NEW YORK -- Highlights of the tentative agreement reached
Friday between baseball players and owners, as obtained by The
Associated Press from player and management sources:
The agreement starts with the 2002 season and runs through Dec.
Teams whose payrolls exceed set thresholds will be taxed on the
portions above the thresholds, with the money to be used for player
benefits, including player benefit plan, or the industry growth
fund, or developing baseball players in countries lacking organized
high school baseball. The thresholds are as follows:
2002 -- No tax
2003 -- $117 million
2004 -- $120.5 million
2005 -- $128 million
2006 -- $136.5 million
The following tax rates apply:
1st time over threshold: 17.5 percent in 2003, 22.5 percent in
2004 and 2005, no tax in 2006
2nd time over threshold: 30 percent
3rd and 4th times over threshold: 40 percent
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
Payrolls are for 40-man rosters and include averages of
multiyear contracts; health and pension benefits; clubs medical
costs; insurance; workman's compensation, payroll, unemployment and
Social Security taxes; spring training allowances; meal and tip
money; All-Star game expenses; travel and moving expenses;
postseason pay; and college scholarships.
Base plan -- Each team contributes 34 percent of its net local
revenue, after deductions for ballpark expenses, to a pool that is
redistributed equally to all 30 teams.
Central fund component -- $72.2 million annually, taken from those
teams that are net payers in base plan and redistributed to teams
that are net receivers in base plan. The central fund component
phases in at 60 percent in 2003, 80 percent in 2004, and 100
percent in 2005 and 2006. It is collected by taking a figure in
which the numerator is $72.2 million and the denominator is total
net local revenue after ballpark expenses of all payer clubs, and
multiplying the figure by a payer club's total net local revenue
after ballpark expenses. It is redistributed on a split-pool basis
based on distance from the average.
Commissioner's Discretionary Fund
A total of $10 million -- $333,333 from each team -- is taken from
the central fund and may be redistributed by the commissioner.
All players will be randomly tested for illegal steroids in 2003
as a survey. If 5 percent or more test positive in any survey year,
mandatory random testing for illegal steroids shall take place
during the following two years. If 2.5 percent or fewer test
positive in consecutive years, mandatory random testing shall
cease. In any year in which there is not mandatory random testing,
there shall be survey testing. The first time a player tests
positive during mandatory random testing, he is placed in a
treatment program. For subsequent positive tests, penalties range
from a 30-day suspension to a two-year suspension.
The sides shall establish a committee to establish rules for a
worldwide amateur draft, which it will try to have in place for
June 2003. Clubs have proposed 38 rounds, players 20. The committee
will make the determination. The committee will consider, among
other issue, whether teams should be allowed to trade draft picks
and the negotiating rights to selected players. If a team fails to
sign a first-round draft pick, it will receive a corresponding pick
in the first round of the following year's amateur draft (example:
if a team fails to sign the No. 2 overall pick, it would be awarded
an extra pick immediately following the No. 2 pick in the following
draft). If a team fails to sign a second-round draft selection, it
will receive a pick in the sandwich round between the second and
third rounds of the following year's amateur draft. Order of
selection for the sandwich round shall be determined by inverse
Teams may not be eliminated through the 2006 season. The clubs
may elect to eliminate two teams for the 2007 season, but must
notify players by July 1, 2006. If the clubs elect to contract for
2007, the union wound not contest before the National Labor
Relations Board that contraction is a mandatory subject of
bargaining. If clubs elect to eliminate teams they do not have to
identify at that time.
First figure is for major leagues, second is minor league rate
for players with split contracts appearing on a 40-man roster for
two or more years:
2002 -- $200,000/$40,500
2003 -- $300,000/$50,000
2004 -- $300,000/$50,000
2005 -- $300,000/$50,000 plus two-year cost-of-living adjustment
2006 -- 2005 minimums, plus one-year cost-of-living adjustment
A team may not have more debt than 10 times EBIDTA (earnings
before interest, depreciation, taxes and amortization), except that
a team that has moved into a newly constructed ballpark within the
past 10 years may not have more debt than 15 times EBIDTA. There
will be a three-year grace period, during which the commissioner
has the right to retain the debt service rule, fully implemented.
If he so elects, the commissioner must revoke the 60-40
assets-to-debt ratio rule. If he doesn't want to revoke the 60-40
rule, the debt-service rule becomes fully implemented.
Interleague play, which had been agreed to on a test basis in
the 1997-2001 agreement, is agreed to for the length of the
Free Agent Draft Pick Compensation
Draft-pick compensation for losing Type A and Type B free agents
The clubs' contribution will be $114 million to $115 million
annually, up from $70 million in 2002.
Spring training and in-season allowances will be increased at
the rate of the Consumer Price Index.
Each year will be divided into four waiver periods instead of
three. The current periods are Nov. 11 to day 30 of the season, day
31 to July 31, and Aug. 1 to Nov. 10. The first period will be
divided into Nov. 11 to Feb. 15, and Feb. 16 to day 30.
Players with less than five years of major league service can be
directed for no more than 20 days to undergo baseball-related
rehabilitation at a team's spring training facility. However,
starting with the 11th day, each day at the spring training site
would be deducted from the limit on a rehabilitation assignment to
the minor leagues for the player, currently a maximum of 30 days
for pitchers and 20 days for others.
Second Medical Opinions
A provision that divided the United States into three regions,
and required a player to pay for his transportation if he went out
of his region, is eliminated.
All contract tenders to unsigned players on 40-man rosters will
be made by the commissioner's office instead of individual teams.