An Idea to Even Out the Yoan Moncada Sweepstakes

Every team in baseball would like to have Yoan Moncada. The 19-year-old Cuban defector is an infield prospect with tremendous talent in all facets of the game. Between his quick bat, power potential, blazing speed, and the defensive skills to stick at second base, Moncada could be one of the top prospects in any organization in baseball.

However, the nature of Moncada’s situation will prevent most MLB teams from having any chance at him. Since Moncada is just 19 and did not spend five seasons as a professional in Cuba, he will count against teams’ international free agent bonus pools and cause the franchise that signs him to incur major penalties.

One of the penalties is that a team that exceeds its bonus pool by more than 15% is ineligible to sign a player for more than $300,000 in the next two signing periods. That is mostly irrelevant here because Moncada is a better prospect than nearly all international free agents and much more advanced than the 16 year olds that are usually signed. Many teams would be fine facing that penalty in exchange for getting Moncada.

The other penalty, though, limits Moncada’s suitors significantly. Rumor has it that Moncada will get at least $30 million when he signs and could get as much as $40 million. Since all overages beyond a team’s bonus pool are taxed at a rate of 100%, the signing team would really need to pay $60 million or as much as $80 million to sign Moncada.

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It is no coincidence that the leading suitors for Moncada are reportedly the New York Yankees, Boston Red Sox, and Los Angeles Dodgers. Those are the only teams with sufficient funds that such an expenditure would be worthwhile. As stated by Rays President of Baseball Operations Matt Silverman, a team like the Rays has no chance in bidding war with those teams because the offers to Moncada would quickly leave the franchise’s financial comfort zone.

Other than the sheer amount that signing him would cost, Moncada would also have to receive all of the money in one shot. Unlike say Yasmany Tomas, who will received $68 million over the next six years from the Arizona Diamondbacks, Moncada is ineligible to receive a major league deal that pays him over time because of his amateur status.

Moncada’s contract would be a bonus, meaning that the signing time would have to pay him his money–and the accompanying tax–as soon as the deal is finalized. How could the Rays pay as much as $80 million in one shot to sign one prospect when their entire MLB payroll will be less than that this season?

Silverman said that the current system to sign Cuban defectors is another example of small-market teams being at a severe disadvantage. The Rays have enough finances to sign the top amateurs when the bidding tops out under $5 million, and they actually did beat the Yankees and others to sign top prospect Adrian Rondon. However, once players cost as much as Moncada, they simply have no chance.

Is there any way to even out this system so that small-market teams have a better chance of inking prospects like Moncada? The whole point of bonus pools is so that the worse teams get more opportunities to sign top prospects. Baseball also has the competitive balance draft picks to give smaller-market teams additional selections even if they succeed on the field.

For prospects like Yoan Moncada, the bidding on them is all about the money because every team, whether it’s rebuilding or preparing for a pennant race, would like to sign him. This is simply a matter of big-market teams versus small-market teams, exactly like the logic behind the competitive balance picks. With that in mind, the best way to fix the system would be a graduated penalty based on market size.

To begin with, there still have to be penalties for exceeding bonus pools–otherwise, what’s the point of having them? It makes sense for say the first $10 million beyond the bonus pool to be taxed at 100% like it is now. In most situations, that will be enough to keep teams within their bonus pools or at least feel the ramifications of exceeding them.

For prospects like Moncada, however, who will cost more than $25 million beyond the biggest international bonus pool for this season, the rules need to change. For bonuses exceeding a team’s bonus pool plus $10 million, the tax rate should be based on the comparative size of each team’s market. If we use estimates for each team’s metropolitan area and make adjustments for payroll, we could get tax rates something like this.

I calculated the tax rates by using the average percentage difference between each team’s market size and payroll and the overall averages. The average of the tax rates is still 100%, but as you can see, there is a lot more variability now.

I used a very simple formula–there are better ways to calculate a team’s market size and say a three-year average of a team’s payroll is better than just using the previous year. Some teams are being taxed too little or too much–the Boston Red Sox look like an example of the former. Nevertheless, this sort of arrangement could represent progress in regards to giving every team a better chance to sign players like Moncada.

Under these tax rates, it would cost the Yankees $106.0 million including to sign Yoan Moncada for $30 million while costing the Rays $47.1 million. While that would certainly even the playing field for Moncada, that is probably too extreme of a measure. If we set say a maximum tax of 150% and a minimum tax of 50%, then it would be $75 million versus $47.1 million, which is more reasonable.

Maybe the Yankees would decide that outbidding the Rays by nearly $30 million if Yoan Moncada’s bonus is $30 million or nearly $40 million for a $40 million bonus is still worthwhile. Maybe that $47.1 million number would still be too high for the Rays–heck, it probably is.

However, a system like this would keep teams like the Rays in the mix for Moncada while still giving the Yankees and Dodgers the chance to get him for more money if they so desire. If Major League Baseball truly wants more competitive balance by the time the next Yoan Moncada comes around, this is the type of measure that they should institute.

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