The deal recently struck between Nick Castellanos and the Reds will include some notable deferrals, per Ken Rosenthal of The Athletic (via Twitter). The annual payouts won’t be pushed too far into the future, but will come on a delayed schedule that should assist the team with managing its payroll.
Here’s the full structure of the four-year, $64MM contract, per the report and previously reported information
- 2020: $16MM salary with $10MM payable during season and $2MM payments on January 15, 2021, February 1, 2021 & January 15, 2022
- 2021: $14MM salary with $10MM payable during season and $2MM payments on January 15, 2022 & January 15, 2023
- 2022: $16MM salary with $12MM payable during season and $2MM payments on January 15, 2023 & January 15, 2024
- 2023: $16MM salary with $12MM payable during season and $2MM payments on January 15, 2024 & January 15, 2025
- 2024: $20MM mutual option ($2MM buyout)
Add it all up, and this is the full guaranteed payout schedule for Castellanos:
- 2020: $10MM salary
- 2021: $10MM salary + $2MM (1/15/21) + $2MM (2/1/21)
- 2022: $12MM salary + $4MM (1/15/22)
- 2023: $12MM salary + $4MM (1/15/23)
- 2024: $2MM buyout (or $20MM salary) + $4MM (1/15/24)
- 2025: $2MM (1/15/25)
It should be noted: once earned, a given season’s salaries will still be paid by the team even if Castellanos opts out. He has two opportunities to do so, after each of the first two seasons of the contract. Should he opt out, Castellanos would sacrifice the ability to earn additional money under the contract but not the right to receive the deferred payment for what he had already earned.
This deferral schedule is a bit complicated, but doesn’t wildly alter the value of the contract. By comparison, some other contracts — for instance, Max Scherzer’s agreement with the Nationals — have pushed the earnings much further into the future and required rather more significant adjustments to assess the true cost of the signing.
Financing the future…
Aren’t they still paying Griffey?
Griffey and Arroyo
No
Yes, they are still paying deferred salary to both Griffey and Arroyo.
Bronson Arroyo – (yearly deferred contract through 2021)
Ken Griffey Jr. – (yearly deferred contract through 2024)
[confusion]
From a team cash-flow perspective, a dollar paid in a couple of years is cheaper than a dollar paid today. But regarding luxury tax considerations (as if, in the case of Cincy), it’s determined by the AAV, right?
Yes.
AAV, sure. But I can’t honestly see the Reds pushing up against the luxury tax limit at any point.
Lol, i wish they would
This is one of the more complex contracts I can ever remember
It’s quite normal actually.
I dont think most contracts have player opt outs every year.
Are the Reds are a little overextended? They’ll be paying Votto, Moose, and Nick $54MM AAV for the next four years..
It will all be worth it if they can win a WS. And I think they have a realistic shot with their roster today. And they have a bunch of prospects that can be traded to improve the roster or simply keep on hand incase some of these star players start to decline.
I don’t see how. It’s not like they are at $175 million or anything. They have an equity stake in their tv carrier, and they are always high in the ratings, so I’m sure that gives them a bit of a financial boost. Plus, aside from Votto, I’m sure they could deal the contracts if the roof falls in. Not worried about it. I just watch the games.
Yeah I don’t see the money they spent this off season being a problem. It’s not going to handicap them for 5-10 years. I think they’re good.
In essence,Castellanos signed a pillow contract for the same amount he made last season when you figure in the opt outs in the first two years of his deal.
Unless he really stinks out the joint,blows out a knee or otherwise opts in to the rest of the deal.
The Boras insurance Company.
Theres been no mention of any trade clause. Basically he deferred 6 million for opt out options. Reds get a big bat and payroll flexibility while nick has the option to leave. If he doesnt, then nick gets big checks in years 3 and 4 while the reds have control over his roster status.
yet the cubs couldn’t do this
The Reds overpaid. The Cubs have their own overpayments to swallow
facts. I loved Nick’s intensity here, but they really need let these contacts at the very worst expire before exploring new, expensive FAs. I understand it sucks but it’s the reality of it. After 2020 you have Chatwood, Quintana, and Descalso to fall off the books (Descalso has a Club option which i’m certain will be declined and he’ll get a buy out). That will free up a little payroll but IMO they need to start developing some arms.
OverallI think they will be a better team in 2020 as for some reason that whole team regressed or peaked after winning the WS. We’ll see though, the NL central will be fun to watch and we’ll see what happens.
Yes, $50 MM coming off the books next offseason. And I think the Cubs should be better this season barring any catastrophic injuries.
Better? How are they a better team? You could maybe say status quo.
They underperformed last year. But to win the division, they really need Darvish to pitch like he did in the 2nd half last season and Kimbrel to straighten out.
Now do we assume they regressed as a team or are they really as advertised, above average with some glaring holes? With Rossy at the helm I think they’ll turn a corner, as it felt like Maddon sort of gave up last season. I see where you’re coming from though and you could also be correct, but it’s baseball and another is written in stone.
But Theo will be gone by then so who knows if the Cubs will be good or go back to sucking again.
Cubs didn’t underperform; they weren’t that good. And they are probably an 80 win team this year. I’m not a hater, I’m a Cubs fan but one who tells it.like it is rather than the typical fanboy you find on these sites.
D.C. West.
I’m assuming there is some great tax loophole that has been found. Castellanos lives in Florida so I assume these checks don’t pay Ohio taxes.
