MLB Proposal Would Eliminate 42 Minor League Teams

Editor’s Note: This story initially reported that the proposal would move the MLB draft back to August. Further reporting has found that while the draft in the proposal would move to after the College World Series, it would not be moved as late as August. We regret the error. Also, the number of roster spots for minor leagues would be limited to between 150 and 200 players. The story initially said teams would be limited to 150 players.

The Professional Baseball Agreement (PBA) between Major League Baseball and minor league teams expires at the end of the 2020 season. But if a new MLB proposal were to become reality, more than three dozen cities with affiliated minor league teams will lose those teams a year from now and thousands of minor league players will be out of work as well.

The MLB proposal is just one idea at the start of what will likely be a lengthy negotiation, but the two sides are further apart than they have been in any PBA negotiation since 1990. At the core of the negotiations, MLB is looking to dramatically improve Minor League Baseball’s stadium facilities as well as take control over how the minor leagues are organized as far as affiliations and the geography of leagues. Those areas have been under the control of MiLB for the past 100-plus years and would lead to a dramatic restructuring of how MiLB is governed and operates.

MLB has offered a proposal that, if adopted, would reduce Minor League Baseball from 160 teams—not counting the complex league teams that are wholly MLB-owned—to 120 beginning in 2021.

The proposal is described as a preliminary offering subject to alteration. But if the proposal, or some version of it, is adopted, it will lead to the most dramatic restructuring of the minor leagues in more than half a century. Under the proposal, not only would more than 25 percent of MiLB teams be eliminated, but the remaining leagues would also be dramatically reworked with some leagues getting much smaller, others getting bigger, and teams switching classification levels all around the country.

Baseball America has been reporting on the negotiations of the new PBA for more than a year. That has involved multiple discussions and interviews with owners and officials from MLB and MiLB. Because of the sensitive nature of ongoing negotiations, almost everyone requested anonymity. The ownership group of Baseball America includes owners of Minor League Baseball teams, but the reporting on this story has been done independently.

“We are engaged with Major League Baseball on a successor agreement to the PBA. It’s early in the negotiations, and that’s the most I can say,” MiLB president Pat O’Conner said.

“We’re at the very initial stages of the negotiations where each side is presenting to others the issues and concerns they have with the existing PBA,” MLB deputy commissioner Dan Halem said.

“From the perspective of MLB clubs, our principal goals are upgrading the minor league facilities that we believe have inadequate standards for potential MLB players, improving the working conditions for MiLB players, including their compensation, improving transportation and hotel accommodations, providing better geographic affiliations between major league clubs and their affiliates, as well as better geographic lineups of leagues to reduce player travel.”

Before the 2021 minor league season begins, Minor League Baseball and Major League Baseball must agree to a new PBA and both sides must ratify it.

Since 1903, there has always been an agreement between MLB and MiLB. There was a contentious PBA negotiation in 1990, which ended with MLB receiving a ticket tax from MiLB teams, eliminated payments from MLB to MiLB for player transactions and implemented requirements for significant facility improvements. But before that and since then, new PBA agreements and renewals have generally been uncontentious affairs with relatively few adjustments.

This PBA negotiation has already turned contentious. MiLB has long said that it sees the need for improved facility standards—something that has not been significantly changed since the 1990 PBA—but in general, MiLB is quite happy with the current arrangement.

MLB is not happy with the current structure. In the view of some MLB owners and front office officials, the current system, where MLB teams and MiLB clubs negotiate every two years to sign two-year Player Development Contracts, leaves MLB clubs in undesirable situations from facilities and geographical standpoints. In a number of cases over the past decade, MLB owners have ended up purchasing MiLB teams to avoid ending up in what are viewed as some of the worst stadiums around minor league baseball.

In MLB’s viewpoint, roughly a quarter of all current MiLB clubs far fall below the level of facilities they view as needed for their minor league players. MLB has essentially put the onus on MiLB to find a way to guarantee those stadiums will all reach what MLB deems as acceptable standards in the near future. If MiLB cannot, then MLB has a proposal to simply reduce the number of affiliated minor league teams going forward to the 75 percent of MiLB clubs that MLB deems capable of meeting their facility needs. MLB would work with MiLB and others to ensure the remaining 25 percent of clubs have baseball teams of some sort, but they would no longer be affiliated MiLB clubs.

