Mid-Market MLB Method: Lock Up Now or Wait Until After Arbitration Years

August 24, 2010

When the Tampa Bay Rays opened the 2008 major league season, third baseman Evan Longoria was playing for the Durham Bulls in the Triple A International League.

It was the minor leagues for the Rays first choice in the 2006 draft, and was the third overall pick. Many people, including myself, suggested the Rays were trying to save themselves some money by delaying Longoria’s “arbitration clock” by sending him to the minors.

Isn’t the idea to try and win games? Longoria was the Rays best opportunity at third base to help them win, but was mired in Triple A for financial reasons.

But being mired lasted all of seven games and 25 at bats, before Longoria was promoted to the majors. The Rays were going to let the clock start early on their prize after all.

But even the Rays startled everyone by signing Longoria the next day to a six year, $17.5 million contract through 2013 including three club options for 2014-2016. The Rays bought out all of Longoria’s arbitration years and his first three free agent years with club options.

Based upon Longoria’s performance, the team has made out very well. Even though they gambled on an unproven young talent and are going to save a bunch of money over the long haul.

This buying out of a players early “control” years is a growing trend which began in the early-to-mid 1990’s by General Manager John Hart when he was with the Cleveland Indians. He signed up youngsters Kenny Lofton, Sandy Alomar, Jr., Carlos Baerga, plus Joey and Albert Belle to multi-year deals WHILE they were really good…and really young. 

For example, Lofton has a 7.7 WAR* in 1994 (shortened season due to strike), the highest in baseball that season and his WAR was 7.3 in 1993. He made only $925K that year and $1.925 million in 1995. His salary would have been much higher had Lofton actually gone to arbitration in 1995.

*That is the first time I used the WAR stat in any article ever. While I am not needing to be rushed to the hospital, I am still in shock. It was needed for reference on how good Lofton was those seasons. Don’t expect it all the time.

Hart needed to do this to keep together what he projected his core would be for many years at reasonable prices than what these players would receive through arbitration and early free agency. As a smaller market team, Hart reasoned the Indians had a smaller window to win.

Signing up young players is a great tactic for these small market** teams to use.

**I love the term small-market. With all these billionaire owners, they can afford to spend their OWN PERSONAL money on players. I don’t mean to spend frivolously big on free agents like you are Omar Minaya, but to spend to keep the players your organization develops.

Why then are there small markets when these guys have their own money they can spend. Before he died, Carl Pohlad of the Minnesota Twins was the richest owner in baseball but did not spend money. Lucky the Twins re-signed Kirby Puckett when Carl was alive, but I am not so sure he would have signed Joe Mauer to that contract last off season.

Should other small-market teams use the same ideas?

Of course, they should. They have to in order to compete with the so-called big boys of Boston, New York, Los Angeles, and Philadelphia.

But these big teams do the same thing.

The Red Sox signed Jon Lester, Dustin Pedroia, and Kevin Youkilis to long term deals before even going to arbitration on Lester and Pedroia and after the first arbitration year for Youkilis. I fully expect them to extend Clay Buchholz after the 2011 season.

They want to see players perform for two or three seasons before they sign players longer term. This allows for any adjustment periods the league makes to the players after their rookie and sophomore seasons.

The Yankees also did that with Robinson Cano two seasons ago and even Derek Jeter, who was signed to a ten-year deal after his second arbitration year. Yankees would probably sign Phil Hughes to a multi-year deal, too, after 2011, buying out several arbitration years and maybe a free agent year or two.

Even the Philadelphia Phillies tied up their young guys Jimmy Rollins, Chase Utley, and Ryan Howard, who were tied up after their first arbitration years.

There is quite a bit of talk now about the MLB financial statements for several teams being made public. These statements put teams like Pittsburgh and Florida into bad light, and for once it was not about their on field records. They show that the teams have made tens of millions of dollars but have not put that much of that money into player salaries.

These teams need to start signing their young stars when they believe their young players are going to be well-above average for the long haul. This is tricky because if you jump too soon on a player, you could be left holding the bag at big dollars for very little in the way of results.

Similar to what Scott Kazmir and Nate McLouth have become.

