Buffing Their Halo: The Angels Make the Best of a BAD Situation
About a week before the August 1st trade deadline, the Los Angeles of Anaheim made it known that they would not be trading their once-in-a-century two-way star, Shohei Ohtani. Many in the baseball world criticized this decision, believing that the Angels could reset their farm system (currently ranked 28th by MLB Pipeline) with the haul they would receive for their soon-to-be free agent.
Not four days later, owner Arte Moreno doubled down on his decision, trading two top-100 prospects to the White Sox for pitchers Lucas Giolito and Reynaldo López. Just a few days after that, Moreno tripled down, trading two lower-level prospects to the Rockies for C.J. Cron and Randal Grichuk. In making these moves, the frugal leader pushed his team above the competitive balance tax (first tier: $233M) for the first time in his 20 years as owner. When the dust settled on these deals, the Angels, who had won nine of their last 12 games, were four games back of the third and final Wild Card spot. Moreno had pushed his chips all in.
Since the trade deadline, the Angels are an MLB-worst 8-23, falling 11 games behind the three-way goat rodeo for the final two Wild Card spots. As of August 28th, FanGraphs listed the Angels’ playoff odds at 0%, where they remain today. Suffice it to say, the gamble didn’t pay off.
To add to the insult are injuries to Ohtani – who will most likely need “some sort of procedure,” including potentially a second Tommy John surgery – and Mike Trout, who most likely won’t play the rest of the season due to a bad wrist. As such, the Angels found themselves with players they didn’t need and a potential CBT bill due. Sure, Moreno could have just played out the string with the decisions he made in July, but that is not how one becomes a billionaire; that is not how one comes to own an MLB team.
If the Angels stood pat, they would have ended the season above the CBT threshold (since we don’t have full visibility, the numbers vary: according to Spotrac, by about $5M; according to Roster Resource, by about $1.4M), which is subject to a 20% tax. Although a tax bill somewhere between $280,000 and $1M is a drop in the bucket for a team valued at more than $2 billion, why spend that if you don’t have to. Further, by staying above the CBT threshold, the compensation pick the Angels will receive if Ohtani signs elsewhere (once he receives and turns down a qualifying offer) would come after the fourth round. However, if they are not required to pay the tax, the compensation pick would come following the second round. The difference is somewhere between 60 and 70 picks – a massive difference.
One last benefit of staying below the $233M CBT level: First-time offenders are subject to the above-referenced 20% tax, but second-timers get hit with a 30% tariff. So, if the Angels want to spend lavishly this offseason (on, say, a two-way superstar), their tax basis will be 50% less.
Faced with this situation, the Angels did the prudent thing – they put six players, including four they recently acquired, on waivers. This means that any team could “claim” the player by simply agreeing to pay their salary for the final month of the season. All of the players the Angels put on waivers will be free agents at the end of the year, so there was no long-term loss of player capital. If all six players had been picked up, the Angels would have saved roughly $7M in salary obligations; and the above-referenced competitive balance tax; and would get a processing fee of $50,000 per guy. In short, by “dumping” (as it has been portrayed by many media outlets), the team stood to be more than $8M in the black and receive a draft pick nearly two rounds earlier.
Five of the six were claimed. Randal Grichuk got stuck in Anaheim, a boon for the club since part of his salary is still being paid by the Blue Jays, and the Rockies sent cash to the Angels when he was acquired six weeks ago. Now that the five players are in their new (temporary) homes, the Angels saved just under $6M in salaries and received $250,000 in waiver fees. Unfortunately, without moving Grichuk, it has been reported that the Angels did not fall below the CBT threshold, and thus will receive the worse draft pick if they lose Ohtani to free agency.
Buster Olney lamented the Angels’ waiver action as cynical. But when he interviewed a baseball executive, the choice was lauded as a savvy business decision. Olney fears that this may become the new norm and upset pennant races, which would contravene the intent of abolishing the August 31st revocable waiver wire a few years ago. However, insofar as the players are available to teams in reverse order of the standings, this will not automatically benefit big market teams (the five players were acquired by Cleveland, Cincinnati, and Seattle).
Even if this does become customary, it would add another level of strategy for teams who may elect to lose a game or two at the end of August to improve their waiver claim position.
As a postscript to this story, and in a sign that maybe the tide is beginning to turn for the Angels, the team caught a break. Max Stassi, who has missed the entire season due to a family emergency, was still receiving paychecks. However, over the weekend he informed the club that while he is now capable of playing, he will not return to the team, thus forfeiting approximately $1.2M in salary. With this reduction – and with removal of the five above-referenced players – it appears the club is now under the CBT threshold, and is in line to receive a better draft pick. Taking Stassi’s money off the books would have had no effect if the Angels had not been shrewd and clever in the days before the waiver deadline.
The Angels are a snake-bitten organization, to be sure. They have made many questionable decisions (see, Vernon Wells, Josh Hamilton, Albert Pujols, Anthony Rendon, dealing with the Mayor of Anaheim, etc.). They can be taken to task for holding onto Ohtani last season, this past winter, and this July. But once they sunk the cost and sunk in the standings, they didn’t need to be sunk. Bemoan all you want, worry about the league-wide implications if you must, but for the first time since they re-signed Trout, the Angels should be praised for attempting to execute an adroit strategy, setting the team up for future success (or at least less pain).