Sunday, January 27, 2008

On Contracts and Cliches

It's easy to say "sign stars to long-term contracts".

In fact, that's part of the problem. Things that are easy to say run the risk of becoming cliches, and cliches are perceived to be a sort of wisdom. That's especially true for this cliche, because the judgement must be delayed, and usually relies more on something nobody can control - namely, injuries - than the details off the contract. But the details is what makes these deals happen or not happen.

On Friday, it happened, and it happened twice. Just before TwinsFest began, the Twins announced that they had signed Justin Morneau and Michael Cuddyer to long-term deals. Twins fans generally viewed it as good news, with some telling us to celebrate, and some cautioning us.

Last week I speculated on the type of deal the Twins should offer Morneau, and the resulting deal is awfully close. But the devil is in the details, and I suffer a debilitating weakness when it comes to this stuff. So how about we spend 1000 words or so breaking these things down?

The Signing Bonuses
Now we know what the Twins are going to do with that extra money, right? Well, kinda. This still doesn't mean the Twins are tapped out, even if they don't trade Johan Santana. The $8.75 million singing bonuses that they gave Morneau and Cuddyer don't bring the Twins to last year's Opening Day payroll. And at TwinsFest, Bill Smith said they had planned on a sizable increase above that. Plus, of course, if Santana is traded for prospects, they're going to save another $13 million.

But credit the Twins for recognizing a situation that fell into their laps and taking advantage of it. On Friday I wondered why the Twins hadn't structured an offer for Torii Hunter similar to what the San Francisco Giants agreed to with Aaron Rowand, which included a sizable signing bonus. If they didn't think of it then, they certainly did now. And there's two advantages to doing that.

The first is that the signing bonus is essentially free money to Twins management, since they weren't going to find a decent free agent to accept it at this point in the offseason. In fact, this organization's motus operandi has been to throw leftover money at veteran free agent gambles, which just encourages the coaching staff to invest playing time on them, which does as much harm as good.

And the second advantage?

The Money
The second is that money now makes the back end of the contract more palatable. For instance, last week I proposed the Twins offer Morneau a contract that paid him $14M/$15M/$16M over the last 3 years. The contract that Morneau actually signed pays only $14M over each of those last three years. Those are the years where the Twins are going to be more strapped for money, as they continue to keep their best players from free agency.

But it's not just more palatable to the Twins. If things change and the Twins need to trade Morneau and his payroll to another team, he's a more marketable commodity because of his slightly lower price tag. There's a decent chance that $14 million will be an affordable contract in five or six years.

Hmmm. I suspect I'm going to get some grief for that last sentence. There's a decent chance that $14 million will be an affordable contract in five or six years. Let's explore it a little...

Can we expect Morneau, whose offensive performance decline last season, to be woth that money? Well, he is just 26 years old. His home park is going to be beneficial to lefties for the next six years. And we've already see what he's capable of n 2006. I don't know what the various projecting systems say, but I'd be surprised if they didn't put him among the top first baseman in the game over the next few yeas.

And there's also the fact that contracts have risen at a crazy rate lately. Six years ago, the big free agent first baseman signing was Jason Giambi, who the Yankees signed to a contract that will pay him $21 million this year. But back then it was paying him just over $10 million. That kind of increase gives a sense of what has happened to contracts. And then there's Ryan Howard, who will make $7 million in just his first year or arbitration - if he loses.

The Years
By far, the most significant fact about either contract is the length of Morneau's. The Twins have NEVER given a six year contract to anyone. Hell, Kirby had a four year deal. The fact that the Twins would pony up that number of guaranteed years is the bravest, and the scariest, part of this deal.

Personally, I was disappointed that the sixth year wasn't a team option, which is what I proposed last week. But, on the other hand, Morneau's side could have insisted on the same thing - a player option for that year which he could exercise if the market takes off.

Primarily, I think the length of each deal was a factor of each player's age. Both Morneau and Cuddyer will be 32 years old when their deals expire, meaning they will still be perceived as young enough to get a three or four year deal. From the Twins standpoint, they have committed a lot of money, but they're also getting the best years of these guys' careers.

The No-Trade Clauses
Let's review these contracts with three scenarios. First, if Cuddyer and Morneau are hurt or decline significantly, the Twins are screwed. Of course, if the Twins thought that was going to happen, they wouldn't be offering them long-term deals.

But if not, they have signed two productive bats with some significant upside through their peak years. To cover themselves, one of the deals has an option year, and the other is front-loaded to provide flexibility to future payroll. If the players reach the ceiling the Twins hope, they're both going to look like bargains.

And what if both players just level out? Well, with escalating salaries, neither deal should be a terrible loadstone to the Twins, and certainly not to higher payroll teams in the league. Which is why the very limited no-trade clause that each player has is such a nice detail.

Often, when a player feels like he's signing a long-term deal below market value, they want trade protection that they won't be traded. But in this case, Morneau can choose only six teams he can't be traded to, and Cuddyer has just three. That leaves a couple of dozen teams that each can be traded to, and most players won't eliminate large market teams because they're the ones that tend to pay the best.

We know all too well that contracts that are burdensome to the Twins aren't to other teams. At the very least, the Twins should be able to get out from under both of these deals in a pinch. In a best case scenario, they could even get back something of value.

I haven't been terribly complimentary of the Twins ability to negotiate contracts in the past, and these aren't perfect. But they provide the Twins what they needed, and they do so at a fair price, with a creative structure, and provide them some protection. These contracts are what they should be. The fanfare surrounding these cliches is appropriate.


Jon Marthaler said...

The rules are fair. The regulations are fair. The competitive balance is fair.


Sorry. Got caught up in the cadence at the end there. :-)

neckrolls said...

How about a signing bonus for Santana? He might come down from his 6-7 year demands if he were offered 5 years/$100 million + a $6 million bonus for this year. If Liriano's as healthy as he thinks he is, having both those guys in the rotation keep the Twins in contention, no doubt.

Jack Ungerleider said...


The number on the bonus should be $6.5 million. Add that to what he is making this year and you have your 6yr/$120 mil. contract.