On Sunday, the Adrian Gonzalez trade went down without a contract extension in place. However, the Red Sox wouldn't have been willing to send four prospects to the Padres if they weren't confident that an extension could be worked out, and after Ken Rosenthal reported on the expected parameters, Bob Nightengale is saying now that an agreement has in fact been reached, and the two sides are simply waiting to make an announcement.
According to Nightengale's sources, the Red Sox will sign Gonzalez to a seven-year extension worth $154 million, or $22 million per year. These figures match up exactly with Rosenthal's reported parameters, and would give Gonzalez a deal comparable to the eight-year, $180 million contract Mark Teixeira signed with the Yankees two seasons ago.
Why hold off on making an announcement? The most likely answer is for luxury tax reasons. If the Red Sox announced the extension now, then Major League Baseball would look at Gonzalez's next eight years and average out all the salaries for luxury tax purposes. Adding $154 million to 2011's $6.3 million and dividing by eight yields an average annual value against the tax of $20.04 million.
If the Red Sox wait to announce the extension until the day after Opening Day, though - as they did with Josh Beckett last season - then Major League Baseball would only apply the $6.3 million tax charge in 2011, and then give Gonzalez's contract an average annual value of $22 million from 2012 through 2018. It would be more expensive for those seven years by about $2 million, but it would be less expensive by about $14 million in 2011. The Red Sox try to avoid paying a luxury tax penalty, so this could be important.
It's a bit of a loophole, of which the Red Sox appear prepared to take advantage.