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The Chicago Cubs agreed to a four-year, $52 million deal with free agent starting pitcher Edwin Jackson this week, but as is always the case with bigger contracts, we are deeply curious about the precise structure of the deal. And, in Jackson’s case, it looks like it’s pretty interesting.

Per ESPN, citing a Cubs source, Jackson’s deal comes with an $8 million signing bonus, and annual salaries of $11 million thereafter.

That $8 million bonus, presuming it’s paid out before the end of this year, could nominally be a part of the 2012 baseball budget, leaving a mere $11 million commitment in each of the next four seasons.

A few things to note:

  • For the purposes of the luxury tax – if the Cubs are ever pushing up against it (will be $189 million in 2014, so they’d have to add *a lot*) – contracts are treated as evenly spread out over their length. This is done to avoid shenanigans, and would mean that Jackson’s deal, for purposes of the luxury tax cap, is treated as worth $13 million per year through 2016.
  • Fans always want teams to front-load deals because then the team is paying the most money for when the player is likeliest to be at his best (and paying the least when he’s likelier to be old and broken). But, in financial terms, that just never makes sense. Because of inflation, and because baseball contracts are fully guaranteed (the money is going to be spent), teams always prefer to back-load deals – put simply, money paid out five years from now is worth less than money paid out today. While we like to think about “creating additional budget space a few years from now,” teams tend not to think that way – money spent is money spent, whether it’s in 2013 or 2015.
  • HOWEVA, there is an exception. All things equal, teams would prefer to back-load, but, conversely, players would prefer to front-load for the same reasons. So, where you can front-load (for example, with a huge signing bonus) as an incentive to the player, and the budget in the given year allows for it, then it can make some sense. The nice byproduct will be a “feeling” like there’s more money to spend in later years since a big chunk of the money was spent up front, even if owners don’t necessarily think the same way.
  • DOUBLE HOWEVA, if the Ricketts are dead-set on a setup where the baseball budget is directly tied to revenue, then I suppose in a year where there is “extra” money left to spend (like 2012), the baseball ops guys might help themselves ever-so-slightly by giving Jackson the big signing bonus this year, before his annual salary even kicks in.
  • Jptopdog

    The Rangers signed Pierzynski and their roster is at the 40 man limit prior to the signing. If Beliveau is waived and reclaimed by the Cubs would he be assigned to AAA or would he have to be put on our 40 man roster? Just sayin’ cuz they have eight lefty pitchers with Beliveau.

  • Curt

    Triple howeva oh nm I Just like saying howeva lol, happy holidays Brett hope you enjoy the Louisville factory maybe you can find some bats with hits in them for the cubs.

  • bluekoolaidaholic

    I’m curious, do millionaire baseball players pay/get social security? And what about unemployment compensation? If Soriano is out of work, does he get a paltry $100,000.00 a week or so till he can get back on his feet again?

    • Rcleven

      Would imagine each player being treated as a independent contractor(would have to pay taxes and benefits out of their income).
      Not really sure tho.

    • DocPeterWimsey

      They should pay into FICA for the first $110K of their salary, just like everyone else. (Of course, only a minority of people have a “first” $110K of their salary!)

    • Rcleven

      http://econ.tulane.edu/RePEc/pdf/tul1209.pdf
      For the accountant in all of us.

  • Rcleven

    “DOUBLE HOWEVA”
    This is also incentive for a player to sigh on the bottom line to a 100 loss team.
    Last years savings well spent.
    Nice approach.

  • cRAaZYHORSE

    No mention of a no trade clause?

  • Brian Peters

    There isn’t a no-trade clause in Jackson’s contract.

  • cubsin

    There’s also a good chance Jackson’s tax bill will be lower if he’s paid in 2012.

    • http://www.taxupdateblog.com Joe Kristan

      Credit to Jackson’s tax man. Getting the $8 million in 2012 could save him $440,000 in federal taxes, with the 39.6% top bracket and .9% medicare surtax scheduled to take effect 1/1/13 (compared to 35% now)

      • http://www.bleachernation.com Brett

        Very good point.