MLB also wants to completely rework the PDC process to ensure MLB clubs can have MiLB affiliates that meet their desires geographically. To do so, they want to eliminate the current two-year PDC process and replace it with much longer-lasting MLB-MiLB franchise agreements. Doing so would give the MLB clubs much more certainty, but it would also eliminate the negotiating leverage MiLB teams currently have every two years.

And MLB wants MiLB to share in the increased costs that are going to come with increased player pay. In MLB’s view, there may be several ways to reach these goals, but their initial proposal is one path to those goals.

At the root of the disagreement is a preliminary proposal MLB has offered to reduce its number of Player Development Contracts (the affiliation agreement by which MLB teams provide players and staff to MiLB teams) from 160 to 120. That reduction would completely eliminate the four, non-complex Rookie-level and short-season classifications from the minor leagues.

The proposal also completely reorganizes the full-season minor leagues. While there would still be Triple-A, Double-A, high Class A and low Class A, those four levels would be completely reworked to make the leagues much more geographically compact. In Triple-A, the Pacific Coast League would shift from 16 teams to 10. The International League would grow to 20 teams. The 14-team low Class A South Atlantic League would be turned into a six-team league with a new Mid-Atlantic league springing up.

The short-season Northwest League would move to full-season ball.

Under MLB’s proposal, some teams would be asked to move from Class A to Triple-A. Others would be asked to move from Triple-A to Class A, and there would be other less dramatic moves as well.

The proposal lays out valuations for the different levels. Triple-A is valued at $20 million. Double-A is valued at $15 million. High Class A is valued at $10 million. Low Class A is valued at $8 million, and short-season/Rookie-level teams are valued at $6 million. A team moving up from low Class A to Triple-A would be asked to pay $12 million to move up. A team asked to move from Triple-A to high Class A would receive $10 million in compensation for the move down to a lower level.

That is likely a significant point of contention in the negotiations because those valuations bear little resemblance to the prices teams are currently going for on the open market. While MiLB team valuations used to be largely tied to their classification level, that is not really true on the open market. A low-attendance, low-revenue Florida State League club in high Class A has a sale price significantly lower than that of a high-revenue low Class A club.

Not all current full-season teams would survive in this proposal. Some short-season clubs would be asked to move up to take the place of excised full-season affiliates. The proposal even suggests a pair of independent league clubs—in St. Paul, Minn., and Sugar Land, Texas—would be brought into affiliated ball.

What would happen to the 42 current teams who are left without PDCs in the proposal? MLB suggests setting up what it calls the Dream League.

As part of its overhaul, MLB would move the draft back to August and would reduce it to 20-25 rounds. Those players who go undrafted would have the option of playing in the Dream League (or going to independent leagues). The Dream League would be a joint MLB-MiLB venture, but in essence, it would be a quasi-independent league where the clubs would field teams of undrafted players.

MLB teams would be limited in the proposal to fielding five minor league clubs in the United States. That’s four full-season teams plus one complex-based Rookie affiliate. In addition to their 40-man roster players, each MLB team club would be limited to 150-200 players under minor league contracts on MiLB rosters. The proposal does not address roster limits for international players playing in the Dominican Summer League.

Under the proposal, some teams would have to shed as many as 100 players from their current MiLB rosters. The Yankees currently field eight U.S. minor league affiliates, which means they can currently have as many as 285 players under contract. Under this proposal, they would have to drop as many as 135 players to meet the new restrictions. Right now, there are no restrictions on how many teams—and, therefore, how many players—a team can field. Under this proposal, all MLB teams would be limited to the same number of teams and players.

Moving the draft later would likely have significant effects. Since there would be no short-season and non-complex Rookie-level teams, drafted players would likely not play official games during their draft year. Instead, they would probably play in scrimmages and instructional league-type games in August and September. The next spring, college players would likely head to low Class A in their first full pro seasons, while high school draftees would join international signees in the complex leagues.

