Wednesday, October 16, 2013

Breaking Down the Tigers Current 2014 Payroll While Explaining Payroll Obligations, Arbitration, and Other Things...

This offseason for the Detroit Tigers is a big one, and there is no question about that. Whether or not the Tigers surge past the Boston Red Sox in the ALCS and/or win their first World Series title since 1984, they have some big-time business decisions to make. They have undoubtedly the best hitter on the planet in Miguel Cabrera who is bound for free agency after 2015 unless the Tigers sign him this offseason, they have a Cy Young Award favorite in Max Scherzer who is a free agent at the end of next season, and they have a few frustratingly inconsistent players on their roster who are about to become very expensive via arbitration. The bottom line is this: contrary to popular belief, owner Mike Illitch does not have bottomless pockets, the Tigers' stars are not getting any younger, they have a less than middling farm system, and their roster is probably not going to be any better next year than this year's, barring something completely unexpected.

I understand how depressing that sounds, but believe me, this is not me saying that the Tigers cannot be World Series contenders next year, because they probably can be. This is simply the reality of Detroit Tigers. If they continue to do business the way they have since 2010, which has worked for them lately, they will begin to see their plan backfire and they will be forced to go into a full rebuilding phase sooner rather than later. Their window for contention is closing, whether you as a reader realize it or not.

That said, their baseball operations department will have a plan for this offseason, and it may differ from mine. I have some ridiculous ideas to keep that window of contention open for awhile longer all while keeping some valuable pieces in Detroit, which I will post next. Before I get into that, however, we are going to have to lay the foundation for the reasoning behind my madness, and that begins by breaking down the Tiger's 2014 payroll.

We will begin by examining the Tigers' 2014 current salary obligations according to Cot's Baseball Contracts (parentheses are when contracts expire. For example, Prince's contract runs through 2020 so he will be a free agent in October of 2020, which is the 2021 offseason):

1. Prince Fielder 1B: $24,000,000 (2021)
2. Miguel Cabrera 3B: $22,000,000 (2016)
3. Justin Verlander SP: $20,000,000 (contract runs through 2019, club option for 2020)
4. Anibal Sanchez SP: $15,800,000 (contract runs through 2017, club option for 2018)
5. Torii Hunter RF: $14,000,000 (2015)
6. Victor Martinez DH/1B/C: $12,000,000 (2015)
7. Jose Veras RP: $3,250,000 (2015)

These particular players have guaranteed salaries for next year, meaning that their salary is set in stone, and the Tigers have an obligation to pay these players. These seven players already account for a whopping $111,050,000 in payroll next year. Keep in mind that there are still 18 other roster spots that are going to be pricy, so we have to determine how much these players are going to get paid too. Of the 18 remaining roster spots, half of those spots are players who are eligible for arbitration, meaning they are players who have between three and six years of service time on a Major League roster, and are eligible to negotiate a larger salary than the league minimum (for 2014 the minimum a MLB player is allowed to be paid is $500,000). 

Max Scherzer is arbitration eligible this offseason.
The process of arbitration is complicated to explain and to understand, so all you need to know is depending on how many times a player has already been eligible is directly proportional to how much a player is going to make, in addition to other factors such as on-the-field performance and comparable player's salaries. In other words, a player who is eligible for a third time is probably going to make more money that a player who is eligible for a first time, and if player "A" is better than player "B", player "A" will be compensated with a heftier salary. Kind of makes sense, right?

These nine players are eligible for arbitration (parentheses are when a player is eligible for free agency. For example, Max Scherzer is eligible for free agency after the 2014 season, which is the 2015 offseason):

1. Max Scherzer SP (2015)
2. Rick Porcello SP (2016)
3. Doug Fister SP (2016)
4. Austin Jackson CF (2016)
5. Alex Avila C (2016) 
6. Phil Coke RP (2015)
7. Don Kelly IF/OF (2015)
8. Andy Dirks OF (2018)*
9. Al Albuquerque RP (2017)

*Andy Dirks is a Super-Two player and is eligible for arbitration four times instead of the normal three.

