Tuesday, January 21, 2003

Deferred salaries no bonus for Reds


Accounting method for budget minimizes the benefits

By John Fay
The Cincinnati Enquirer

When the Reds signed Ken Griffey Jr. to a nine-year, $116.5 million contract in February 2000, it was hailed as a great thing for Cincinnati baseball because Griffey signed for under market value and more than half the money - $57.5 million - would be deferred.

The Reds would pay Griffey only $6 million up front each year. The other $6.5 million of his annual salary would be paid from 2009-2024 (his overall salary was higher than $12.5 million in 2000).

In theory, that would free up money for the Reds to spend on other players.

But Griffey taking all that deferred money didn't have a major impact because the Reds are applying much of it to their annual payroll anyway.

The closest the Reds have come to revealing their 2003 player payroll is when chief operating officer John Allen and general manager Jim Bowden said in December it would be 33 percent higher than last year's payroll of $45 million.

That puts this year's payroll at $60 million.

Of that, $11.3 million is being counted by the Reds toward Griffey. That's only $1.2 million less than Griffey's average salary before deferred payments. The Associated Press, which publishes the list of salaries that are commonly referred to in the media, uses present-day value. The AP listed Griffey's salary at $8,557,223 last year. That's roughly $4 million less than Griffey's actual salary.

Brian Goldberg, Griffey's agent, thinks the Reds are going too far by budgeting $11.3 million.

"There's a major league formula where you have to fund a certain percentage of deferred payments to get to the number it needs to be at," Goldberg said. "It's my understanding from Reds ownership that the Reds put aside between $3 and $3.5 million. That's a total out-of-pocket of $9 to $9.5 million (over the $6 million base)."

Allen said the $5.3 million (above the base) is necessary to cover the 4 percent compound interest on the deferred money.

"We don't want to get in a situation where we're using the 2009 budget to pay Junior's deferred money," Allen said.

Barry Larkin's $9 million-a-year contract also has deferred money. Larkin also is paid $6 million up front.

But, again, the deferred money doesn't help this year's budget. The Reds count Larkin as $9.4 million against the budget.

The Reds have been forced to set aside more money because investments aren't giving the kind of returns they were when the contracts were written. The investment climate affects Larkin's contract even more since part of the deferred money is due next year.

Even if you count Griffey's salary at $11.3 million and Larkin at $9.4 million, the projected Opening Day payroll should come in the $57-$58 million range. So why are the Reds, according to a source, trying to trade either Gabe White ($3.1 million) or Scott Sullivan ($2.8 million) to further trim the payroll?

Such a trade would get the budget to $55 million or so. That would give the Reds more flexibility to make trades during the season.

Allen would rather not talk about finances. .

"I hate to talk budget," he said. "What should be talked about is what kind of team we put on the field. We get criticized for not spending enough, but look at the product on the field. We've spent well."

But the fact is modern-day baseball fans are as likely to know their team's payroll as they are a slugger's home run total. The Reds and CEO Carl Lindner were major supporters of commissioner Bud Selig's push for a greater luxury tax and more revenue-sharing in the latest collective bargaining agreement.

The Reds haven't publicly said their budget would be $60 million. But based on Allen and Bowden saying it would go up 33 percent, the media projected it at $60 million. Last year's Opening Day payroll was listed at $45,050,390 by the Associated Press.

"There's never been a number," Allen said. "We said it would be in that range. We've been able to make some good deals."

For example, the No. 4 starter slot was budgeted at more than $500,000. But the Reds were able to sign Paul Wilson to a deal that pays him $500,000 in 2003 and $3.5 million for 2004. By signing Danny Graves to a three-year deal, the Reds saved between $250,000 and $1.7 million this year.

Allen said there are other items that affect the budget. The Reds count these items in their payroll budget:

The $333,333 they paid as part of the deal that sent Elmer Dessens to Arizona in a three-way trade that netted the Reds Felipe Lopez. The $350,000 salary of catcher Dane Sardinha. Sardinha signed a major league contract in 2000. The Reds used major league contracts to avoid paying Sardinha and infielder David Espinosa bonuses. Espinosa has since been traded.

The $300,000 budgeted for September call-ups.

That adds up to $983,333.

"That's all money that comes from somewhere," Allen said. "You'd be stupid not to budget it."

Allen thinks Lindner is unfairly criticized."Before Carl took over, the biggest budget I had was $36 million," Allen said. "One year - 1997 - it was going to be in the upper 20s. Carl went out and spent a boatload of money to sign Griffey. That's what the fans wanted. He doesn't get enough credit for that in the community."

E-mail jfay@enquirer.com

Salary breakdown

Here are the Reds' salaries for players likely to be on the Opening Day roster. The salaries listed for Bruce Chen, Adam Dunn, John Riedling, Austin Kearns, Reggie Taylor, Ruben Mateo, Felipe Lopez, Brandon Larson and Seth Etherton, who are unsigned, are estimates. Luke Prokopec and Russell Branyan are included because they will start the season on the disabled list. The New York Yankees are paying Wily Mo Pena's salary:

PlayerSalary
Ken Griffey Jr. $11.3 million
Barry Larkin $9.4 million
Sean Casey $5.6 million
Danny Graves $5 million
Aaron Boone $3.7 million
Ryan Dempster $3.25 million
Gabe White $3.1 million
Scott Sullivan $2.8 million
Jimmy Haynes $2.5 million
Scott Williamson $1.6 million
Kelly Stinnett $1.3 million
Jason LaRue $1.25 million
Juan Castro $800,000
Bruce Chen $700,000
Paul Wilson $500,000
Chris Reitsma $500,000
Jose Guillen $500,000
Russell Branyan $400,000
Adam Dunn $400,000
John Riedling $400,000
Luke Prokopec $390,000
Austin Kearns $350,000
Reggie Taylor $350,000
Ruben Mateo $350,000
Felipe Lopez $350,000
Seth Etherton $350,000
Brandon Larson $325,000
Total $57.465 M




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