But certain smaller-market teams have reaped the benefits of signing young talent early, like Milwaukee with Ryan Braun, Yovani Gallardo and Corey Hart, the Marlins with Hanley Ramirez and Josh Johnson; and the Mariners with Franklin Gutierrez and Felix Hernandez.

Other teams like the Braves with Brian McCann (and likely Jason Heyward soon), have done this.

The Pirates have a couple good, young talented ballplayers in Pedro Alvarez and Andrew McCutchen. Alvarez is signed through 2014 (including club options), but it would be good to spend some of that profit and also sign McCutchen after his first full season to a long-term commitment, saving long-term money.

The smaller-market teams need to decide who the players they want to keep. Not just “team” players who can be replaced cheaper through from their farm system, but players who already have been All-Stars.

And who they feel will continue to be All-Stars and league leaders, not league average.

McCutchen appears to be that type of player a team can take that risk.

Many other teams have major decisions to make.

Players like Wandy Rodriguez of the Astros, Dallas Braden and Trevor Cahill of the A’s, and Jair Jurrjens of the Braves need to be looked at longer term at below future-market rates. 

But the biggest task might fall to the Cincinnati Reds have to decide if Joey Votto (yes, of course!), Edinson Volquez and Johnny Cueto need to be locked up soon. They all are coming up on their arbitration years.

This would be a great move for the first-place Reds to sign all three, who have plenty of young players in the fold who could keep the Reds at the top of the NL Central standing for many years to come. Similar to what their in-state brethren, the Cleveland Indians, did almost 20 years ago.   

Most of the big market teams seem to like to get their players just before or a year after their first year of arbitration. 

I feel it might be better for the smaller-market teams to take a bigger risk by signing top guys earlier, like Longoria in Tampa and Troy Tulowitzki (his college teammate) in Colorado. The Rockies would be wise to lock up Carlos Gonzalez to a “Longoria type” deal this off season and keep the young slugger locked up in Colorado through age 30.

It sure worked for the Rays.

Advertisements

Carl Crawford: Why This Tampa Bay Ray Will Not Be a New York Yankee in 2011

April 4, 2010

Too many articles talked about Joe Mauer heading to free agency after this season and signing with the Yankees. That was never going to happen because of Mauer’s native roots and his homegrown status of being a Twins first-round draft choice and first pick overall.*

* Do you think the Twins feel good that they did not take Mark Prior first overall? Just before the draft, Prior was going all John Elway on Minnesota, saying he did not want to play for the Twins. Good thing for Minnesota they listened to Prior’s rants. However, if the homegrown Mauer was not available, the Twins were ready to take Mark Teixeira. Besides Mauer and No. 5 overall Teixeira, the 2001 draft might have the worst first round in history.

Now Yankee fans are clamoring for next season’s free agent list. I have seen articles preaching that the Yankees are going to go after and sign Cliff Lee (and if Lee is healthy, the Yankees will do just that), Jayson Werth of the Philadelphia Phillies (possible), but especially Carl Crawford of the division rival Tampa Bay Rays.

I have read that certain Web sites claim their sources have told them that the Yankees hierarchy “absolutely love Crawford.” Jon Heyman, a respected national baseball writer, also claims the Yankees love Crawford, and they want him to play left field for the Yankees—probably for the next five seasons.

With Crawford as a free agent after this season, it will take a five-year deal to land him. In addition to the Yankees, the usual cast of characters—like the Boston Red Sox and the New York Mets—would be in the running, too.

Most baseball executives and media people believe Crawford will sign with the Yankees. Financial estimates are that it will take a five-year deal for about $15 million per year to get Crawford. That is $75 million for a guy with a career split of .297/.335/.437/.772 with an OPS+ of 103, just above league average .

But he steals lots of bases, plays good defense, and has a little pop with his bat.

Except for the pop, with the same amount of plate appearances, that description could be Brett Gardner—and he will cost a whole lot less. I am not saying that Gardner is as good as Crawford, but he will do a lot of the things Crawford does—except for the power.

The Yankees do not need Crawford for 2011, and they will not sign him after this season.

Why? Because, like Mauer, Crawford will re-sign with the only team he has known—the Tampa Bay Rays. They can afford it.

