Explaining Payroll Implications of the Marco Gonzales Trade

After the Winter Meetings were almost two thirds of the way through and the biggest thing to happen for the Pittsburgh Pirates was slotting in ninth in the 2024 Rule 4 Draft, ESPN’s Jeff Passan reported late Tuesday night that the team acquired left-handed starting pitcher Marco Gonzales (and cash considerations) from the Atlanta Braves for a player to be named later or cash, the team’s first big move of the offseason and the first of what is likely several pitching dominoes to fall.

While the implications of the deal are interesting on the field, we all know that’s not why I’m here—I care about the contract. So, let’s take a look under the hood shall we, because this one is interesting.

As I hope you all know by now, there are two figures tracked as far as payroll goes—a Labor Relations Department (LRD) total and a Competitive Balance Tax (CBT) total. There are differences in how they are applied and tracked, but the good news is that, at least for 2024, Gonzales’ impact is going to be the largely the same.

The biggest difference is the yearly salary impact, in which LRD tracks what a player actually is owed, while CBT takes the Average Annual Value (AAV) of a contract, prorating all the guaranteed money over the life of the deal, applying the same figure every year. For Gonzales, who signed an extension in February 2020 that tacked on four years to an earlier deal that had one year left—2020—Gonzales’ total contract is $31 million over five years: $1 million in 2020, $5 million in 2021, $5.5 million in 2022, $6.5 million in 2023, and $12 million upcoming in 2024, with a $1 million signing bonus and no buyout on a $15 million club option for 2025.

For LRD purposes, the $1 million is prorated over the life of the deal, adding $200,000 to each year’s salary, while the AAV would have been $6.2 million for all five years. In 2024, Gonzales’ LRD figure would have been $12.2 million and his AAV $6.2 million, if he had stayed in Seattle that is. However, a new rule in the 2022 Collective Bargaining Agreement changed that.

Now, once a player is assigned via trade, their AAV is recalculated based on the remaining guaranteed years and dollars. For Gonzales, that’s easy, as the only remaining monies owed are the $12 million for 2024, making his 2024 AAV $12 million, matching his LRD—well, at least with a difference of $200,000 (but we’ll get there).

Gonzales’ trade mate from Seattle to Atlanta was Evan White, who was still due $7 million in 2024, $8 million in 2025, and a $2 million buyout on a 2026 option—$17 million total, or a $8.5 million AAV, up from his original $4 million AAV. This will be important, I promise.

In the original trade just the day before, the Mariners sent $4.5 million to the Braves to defray part of the $29 million still owed to the two players. In trades involving multiple players, cash isn’t assigned to any one player, with the team just getting the total credit to their payroll; however, once Gonzales was assigned again, that changed. According to Article XIII(C)(2)(b)(i)(B) of the CBA, which clarifies what happens to a player who is traded after being acquired with cash considerations in a previous transaction:

If the assignor Club acquired multiple Uniform Player’s Contracts in such previous transaction, the cash consideration from the prior transaction shall be considered to have been intended to defray the salary obligation of the Uniform Player’s Contract with the greatest total remaining salary obligation, with any remaining totals allocated successively to the Uniform Player’s Contract with the next greatest remaining salary obligation.

In this case, the assignor is the Braves, who are sending Gonzales to the Pirates, and White is the player with the “greatest total remaining salary obligation” from the previous transaction ($17 million versus $12 million). That means, for CBT purposes—which these rules are referencing—the $4.5 million does not affect Gonzales, only White.

That means the Mariners have a $0 hit in CBT for Gonzales in 2024, while Atlanta has the cash considerations they paid the Pirates and the Pirates have the new $12 million figure, less the cash considerations from the Braves.

In this case, the Braves are paying the Pirates $9.25 million to take Gonzales off their hands, saving $2.75 million in salary and receiving a player to be named (or cash) for their troubles, while Pittsburgh takes a $2.75 million CBT hit in exchange for an established starter to add to their stable of one.

For you visual learners out there, here’s what it looks like laid out nice and pretty:

But what about LRD, as I’ve said calculations differ from one to the other? Unfortunately, LRD rules are not laid out in the CBA like CBT ones are, so it’s harder to glean anything here; however, we know his LRD salary is $12.2 million. In this case, Seattle seems to be keeping the $200,000 on their books for 2024 after they paid the original signing bonus. That leaves the $12 million, which is allocated the same way between the two teams—$9.25 million to the Braves and $2.75 million to the Pirates. There is one more wrinkle though.

Gonzales’ contract called for an assignment bonus, which is a payment made to the player when they are traded. Sometimes they are one-time deals, but Gonzales’ was for each assignment and is to be paid by the assignee; therefore, he was paid $250,000 by the Braves and Pirates back-to-back, raising both AAV and LRD totals for 2024 by the $250,000.

In total, that leaves a $3 million hit for the Pirates in 2024 on a $12 million pitcher. For those with good memories, this is akin to AJ Burnett, who the Pirates paid roughly $13.7 million of a total $33 million due to the pitcher after he was dumped by the New York Yankees in 2013.

For Pirate fans, they can only hope Gonzales goes on to have a similar impact, turning the team around and helping lead them to the playoffs.