How Yordan Alvarez’s extension affects the Astros’ future payroll

The Houston Astros extended designated hitter and left fielder Yordan Alvarez to a six-year, $115 million contract Friday, Jeff Passan of ESPN reports. The contract opens next season as the largest deal ever for a designated hitter with $26 million a year over three free-agent seasons.

The contract is the fourth biggest in Major League Baseball history for a player who has yet to reach arbitration behind Buster Posey, Mike Trout and Fernando Tatis Jr. Alvarez also becomes the highest paid Cuban player in the history of the sport.

Chandler Rome of the Houston Chronicle noted Alvarez’s deal as the second largest under Jim Crane’s ownership, behind Jose Altuve’s five-year, $151 million extension in 2018.

As the Astros lock down Yordan Alvarez for six seasons, how does his contract affect the future payroll?

According to FanGraphs, the Astros’ estimated payroll for the 2022 season stands at $175 million at season’s end. While Alvarez’s extension doesn’t factor into this season’s sum, the team still sits south of the current Competitive Balance Tax — which is $230 million under the new Collective Bargaining Agreement.

In 2023, that number will rise $3 million as a steady increase follows until the 2026 season and the expiration of the latest Collective Bargaining Agreement. For the Astros, this increase offers more room to extend franchise cornerstone pieces — Alvarez and possibly Kyle Tucker.

But for how the payroll sits at the start of the 2023 season, the Astros have room to spend and easily stay under the CBT, avoiding tax and draft punishment. Spotrac is estimating a payroll in the ballpark of $130 million with Justin Verlander’s $20 million player option affecting the projected total.

Alvarez’s $19 million average annual value isn’t factored into the $130 million, but it does leave the Astros nearly $75 million under 2023’s luxury tax threshold. Additions and subtractions from the 40-man roster will hit the payroll over the next year, but as the Astros’ plan their next steps in contention, Alvarez’s deal fits nicely into the equation with room to extend Tucker and avoid arbitration with the right fielder.