There is so much talk about how the small-market Rays can’t afford Crawford and their other free-agent-to-be, Carlos Pena—and the Rays will lose both players.

The term “small market” is so overused, it is comical. First, revenue sharing reaps teams such as Tampa—and Pittsburgh and Kansas City—at least $25 million every year right at the start. Each team also receives at least $35 million for MLB through licensing agreements.

Second, at the end of the 2010 season—Bye, Tom Hicks—every owner of every baseball team will be stupid rich. The owners made their money outside of baseball, and they are part of the best restricted club in the entire country.

Tampa owner Stuart Sternberg is worth a ton of money. He made it on Wall Street and got out to buy the Rays just before the stock market fell in value.

The idea of the luxury tax and revenue sharing was developed so teams can put that money back into signing free agents—not other teams’ free-agents-to-be, but their own .

That is why the Florida Marlins ponied up the money for Josh Johnson, the Royals ponied up a couple of years ago for Zach Greinke, and the Rays will pay to keep Crawford. Although the Marlins appeared to be forced to pay Johnson, I still believe the Marlins never would have let him leave through free agency.

By having money from a wealthy owner—and revenue and licensing sharing funds in their coffers—the Rays will re-sign Crawford.

The second reason Tampa will re-sign Crawford is that he has been the face of the franchise for a few years now. Sure, Evan Longoria is the younger, power-hitting third baseman. But he has been with the franchise only two seasons, while Crawford will be entering his 13th season with Tampa—his 10th in the majors.

Crawford, who will be 29 this season, was even quoted in the Heyman SI.com piece that “I’ve been here since I was 17. This is all I know .” The Rays and Crawford’s agent, Brian Peters, tried to get a long-term deal done just after the 2009 season. But they were far apart, and talks were tabled until after the season.

That gives the Rays an exclusive negotiating window of about 15 days after the World Series ends to deal with Crawford.

The third—and maybe most important—reason Tampa will re-sign Crawford is that the Rays, excluding arbitration cases, are now only on the hook next season for $13 million in player salaries. Their best player, Longoria, is tied up for through 2016 at very reasonable rates. It is ridiculous that Longoria’s salary is only $2 million this season. It might be the best contract ever for a sports team based upon production received.

Rays who are free agents after this year include Crawford, Pena, Pat Burrell, Rafael Soriano, Grant Balfour, Randy Choate, and Gabe Kapler. There’s no way Burrell re-signs. Soriano is a maybe based upon his 2010 season—but not more than a two-year deal—while Balfour, Choate, and Kapler are replaceable spare parts.

The Rays have arbitration deals with many of their younger players, including BJ Upton, Matt Garza, Ben Zobrist, Jason Bartlett, JP Howell, and Dioner Navarro. I believe they get all those guys done for about $25 million—unless they deal Bartlett, who could be a free agent in 2012.

That is about $40 million—I rounded up—really tied up for next season. With a payroll of $70 million this season, Tampa’s obligations are about $30 million under what it is currently paying.

What the Rays do very well is promote their young talent. The have youngsters like Wade Davis, Jeremy Hellickson, Desmond Jennings, Sean Rodriguez, Matt Joyce, and Reid Brignac—who will make an impact this year or next. All will be playing at near league- minimum salaries for the next couple of seasons.

Some people are saying Jennings, a natural center fielder, is destined to take over for Crawford, who plays left field. Jennings is more likely to take over for Upton in center field, with the team moving Upton to right field or out of Tampa by trade.

I mentioned the hard-hitting Sean Rodriguez, one of the Rays younger players. He was obtained from the Los Angeles Angels in the Scott Kazmir trade, and he is expected to play a big role this year with his ability to play multiple positions. The Rays traded Kazmir mostly to rid themselves of his contract so they can afford to re-sign Crawford.

While many are saying the Rays could let Crawford go as a free agent and collect the two draft picks, they would not be getting the top draft picks—unless the Mets sign Crawford. The Rays made their current team by drafting near the top of the first round and by making shrewd trades. The pick from the Yankees or Red Sox would not be near the top.

