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Draft : : Story
2012 Draft Overview
Published: Friday, April 13, 2012

New Constraints on Signing Bonuses Puts New Spin on This Year’s Process

The 2012 draft is less than two months away, and there has been as much discussion this spring among scouts about the potential impact of the most-sweeping changes in the draft’s 47-year history as there has been about the available talent pool.

For sure, there isn’t a clear-cut talent at the top of the draft board for the Houston Astros to choose from, like San Diego State righthander Stephen Strasburg in 2009 or Las Vegas teenage star Bryce Harper a year later—both slam-dunk selections as the No. 1 pick. Rather, the field is somewhat muddled and there’s been more talk about how the Astros, and the teams drafting behind them, will deal with the new financial parameters that are now in place.

Record spending on signing bonuses in recent drafts, which came to a head in 2011, prompted baseball’s power brokers to undertake multiple changes to the game’s primary talent procurement process as part of a new Collective Bargaining Agreement between owners and players. The modifications, ratified in November 2011, go into effect with this year’s draft.

There may not be a hard cap on individual draft slots, as owners initially pushed for, but stricter, enforceable measures were implemented that will limit the total amount that teams can now spend on players signed in both the domestic and international markets. If teams exceed the imposed limits, they will be subject to significant taxes and even the loss of premium draft picks.

There’s still a lot of mystery how this draft will unfold,” said an American League scouting director. “We’re not totally sure how to approach it, and I know other clubs aren’t, either.”

With the lack of a consensus top talent in this year’s draft, there are questions whether the Houston Astros will even spend to their allowable limit of $7.2 million to sign the pick, no matter who they end up taking.

The Astros, understandably, aren’t tipping their hand on their strategy with the No. 1 selection, but there has been much speculation in the industry that they are targeting a pitcher, with three significant college righthanders reportedly on their short list: Stanford’s Mark Appel, Louisiana State’s Kevin Gausman and San Francisco’s Kyle Zimmer.

Houston might have also given final consideration to California prep righthander Lucas Giolito, but he all but took himself out of the running in March by injuring the ulnar collateral ligament in his pitching elbow. It’s unclear whether Giolito will pitch again in a game environment prior to the draft, set for June 4-6.

If the Astros don’t opt for a pitcher, that would almost certainly bring the likes of University Florida catcher Mike Zunino and Georgia prep outfielder Byron Buxton into the mix. They appear to be the consensus best everyday talents in the draft.

The Minnesota Twins and Seattle Mariners pick second and third, respectively, and have essentially the same players on their preferred list, though have proportionately less money to spend than the Astros. The Twins have been assigned an upper limit of $6.2 million to sign the second pick in the draft, the Mariners $5.2 million to sign the third.

Despite the best efforts of the commissioner’s office to limit runaway growth on signing bonuses to draft picks in recent years, they rose for the fifth year in a row in 2011. Collectively, teams spent more than $228 million on bonuses to players subject to the draft in 2011, including roughly $192 million in the first 10 rounds. The overall amount shattered the previous record of $195,782,000, set a year earlier.

The new CBA mandates that teams cannot spend more than $185,153,500 combined on bonuses to players in the first 10 rounds in 2012, a slight reduction from the amount spent a year ago. Each team has been assigned an upper limit for each slot, depending on its position in the draft rotation.

For the Astros, the allowable amount they can spend on their first 11 picks—their own 10 picks plus a compensation selection between the first and second rounds for the loss of shortstop Clint Barmes to free agency—is $11,177,000. The Twins, in turn, have $12,368,200 available for 13 picks in the first 10 rounds; the Mariners have $8,223,000 for 11 selections.

Those amounts are in contrast to 2011, when the Pittsburgh Pirates paid out a record $8 million to sign No. 1 overall pick Gerrit Cole and subsequently spent a record $17,005,700 to sign all their draft selections, more than $5 million over the previous mark.

The new, restrictive draft measures were enacted to both curb continuing runaway inflation on signing bonuses, such as occurred with the Pirates a year ago, and also better assure that the best prospects end up with the weakest teams, restoring the original premise of the draft.

As the team with the poorest record in 2011, the Astros have been granted the most money to sign their 2012 draft picks. Each succeeding team will have progressively less to spend on both their first-round pick and all picks cumulatively through the first 10 rounds

The amount available for the Astros to sign the top pick this year is conveniently 10 percent less than the amount Pittsburgh spent on Cole, and yet it’s open to question whether there may be a headline player in this year’s talent pool that might tempt the Astros to cough up as much as $7.2 million. Conceivably, the Astros could end up spending less than that slotted amount and allocate the difference to other picks in the first 10 rounds without being penalized.

However, if the Astros were to sign all 11 of their picks in the first 10 rounds and exceed their limit of $11,177,000 in the process, they would be penalized for going over the limit.

A team overspending by up to five percent of its allotment will be subject to a penalty of 75 percent of the amount by which it exceeds the threshold. If it spends upwards of 15 percent more, it could stand to be punished with a 100 percent tax on the overage and the loss of first-round picks in each of the succeeding two drafts.

There have been numerous upward and downward adjustments to the allotted bonus amounts each team is assigned in the first 10 rounds, mostly stemming from free-agent compensation. There will be 30 supplemental first-round Type A and B selections this year (31, if free agent first baseman Derrek Lee eventually signs a major-league contract). Several teams have also earned bonus picks for their failure to sign premium draft picks a year ago—most notably the Toronto Blue Jays, who failed to come to terms with first-rounder Tyler Beede.

The 30
th and last team in the draft rotation, in this case the Philadelphia Phillies, have been earmarked $1.6 million for their first-round selection and a total of $4,916,900 for all their selections through the first 10 rounds.

In all, the Blue Jays, Cardinals and Padres will have 14 selections in the first 10 rounds, and their signing bonus pool for 10 rounds has been adjusted upward to reflect that. The Twins will have the most money overall to spend ($12,368,200), while the Angels ($1,645,700) will have the least. The Angels have only eight selections in the first 10 rounds as they forfeited their picks in the first two rounds for the off-season signings of first baseman Albert Pujols and lefthander C.J. Wilson.

Additionally, a team may spend up to $100,000 on a player drafted after the 10
th round or signed as a non-drafted free agent, without being penalized. But if it signs a player for more than $100,000, the excess amount must be applied against the team’s allotment in the first 10 rounds. For instance, if a team signs a 14th-round pick to a bonus of $500,000, the additional $400,000 will apply to the team’s signing bonus pool.

Numerous other changes to the draft will go into effect this year, including a reduction in the number of rounds from 50 to 40 and a new, mid-July signing deadline. In the case of 2012, that deadline will be July 13.

Sweeping changes are also in the works to limit the amounts that teams can spend on the international market. For 2012, each club has been assigned the same upper limit, $2.9 million, but that figure will change in succeeding years as Major League Baseball moves towards the implementation of a full-blown international draft, possibly by as early as 2013 or 2014.



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