Article: Finer Points: Draft Bonus Pools

[Jeremy Nygaard]

The new draft rules have been in place since 2012 (much longer than I realized) and people are still trying to wrap their brain around the changes. Below is a primer to help understand the complexity of draft spending.MLB DRAFT BONUS POOLS

 

Long gone are the days of signing players to MLB contracts (immediately putting them on the 40-man roster) and uncontrollable signing bonuses.

 

In are the days of assigned slot values and team bonus pools.

 

Once the draft order is set, each pick in the first 10 rounds is assigned a value. Though it’s not a “hard-slotted bonus” for the player selected with the pick, the value of that pick is part of the team’s overall bonus pool.

 

The Twins own picks in each round of the draft and one extra “Competitive Balance” pick this year. There values are as follows:

 

Round 1, pick 13 overall: $4,197,300

Comp Round A, pick 39 overall: $1,906,800

Round 2, pick 54 overall: $1,338,500

Round 3, pick 90 overall: $657,600

Round 4, pick 119 overall: $483,000

Round 5, pick 149 overall: $360,800

Round 6, pick 179 overall: $274,800

Round 7, pick 209 overall: $214,900

Round 8, pick 239 overall: $173,000

Round 9, pick 269 overall: $154,100

Round 10, pick 299 overall: $145,000

 

TOTAL BONUS POOL: $9,905,800

 

If only it was that simple, right?

 

So the Twins are allowed to spend nearly $10 million on their draft picks, but there are a few additional rules to know.

 

If the Twins fail to sign a pick that has value attached to it, their pool is reduced by the value of the unsigned pick. This happened with Kyle Cody in 2015. The 73rd pick did not sign and the Twins draft pool was reduced by $839,700. Because he was unsigned in the top three rounds, the Twins received the 74th pick in the 2016 draft.

 

(Jeremy’s note: At some point during the “will he/won’t he sign” debacle, I broke the news that it had to do with a concern over Cody’s elbow. The Twins reduced their offer to Cody - which would have allowed them to spend additional money elsewhere. Ultimately, Cody didn’t sign, went back to Kentucky and was drafted by the Rangers the following year. Cody had Tommy John surgery and is currently on the shelf. Guess the Twins weren’t crazy…)

 

(But wait there’s more! Up until this point, I never revealed what the plan was with their additional money. And this seems like as good of time as any. Had the Twins signed Cody, they would have also signed two other prospects as well: Kyle Wilson, a pitcher drafted in the 19th round, and Jonathan Engelmann, an outfielder drafted in the 28th round. Wilson and Engelmann went on to play collegiately at Crowder College and Michigan, respectively, and were both re-drafted later. Wilson is pitching in the Mets system, currently at high-A. Engelmann had a very good pro debut in the Cleveland system last year and has yet to break a lineup in 2019. You’re welcome!)

 

The other thing to know is that every team can spend up to $125,000 to sign picks outside of the Top 10 rounds. If they spend more, that money is counted towards their pool.

 

So, in theory, the Twins could sign their Top 10 round picks for $8,905,800 collectively (one million less dollars than their pool) and then sign their 11th round pick for $1,125,000.

 

A strategy used often is teams will draft seniors in the back half of the first ten rounds and then sign them for significantly less than their assigned value. They’ll use that savings to spend more on a player than their assigned value or to be able to sign a non-top 10 round player. It’s become very important for area scouts to know before the draft exactly what players’ demands are.

 

It should also be noted that there are penalties for teams exceeding their bonus pools. The Twins haven’t - and won’t - ever exceed their pool, so I’m not even going to tell you about the penalties.

 

We’ll visit the rules surrounding International Spending Pools before International Free Agency opens in early July.

 

 

 

~Articles in the Finer Points series~

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[ashbury]

If the Twins fail to sign a pick that has value attached to it, their pool is reduced by the value of the unsigned pick.

....

 

It should also be noted that there are penalties for teams exceeding their bonus pools. The Twins haven’t - and won’t - ever exceed their pool, so I’m not even going to tell you about the penalties.

