Gerrit Cole will draw a lot of interest this winter as arguably the top available talent in this winter’s free agent market, though it isn’t yet clear if his current team will join in the hunt. Astros owner Jim Crane told Chandler Rome of the Houston Chronicle that the AL West champions “don’t know yet” if they will have the payroll space to afford what could very well be a $200MM+ contract for the right-hander’s services.
“We’ll see where we end up after the year. We may make a run at it. We’re not sure yet. We’re going to wait and see what else unfolds and who else is going to stay on the team,” Crane said.
The Astros’ ability to stay under the $208MM Competitive Balance Tax threshold could very well be a factor, as Crane said that he would “prefer not to” exceed the number, “but we may win the World Series, so you never know.” That last comment could be interpreted in a couple of different ways — a long postseason run would add extra revenue to the team’s coffers, and perhaps provide the extra funds necessary to splurge for Cole. Or, Crane could be making a reference to the Astros’ competitive window, as winning a second championship in three years could spur the franchise to exceed their financial comfort zone in pursuit of becoming a mini-dynasty.
Houston extended Justin Verlander last spring and then acquired Zack Greinke at the trade deadline, leading to speculation that the Astros were already looking ahead to bolster their rotation for a post-Cole world. Beyond those two veteran aces, however, there’s a lot of uncertainty in the 2020 Astros’ pitching mix.
With Wade Miley and Collin McHugh also scheduled for free agency and Aaron Sanchez uncertain to be tendered a contract in the wake of shoulder surgery, the Astros have breakout rookie Jose Urquidy, Lance McCullers Jr. returning from Tommy John surgery, Brad Peacock, and Framber Valdez all lined up as contenders for the final three rotation spots. Top prospect Forrest Whitley is also tentatively expected to make his debut next season, despite a very rocky 2019 campaign. Needless to say, returning Cole to the rotation would obviously be a huge boost, and would greatly aid the Astros in their search for another title.
As per Roster Resource, Houston’s luxury tax figure for 2020 sits just shy of $156.5MM, a number boosted by the recent extensions handed out to Verlander, Alex Bregman, and Ryan Pressly. That figure will be further increased by big arbitration raises due to George Springer, Roberto Osuna, and Carlos Correa (among other arb-eligibles), leaving the Astros in the $200MM ballpark even before re-signing Cole.
It’s worth noting that the Astros have never exceeded the CBT threshold in their club history, and thus would be taxed at the first-timer rate of 20% of every dollar spent between the $208MM and $228MM figures. The team also has some significant money coming off the books after the 2020 season, as Springer, Michael Brantley, Yuli Gurriel, and Josh Reddick are all free agents. While one would figure Houston would look to re-sign at least some members of that group (Springer in particular), there is some room for maneuvering if the team only wanted to exceed the tax limit for one season. If the Astros stayed under the secondary penalty limit and only had a $227MM luxury tax number in 2020, their tax bill would come to roughly $3.8MM — seemingly a pretty modest price to pay.
While the luxury tax has been around in some form since 1997, it has become an increasingly large factor in teams’ offseason spending in recent years, particularly since the current Collective Bargaining Agreement was finalized in the 2016-17 offseason. Traditionally big-spending teams like the Yankees and Dodgers have taken pains to duck under the tax line, while the Red Sox are also planning to get under the $208MM mark next season, less than two years after winning a World Series while exceeding the top penalty area (at least $40MM over the threshold) to do so.