      • MichiganGoat

        Ah the problems of the rich

      • baldtaxguy

        Definitely something I would think we may (should) see more of (signed FA’s with 2012 paid bonuses) in these last days as we walk toward the cliff.

  • Bilbo161

    The lower salary going forward also makes him a more attractive trading chip if the Cubs decide their season is lost by the trade deadline. I’m sure the FO team will be listening for someone to pony up some nice prospects.

  • Chad W

    Mr. Kristan, very, very good point! Great, considerate move by Jackson’s representatives. That up front signing bonus made sense for both parties involved: Jackson and the Cubs. I really like the structure and nature of the deals Theo, Jed & Co. have out together to this point and the Jackson deal is no exception.

  • Chad W

    Brett, any word or final confirmation as to Jackson’s contract containing a no-trade clause? Originally I read reports that said he ha a NTC but Phil Rogers then reported that it didn’t. Any other reports out there to confirm or vouch Mr. Rogers’ report?

    • MichiganGoat

      There is NOT a NTC, i think many got confused because it was reported as a no no trade clause and some report that double negative as a positive NTC.

      • NyN

        I can see that confusion. Considering most of the contracts given out by the Cubs have a guaranteed trade clause. So some might even consider the no no trade clause to be the you will be traded clause that Baker and Feldman got.

      • calicubsfan007

        @MG: I think that the Cubs had to front out a little more money in the beginning of the contract to help Jackson sign.

  • Tim

    Dbacks signed Cody Ross. Hey theo get on the phone with Ruben and talk some Soriano :)

    • Rcleven

      Kubel- Upton. Could make them available also.

    • calicubsfan007

      What the hell are the Dbacks doing? Besides giving us more leverage. (= They seem to really be set for a win now mode.

  • Hee Seop Chode

    If we’re pretending to be accountants, wouldn’t you want to match an asset’s expense to its contributing value? I would think the best way to set up a contract is find the net present value of projected future WAR and pay accordingly. Otherwise you’d be using strait line depreciation.

    Example:

    Say Jedstein expects PJax to have WARs of 3.0, 3.0, 2.5, and 2.0 for 2013, 2014, 2015, and 2016. If the value of WAR for pitchers will be $4M per year in 2013, and become $1/2M more expensive each year going forward, the present day baseball value of the next 4 years will be $12M, $13.5M, $12.5M, and $11M. Then you’d have to figure out the Cubs internal cost of funds to find the net present value of those figures.

    To accurately match contribution to compensation you’d have to know or estimate: future WAR contribution (or however you want to measure value), future price of WAR (which will be effected by TV contracts, budgets, ext. across the game), future inflation of the broader economy, and the specific clubs internal cost of funds.

    If my wife wouldn’t be mad at me spending so much time away from the family during the holidays i’d make an excel spread sheet. Maybe I will anyway tonight…

    • dob2812

      Sure but you’re only gonna care about that if you’re an accountant and then probably only if you’re sitting an exam.

      Cash is king is why contracts are back loaded. Obviously there isn’t such a demand for cash with the Cubs right now, so they can do stuff like this.

      And seeing as they have the cash, why are they not in on Swisher? 4/52 from the Indians and he’s supposedly giving it serious consideration. That would be a steal. Second round draft pick bye bye and good riddance.

  • bbrave307

    Cubs get to show the $8 million expense this year. Helps with their taxes too.

  • cubfanincardinalland

    Cody Ross and his career .782 OPS is an 8 million dollar a year player, and the Cubs can’t find a taker for Soriano at 5 mil. a year?
    Some of the guys running these teams ain’t rocket scientists.

    • Marcel91

      I agree cubfanincardinaqlland. Ross’ contract is ridiculous and made even less sense for the diamondbacks than most teams. Thats expensive for a platoon player. But nobody wants Soriano…..