The draft currently is held at the end of most states’ high school baseball seasons and the final month of the college baseball season. If the draft moved to to July, it could  reshape the summer showcase circuit, because high school seniors would have more time post-graduation to try to impress scouts, as well as rework summer college wood bat leagues.

MLB’s proposal would create a seismic shift for Minor League Baseball. Since it is early in negotiations, it is not clear if this proposal is a dramatic opening salvo aimed at reducing MLB’s share of expenses associated with supporting MiLB or a clear attempt to dramatically reduce the scope of the affiliated minor leagues. MLB could always walk back its demands to land smaller concessions from MiLB in a final deal.

Regardless, if MLB’s proposal or any similar move is adopted, it would be the most dramatic rework of the minor leagues since they were reorganized in 1962.

MLB teams are responsible for paying for the salaries and benefits of players and coaches on all affiliated minor league teams, while minor league teams pay for the minor league staff, travel and other expenses. In the case of a short-season or Rookie-level club, players’ and coaches’ salaries—and the worker’s compensation insurance that comes with it—can be a significant share of a team’s total expenses.

Many people contacted said they expect MLB to raise salaries for minor league players in the near future, with the expectation that minimum salaries will be raised by 50 percent and the reduction in total affiliates (and players) will help pay for those increases. MLB is also currently involved in a class-action lawsuit filed by minor league players who contend they should have been paid for their time in spring training and extended spring training.

Owners of the eliminated minor league teams would expect to be compensated. It’s also likely a number of municipalities would look at taking legal measures to recoup any money they spent to upgrade facilities in recent years for affiliated clubs that would be taken away under the proposal.

The proposal would likely create a group of haves (the remaining 120 teams with PDCs) and have-nots (the 42 teams left out of the new PBA), but it would likely have negative impacts for all affiliated minor league clubs because it would likely decrease valuations for all minor league teams.

Values for affiliated clubs are dramatically higher than independent minor league clubs, even in cases where the independent club’s market and revenue is comparable. The reason is largely tied to the guarantee of a PDC. While the number of independent (and summer college league teams) are theoretically infinite, there are a limited number of PDCs that tie teams to MLB teams. And for the past 30 years, that number has never gone down.

Teams have frequently swapped affiliates, but as long as a team has a PDC, it is guaranteed to have an affiliation with an MLB club.

MLB’s proposal for the new PBA is limited to five years, down from the seven that PBAs have traditionally been in the past. That proposal also could be a sign of future intentions. If MLB reduced the minor leagues by 42 teams in this negotiation, there is no guarantee it wouldn’t look to reduce the number further in the next round of PBA negotiations. With no guarantee a team will always have an MLB affiliate, the value of even the most successful MiLB teams will likely be reduced to price in that uncertainty.

The full details of how the Dream League or leagues would work are not yet clear. In the proposal, league teams would be responsible for paying players and the coaching staff as well as the training staff, but there is also an awareness on MLB’s side that some sort of subsidies would be needed.

MLB would potentially assist in helping teams identify players, but it appears teams would be responsible for acquiring their own players. The expectation is these players would be paid very modest salaries for the chance to catch the attention of MLB scouts. MLB clubs would then have the option to purchase the contracts of Dream League players in-season for $5,000 per acquisition.

A rough estimate is that going from affiliated baseball to the proposed Dream League would add $300,000 to $400,000 in costs to club for in salaries, worker’s compensation and staffing.

Because the markets for most Appalachian and Pioneer league clubs are unlikely to be able to support the increased costs of the Dream League, teams in those leagues would instead be encouraged to form summer wood bat amateur teams under the auspices and organization of MLB. By doing so, MLB could assure cities that while they may no longer have MLB-affiliated teams, they still would have baseball tied to the MLB/MiLB umbrella.

The two sides have taken October off from negotiations during the MLB playoffs, but they are expected to meet again in November. This could set up an interesting dynamic at the Winter Meetings, this year held in San Diego, which is normally a celebration that major league and minor league owners can partake in together.

This year figures to be contentious more than celebratory.

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