Gregory Fisher-USA TODAY Sports

We’ve updated the previous piece to include the signings of Brandon Nimmo and David Robertson. 

With the Winter Meetings wrapped up, it’s time to take inventory of how much payroll the Mets have added with their signings of multiple starting pitchers, a trade for a legitimate high-leverage lefty reliever, and a Rule 5 Draft selection.

The additions help fill the massive voids left behind by the numerous players who reached free agency this winter, but, it also tacks on a huge expense to an already massive payroll for the 2023 season.

Last season, the Mets finished the year with a franchise-record $286.55M payroll (for MLB luxury tax purposes), and with Justin Verlander, Jose Quintana, Brooks Raley, and Zach Greene in the fold, they have already broken that record again, and seem guaranteed to exceed a $300M payroll.

Let’s take a quick look at how the 2023 payroll looks as of right now.

Simple Guaranteed Contracts

  • RHP Max Scherzer | 3 yrs/$130.0M (2022-2024) [$43.33M AAV]
  • RHP Justin Verlander | 2 yrs/$86.6M (2023-2024) [$43.33M AAV]
  • OF Brandon Nimmo | 8 yrs/$162.0M (2023-2030) [$20.25M AAV]
  • OF Starling Marte | 4 yrs/$78.0M (2022-2025) [$19.50M AAV]
  • OF Mark Canha | 2 yrs/$26.5M (2022-2023) [$13.25M AAV]
  • RHP Jose Quintana | 2 yrs/$26.0M (2023-204 [$13.00M AAV]
  • C James McCann | 4 yrs/$40.6M (2021-2024) [$10.15M AAV]
  • IF Eduardo Escobar | 2 yrs/$20.0M (2022-2023) [$10.00M AAV]
  • RHP David Robertson | 1 yr/$10.0M (2023) [$10.0M AAV]
  • LHP Brooks Raley | 2 yrs/$8.75M + $6.5M club option or $1.25M buyout (2022-2023) [$5.75M AAV]
  • 1B/OF Darin Ruf | 2 yrs/$6.0M + $3.5M club option or $250k buyout (2022-2023) [$3.125M AAV]

Total Salary Guaranteed Contracts: $191.69M

For MLB Luxury Tax calculation purposes, salaries for players on guaranteed deals are determined by the Average Annual Values of their contracts. An easy simple ($$/years) calculation. One thing to keep in mind though is how option years and/or buy-outs are calculated. Contracts with Players Options are considered guaranteed years and as such the AAV calculation will include the option year. All other options (Club, Vesting, Mutual) are considered non-guaranteed. Any buyouts associated with these options are included in the AAV calculation but the options themselves are not.

For example, Darin Ruf’s two-year, $6 million deal pays him $3 million per season, however, since it has a $250k buy-out with his 2024 club option, the AAV ends up being $3.125M instead.

One oddity as a result of the new CBA…per Matt Gelb of the Athletic, any player traded with guaranteed money still on their contract has their AAV impact re-calculated based on how much money is remaining on the deal. So for Brooks Raley, his 2023 AAV hit on the payroll is his 2023 $4.5M salary + the $1.25M buyout on his 2024 club option.

Mandatory Credit: Brad Penner-USA TODAY Sports

Guaranteed Contracts from Option Years

  • 1B/DH Daniel Vogelbach | 1 yr/$1.5M via exercised club option, $200k buyout not used (2023) [$1.3M AAV]
  • RHP Carlos Carrasco | 1 yr/$14.0M via exercised club option, $3.0M buyout not used (2023) [$11.0M AAV]
  • RHP John Curtiss | 1 yr/$775k (2023) [$0.775M AAV]

Total Option Year Contracts: $13.075M

These are generally the same as the previous category, however, the flipside of how buyouts are included in AAVs fall out here. Since Vogelbach and Carrasco’s 2023 option buyouts were already included in previous AAV calculations but were not used, the Mets may now take a credit for the buy-out amounts in the option year season. So Vogelbach’s AAV impact is reduced by $200k and Cookie’s by $3 million.