Finally, I cannot see the Rays letting Crawford go as a free agent—knowing he will likely land with the Yankees or Red Sox—and have to play against him for the next five seasons. While Crawford is a player based upon his legs, he is good enough to give a team the same future production in the next five years as he has during the previous six full seasons.

But that production—an OPS+ of 103—is not good enough for a corner outfielder, and not at that asking price.

Not for a team signing another team’s free agent, but it is good to fit into the scheme of the current team.

The Rays can most certainly afford Crawford at $15 million per year.  They could even sign Crawford and Pena and still be at the same salary as last season—but with the versatile Zobrist and Rodriguez providing power, Pena is likely gone.

The Rays will compete this year—at some points this season, they will occupy first place in the AL East and could make the playoffs.

Crawford fits well with the Rays. He is the first homegrown star, the Rays want him back, and he is going to make a lot of money.

And that money is going to come from the Rays.


Why Don’t Major League Baseball Teams Front-Load Contracts?

July 15, 2009

One of the possible deal breakers for trading Roy Halladay might not have anything to do with Halladay at all. It could come down to whether another team wants to take on Vernon Wells’ contract.

The sticking point is that Wells is owed $97.5 Million IN BASE SALARY ALONE over the next five years. He has commitments of at least $21 Million through 2014, when he will be 35 and definitely at the end production wise.

According to SI’s Jon Heyman, nobody wants to touch Wells’ contract and Tyler Hissey wrote the piece about Wells’ untradeable contract. Which got me thinking:

Why don’t these teams front-load their big contracts?

This is more sensible tactic to the back-loading process which goes on now. Why do teams continue to pay the players the most money per season when these are the years their production is in decline?

Instead, front-load those deals where the player is getting most of his money during his prime years.  Most of the time when a team wants to lock up a real good young player, the player is signed either a year before or during his arbitration years. This saves headaches during the arbitration process and the team benefits by locking a player up during his first couple years of free agency.

Perfect examples are the Florida Marlins deal with Hanley Ramirez and the Tampa Bay deal with Evan Longoria, who was signed long term really early. The deals for David Wright and Jose Reyes of the New York Mets are other examples.

Unless these players deals are reworked (and Longoria’s likely will be redone – it is a steal for the Rays), all four players will become free agents for the first time during their peak years of 28-31, and if they hit the free agent market, many teams will vie for their services.

A team will have to sign them for 4 or 5 years in order to get them, while guaranteeing big money through the years of 32-37. Those early to mid-30’s years have historically see a gradual, but sometimes precipitous, drop in production. Only Reyes at 28 years of age when he hits free agency will be under 30, but with a game built on speed and with leg issues already, what will his 28 to 30 something years be like?

So instead of paying the player smaller amounts earlier in the contract when production is likely to be the highest, why not reverse the contract and pay them less in the later years?

What this process would do is to get the biggest bang for the buck.

For example, take Mark Teixeira’s New York Yankee contract.  Teixeira’s contract is for 8-years and $180 million. After the $5 million signing bonus is paid, Tex will receive $20 million this year and 2010, plus $22.5 million per season through 2016. At age 35 and 36 will Teixeira be as productive as his late 20’s seasons? Will he even be equivalent to his 162 games averages of 40 doubles, 37 HR’s, 121 RBI’s and .288/.378./540?

Before you say, “of course Teixeira will,” remember that Wells was coming off  a .303/.357./.542 season before he signed his mega-deal and was in his prime age of 27.

Why not pay Teixeira $35 million for the next four seasons (through age 33) and then $8.75 million in years 2013 through 2016? The last four salaries could also be gradually declined from a high of $15 million in 2013, to $10 million in 2014 and $5 million each in years 2015 and 2106. And he is still getting the most money of any team, and he is getting the money much more quickly.

There are benefits to this situation for both the team and the declining player.

POSITIVES

1) More flexibility – Lets say Player A is declining in production and said team has a young minor league stud they want to bring up, but Player A is making $22 million and has no trade value. If the contract was front loaded, the still viable player (but not worth $22 million) could go to a contending team and try to win a title.

An aging slugger would fit well with a hungry young team looking for a bat, but unwilling to pay a massive back ended salary. Example: any expensive bat would be a great fit in San Francisco.  Said bat would be easier to move with a reduced price.

