Draft Pools – Owners Try to Stop Themselves from Overspending on the Draft
One of the big questions going in to the negotiations of MLB’s new Collective Bargaining Agreement was whether we’d see “hard slotting” for the draft. Essentially, that’d mean that each draft position would have a dollar value assigned to it, and the player either accepted it or returned to school/signed with an independent team. This would prohibit teams from throwing multi-million dollar signing bonuses at high school stars who wanted to play in college, which, depending on your point of view, was either another way wealthy teams could subvert the purpose of the draft (to give parity a boost by allocating the best amateurs to the worst MLB teams) or prohibiting a smart team from taking a calculated risk in order to quickly close a talent gap. Recently, we learned about the compromise the players/owners agreed to (pdf)- aggregate draft pools instead of hard slotting.
First, let’s review what teams did last year. Each year, MLB has a recommended signing bonus for each pick in the draft with the overall #1 getting the most and a long, smooth descent from there. Each year, the teams ignore the Commissioner and sign whoever they want, with some teams saving money by signing players who’ll sign for “slot” and others throwing money at players with strong commitments to College teams. Last year the Pirates spent over $16m on their top 10 draft picks, signing #1 overall pick Gerrit Cole and then springing for high school OF Josh Bell (whom almost no one thought was signable) for $5 million, energizing their rebuild by essentially getting two first-round picks. The M’s spent almost $10 million on their top 10 (almost all of which went to Danny Hultzen and Brad Miller), but then spent another few million on late round guys like Jack Marder; they went over slot for many of their picks (Carter Capps, Cavan Cahoes, Marder, etc.), but didn’t go crazy on any one pick. This allowed them to reach for some guys who might not sign, but spread the risk around. The Cubs gave out two $1 million plus signing bonuses to two guys after the 10th round.
2011 wasn’t an example of the rich getting richer – the M’s, Pirates and Cubs were all under .500 last season and need the draft to restock. Signing guys like Bell, or Marder or Shawon Dunston, Jr. may be a better option for many teams than trading away cost-controlled players. It’s not always like this, of course, as the Tigers were able to sign Andrew Miller (whom many considered the #1 player in that draft) with the 6th pick when word of his exorbitant demands spread. The next year, they picked Rick Porcello at #27 and were able to sign him by paying him more than #3 overall pick Josh Vitters received from the Cubs, and just a few picks later, the Yankees gave their pick (#30 overall Andrew Brackman) more than Vitters got as well. There were some concerns that small-market teams simply couldn’t afford to take the best available player, and that the Yankees/Red Sox/Tigers/etc would essentially get their pick of the best talent at the end of the round.
This year, the CBA calls for an aggregate amount of money that each team can spend on its first ten picks – an amount that’s calculated based on the number of picks each team will have and the “slot” for each pick. More importantly, there are now consequences for teams that overspend. If a team exceeds its draft pool by up to 5%, it pays a luxury tax of 75% of the overage amount. If it spends 5-10% over the pool, the tax is 100% of the overage and the team loses a first round pick. 10-15% overage results in a 100% tax and the loss of a first and second-round pick, and overages above 15% result in forfeiting a first round pick in the next two drafts.
Thus, while there’s nothing to prevent a team from signing the next Josh Bell in 2012, they’d better like him a whole lot, because he’s probably going to cost them TWO #1 picks. You can go overslot for someone and avoid losing a draft pick, but you’re going to want to do so when your pool’s larger (a 5% overage on a pool of $11 million’s obviously going to buy you more than a 5% overage on a $1 million pool). Trading draft picks outright is still verboten, but this system seems to allow teams to do the equivalent of moving up in the draft by forfeiting future picks; since this quasi-”trade” is with the league and not a club, so there’s no risk of hearing “no.” Will scouting college seniors who may be willing to take below-slot bonuses become the new market inefficiency?
There’s no way to talk about an optimal strategy without seeing the draft board and talking to scouts about the relative strength of one class versus the next, but I can’t way to see how this plays out. Will teams try to stick within their pool and then, if they’re going to be close to 10%, go crazy and double their bonus (taking the equivalent of two or three first rounders in one year)? For a sense of scale here, the Pirates exceeded their slot bonuses by 268% last year; if you’re going to exceed the cap and face a stiff penalty at 6%, why WOULDN’T you go to 268%? Would a team be more likely to blow through its draft pool number if it felt that it was closer to contention (meaning the forfeited draft pick would be of lower value), or because it thought the subsequent draft class was weak? Are the penalties to severe, or do they not go far enough? Some are concerned that this will hurt poorer clubs, while those who wanted hard slotting would argue it doesn’t do enough to *protect* them.
The M’s have the 7th highest bonus, largely the result of having the #3 overall pick. The Angels have the smallest pool at $1.7 million total – the result of losing two top picks when they signed Albert Pujols and CJ Wilson. The M’s clearly have enough to sign whoever they want at #3, but a repeat of last year’s draft is probably out. Do you care? Do you hate the new rules, and why? Do you support any move that may prevent the Yankees from leveraging their wealth to buy up talent, or is Selig an idiot for taking away one of the few tools the Pirates had to try and compete with their larger rivals?