Dodgers: Can The Dodgers Upgrade While Staying Under the Luxury Tax?

LOS ANGELES, CA - MAY 12: Joc Pederson #31 of the Los Angeles Dodgers hits an rbi single to right field in the fourth inning as catcher Tucker Barnhart #16 of the Cincinnati Reds looks on during the MLB game at Dodger Stadium on May 12, 2018 in Los Angeles, California. (Photo by Victor Decolongon/Getty Images)
LOS ANGELES, CA - MAY 12: Joc Pederson #31 of the Los Angeles Dodgers hits an rbi single to right field in the fourth inning as catcher Tucker Barnhart #16 of the Cincinnati Reds looks on during the MLB game at Dodger Stadium on May 12, 2018 in Los Angeles, California. (Photo by Victor Decolongon/Getty Images) /

Yes, the Dodgers are struggling in various areas and are having a hard time winning games.  Several key veterans should return within a reasonable amount of time, and provide an immediate boost to the team’s fortunes.

Despite these internal reinforcements, the Dodgers, as they have often during their five year stretch of postseason appearances, would likely turn to the trade market to upgrade the ballclub.  But can they?  The answer is complicated and requires an understanding the MLB Collective Bargaining Agreement (CBA) and the Competitive Balance Tax (CBT), otherwise known as the “Luxury Tax.”

Justin Turner, Logan Forsythe, Tony Cingrani, and hopefully, Clayton Kershaw will return in the near future. Hyun Jin Ryu, Tom Koehler, and Julio Urias might return later this summer.  Despite these reinforcements, the Dodgers will likely need to upgrade various areas of the ball club.  The organization has a good farm system from which to deal and the financial resources one would expect the Los Angeles Dodgers and the Guggenheim ownership group to possess.  There is one big obstacle, however, the MLB luxury tax.

The Dodgers payroll stands at approximately $189,446,354 (See Spotrac for a complete listing, and below for my explanation of what counts towards payroll and what doesn’t).   If the team’s 2018 payroll exceeds $197 million this season, the team will pay the penalty, but more importantly, will not be able to reset their tax level/threshold in time for this offseason’s strong free agent class.  This causes a chain reaction.

If the Dodgers exceed the $197 threshold this season, sign a big-time free agent (And re-sign Kershaw) this offseason, the team could pay 95% fine on the difference between the actual payroll and the threshold.  Most importantly for the Dodgers, the team’s first pick in the MLB draft will drop ten slots.  The organization prizes their draft picks.  If the Dodgers stay below $197 million this season, they will not have to worry about this particular scenario, as the CBA expires after the 2021 season.

The $189,446,354 payroll represents players who are or have been on the 40-man roster and disabled list this season to include players optioned to the minors, as well as payments owed to Adrian Gonzalez, Andre Ethier, Hector Olivera, Luis Avilan, and players’ benefit payments.  Players that were outrighted (removed from the 40-man roster) to the minors before this CBA, such as Erisbel Arruebarrena and Yaisel Sierra, do not count unless they are added back to the 40-man roster.

This payroll allows for only approximately $7,553,646 in additions–not much by today’s MLB standards!  There are a couple of other wrinkles here for the Dodgers.  The Dodgers will likely need to add a few other players to the  40-man roster out of necessity, as they just did with pitcher Pat Venditte.  The biggest unknown is Kenta Maeda’s contract.  He can earn another $4-7 Million in bonuses should he hit his games started and innings pitched incentives.  As you can see, the Dodgers don’t have the wiggle room they need to keep their current in-house options below the 2018 threshold.  This seems rather bleak for the 2018 edition of the LA Dodgers.  Or is it?

The organization will have to get creative, no doubt.  The Dodgers still have many coveted prospects on the farm that the organization can pair with a veteran salary or two to enable some incremental upgrades.  Here are two trade proposals that will benefit the Dodgers, their trading partners, and allow the payroll to remain below $197 million.


Outfielder Joc Pederson and Catcher Will Smith to the Tampa Bay Rays for Infielder Matt Duffy

Pederson has re-established some trade value and Smith is one of the top catching prospects in the organization, although not the top catching prospect, as that honor still belongs to Keibert Ruiz.  The Rays could use a serviceable young outfielder with some pop like Joc, who at $2.6 million this season fits the Rays budget, and won’t be eligible for free agency till after 2020.  (Of course, as with any players discussed here there salary for the remainder of the season is slightly prorated since we are already a month into the season.)  Smith would immediately become Tampa Bay’s catcher of the near future as they lack a true catching prospect at the higher levels.

Duffy would bring the Dodgers a solid right-handed bat off the bench with some defensive versatility in the infield at 2B, 3B, and SS.  Duffy is a professional hitter who grinds out ABs, and would be a good piece to have off the bench, or could be inserted in the lineup every day at different infield positions to spell the starters.  Best yet, Duffy’s 2018 salary is $930,000.  A player like Duffy won’t be around for the Tampa rebuild with prospect Christian Arroyo waiting in the wings.   Duffy would be under arbitration control until after the 2020 season.

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RHRP Pedro Baez, RHRP Tom Koehler, and OF Yusniel Diaz to the Cincinnati Reds for RHRP Raisel Iglesias

The previous trade would allow the financial flexibility to make this trade happen.  Iglesias comes with two more years on his contract after 2018 and is signed through 2020.  He has a total of approximately $16 million left on the entire contract.  However, only $5.2 million of his contract is allocated to the 2018 season.  More on Iglesias in a minute.

Baez is owed $1.5 million this season and still has some upside.  He is arbitration controlled through 2020, and may just need a change of scenery to a smaller market where he won’t be subjected to as much scrutiny!  The Dodgers will have to convince the Reds to take the injured Koehler’s contract, which is set at $2 million for the 2018 season.  The real “get” here for the Reds is the multi-talented Yusniel Diaz, ranked in the top 100 prospects in all of baseball.  The Reds will also be able to shed the remaining $16 million on Iglesias’ contract while only taking on about $3 million in salary commitments that expire after the season.

Iglesias will give a Dodgers a young closer who is entering his prime and will be under team control, with a team friendly contract through 2020.  He will also give the Dodgers closer insurance against Kenley Jansen, and at the least provide the Dodgers with a shut down set up man that they have lacked the past few years.  This move would strengthen the bullpen as Iglesias would serve as an upgrade over Baez.

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These two trades will enable the Dodgers to add pieces that are a better fit for the current roster than the players being subtracted, and at the same time, keep the payroll below the tax threshold, albeit at the cost of giving up two significant prospects.  It is a blow the Dodgers farm system can absorb, and a small price to pay to provide key improvements towards salvaging the 2018 season.