OK, but tell me at least this much. Suppose the team puts out what they think are signable contracts that use all the pool to the very last penny, then all the draftees do sign, except one, who unexpectedly drags his feet but strings the team along, and then decides at the very last day to go to school. The team can't un-sign all the other contracts, so then their bonus pool is reduced and they are in a penalty situation despite their intentions, correct?

[Mr. Brooks]

OK, but tell me at least this much. Suppose the team puts out what they think are signable contracts that use all the pool to the very last penny, then all the draftees do sign, except one, who unexpectedly drags his feet but strings the team along, and then decides at the very last day to go to school. The team can't un-sign all the other contracts, so then their bonus pool is reduced and they are in a penalty situation despite their intentions, correct?

There is a reason the language, "the Twins and 3rd round pick X have reached an agreement" is typically what you see reported.

I think teams typically agree to terms with many of their picks, but don't actually ink the contracts until they are sure they have all their ducks in a row.

[ashbury]

There is a reason the language, "the Twins and 3rd round pick X have reached an agreement" is typically what you see reported.

I think teams typically agree to terms with many of their picks, but don't actually ink the contracts until they are sure they have all their ducks in a row.

This makes sense on the surface. But can you really come to terms when the offer is contingent on others? (People buy houses with contingencies, and those deals fall through all the time.) Can the team "reach an agreement" with a draftee saying "our offer is $x million, but we will reduce it by whatever percent is required if anyone else doesn't agree to terms?" And then if that draftee balks and changes his mind, everyone else's offer is reduced further. There's a degree of circularity and ripple effect that I would think a capable lawyer could ask for damages and receive.

 

Further thought - if it's all not "inked", there is room for one of the draftees to change his mind and demand more, too, thus causing a last-minute ripple effect from the other direction. But verbal contracts can be enforced, in either direction, so I'm actually not sure what it means to delay signing.

 

Here's hoping Jeremy has the answer already at hand. It can't be this difficult.

[Mr. Brooks]

This makes sense on the surface. But can you really come to terms when the offer is contingent on others? (People buy houses with contingencies, and those deals fall through all the time.) Can the team "reach an agreement" with a draftee saying "our offer is $x million, but we will reduce it by whatever percent is required if anyone else doesn't agree to terms?" And then if that draftee balks and changes his mind, everyone else's offer is reduced further. There's a degree of circularity and ripple effect that I would think a capable lawyer could ask for damages and receive.

 

Further thought - if it's all not "inked", there is room for one of the draftees to change his mind and demand more, too, thus causing a last-minute ripple effect from the other direction. But verbal contracts can be enforced, in either direction, so I'm actually not sure what it means to delay signing.

 

Here's hoping Jeremy has the answer already at hand. It can't be this difficult.

Verbal contracts are not binding until there is an exchange of value.

For example, if I say I'll pay you to mow my lawn, then- before you start mowing my lawn, and before I've paid you- I say, "nevermind, I decided to do it myself", then there is no breach of contract. If I've already paid you though, or you've already mowed my lawn, then the verbal contract is binding.

 

This is why Anthony Barr is not a Jet. They reached a verbal agreement, but there was never an exchange of value, so Barr was able to back out.

 

Until the Twins give the draftee money, or until the draftee shows up and starts engaging baseball activities for the Twins, then the verbal agreement is not legally binding whatsoever.

[gunnarthor]

 

OK, but tell me at least this much. Suppose the team puts out what they think are signable contracts that use all the pool to the very last penny, then all the draftees do sign, except one, who unexpectedly drags his feet but strings the team along, and then decides at the very last day to go to school. The team can't un-sign all the other contracts, so then their bonus pool is reduced and they are in a penalty situation despite their intentions, correct?

This was more or less the Astros Brady Aiken mess. They assumed he'd sign for 5m and leave them 2m+. With that they were going to sign Jacob Nix and Mac Marshall (I think). After Aiken didn't sign they had to not sign those two but Nix brought a grievance and the teams settled out of court with Nix getting nearly all the promised money.

[ashbury]

and the teams settled out of court with Nix getting nearly all the promised money.

So then, penalty to MLB potentially on top of that?

