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The Financial Implications of Justin Verlander's Return

The Trade


The Astros and Mets completed a trade a few hours before the deadline Tuesday that sends Justin Verlander back to the Astros in exchange for outfield prospects Drew Gilbert and Ryan Clifford. The Mets also retained $52.5 million of Verlander’s salary.


Verlander became a free agent at the end of the 2022 World Series, and the Astros owner said that negotiations quote “got to a number we couldn’t match.” He quickly joined the Mets on a 2 year, $86.6M contract with a vesting option worth $35M in 2025.


The Astros expected to tackle the 2023 season with a rotation led by Framber Valdez, Cristian Javier, Luis Garcia, Lance McCullers Jr, Hunter Brown, and Jose Urquidy. On paper the logic tracked, however that plan quickly dissolved with McCullers and Garcia lost for the entire season and Urquidy missing over 90 days all due to injury. To make matters worse, both Javier and Valdez battled ineffectiveness in July. The need for starting pitching was clear, even as General Manager Dana Brown insisted they weren’t targeting that area.


Bringing back Justin Verlander fills an obvious need at the top of the rotation for the Astros both this year and heading into 2024. He gives them a massive boost as they attempt to win a 3rd World Series in the team’s golden era, an accomplishment that would cement their place in history as a dynasty.


The players the Astros gave up in the trade are now ranked 4th and 6th in the Mets current MLB prospect rankings, but some rankings will have Gilbert as high as 1 and Clifford as low as 8. While other rankings will certainly vary, the general consensus is that the Mets got two very strong prospects. Clifford projects as a corner outfielder or first baseman with offensive upside and the potential for huge power numbers. Gilbert was on a fast track, with the Astros aggressively promoting and challenging the prospect just a year removed from college. He blends an aggressive style of play with speed and a solid hit tool that makes him a home team favorite. Scouts are split on if he will be able to stay in CF or eventually moves to a corner spot, but most believe that he will be at least an every day player.


As with all prospects, there are no guarantees. Justin Verlander provides certainty in the short term, but these were a pair of players that the team hoped would be part of the next wave of great Astros teams. The path to filling out those teams in 2025 and beyond is now murky, at best.


The Money


A big piece of this trade is the financial aspect of the deal. Verlander is owed $14.2M this year, $43.3M next year, and has a vesting option for 2025 worth $35M. The Mets are reportedly paying $35M of the roughly $57.5M owed between now and the end of 2024. They will also pay an additional $17.5M in 2025 if the option vests.


The impact of this money is certainly felt from a payroll perspective, but most fans are concerned with how it impacts the Competitive Balance Tax threshold, or CBT. The CBT is set at $233M in 2023 and increases to $237M, $241M, and $244M in the subsequent seasons. Tax penalties start at 20% and escalate from there. Repeat offenders face a surtax, and teams who exceed the CBT by $40M+ in consecutive seasons also face draft penalties.


When calculating how much a player will count against the CBT, the average annual value (AAV) of the contract is used. Verlander’s deal has salaries of $43.3M, $43.3M, and $35M, making the AAV $40.53M. This is Verlander’s annual CBT figure, however it doesn’t factor in the cash from the Mets.


As we mentioned earlier, The Mets are going to pay $35M of Verlander's total salary for 2023-24, however we don’t know how that money is being broken down annually. Fangraphs has estimated that Houston will receive $8.75M this year and an additional $26.25M in ’24, whereas Spotrac is showing that Verlander will carry a zero cap figure this year and roughly a $22.5M figure next year. The actual CBT figures for the Astros will be impacted by how that $35M is split up between this year and next, but I find it highly unlikely that the Astros would want this year’s CBT number to be zero when their payroll will only rise in 24. For that reason, I’ve used the Fangraphs estimates to illustrate how JV could impact the team financially.

2023

2024

2025 (Option)

​Total Salary

$43.3M

$43.3M

$35M

CBT Figure

$40.53

$40.53M

$35M

Mets Cash

$8.75M*

$26.25M*

$17.5M

Astros Payroll Cost

$6.05M*

$17.05M*

$17.5M

Astros CBT Figure

$3.28M*

$14.28M*

$17.5M

*Denotes estimates based on publicly available information.


The Future


The Astros, who were going to be in the market for another starting pitcher at the end of the season, no longer need to fill that spot. They will need to shore up the bullpen and bench either internally or in free agency, but the roster for next year is pretty set.


That roster stability is good thing because, with the Verlander money on the books, the Astros are going to be within $10M of the CBT threshold once raises are factored in for arbitration eligible players. This won’t leave them much room to fill out their needs without encroaching on the tax.


The Astros exceeded the tax in 2020, but have otherwise treated the threshold as a defacto cap. The addition of Verlander, even with the cash included, could put the Astros in a situation where they might look to exceed the tax again in either ‘24 or ‘25, but it’s not likely that they’ll exceed it in consecutive seasons due to the surtax.


How this impacts the team’s 4 extension candidates right now remains to be seen, but if past precedent is any indicator, Kyle Tucker and Framber Valdez will have to wait for their big paydays. Any extension this winter would increase their annual CBT figure in both ’24 & ’25, limiting the team’s ability to aggressively pursue titles in the short term. If either Altuve or Bregman departs after 2024, the team would have ample payroll to extend one of, if not both Tucker and Framber.

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