Some words have written about the Dodgers’ interest in Cuban phenom Yoan Moncada and the penalties associated with his signing. To me (and others), there is no question the Dodgers (and other teams, really) should not be concerned with blowing through their international spending limit.
I don’t buy for one second the Dodgers are overly concerned with the amount of money Moncada costs, nor do I think they really care about losing the ability to sign lottery ticket players for more than $300,000. But before I get to my reasoning, here’s a primer on (the ridiculous) international signing rules (as it relates to Cuban players).
Cuban players who are 23 or older and have spent five or more years in Serie Nacional are exempt from MLB’s international signing pool, hence the reason Jose Abreu got $68 million last winter from the White Sox and Rusney Castillo got $72 million in the summer from the Red Sox. Moncada doesn’t meet either requirement, so any team signing him would be subject to penalties. The only teams that cannot sign him are the Cubs and Rangers, because they went over their bonus allotments last year. The Yankees, Red Sox and Rays cannot sign Moncada after June 15, but Moncada is going sign by the end of February, so consider the Yankees and Red Sox in. The Rays, despite spending somewhat largely internationally, will not pony up the necessary money to sign Moncada.
The international signing period, known as the July 2 period, is the time when teams can sign international prospects not subject to the MLB Draft. Like the draft, there are signing restrictions. There are bonus allotments teams cannot exceed without penalties.
The period runs from July 2 through June 15. The Dodgers have $1,963,800 to spend on bonuses for international prospects. They can acquire more slot money in trades, as they did last year in trades with the Cubs and Marlins. But they cannot acquire more than 50 percent of their original bonus allotment, or $981,900. There probably isn’t that much extra bonus space available in trade anyway. They were able to land $406,700 last year.
Here’s how it works, via the Collective Bargaining Agreement.
|Overage (percentage)||Penalty (taxed amount)|
|0-4.99||75 percent tax ($73,641.75)|
|5-9.99||75 percent tax ($147,284.25)
One bonus of more than $500,000
|10-14.99||100 percent tax ($294,569)
No bonuses more than $500,000
|15-plus||100 percent tax ($294,570+)
No bonuses more than $300,000
And here’s where the Dodgers stand at present.
|Yadir Drake||unknown (won’t count)|
|Total||$1,332,500 (of $1,963,800)|
The last three signees probably won’t get enough to count against the pool, and Drake doesn’t fall under the restriction due to age.
The Dodgers have already spent, based on known figures, 67.8 percent of their bonus pool allotment. They can acquire more, but the amount couldn’t be applied to these deals. It’s only for future deals. They can go $97,993 over their allotted bonus pool without suffering any consequences (other than taxes). If so, then they have about $729,293 left to spend on July 2 prospects.
Moncada is expected to get a signing bonus of at least $30 million, and that’s on the extremely low end. Most folks are predicting a bonus in the $40-50 million range. No matter what team signs him, said team will have to pay a 100 percent tax on the overage — basically, it’s a dollar-for-dollar tax.
Ken Gurnick on Jan. 29:
“Moncada will command a signing bonus speculated to range between $30 million and $40 million. The Dodgers have the money. But because of Moncada’s status and the rules regarding international players, a 100 percent penalty would be assessed against any signing club exceeding its allotted bonus pool in a one-year period.
OK, they even have that much money. But perhaps of even greater concern for the deep-pocketed Dodgers is the penalty also includes banning a signing club from re-entering the international market for pool-eligible players for an additional two years.
The Dodgers are serious about restoring their legendary player development system. Current ownership has jump-started the process by ramping up international signings. While the signing of Moncada would land a potential superstar, it would also sideline the franchise from future big-ticket signings for two years.
According to Sanchez, the Dodgers were serious enough in their vetting of Moncada to have president of baseball operations Andrew Friedman and manager Don Mattingly at the infielder’s private workout for the club. Earlier, general manager Farhan Zaidi told MLB Network Radio that the club would be “players” in the bidding for Moncada.
Despite all of that, sources indicate the club hasn’t concluded whether to go forward when Moncada is given clearance to sign, because of the costly repercussions that would prevent the Dodgers from signing any expensive pool-eligible players, Cuban or otherwise, for two years.”
I understand the part about the Dodgers wanting to get back into the international community like they were so many years ago. But, I have no fewer than nine reasons why the Dodgers blowing out their budget on Moncada is a no-brainer.
- They finished second in Yoan Lopez sweepstakes
- They haven’t invested much internationally in recent years
- 2016 Collective Bargaining Agreement/International Draft
- Tax paid in lump sum
- No player available in 2015-16 as good
- Top July 2 guys already agreed to
- Helps with salary present/future
- Position versatility
- Have all the money
Yoan Lopez sweepstakes
Source: #Dodgers aggressively pursued Yoan Lopez but came up short. Will now shift attention to OF Yoan Moncada. Expect a private workout.
— Jesse Sanchez (@JesseSanchezMLB) January 13, 2015
They finished second in the bidding. Lopez signed with the Diamondbacks for $8.25 million. At that price, it would have penalized the Dodgers exactly the same way they would be penalized if they go all-out for Moncada. The only difference is, Moncada costs more money than Lopez. That’s it.
Minimal investment recently
Since Guggenheim took over, the Dodgers have signed a total of four international/July 2 prospects for more $300,000 — Julio Urias ($1.8 million), Lucas Tirado ($1 million), Romer Cuadrado ($750,000) and Alberto Estrella ($600,000). Granted, the quartet of Victor Gonzalez, Julian Leon, Lenix Osuna and William Soto cost about a million bucks, but even if you simplify it, that’s only $250,000 per prospect. The Dodgers being constricted to a $300,000-maximum for international players for the next two years isn’t nearly as big a penalty as it seems.