[gunnarthor]

 

So then, penalty to MLB potentially on top of that?

Yeah, if Nix had won his grievance, the Astros would have been forced to pay him 1.5m which would have put them over the allowed pool amount and cost them a first round draft pick the following year. So they basically paid him 1m to drop his grievance. Can't remember if Marshall also got something.

[old nurse]

Teams agree verbally to contracts. From MLB.com here are the penalties for going over

 

A team that outspends its pool by 0-5 percent pays a 75 percent tax on the overage. At higher thresholds, clubs lose future picks: a first-rounder and a 75 percent tax for surpassing their pool by more than 5 and up to 10 percent; a first- and a second-rounder and a 100 percent tax for more than 10 and up to 15 percent; and two first-rounders and a 100 percent tax for more than 15 percent.
In six years with these rules, teams have outspent their allotments a total of 95 times, but never by more than 5 percent.

 

The sad tale of Brady Aikin, Jacob Nix Mac Marshal and the Astros. Ailin agreed to a below slot value which allowed the Astros to offer Jerome Nix and Marshall  a 1.5 million dollar signing bonus. 2 parties with verbal agreements in place. The fateful MRI on Aiikin caused the Astros to lower their offer. Aiikin refused to sign. They couldn't sign Nix. In the end each player lost out on around a million dollars each. They also ended up each with UCL damage and missing time.. Houston came out way ahead. The following year they drafted Bregman in the second slot.

[Seth Stohs]

Without getting into much detail, I was talking with Helman and he basically said that he waited until that last day to sign just because they had to wait on Larnach signing. I think Charles Mack also didn't sign until that last day. 

[Jeremy Nygaard]

Nothing is official until the contract is signed. And the contract isn't signed until everything is in place... and that includes in place with others too. 

 

In 2015, I did the Twins Draftbook (which was cool, but a ton of work), I worked the phone pretty heavily. Basically, my goal was to be Jim Callis of the Twins and break the news on signings and bonuses.

 

I learned there was a lot of cat and mouse. Chris Paul, drafted in the sixth round, had a pick value of $290,300. He was in agreement for $50K soon after the draft, it was one of the first deals that I had documented... the problem was the reps for all the players would want a piece of that extra $240,300 the moment it became official. So, of course, there was nothing official for quite a while.

 

The for-slot deals, like Tyler Jay, could be announced right away.

 

I reported the Cody deal, which was pending physical. Well, we know that didn't go well. I then got a phone call from Cody's agency, Frontline Athletic Management, asking (or demanding) that "retract" my story cause it could impact his eligibility. 

 

My goal of sharing information turned into much more of a mess than it was worth.

 

But long story short, the whole process is full of shenanigans... and nothing is officially official until EVERYONE agrees, and that takes time.

[2wins87]

 

OK, but tell me at least this much. Suppose the team puts out what they think are signable contracts that use all the pool to the very last penny, then all the draftees do sign, except one, who unexpectedly drags his feet but strings the team along, and then decides at the very last day to go to school. The team can't un-sign all the other contracts, so then their bonus pool is reduced and they are in a penalty situation despite their intentions, correct?

 

I'm confused by this hypothetical, were they planning on signing that guy for like $10,000?  Presumably they budgeted close to his slot value for him, so when they lose his slot money they also aren't using the money that they would have to sign him.  They should still be spending more or less all of their remaining pool money on the remaining players.  There is a little bit of overslot wiggle room before the penalties kick in, so unless he was their first pick and they thought they had a big underslot deal on him then they would be very unlikely to be affected by penalties.

 

If a team does go overslot on everyone expecting to be able to negotiate a guy into signing a $10,000 contract which he's unwilling to do then that seems like their own fault and they should be penalized.

[ashbury]

I'm confused by this hypothetical, were they planning on signing that guy for like $10,000? 

The two sides of a negotiating table may have different ideas about what is "signable," but I did invoke that word with the intention to rule out downright low-balling the players - the team would indeed get what they deserve if they do that.

 

My hypothetical involves our front office getting verbal agreements, and the Aikin case previously brought up plus Jeremy's response makes it clear: nothing is clear, until all the dust settles.

