How The New CBA Affects MLB and the Colorado Rockies

MLB and the MLBPA reached a five-year collective bargaining agreement last week. While no one knows for sure what the next five years will hold, the details from the agreement have given us a bit of clarity about the future for both the league and its teams, most notably (for our purposes) the Colorado Rockies.

(Page one of this article will on the effect this has on the Rockies. Check out page two for thoughts on how this will affect the rest of the league.)

This newest labor agreement is full of changes and new rules. But for the Colorado Rockies, the most significant change is likely the hard spending limit now imposed on international free agents.

Under the previous agreement, teams could spend as much as they wanted on players from other countries. Each team had an allotted spending limit, but the only penalty for exceeding that limit was a tax that many teams happily paid in exchange for dominating foreign player markets.

That option is now off the table. Teams can now spend around $5M (slightly more for smaller revenue teams and slightly less for higher revenue) per year on international free agents. Franchises can now trade for more international signing room, but they can only take on an additional 75% at maximum. So even under the most favorable conditions possible, a team will only be allowed to spend roughly $10M on international free agents.

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This is great news for the Rockies. $5M is still enough money that it shouldn’t significantly alter their plans in international free agency, but it severely handicaps the spending power of Colorado’s big market division rivals. The Dodgers, Giants and Diamondbacks have all spent aggressively on international free agents in recent years, but now Colorado can afford to match them dollar for dollar (or even exceed them, in some cases).

Baseball America estimated that the Los Angeles Dodgers spent over $45M on international free agents in 2015; under the new rules, they’ll have to slash that budget by about 90 percent. Large market teams had identified international free agency as an area that could exploit with their superior resources, but this new rule will effectively level that playing field.

More good news for Colorado: the new CBA also includes stiffer luxury tax penalties for teams with huge payrolls. Teams that exceed the tax threshold for multiple seasons or by more than certain amounts will be forced to pay even higher taxes, with a maximum tax of 90 percent on revenue. That’s not a hard limit, but it might as well be. It’s incredibly unlikely that any team will be willing to pay those kinds of fees.

This won’t completely negate the advantages offered by a larger payroll, but it will force teams to at least consider the long-term ramifications of a deal before they make it. Take the Dodgers again, for instance. They’re attempting to negotiate contract extensions for Kenley Jansen, Justin Turner and Rich Hill this offseason. In a bubble, they probably have enough cash to bring back all three. However, with these new luxury taxes, the long-term cost of all three might be too great for even the Dodgers to bear.

The new CBA isn’t all good news for Colorado however. The qualifying offer system underwent a dramatic overhaul, and the changes seem to benefit the players much more than the benefit the teams.

When a player reaches the end of his contract and is due to become a free agent, his original team can make him a “qualifying offer”, a one-year contract at an average of the top 125 player salaries from the previous year (this offseason, the qualifying offer is a little over $17M). The player can reject the offer and become a free agent, but the team that signs him has to forfeit a draft pick.

Under the previous rules, this draft pick was a “sandwich” pick between the first and second round. The new rules, however, designate these compensation picks later in the draft, which saps their value tremendously.

Recently, concerns over losing draft picks had artificially deflated the value of free agents on the market. This change was added in order to give those players more negotiating power, which it will, but their increased negotiating power could make things very difficult for a smaller-market squad trying to land a top-notch free agent.

In recent years, teams were hesitant to give up their first-round draft pick to bring in an expensive free agent, but losing a third-round pick is much less intimidating. The end result will almost certainly be more teams bidding more money for players that previously might have only received a single offer. For a Rockies team reportedly interested in signing someone like Mark Trumbo, this is not good news.

In general, however, the new changes to the CBA should help teams like Colorado. MLB appears to be searching for parity, and that’s good news for smaller-market squads looking to find a way to compete with the big money beasts of the game.