KC Royals: New CBA Good for the Royals

MLB and players’ union passes new five-year CBA late Wednesday night, hours before the deadline. Baseball will enjoy labor peace for another five years.

Less than four hours before their current deal was set to expire, the billionaires came to terms with the millionaires and an MLB work stoppage was avoided.

USA Today’s Bob Nightengale reports on the new deal, which is set to run through the 2021 season. The upcoming CBA largely adheres to the framework of its predecessor, but there are several tweaks which should be beneficial to the Royals.

Luxury tax cap goes up, but not astronomically

Under the new deal, which still needs to be ratified by the owners and the union, MLB’s luxury tax increases, but not radically. It goes from $189 million this past season to $195 million in 2017, $197 million in 2018, $206 million in 2019, $208 million in 2020 and $210 million in 2021. That’s just a $15 million increase over five years. By comparison, the median opening-day payroll for teams jumped from $88 million in 2012 to $115.5 million in 2016.

How’s this good for the Kansas City Royals?

More large-market clubs will likely approach the luxury cap and either be forced to pay the luxury tax or curb spending, both of which are good for small-market teams. Already the Dodgers, Yankees, Red Sox and Tigers are over the 2017 $195 million limit.

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Tiered free-agent compensation

Another new wrinkle is compensation for free agents. Under the old deal, clubs forfeited their first-round draft pick when signing a free agent who turned down a qualifying offer. (See Ian Kennedy). With the new CBA, teams under the luxury cap would only lose a third-round pick, while teams over the cap would forfeit a second- and fifth-round pick.

Two thoughts on this:

One, losing a first-round pick severely penalized small-market clubs that rely more heavily on the draft than those that do most of their roster building through free agency. A third-round pick is much more manageable.

Two, I like that the new rule penalizes teams that have gone over the cap. Again, a win for smaller organizations that don’t have the financial windfall as teams in New York, L.A. or Chicago.

Note, compensation for teams losing free agents has yet to be reported on as I write this. Under the old CBA, teams were rewarded picks sandwiched between the first and second round if they lost a player who turned down a qualifying offer.

(Important note, it’s never been a straight trade of the first-round pick. For example, when the Royals signed Kennedy last offseason, they lost the 24th pick of the draft. The Padres ended up with the 25th pick for losing him since there were technically only 23 first-round draft picks in 2016 as seven teams lost their first-round pick for signing free agents. Clear as mud, I know.)

This part of free-agent compensation was crucial for smaller clubs that routinely lost their stars once they hit the open market. Will clubs still get some compensation? Will it be a sandwiched pick between the first two rounds or something more in line with what teams are losing?

How this plays out obviously affects the Royals, especially come next season when a bulk of the team becomes eligible for free agency.

[Edit: compensation for free agents has now come to light. For players who decline a qualifying offer, teams will get a pick after competitive balance round A (after the first round) for players who sign for more than $50 million. For players who decline their qualifying offer and sign for less than $50 million, teams will get picks after competitive balance round B (after the second round). If a team pays the luxury tax, their compensation won’t come until after the fourth round.

Overall, this is good news for the Royals. Eric Hosmer, Mike Moustakas, Wade Davis, Lorenzo Cain, and Danny Duffy will all command more than $50 million in any free-agent deal next winter. However, Kelvin Herrera and Jason Vargas could conceivably get qualifying offers yet still sign for less than $50 million.]  

Oakland’s revenue sharing cut

Under the old and new CBAs, baseball’s teams in its 15 smallest markets receive extra money through the league’s revenue-sharing plan. The A’s, who are not in one of baseball’s smallest markets, have been among those who received revenue-sharing money – as much as $34 million last season according to Susan Slusser of the San Francisco Chronicle.

That will come to an end during this CBA. Oakland had been receiving the extra financial support because their home stadium has been such as financial disaster.

This is good for Kansas City and every small-market American League club. Good for A’s fans, too, as it’s a serious sign to the organization that it needs to get its stadium situation figured out.

Next: Why the Royals Should Look at Colby Rasmus

Best of all, the CBA is done. No lockouts, no strikes and we can get back to baseball. Would love to hear your thoughts, what you like or don’t like about the new agreement.