    • Pat

      The problem isn’t that no one will take the chance on Soriano a 10 mil for 2 years. It’s that no one is going to give up any kind of decent prospect to do so. At least no one has so far.

    • another JP

      The problem with Sori isn’t the $5M/yr… that’s great value for any team. With the new CBA teams are holding on to their prospects + the NTC limits who Fonz will go to.

      My personal feeling is we’re better off to keep Soriano for the next two years. He’s good with young players and is still productive. I compare him to Manny Ramirez in many ways- an older guy who could still hit that Theo had with an immovable contract. Boston didn’t unload Ramirez until the end of his contract and it looks like the same will happen to AS.

      • MichiganGoat

        Well that and Manny’s love of the juice ;)

        • Soler Power

          Skimming the recent comments, I thought that said “Manny’s love juice” at first.

          • MichiganGoat

            I think that was his excuse the first time- something about fertility treatments aka love juice

  • Alec

    Gerardo Parra could also be available. I take him in rf. he’s young. Great defense. Hada little power, not much, but he’d be a good fit I think

    • daveyrosello

      Do not want. Why bother? He’s no better than Schierholz.

      • Jeff1969

        He’s actually quite a bit better than Nate.

  • Jon

    Brett-
    Love the picture of Tio Rico. Every time I see the billboard in AZ I will think of Bleacher Nation. AWESOME!

  • ferrets_bueller

    I like the front load- pay more now when you’re not competitive, then have more to spend when you are.

  • 5412

    Hi,.

    Folks are forgetting the fact the Bush tax cuts are expiring. Top rates go from 36 to 39.6%. By moving the money into 2012 he saves $288,000 in federal income tax, plus he gets the time value of the money being moved forward.

    regards,
    5412

    • another JP

      I’m sure other FA look at the arrangement and appreciate the Cubs flexibility in helping out Jackson with the tax implications of a front loaded contract in this case.

  • http://Bleachernation.com Ramy16

    I would do a Lake for Parra swap..Parra isn’t eligible for free agency until 2016

    • Jeff1969

      The D’Backs have a bunch of shortstops in the minors & traded for Didi Gregorius as well. I don’t think they’d be interested in Lake. Castro, maybe, for Upton, but not Lake for Parra. Maybe there might be a Castro-Shark for Upton & either Bradley or Skaggs and /or Gregorius? is that nuts?

      • Kevin B

        Yes Jeff I think that is absolutely nuts. First of all Didi Gregorius is not so terrific. I would not trade Castro straight up for Justin Upton, let alone through in Shark? If the Cubs wanted to trade Castro, a young all star shortstop (prime position) locked into a reasonable long term controlable contract, then someone better be unloading numerous blue chip prospects not Justing Upton with two years of control left and declining stats.

        Skaggs and Bradley are prospects, no guarantee they even become as good as Shark, let alone Castro.

  • Jbb

    Parra seems to be equal to Sappelt but with a lefty bat. The backs do need to move a outfielder if you believe they are ready to move Upton.

    • Jeff1969

      To Dave Sappelt? Of the Chicago Cubs?

  • nkniacc13

    everytime I see trade talks of the Dbax’s I can’t help but wonder what the trade that those 2 were working on with Garza at the deadline would have brougt the cubs

    • DocPeterWimsey

      Supposedly Garza would have been traded to the Rangers, not the DBacks. Well, that’s a “supposedly” that I have read: we probably never will know for certain.

    • JR

      Yeah depressing stuff. We gotta move on though… I really have no idea why anyone would trade much considering what Garza makes and the questions about his elbow.

  • Cory

    If the D-backs move anyone its going to be Kubel. He’s at his peak value and Ross slides into his spot easily with Parra in center. Parra’s value is similar to Barney’s which means his value to his value club is much more then anyone else is willing to pay.

