing authorities, team employees, stadium workers and season-ticket holders can still sue. Local governments can raise a stink. Minor-league franchises can seek restraining orders. Contraction still faces many hurdles beyond just the players' union.

Q: This agreement ends 10 months of awful publicity for the game -- the fight over contraction, the finger-pointing at the Yankees, the claims of owner poverty, the fan bitterness reawakened by a near-strike. But did the owners really really wind up with a much better deal than they would have without all this fighting?

A: We'll never know. But two management officials who requested anonymity told us they think this deal isn't substantially better or different than one they could have negotiated in a quieter, less contentious manner. On the other hand, after watching the way these negotiations went down in the final hours, it sure looked as if they needed a deadline to get any deal done.

Q: How will the steroid testing system work?

A: You haven't heard the last of this controversy, because this is not a system designed to punish players who test positive. This isn't the Olympics. But it's better than no testing at all. It's a system designed to reassure the public that steroid use is less prevalent and that the game has more integrity than Ken Caminiti and Jose Canseco may have intimated. Whether it will accomplish that remains to be seen. But in every year of the agreement, players will be tested to determine what percentage actually use steroids. If more than five percent test positive, then random testing begins and continues every year until steroid use drops to less than 2½ percent. If less than five percent test positive, the same type of testing will take place every year of the agreement.

Q: After all the talk of starting a worldwide draft, how come it isn't in the deal?

A: In the end, it turned out there were more questions than answers raised by the worldwide draft. For one thing, the union agreed to the concept -- but wanted to cut the entire draft (including U.S. players) to only 16 rounds. The owners opposed that. But the owners also were finding that a worldwide draft had more complications in practice than it seemed to have on the drawing board. So it appears the sides agreed to make it a separate issue and study it to determine whether it's feasible and how to make it work if it is.

Q: Was Sept. 11 a factor in averting he strike?

A: No doubt. Mostly, it was the sheer will of both sides to negotiate a deal without stopping the games that got this agreement done. But a big reason for that was a widespread desire to avoid all the catastrophic effects of a strike. And nothing symbolized that potential nightmare more than Sept. 11. We're convinced that by setting the strike date before September, players sent a clear message that the only way to escape the embarrassment of being on strike Sept. 11 was to negotiate a deal. To have done the opposite would have stripped this sport of its last shades of dignity.

Q: This deal contains a "status-quo rollover." What the heck does that mean?

A: It's actually a fascinating aspect of the deal. In fact, it means the deal is more likely to last five years than four. True, this agreement is supposed to expire after the first four seasons, after 2006. But both sides wanted to guard against some of the chaos that erupted this season when the previous basic agreement ended, but no new deal had been settled on. So this deal contains language and numbers dictating what happens to revenue-sharing and payroll taxes in 2007, too. Realistically, if at least one of the two sides likes this system, it wouldn't have much incentive to negotiate a new system after 2006 -- meaning the 2007 portion of the deal would take effect while they negotiated the next agreement.

Q: Who were the unsung heroes in this story?

A: Bud Selig and Don Fehr may have been the leaders, the front men and the men who did most of the speaking on the podium Friday. But the most important work in these negotiations was done by men who will get next to no credit -- Rob Manfred and Bob DuPuy on the owners' side, Michael Weiner and Steve Fehr (Don's brother) on the players' side. They were the men who quietly hammered out most of the key provisions, and especially the crucial compromises, in two-on-two sessions for days and weeks leading up to the grand finale. When directions shifted, when marching orders changed, when tempers flared, these were the men who got the focus back on solutions and deal-making. And the entire sport owes them far more gratitude than they'll ever get publicly.

Jayson Stark is a senior writer for ESPN.com.






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