MLB Hot Stove: Dodgers reportedly need to shed payroll this winter and here's why
It's actually not that big of a deal though
The Dodgers, who have surpassed the Yankees as baseball's biggest spender, are working under an MLB mandate to eliminate debt, according to Bill Shaikin of the Los Angeles Times. The club is trying to cut payroll from approximately $300 million in 2015 to $200 million by 2018 as well.
Here are some more details, from Shaikin:
The rule, designed to ensure teams have the resources to meet their financial obligations, generally limits debt to no more than 12 times annual revenue, minus expenses. The Dodgers were not profitable in any of the first three full seasons under new ownership, co-owner Todd Boehly said last year. Their debt is believed to be in the hundreds of millions.
The current collective bargaining agreement requires teams to be in compliance of the debt limit within five years of an ownership change, and 2017 will be year four for the Dodgers under the Guggenheim group.
The debt rule is unlikely to have any impact on the team on the field -- Los Angeles has been looking to trim player payroll for a few years now anyway -- but going from $300 million in payroll to $200 million in the span of three years seems daunting. It shouldn't be too difficult given the salaries the Dodgers have coming off the books the next few years:
- Gone after 2017: Carl Crawford ($21.857 million), Andre Ethier ($17.5 million salary plus $2.5 million buyout of 2018 option), Alex Guerrero ($7.5 million)
- Gone after 2018: Adrian Gonzalez ($22.375 million), Scott Kazmir ($17.67 million), Brandon McCarthy ($11.5 million), Hyun-Jin Ryu ($7.83 million), Erisbel Arruebarrena ($6.5 million)
Also, Clayton Kershaw can opt out of his contract following the 2018 season. He'll earn $33 million in both 2017 and 2018. Among all the players listed above, Kershaw is pretty much the only one the Dodgers will want to re-sign when the time comes.
High-end young players like Julio Urias and Corey Seager, as well as top prospect Cody Bellinger, will give the Dodgers cheap production for the next few seasons and help them lower their payroll. The Dodgers have spent big on MLB players the last few years to keep the team afloat while rebuilding the farm system.
The upcoming CBA is expected to raise the luxury tax threshold to $200 million or more. Getting under that will not only save Los Angeles millions in luxury tax payments, but also reset their tax rate going forward. The team paid a record $43.6 million in luxury tax for the 2015 season.
The Dodgers are three years into their 25-year, $8.35 billion television deal with Time Warner, though non-Time Warner customers in Los Angeles can't watch the team because of a rights fee dispute with other cable providers.