Off Season Budget

[SouthSideRyan]

Because 30M in 2012 and 20M in 2018 is more money than 20M in 2012 and 30M in 2018.

[jersey cubs fan]

Because 30M in 2012 and 20M in 2018 is more money than 20M in 2012 and 30M in 2018.

 

Sure, but it's not true that you should never volunteer to pay out more money at the start than at the end. You can get the overall value of the contract lower, and can fit it into your budget better when appropriate. There are a variety of factors to take into account, including expected tax rates. If 2 teams are offering the same guy 2/50, you can front load it to make your offer more attractive.

 

 

In general, yes, it's cheaper to backload. But paying more early on can make sense and you should not completely rule it out.

[SouthSideRyan]

Because 30M in 2012 and 20M in 2018 is more money than 20M in 2012 and 30M in 2018.

 

Sure, but it's not true that you should never volunteer to pay out more money at the start than at the end. You can get the overall value of the contract lower, and can fit it into your budget better when appropriate. There are a variety of factors to take into account, including expected tax rates. If 2 teams are offering the same guy 2/50, you can front load it to make your offer more attractive.

 

 

In general, yes, it's cheaper to backload. But paying more early on can make sense and you should not completely rule it out.

 

The budget isn't a factor, as I said you budget however you see fit. Pay the player 20M, but put that other 10M aside to be paid out in '18. If you're offering 2/50 and you're front loading it then your offer is more than the other team's 2/50.

 

Expected tax rates is something I'd never considered, but I can't imagine a player taking less money because you frontload the contract. Especially on something as tenuous as an expected increase in their tax rate.

[Little Slide Rooter]

Because 30M in 2012 and 20M in 2018 is more money than 20M in 2012 and 30M in 2018.

 

Sure, but it's not true that you should never volunteer to pay out more money at the start than at the end. You can get the overall value of the contract lower, and can fit it into your budget better when appropriate. There are a variety of factors to take into account, including expected tax rates. If 2 teams are offering the same guy 2/50, you can front load it to make your offer more attractive.

 

 

In general, yes, it's cheaper to backload. But paying more early on can make sense and you should not completely rule it out.

 

The problem is, we can't afford to front load. The whole purpose of frontloading is because we can give them more money when Soriano, Zambrano, and Dempster are off the books. Otherwise, I agree, frontloading could be good if you have the money in the budget at the time, so when the player starts to get older and hit a decline, you have some money freed up to restock.

[WrigleyField 22]

The budget isn't a factor, as I said you budget however you see fit. Pay the player 20M, but put that other 10M aside to be paid out in '18. If you're offering 2/50 and you're front loading it then your offer is more than the other team's 2/50.

 

Expected tax rates is something I'd never considered, but I can't imagine a player taking less money because you frontload the contract. Especially on something as tenuous as an expected increase in their tax rate.

Most front loaded contracts end up being for less overall value because of this. Conversely, backloading too much can make the overall contract value large becuase of this. I realize the players are pretty dumb on average, but they have smart agents working for them who will realize what time value of money is and adjust demands accordingly.

[SouthSideRyan]

The agents are also concerned with getting the biggest # for precedent. The players like the big # because they're dumb, and because it's a status symbol.

[davearm2]

Would it not make some sense to front-load a guy like Albert Pujols' next contract, so as to have his paycheck more closely mirror his actual production year to year?

 

That is to say, paying him 30 28 26 24 22 20 etc. frees up a little payroll each year that can be used to offset Pujols' own decline.

 

Do it the opposite way, and in the out years you're pretty screwed -- the guy's taking his largest bite out of payroll when he's producing the least.

 

We all get that in present value terms, the backloaded deal is cheaper (assuming the same total dollars). That doesn't automatically make it optimal in the bigger picture.

[SouthSideRyan]

As I've said several times, you pay Pujols 20-22-24-26-28-30, and along the way you invest 10-6-2 over the first 3 seasons and you pay the remaining 18M over the last 3 seasons from the Albert Pujols CD rather than your operating budget.

[WrigleyField 22]

Well this back and forth has become silly. Of course front loading is silly in the MLB if you aren't going to take advantage of the time value of money to try and reduce the overall value of the contract.

 

Besides the original idea was backloading was harmful. That isn't an endorsement of frontloading or refusing to backload, just that it may not be advisable to pay Alphonso Soriano $6M in year one of a deal that averages $17M.

[SouthSideRyan]

Well this back and forth has become silly. Of course front loading is silly in the MLB if you aren't going to take advantage of the time value of money to try and reduce the overall value of the contract.

 

Besides the original idea was backloading was harmful. That isn't an endorsement of frontloading or refusing to backload, just that it may not be advisable to pay Alphonso Soriano $6M in year one of a deal that averages $17M.

 

It's 10M, and I agree it probably shouldn't be that extreme, but as long as you keep backloading what does it matter?