The Padres must spend at least X million on international free agents

Since the new international free agent system was unveiled, baseball game strategists have lobbied for teams to significantly outspend their MLB-mandated signing bonus pool. (Prior to the new system, teams had an unfettered ability to sign whomever they wanted for whatever price they wished.)

The prevailing wisdom for why teams should do so goes like this: even after paying a penalty for exceeding the bonus pool, the international players are still a bargain; the more bargains you put on your roster, the less that are available for opponents’ rosters; unlike a draft system, where you are bound by the other selections, you can hand-select almost any player you want; in order to get top international free agents, you must exceed your bonus pool; and the restriction on future draft classes is not that awful.

So far, through four years with the new international signing system, the Padres are yet to exceed their international signing pool. Some outlets have reported that the Padres will be exceeding their bonus pool in 2016, even going so far as to tie specific players that may be a part of the class.

If it doesn’t happen in 2016, not only will those pundits be wrong, but it’ll be contradictory to what Padres executives closest to the purse, like team president Mike Dee, said throughout the end of 2015 and into 2016.

Specifically, in an interview with Dan Sileo back in December, Padres President Mike Dee stated that $120 million would “probably be light” with respect to what the Padres will spend on players:

Although Mike Dee initially balks at the $120 figure Sileo throws out there, he then spins around and states that the Padres will probably – his word, not mine – spend more than $120 million “on players in 2016”.

What constitutes “on players in 2016”?

I imagine this would include the 2016 major league payroll, 2016 amateur draft bonuses, and 2016 international free agent bonuses. Likely included in the 2016 major league payroll, though, are contract buyouts from the end of the 2015 season.

The Padres currently have $91.65 million in salary obligations for 2016. This takes into consideration the Dodgers’ payment of a portion of Matt Kemp’s salary, but does not factor in major league minimum players who must fill out the 25-man roster. Those other 12 players, as the obligations cover 13, total roughly $6 million in additional payroll obligations in 2016. That brings the total 2016 payroll up to ~$97 million.

The Padres then have two buyouts that the team is likely counting against the 2016 payroll: Cory Leubke ($1.75 M) and Clint Barmes ($0.20 M). Now we’re up to $99 million.

That leaves $21 million for the amateur draft and international free agents to just reach what Mike Dee stated to fans, let alone satisfy the “probably be light” provision.

The Padres’ 2016 amateur draft bonus pool is $12.74 million. While it is not a “hard cap” by rule, the penalties for exceeding the draft pool are so stiff – forfeiture of future first round picks and luxury taxes that start at 75% – that no team has ever exceeded its bonus pool under the new system implemented in 2012. So $12.74 million is what we can expect the Padres to spend on the amateur draft.

That leaves $8.26 million for international free agents in order to reach $120 million in total player spend in 2016.

However, the Padres’ international free agent pool is only $3.35 million.

That leaves a gap of $4.91 million between the Padres’ current projected spend and the $120 million minimum to meet Mike Dee’s “probably light” figure.

You might think that means that the Padres must sign players in international free agency for a total of $8.26 million – the $3.35 million pool plus the $4.91 million gap – but that would be incorrect.

Major League Baseball taxes the pool overage at 100% for teams that exceed their pool by greater than 15%. That threshold for the Padres in 2016 is $3.85 million, far less than the $8.26 million, so the Padres would be subject to the 100% tax.

Using basic algebra, we can calculate the minimum amount the Padres must spend on international free agents in order to hit the $8.26 million figure, inclusive of the tax:

8.26 = 3.35 + ((X - 3.35) * 2)

Solving for X:

X = 5.805

So, the Padres would need to sign players for basically $5.8 million in international free agency in order to spend $8.26 million and meet the $120 million minimum that Mike Dee stated.

That is a depressingly small total, as the Phillies pool itself is $5.6 million, for example.

That’s why we should bind Mike Dee by his “probably be light” comments.

No one, short of a completely disingenuous asshole, would describe $120 million as “light” in comparison to $121 million. “Honey, your estimate of $1.20 for oranges was a little light. I had to pay $1.21.” The same goes for $122 million, on up through about $125 million, give or take another few million.

A figure of $125 million gives the Padres $13.26 million to spend in international free agents, which works out to actually signing players for $8.3 million.

In comparison to when the Yankees out-spent their international class, spending ~$27 million, and the Red Sox shelling out well over $60 million when they exceeded their spending limit, a $13.26 million bonus pool is actually not very exciting. If Padres fans really want it to be meaningful, they better hope that Mike Dee’s “probably light” line is relative to $130 or $140 million, not $120.

Should the Padres exceed their international free agent pool, they’ll suffer the following penalty in addition to their dollar-for-dollar luxury tax stated above: from July 1, 2017 through June 30, 2019, the Padres would not be allowed to sign an international free agent for more than $0.30 million. They’d still be able to sign less prospects – many of them – just none that individually exceed that $300 thousand threshold. (Another rule you may not be aware of: teams, even after exceeding their pool, can sign an infinite number of players for less than $10,000. The Padres would still be able to deploy a quantity over quality strategy in future seasons, even after hitting the penalty.)

And, honestly, that’s a pretty fair price in exchange for signing the best international free agents out there. None of the best sign for less than the teams’ entire bonus pool, so to get those elite prospects, you must significantly outspend the pool.

There’s more evidence than just one quote to suggest the Padres intend on making this strategy a reality. Besides Baseball America hinting at it, at the most recent “Social Summit”, Dee actually asked, through a show of hands, if fans would be okay with a payroll slash that used those funds on international signings.

Unequivocally, I say yes provided every penny slashed from payroll is used on international signing bonuses. Not half the payroll slash. Not 90% of the payroll slash. All of it. Otherwise, it is just another payroll slash so ownership can throw money down the drain on things like Jeb Bush campaign contributions.

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