End of Year Luxury Tax Bill Looms for Some Teams

The Rimouski Fighting Moose topped the league in payroll spending, at over $191 million this year

At least four teams face the prospect of a luxury tax bill this season after overspending on payroll this year.  The top spender, at over $191 million, were the small-market, small-budget Rimouski Fighting Moose, putting them well above the estimated average payroll of $120 milion, on which the soft cap and luxury tax is based. Three other teams overspent and will face similar hardship this October.

Former GM Bob Weinberg went full “drunken sailor” last off-season, adding Dao-zi Ling, William Febres, Kyle Cahill, Celestino Caparica and Lou Bricknell, adding over $65 million to their payroll. The team was already stocked with high-priced contracts for stars like Alan Isimo, Zenjiro Suga and others.

The lavish free agent splash cost the team in draft picks this year, and they lost all of their picks for the first three rounds as many of the free agents were compensation-eligible.

Some of those pricey players will leave at the end of the year, including Isimo, Cahill, and starters Mu-ruo Chen and Andrew Ward, and others who will free up over $50 million in salary costs. But the luxury tax will add over $9.5 million to their 2019 expenses based on current estimates. Should the Fighting Moose make the playoffs, as now seems likely, playoff revenue will help moderate these extra costs.

Adding to the Fighting Moose woes is pressure from ownership to reduce payroll costs significantly, to a rumored $110 million. What may help is that there is a strong possibility the team will move to a larger market city for 2019.

The Minneapolis Ravens also overspent, and will have a modest Luxury Tax bill

The soft cap is estimated to be at around $144 million for the 2019 fiscal year, and that means Minneapolis Ravens, Seattle Salts and Boston Brawlers all will find themselves paying the proverbial piper come October.

The Ravens, another modest-sized market team, could stand to earn playoff revenue as well. This will make their estimated $2.8 million luxury tax hit easier to swallow. The Ravens payroll nearly reached the $160 million mark this year, but it seems likely they will let Angelo Rodriguez and Micah Jones walk after this year, saving nearly $30 million in salary. Rodriguez, 38, picked up his record setting 150th career win this season, but has seen his best pitching days pass by him now. Jones has been overpaid as a reliever since first joining the club as a free agent starter in 2013, encountering a rapid decline in his abilities just one year into his 6-year deal.

The Seattle Salts face a slew of pending free agents but are well-budgeted and could embark on a fistful of re-signings.  However, if they are not careful, they will stay above the luxury tax threshold for next year as well.

Finally, the Boston Brawlers, who will almost certainly miss the playoffs this year, had overspent on payroll as well, and were already suffering under albatross contracts like Bill Ross’s $35 million a year.  The team is in serious financial trouble, projecting an $18 million season loss, and the luxury tax won’t help. It is a minor miracle that it is only projected at just under $700,000.

Teams that did overspend on salary stand to gain about $1 million each in the revenue sharing of the luxury tax pool.

Next year, the league has indicated the soft cap will be lowered to 15% above league average payroll, and the luxury tax raised to 50%.

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