From 1949-1953, the New York Yankees won five straight World Series titles, the only such team to do so. A key bat off the bench for those teams was Hall of Famer Johnny Mize. The Big Cat was past his prime, but still viable in certain situations. In fact, during the 1951 season Mize hit 25 homers in 305 plate appearances, and in the 1952 World Series, Mize hit .400 with three homers and six RBI’s in the Yankees victory over the Brooklyn Dodgers.

Those were the only World Series Championships for Mize.

2) Adding a needed player – without being saddled with “dead money” for an aging player on the decline, a contending team could add some payroll. A team like Boston is going to ahve big money still to be paid to David Ortiz, Mike Lowell, Julio Lugo and JD Drew, four aging players way past their prime and worth. Will a huge payroll guaranteed for next season, plus maybe having to re-sign Josh Beckett, will they have enough to add payroll this season or next if they need a player?

3) Value of compounding – why wouldn’t a player want most of his money up front? Why not have it your own accounts earning interest instead of the owner’s bank account? I always remember a former boss telling me that he always worked his taxes every year so he paid ” a little something” to the government every year, because he didn’t want to give Uncle Sam and “interest free loan every year.” 

Same concept here. Player A gets big money early, and value of compound interest works in his favor. Placing those big monthly checks in various guaranteed interest accounts sure would keep a ballplayer happy later in life.

There are some perceived negatives, too. Everything can’t be perfectly rosy in MLB, can they?

NEGATIVES

1) Players egos – Players like the back loaded contracts because they keep the player within “the market value of the times. Later in Teixeira’s career he would still be making $22.5 million, probably similar money to another young first baseman just entering his prime earning seasons. Why would Teixeira want to earn significantly less than his younger counterpart? It is not market value.

The compensation is that a experienced veteran could be traded from a lower division squad into a pennant race with a more modest salary.

2) Willie Mays – aging players never want to admit they can’t perform anymore more. Most players end up going out on managements terms rather than their own. It was a sad sight to see Willie Mays a shell of his former self when he was with the Mets. For every Joe DiMaggio who bows out gracefully, there are many Willie Mays types.

Most players believe that getting old and slow won’t happen to them and would not look favorably on getting released for money concerns. You have to give credit to Ricciardi for releasing dead weight like BJ Ryan, but many more GM’s would just have Ryan occupying a roster spot and not contributing. With lower back end salaries, these players are more easily expendable when they decline.

Getting money back ended keeps the flow coming in when the player may not be playing anymore.

3) Smaller free agent market – a GM who starts talking about front loading contracts will undoubtedly get reprimanded by the Players Union, the word collusion will be bandied about and said GM will likely lose out on certain free agents.

The name of the game for GM’s is win now. What have you done for me lately is the new battle cry. GM’s can get fired if ownership is pressured by its fan base to start winning now. The GM might give in to the long term deal demands to just get that one piece he believes he needs to win a World Series. 

Unfortunately, that one piece almost never helps, and the escalation of salaries continues.

There are many benefits to front-loading contracts, both for the teams and the players. There would be more flexibility for the teams to deal, both getting that piece they need and in trading an aging star while the value is equivalent to his production. Managers would not have the pressure of having to play a veteran because he makes $20 million a year. The aging veteran could be the next Johnny Mize.

This scenario offers positives to both the current team in more roster flexibility, and a potential contender seeking to improve their team at an affordable salary. 

The players could even receive more money if they play the game right, all the while helping over-aggressive GM’s keep their dead money under control. So instead of Teixeira getting his money over eight years, with the last four at reduced rates, he could inform the Yankees he wants the $180 million (same market value) but now over, say, five or six years.

I don’t mean to pick on Teixeira nor am saying I think he will decline over his contract, but am using Tex as an example of a player who will get big dollars well after the so-called prime years.

But as egos take hold, the Players Union would pressure to see that front-loading did not happen and players would be more selective in choosing which teams they signed. The desire to win now for GM’s would further diminish the desire to change.  

It would take a maverick GM, someone secure in his position, maybe coming off of a recent World Series title or two. A GM who had built a good farm system so if a free agent or two decided to go elsewhere, the GM had enough resources to supplant a positional need with his own talent.