These particular players do not have guaranteed contracts, but the Tigers have guaranteed control over their contracts until the year that is specified in parentheses. This means that the Tigers can make a decision over what to do with each player's contract, and they have plenty of options. Should they choose to tender the player a contract, they remain under team control, and are required to be compensated at at least 80% of their previous year's salary for the next year. A team can decide to sign them for as many years as both sides can agree to, but normal circumstances usually result in just a one-year contract. If a team decides for whatever reason that a player who is eligible for arbitration is not going to be worth their potential salary, they can choose to non-tender them, thus making that player a free agent and free to sign with any team. 

The tricky thing with arbitration eligible players, however, is that they get expensive very quickly, especially if they are talented and have the statistics to show it. For example, Max Scherzer, the Cy Young Award favorite this year, made $6,750,000 last year. He had an above-average year in 2012, and that warranted an above-average salary for his second year of arbitration. This offseason, however, he and his agent Scott Boras will likely demand $14-15,000,000 for his services because of his unprecedented 2013 campaign, and the Tigers will likely be required to pay him that much should their negotiations go to a hearing.

Each of these eligible players have different skill-sets and are all at different stages of arbitration eligibility and therefore will have significantly different salaries, but the bottom line is all of these players are going to be making a lot more money than $500,000, so for the sake of argument let us say that they will (this is an estimation, mind you) accumulate about $40,000,000 in payroll obligations should every single player be tendered a contract. This then ups the Tigers' payroll obligations to $151,050,000, which is higher than last year's blisteringly high payroll of about $148,000,000, and we still have nine roster spots we have not even gotten to yet

The Tigers have six players who are eligible for free agency, meaning they have six roster spots to fill either internally via their minor league system or through free agent signings. These players are as follows:

1. Joaquin Benoit CP
2. Jhonny Peralta SS
3. Omar Infante 2B
4. Octavio Dotel RP
5. Jeremy Bonderman RP
6. Bryan Pena C

These players played some sort of role on the Tigers this season, and four out of the six made significant impacts on the Tigers this year. These players are free to receive contract offers from all 30 Major League teams in an auction-like atmosphere. Assuming that none of these players return, that leaves us with only a few other players to address, and these are the minimum-salary players.

Minimum-salary players are those who are set to receive at least $500,000, but usually not too much more, from the team they are under contract with. These players have between zero and three years of service time on a Major League roster and therefore are not eligible for arbitration. These players without a doubt in my mind will agree to a contract with the Tigers for the league minimum:

1. Drew Smyly RP
2. Bruce Rondon RP
3. Nick Castellanos LF

These players will account for at least $1,500,000 of the 2014 payroll, so that now brings the grand total to $152,550,000. If I did not mention a player (such as Hernan Perez, Matt Tuiasosopo, Bryan Holaday, Luke Putkonen, or someone else), it is because I do not believe they have earned a guaranteed spot on the Major League roster for next year, these three players without a doubt in my mind have a spot on the 2014 Tigers. The players I have not mentioned will have to fight for one of the six remaining roster spots, and free agents that the Tigers bring in may be guaranteed some of those spots as well. The amount that the Tigers will spend on free agents is not even estimable at the moment because of the unpredictability of the offseason, so for the sake of argument we will say that a conservative final figure for Detroit's 2014 payroll if no roster changes are made is $155,000,000.

So, to conclude, Detroit's payroll if nothing changes on the current roster is going to be noticeably more than last year's. Whether or not this payroll is sustainable is only known by Illitch and the Tigers' highest executives, but from an outside observer, this payroll seems highly unsustainable. . .

. . .and that means change is coming. Part two to this two-part post is coming later this week, where I explain what I would do to deflate the payroll and guarantee long-term success for this franchise.

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