Contract Buyout

[Colby]

Should we add a rule to allow teams to buyout a player's contract with the following stipulations?

• Adds up the rest of the contract into one lump sum, therefore eliminating future years (and salary) of contract.
• That lump sum is increased by some percentage (call it a buyout tax)
• This amount does not count as player's annual salary.  It falls under other expenses, so that it will not affect a team's cap in the following year.
• Total expenses must fall under salary cap

I looked at Mike Mazzetti's, GM of the Dodgers, numbers, and the Dodgers will owe Andruw Jones money for the next five years.  I thought some option to wrap up those cap hits should be available (at a premium of course).

[JMGC]

Yea, we should. That would help some teams, as you mentioned.

[clidwin]

that would be okay, things what have to be worked out!

[Colby]

I am generally looking for a majority approval of the very active people such as the GMs of the Angels, Dodgers, Marlins, Pirates (of course!), Indians, Padres, and even the A's, Mariners, Tigers, and Yankees.

[lp815]

Give the league a figure percentage for the buyout tax, Colby.  Sounds like a good idea, Matthews makes me want to puke every time I see him on my roster.

[clidwin]

percentage would be okay!

[Colby]

Give the league a figure percentage for the buyout tax, Colby.  Sounds like a good idea, Matthews makes me want to puke every time I see him on my roster.

10% rounded up to the nearest $500k sound good?  I will use some current examples to highlight the effects of the buyout and its tax.

Jones, Andruw, Released Under Contract ($5m in 2009, $3m from 2010 to 2014)
Jones' salary hit doesn't fall under the 90/60/30 cap hit rules because these liabilities were inherited. The lump sum as of 2009 is $20m.  Applying the buyout tax of 10% ($2m), and the cap hit can be consolidated into $22m for 2009.

Now, the Dodgers don't have the room to take on such a hit, so what if they wanted to arrange something for 2010 instead of 2009?  I would vouch for an additional rule to say that when a cap hit is consolidated, it must start in the current year and not increase in any future years.  Also, the number of years of the buyout must be less than or equal to the number of years in the current cap hit.  Say the Dodgers only have $4.5m in cap room, but they wish to max that out for Jones' contract buyout.  Now, note that Jones already has a $5m cap hit in 2009, so that needs to be taken out of the equation.  They really have $9.5m in cap room without Jones' liability. 

They may now divide the $22m liability in a myriad of different ways as long as it does not go beyond 2014 and is never increasing from one year to the next...

• $9.5m, $9.5m, $3m
• $9.5m, $8m, $4m
• $8m, $7m, $7m
• $7m, $6m, $5m, $4m
• $6m, $5m, $4m, $4m, $3m

The point of consolidating the cap hit is to relieve your team from liabilities in future years, so I imagine the first option would be taken.  Let's do another example with Carlos Silva, formerly of the Seattle Mariners.

Silva, Carlos, Released under contract (2012 option not exercised), $7m in 2010, $3.5m in 2011, $11m in 2009
The lump sum is $21.5m (10% is $2.15m, rounded up to $2.5m), so the buyout lump sum is a whopping $24m.  With no room under the cap, a buyout isn't possible for 2009.  The team will have to wait until the offseason, so they can arrange a 2010 buyout.  Assume the Mariners have tons of cap room in the 2009-2010 offseason, so they arrange this buyout as one of the top priorities.  The lump sum is now $10.5m (10% is $1.05m, rounded up to $1.5m), so the buyout lump sum is $12m.  They may decide to take it all in 2010, or split it between 2010 and 2011 where the 2010 cap hit is not less than the 2011 cap hit.

Another example with a mid-market team that has some room under the cap for 2009...

Riske, David, Released Under Contract, $2.5m in 2010, $4m in 2009
The Brew Crew is $5.5m under the cap, but without Riske in the situation, they are $8m under the cap.  The lump sum for Riske's contract is $6.5m (10% is $650k, rounded up to $1m), so the buyout lump sum is $7.5m.  They may opt to consolidate the cap hit into 2009.

[lp815]

So essentially the owner can "finance" the buyout.  A very good idea, and I'm all for it.

[firehawk19]

I agree,  sounds good

[clidwin]

I agree...