Guaranteed Contracts with Deferrals

  • SS Francisco Lindor | 10 yrs/$341.0M with $50M deferred (2022-2031) [$32.348M AAV]
  • RHP Edwin Diaz | 5 yrs/$102.0M with $26.5M deferred (2023-2027) [$17.378M AAV]

Total Deferral Contracts: $49.726M

Alright, folks strap in, grab some paper, and a pen as we take a trip down Financial Accounting 401. For any contract that includes deferred compensation, a standard $$/years AAV approach cannot be used. This is because of a concept known as the “time value of money (TVM)”. Said in its simplest terms, “money is worth more now than it will be at a future date due to its earnings potential”. We are all suffering through inflation in our personal lives as we speak so I think we can all understand that a dollar right now can’t get you as much as a dollar did 10 years ago.

With this in mind, in order to factor in this devaluation of money, for AAV purposes, deferrals on a contract must be recalculated and factored in based on their “Net Present Value (NPV)”. This in turn generates a cost savings for teams against the luxury tax based on three main factors…(A) how much money is deferred, (B) How long the money is deferred for, and (C) the discount rate applied at the time of contract signing [Generally based on JP Morgan Bank’s Prime Rate].

For Lindor, $50 million of his compensation ($5M per year) is being deferred for 10 years and discounted at 4.0%. So the NPV of his $50.0M is only $32.479, a ~$17.521M luxury tax savings across 10 years (-$1.752M AAV reduction). So instead of his contract having a $34.1M AAV, the team is only hit for $32.348M.

For Diaz, although only $26.5M of his compensation is being deferred, it is being deferred at a 7.0% discount rate, and for a time frame ranging from 10 to 15 years. So, the NPV of his $26.5M is only $11.391M, a $15.108M savings across 5 years (-$3.021M AAV reduction) reducing his AAV from $20.4M to $17.378M

Dead Money

  • 2B Robinson Cano | 10 yrs/$240.0M (2014-2023), $3.75M paid by Mariners [$20.25M AAV]

Total Dead Money: $20.25M

Yup, he’s still around hurting the Mets. This is the final year of Cano’s contract so we can all finally rejoice when this comes off the books at the end of the season. If another team finds some reason to sign him to their MLB roster, the Mets would gain a small $3,846.15 benefit for each day he’s on a roster. They picked up $158k thanks to the Padres and Braves last year.

Jayne Kamin-Oncea-USA TODAY Sports

Arbitration Contracts (estimates per MLB Trade Rumors)

Total Arbitration Contracts: $30.15M

Once a player reaches three years of service time (or two for players with Super 2 Status), their salaries for subsequent seasons, until they reach six years of service time, are determined based by an arbitrator based on their career and prior season performances in relation to their peers who have also gone through arbitration.

Most of the time, these arbitration cases are settled at a mid-point between what the player wants and what the team wants. By doing so, both sides avoid a painful and awkward arbitration hearing and the player guarantees his salary even in the event of being cut during spring training. If a player/team decides to go through the arbitration process, that salary is then non-guaranteed. If the player ends up being cut before the 16th day of spring training, they only get 1/6th of their salary. If the player is cut between the 16th day and the end of spring training, they only get 1/4th of their salary.

Brad Penner-USA TODAY Sports

MLB/MiLB Renewable Minimum Salary Contracts

$720k if on MLB roster or $117.4k if on MiLB roster ($58.7k if first time on a 40 man roster)

Total Renewable Contracts: $4.406M

Any player with less than three years of service time is subject to team-controlled renewable contracts. While teams can certainly choose to pay their pre-arbitration players more than MLB/MiLB minimum, they are under no requirement to do so.

Other MLB Luxury Tax Requirements

1/30th of the Player Benefits Pool | $17.3M
1/30th of the Pre-Arbitration Bonus Pool | $1.67M

Total Other: $18.97M

The final piece of the Luxury Tax calculation is something the teams have no control over. The Player Benefits Pool and Pre-Arbitration Bonus Pools are both financial pieces negotiated as part of the Collective Bargaining Agreement. Funding for these two pools are split evenly between all 30 MLB teams.

Final Total MLB Luxury Tax Payroll: $326.83M + $59.84M luxury tax payment + Top 2024 Draft Pick moved back 10 spots

A staggering number considering the Mets still seemingly have another rotation spot to fill, half of the bullpen, and a desire to add at least one impact bat to the lineup. In order to fill all these needs they will most certainly need to go beyond a $300M salary, perhaps as high as $330M.

The 2024 payroll situation is no better either as I currently have it at an estimated $260.15M already with the departures of Escobar, Canha, Vogelbach, and Carrasco included.