The San Francisco Giants have been one of the winter's most active teams, trying as best as they can to atone for last season's 64-98 record that left them tied with the Detroit Tigers for baseball's worst mark.
The Giants have also been creative this offseason, a characteristic evident in their latest deal: reportedly a two-year pact with left-handed reliever Tony Watson.
Tony Watson’s deal with the #SFGiants comes with a guarantee of $9 million, source says. It includes escalators and performance bonuses that could ultimately increase the value to $14M over 2 years or $21M over 3 years.
— Jerry Crasnick (@jcrasnick) February 17, 2018
Confirming #sfgiants and LHP Tony Watson are in agreement on terms. Two years with incentives plus a player option with incentives. Does not put them over CBT. Likely not official till Monday. Massive, massive achievement.
— Andrew Baggarly (@extrabaggs) February 17, 2018
Watson, 33 in May, is coming off an uneven effort. Previously a reliable late-inning reliever for the Pittsburgh Pirates, he saw his strikeout and home-run rates head in the wrong direction during the first half of the season. His velocity was also down.
Watson regained the oomph on his heater during the year, however, and was much improved following a midseason deal to the Los Angeles Dodgers, with whom he recorded 15 more strikeouts than unintentional walks in 20 innings. It's worth noting that Watson's move out west included an increased preference for his sinker over his four-seam fastball. At minimum, he'll give the Giants a good left-on-left option.
With apologies to Watson, the most interesting aspect of this agreement is how it's structured to keep the Giants below the competitive balance tax. The Giants entered negotiations with just over $2 million separating them from the $197 million tax threshold. How exactly did they land Watson, who made nearly $6 million in 2017, without exceeding that mark? With creative structuring and presentation:
The player option for Tony Watson counts as guaranteed money for the third year. The guaranteed portion of the entire contract be in the neighborhood of $7 million. That is what allows them to still stay under the CBT. Escalators earned this year would not count for '18.
— Henry Schulman (@hankschulman) February 17, 2018
Here's a way to differentiate incentives and escalators. Incentive: boss says you did such a good job, we're going to give you an extra $1,000 bonus this year. Escalator: boss says you did a good job, so we're going to raise your yearly salary starting NEXT YEAR. #sfgiants
— Henry Schulman (@hankschulman) February 17, 2018
While the complete details of Watson's deal are unavailable, a comparison to Austin Jackson's contract seem spot on.
Jackson signed a two-year deal worth $6 million guaranteed. Yet his deal included escalators and performance incentives that could increase his 2019 salary without impacting his 2018 pay. Jackson could earn an additional $1 million in 2019 if he accumulates 375 plate appearances in 2018, and could add another $1.5 million on top of that in 2019 pay if he's able to reach 475 plate appearances that season. Watson's deal will presumably include incentives and escalators for his appearances or innings pitched totals that won't kick in until 2019 or 2020.
The Giants have walked a thin line this winter in order to add talent while remaining under the luxury tax threshold. The trades that saw them acquire Evan Longoria and Andrew McCutchen also saw them receive cash to offset the aging stars' salaries -- and that's without factoring in Denard Span's inclusion in the Longoria trade, as Span will count for more than $13 million in tax purposes, per Cot's Contracts. The careful accounting has left the Giants with little breathing room, but a little breathing room is better than no breathing room.
Why are the Giants going through all this trouble? To reset their luxury-tax penalty rate. The Giants have paid more than $8 million in overage fees over the last three seasons, and would be penalized at a 50 percent rate if they go back over this season. Presumably the Giants are positioning themselves to go back over the threshold (which will increase to $206 million in 2019) this upcoming winter, when Bryce Harper, Manny Machado, and others hit the market.
The Giants, meanwhile, stand to lose just three players to free agency after the season: McCutchen and fellow outfielder Hunter Pence, as well as backup catcher Nick Hundley.