    • Jeff1969

      I agree the D’Backs would like it to be Kubel, but he was so bad in the last 2.5 months last year, that I would just stay away from him. Parra has already won a GG & is going into his fifth season & he’s going to be 26, 27. He has never really had the starting position in AZ, but what do they do with Pollock & Eaton then? I wouldn’t mind having one of them either.

  • spearman

    wow, this is sad! I liked Ryan Freel.

    • spearman
      • MichiganGoat

        Wow that is tragic, it really reminds you baseball players are real players with real demons.

        • MikeL

          I don’t where this is from, but I found this another site and a couple of people were talking about how he had many, many concussions over the years. I am not sure if this is an accurate quote, but it seems legit. I just with I had a source:

          Ryan Freel said not even Farney believed that Freel made the stupendous diving catch on Albert Pujols Tuesday.

          Farney? Who’s Farney?

          “He’s a little guy who lives in my head who talks to me and I talk to him,” said Freel, acting as if he finally crashed into too many walls, ran into too many catchers and dived into too many dugouts. “That little midget in my head said, ‘That was a great catch, Ryan,’ I said, ‘Hey, Farney, I don’t know if that was you who really caught that ball, but that was pretty good if it was.’ Everybody thinks I talk to myself, so I tell ‘em I’m talking to Farney.’

          • MikeL

            *I wish I had the source.

            • FFP

              “Detectives say an autopsy showed that Freel had died from a .45 caliber gunshot wound to the upper right chest.”(wibw–Kansas?)

              now most reports are more vague and report it was a shotgun (not a .45). Morbid details, but important for those learning more about sports head injuries and their long term consequences.

              If it was a chest wound, Freel would seem to have considered himself a potential head injury victim. This horrible choice of method (any too sad) indicates he is saving his brain for science. Junior Seau’s recent suicide was a chest wound, one assumes for this reason.

              So sad.

            • Scotti

              That was a 2006 comment from a Dayton paper. That was pre-head injuries and really just a joke:

              –Freel, on how “Farney” originated after a conversation with trainer Mark Mann (Baseball Prospectus)

              “He actually made a comment like, ‘How are the voices in your head?’ We’d play around and finally this year he said, ‘What’s the guy’s name?’ I said, ‘Let’s call him Farney.’ So now everybody’s like, ‘Run, Farney, run’ or ‘Let Farney hit today. You’re not hitting very well.’”

  • Chris Lattier

    I vividly remember him throwing his body around the field and making spectacular plays for the Reds in the early 2000′s. He was a valuable player for a while (before we had him). The ultimate team player (on the field anyways). Remember him scraping his arm up @ 3B making a diving catch on a Corey Patterson failed bunt that was popped up. He was good in CF too.

    • Njriv

      I will always remember him from playing MLB The Show (before it was called “The Show’) and every time he made a great play they called him “the jack of all trades” Ryan Freel. The dude played the game hard, and the right way, everyday no matter where he was on the field. He didn’t care how, he just wanted to be on the field and in the line-up, he was the definition of scrappy.

  • Internet Random

    For the purposes of the luxury tax . . . contracts are treated as evenly spread out over their length.

    Brett teaches me stuff and is cool.

    Also, Louisville >> Columbus.

    • http://www.bleachernation.com Brett

      Two outta three ain’t bad.

      • Internet Random

        But Meatloaf is.

  • http://bleachernation harold

    what would ernie banks get paid if he was playing now

    • Internet Random

      Given his advanced age and Theo’s desire not to compensate players for past performance, I’m not thinking it would be a dime over league minimum.

      • Stinky Pete

        Haha.

        “Mr. Cobb, what would you hit if you played today?”
        “I’d say about .295.”
        “.295? But you hit .367 lifetime! Why would your average be so low?”
        “Cuz I’m 70 $^#^$ years old!”

  • Patrick

    Mi Tio Rico!!!!

    As a az resident Parra is one guy I would wanna hang on too. If the cubs can get him-they should consider it. Very underrated player.

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