[twinsfanstreif]

Correct me of I'm wrong but I believe that Kyle Cody pick turned into Akil Baddoo.not a bad trade off (at least so far)

[biggentleben]

One thing to note that did change in the most recent CBA (and was hidden in some language that was not uncovered until recently) - a compensation pick for not signing a previous year's pick used to require the team holding it to sign the player drafted in that slot the next year. That is no longer true. As long as that pick number still falls within the first three rounds, you can not sign a player the next year and get a compensatory pick again. That has strongly shifted the draft strategy in many front offices this year, when there are 3 first-round compensatory picks (Braves, Diamondbacks, and Dodgers) as well as another before the second round (Pirates in the competitive balance round A).

[rdehring]

Thanks, Jeremy, draft manuevering is always interesting to follow.  What I do recall from last year's draft is that the Twins signed more players than I remember under the previous regime.  

 

I see Seth talked about Helman above.  Was he the only player signed to more than $125,000 after round 10?  Or were there others?

 

Although this is related to the International Pool money, do you know if the Twins ever used the dollars they traded for last winter and must be spent by June 15?

[Jeremy Nygaard]

 

I see Seth talked about Helman above.  Was he the only player signed to more than $125,000 after round 10?  Or were there others?

 

Although this is related to the International Pool money, do you know if the Twins ever used the dollars they traded for last winter and must be spent by June 15?

Helman was the only pick outside of the Top 10 that counted against the pool.

 

I haven't heard much about the July '18-June '19 IFA period. The Twins usually include those who signed from July-December in their media guide and it didn't show anyone this year. I'd assume they spent some of... but when they signed Severino, I believe there was a provision that they could dip from more than just last year's pool, so who knows how it's all been divied up.

[rdehring]

 

Helman was the only pick outside of the Top 10 that counted against the pool.

 

I haven't heard much about the July '18-June '19 IFA period. The Twins usually include those who signed from July-December in their media guide and it didn't show anyone this year. I'd assume they spent some of... but when they signed Severino, I believe there was a provision that they could dip from more than just last year's pool, so who knows how it's all been divied up.

Thanks, Jeremy.  My question was related to the three way trade they made I think shortly before spring training.  I may be mistaken, but I recall they got $750,000 of International Pool money from Baltimore for the 2018-2019 signing period.  It was mentioned at the time they were down to $80,000 after signing Urbina and this would give them an additional pot of cash to sign someone late in the period.

[gunnarthor]

 

 

 

The sad tale of Brady Aikin, Jacob Nix Mac Marshal and the Astros. Ailin agreed to a below slot value which allowed the Astros to offer Jerome Nix and Marshall  a 1.5 million dollar signing bonus. 2 parties with verbal agreements in place. The fateful MRI on Aiikin caused the Astros to lower their offer. Aiikin refused to sign. They couldn't sign Nix. In the end each player lost out on around a million dollars each. They also ended up each with UCL damage and missing time.. Houston came out way ahead. The following year they drafted Bregman in the second slot.

I'm not sure the players did as bad as you think. Nix got a million dollars to settle his grievance and then signed the next year with the padres for 900k so came out a bit ahead. Marshall got 750k the following year although I'm not sure if he was involved in the grievance. Aiken turned down the 5m offer the Astros offered and got half that from Cleveland but he also received an undisclosed amount from insurance as well.

[Jeremy Nygaard]

 

Thanks, Jeremy.  My question was related to the three way trade they made I think shortly before spring training.  I may be mistaken, but I recall they got $750,000 of International Pool money from Baltimore for the 2018-2019 signing period.  It was mentioned at the time they were down to $80,000 after signing Urbina and this would give them an additional pot of cash to sign someone late in the period.

 

Yep, I know they added $750,000, but don't have any idea what happened after that. There's also a lot of gray area because there is some time between agreeing and signing - even much longer than the draft in some cases - so teams could go well over their pool and then trade to make sure they have enough by June 15. Having an international draft would be a mess for teams, but would be much easier to follow from a fan's perspective. And holding it sometime during the offseason would be better as well.