With the MLB Draft signing deadline (5 p.m. ET July 15) less than 24 hours away, the Baltimore Orioles are still negotiating with NC State junior first baseman Preston Palmeiro. Palmeiro is in Baltimore to take a physical, per Baseball America’s John Manuel, which may mean a signing is imminent.
If Palmeiro does sign, it will likely be for the exact slot value of his draft spot: $204,700. Because that is exactly how much the Orioles have left in their bonus pool, and according to MASN’s Steve Melewski, the team is probably not willing to exceed that total.
Each team is allotted a bonus pool prior to the draft, and if a team exceeds it, the team faces escalating penalties that begin with a hefty tax on the amount it spent beyond its allotted total. Teams that go 0-5 percent above pool must pay a 75% tax on the overage. No team has ever gone more than five percent above pool, since anything above that threshold would result in the loss of future draft picks.
Basically, if the O’s give Palmeiro more than $204,700, they will incur a cash penalty. If my maths is accurate, they could go as high as $535,270 with their offer (they won’t, but still). That would hit right at the five-percent line, incurring the 75% tax on the overage amount but preserving all future draft picks. They would then take a tax hit of roughly $248,000.
Even though it’s really chump change for them in the grand scheme, clubs rarely have been willing to take the hit. So if Palmeiro went into negotiations with an above-slot number in his head, that could be reason for more drawn-out discussions with the O’s.
We’ll know soon enough how much—if at all—money was a sticking point.