Good call,
I wonder if deferred money avoids the jock tax
it does, yes.
it’s why max did that with the nats (since he moved to florida, once his deferred payments and signing bonuses kick in, they get taxed based on where you live, not where the team plays, so he actually saved himself quite a bit of money, as long as inflation doesn’t go sky high in the next few years).
funny enough, stratsburg taking the same kind of deal won’t actually save him any money (since cali has a tax rate on par with d.c., which might be why his new deal made sure any deferred cash this time around has interest with it).
The player has to pay taxes based upon where he’s working. Cincinnati half the time and the rest of the taxes are calculated based upon the road venues based upon my understanding.
Good to see reds get a little flexibility in the mist of the over pay.
I bet castellanos opts out after first year in pursuit of guarantee dollars. He’s set to have a monster year at the plate in cincy and Boras likes to roll the dice
I think the Mets are still paying Bobby Bonilla
they are, as are the o’s (bonilla is actually getting 3 checks, it appears. one from his 1992 mets deal, 1 from the o’s when they acquired him from the mets and put him on the same payment deal, and one from the mets when they released him in 2000. the pros of having an agent who knew how annuities worked)
Basically 6 million from year 1’s salary is deferred to years 5 and 6.
Essentially means they’re deferring $6 million from 2020-2021 payrolls to 2024-2025 payrolls. Obviously that costs the team less money due to inflation, but I also wonder if it’s to drop the current payroll to a point where they can more easily accommodate a 1-2 year rental at SS that’s bound to make quite a bit in arb?
Does the deferred part of his salary count towards the future season payrolls? If so wouldn’t that also affect revenue sharing and competitive balance picks?
nope. for tax and revenue sharing purposes, they use what the player is listed as being paid, not what he’s actually getting (so a guy who signs for $20 million with 10 of it shifted to later counts as $20 million, rather than $10 million now, 10 million later)
This is how second-tier, small-market teams operate.
“By comparison, some other contracts — for instance, Max Scherzer’s agreement with the Nationals — have pushed the earnings much further into the future and required rather more significant adjustments to assess the true cost of the signing.”
Are the Nationals a second-tier, small-market team?
I think they overpaid for Mous, but not Nick.
I think it’s in MLB’s best interest to ban deferrals. You can say the net present value of the contract is reduced; however, these “deferrals” rob the team of equal financial flexibility in the future. Mortgaging the team’s future in this manner is not in the best interest of MLB as some teams are going to eventually really overdue it and find themselves severely handcuffed and unable to compete as a result of decisions made by a previous front office years or even decades ago.
A real example of this type of impact is the Metrodome and how it hamstrung the Twins. 10% of all luxury suite revenue went to a former VIKINGS GM. Different sport, even. These types of kick the can down the line contracts are irresponsible and can have massive unintended consequences.
I hate deferred payments and don’t think they should be allowed. If a team has cash-flow or revenue problems and cannot afford to pay out the contract on an annual basis, they shouldn’t be offering the contract to begin with. The way front offices turn over in professional sports, a GM deferring money will hamstring their successor and the franchise if the team fails to play to expectations, all of which negatively impacts the fan base.
From a player perspective, Castellanos got a solid deal, irrelevant of deferrals. Unless he gets hurt or his game falls apart, this looks like a 1 year deal for $16m. If he replicates last season, it seems inevitable he walks away to seek more. Considering Ozuna got a 1-year deal for $18m and let’s assume his overall contribution is similar to Castellanos, and Castellanos could have found a 1-year deal for $18m, Nick essentially spends $2m on insurance in 2020 for $48m. If he doesn’t opt out in 2020 (which could imply he had a poor season), he’ll essentially spend another $4m on insurance in 2021 for $32m.
I think the Reds agreed to take on a highly risky contract, as it can really only strongly benefit them for 1 season, but could come back to haunt for the next 4.
If Nick leaves, he would probably get hit with a QO. It did not work out too well for Ozuna.
I don’t think he will opt out next year unless it’s a monster year. What is the limit for QO eligibility? If he opts out after year 2, can he get hit with the QO?
What about at the end of the contract? Probably doesn’t apply because of the 5th year option, but can arenado or someone else get offered a QO after 15-20 years in the league?
He can get hit with a QO whenever he enters free agency but just once in his career.
Thank you
Can’t resist telling this story as it relates to this financial move by the Reds …I’m a Cubs fan and had tickets for a Reds Cubs game at Wrigley about 7 -8 years ago and couldn’t make the game because of some fishing vacation plans that changed last minute. – what can I say, my son was about 12 at the time and he wanted to go fishing rather than attend a game. What irreverence! Anyway, I contacted a ticket broker who I asked what he thought he might be able to get for the tickets as the Reds were in contention late in the season that year and he replied “People in Cincinnati didn’t have money even when everybody had money” referring to the time before the 2008 worldwide financial meltdown. I thought his comment was funny at the time but this is a small market team and this move to defer some of Castellanos’ salary makes sense given the Reds’ budget. That said, I admire the effort that the Reds’ FO is making this year to try to take this division away from St Louis, Milwaukee and my Cubs. They might just get there…have to see how it comes out in the wash. That’s what’s great about baseball and football for that matter – fans talk a lot of smack before the season starts but then there are surprises once the teams start to play and somebody ends up eating crow!.