The Dodgers spent $4.48 million on international prospects in 2013-14 and at least $1.3 million in 2014-15 (likely more than that). The nearly $4.5 million was the third-most in the league, but they haven’t spent during this period as they did the last. The scouting department has been able to find potential gems for less than $300,000 — Michael Medina for $275,000 comes to mind. Ask yourself this: Would you rather have have 10 Medinas or three Tirados?
2016 Collective Bargaining Agreement/International Draft
The new Collective Bargaining Agreement is up in December 2016, and the rules will almost assuredly be reviewed (and changed).
One exec expects Moncada to get $40-$50M, meaning total outlay of $80-$100M with 100 percent tax. Whatever the number, expect renewed talk…
— Ken Rosenthal (@Ken_Rosenthal) February 13, 2015
…about inequity of Cuban 19-year-old getting that much while draft-eligible 19-year-old cannot due to differences in ways such players sign.
— Ken Rosenthal (@Ken_Rosenthal) February 13, 2015
The system definitely needs an overhaul. But expect an international draft sooner rather than later. And with the looming draft, the penalties for going over budget will change. At the very least, the penalties for the current system won’t carry over to the revamped CBA.
Lump sum tax
The 100 percent tax on a signing like this must all be paid in a lump sum 30 days after the original agreement. While most baseball teams are incredibly wealthy, some actually frown upon having to spend $40-50 million at one time. That’s a big reason why most of the small-market teams are out on Moncada. Not a lot of teams have that much money lying around.
No one as good
Despite the Dodgers hitting on Urias and potentially hitting on Leon, there isn’t a player available in the next two years who is either as good as Moncada or would have the same impact as Moncada will in his first few years. There is no player outside of Yadier Alvarez (a post on him could come soon) could have the kind of impact Moncada projects to have as early as 2016.
Alvarez, 18, is the best pitching prospect from Cuba who will be available shortly. Some have said he could get a Moncada-like deal, but it necessarily might not be for this signing period. If the Dodgers sign Moncada, they’d have to sign Alvarez before June 15, because they’d be ineligible to sign him for more than $300,000 on July 2. If they really want to double-down, they can. I’m not sure I see any team investing $200 million (plus MLB salaries to come) in two players without proven track records against advanced competition. It’s one thing to give a 26-year-old Clayton Kershaw $200 million, it’s another thing to invest that much in two Caribbean teenagers. If Alvarez waits, he would eliminate the Dodgers, Yankees and Red Sox — also known as the three richest teams in the league — from signing him. I don’t think that happens. I’ll say this: I don’t think the Dodgers sign both players, and the “loser” in the Moncada sweepstakes will end up with Alvarez.
July 2 agreements
Most of the big July 2 prospects — those on Top 20-30 lists put out by Baseball America, MLB.com and the like — have already agreed to under-the-table deals with teams, even though they aren’t official deals. Rarely do these deals fall through, so the Dodgers aren’t going to swoop in and steal a 16-year-old Dominican prospect from the Blue Jays or anything like that. But Kiley McDaniel had something of note from his chat on Friday.
“Comment From Nate
On a scale of 1-10, how big are the Dodgers J2 agreements? I’m trying to comprehend what type of haul they would be giving up to go over slot for Moncada in this period.
Kiley McDaniel: One big guy is all I know of, but it’s one of the top guys”
That’s interesting. McDaniel had Tirado and the Dodgers a couple years ago and is an authority in this arena, so this makes sense. If the Dodgers were to sign Moncada, the agreement they have in place with the unknown prospect would be rescinded.
MLB Luxury Tax
The new front office wants to get the payroll down to the $189 million threshold as to not pay the yearly tax on it. The first year (2013) is 17.5 percent. The second, 30 percent; the third, 40 percent; the fourth time (and every time after), 50 percent. The Dodgers paid a $26.6 million tax for their 2014 salary. There’s no way they’re getting below that threshold this year, but they can work on it for next year and the coming years. Moncada’s deal would not count toward the luxury tax since it’s a minor-league contract with a signing bonus. His deal won’t start counting toward the payroll (officially) until he is on the active roster — and he’ll make the MLB minimum in his first three years if he isn’t a Super 2 player (which he might be). He will go through the arbitration process as any prospect would (or he could sign an extension at some point).
He offers positional versatility. While he played shortstop in Cuba, he will be a second baseman, third baseman or outfielder in the majors. He looks most comfortable at second base, but the Dodgers might need him to be a third baseman in the short-term. He also profiles well in center field because of his athletic ability and strong throwing arm. No matter what team signs him, it is going to get a premium player at a somewhat premium position.
All of the money
Finally, the Dodgers are wealthy. They literally have almost all the money. I’m not saying they need to be haphazard with it, but opportunities like this don’t come along every year. They struck when Yasiel Puig was on the market (and had interest in Jorge Soler) and attempted to hit with Alex Guerrero and Erisbel Arruebarrena. There’s no reason for them to stop now.
If the Dodgers were an organization like the Indians or Astros (No. 4 and 6, respectively, in 2013-14), I could see them not wanting to restrict their July 2 spending. Those two teams invest a lot of time and money in the process and don’t go over their budget. But the Dodgers have yet to invest a lot internationally, even after getting rid of Frank McCourt. If Moncada weren’t expected to be so good — hello, Robinson Cano comp — this would be a much tougher pill to swallow. But, you always want to bet on elite talent. Moncada is that, and the investment — while quite large — should pay off.
Besides, you can still buy a lot of really nice lottery tickets for $300,000.