Monday, October 12, 2009

Twins Payroll 2010

To me, today is really the first day of the offseason. Yesterday, the day after the last game of the season, is traditionally a day of mourning. But it's also the day that the beat writers talk to the manager. And so today they give us their thoughts on what the Twins will be doing this offseason.

But to be candid, I mostly ignore what I read. I have for years, ever since I read in several sources that Cristian Guzman would re-sign with the Twins. A short look at the payroll situation would tell anyone that cared to look that it was never going to happen. But nobody cared to look. They cared to talk to the manager. And he liked Guzman.

That's one of the reasons I've often run a payroll breakdown for the Twins in the upcoming season around this time. The Yankees series should have driven the point home to anyone that cares to pay attention - payroll is critically important. More important than most want to admit.

How important? Well, consider how you evaluate how a team might do in the upcoming season. First, you evaluate how they did in the previous season. Then you take a look at the players they added or subtracted, or that player you think will improve or decline. So you start with a baseline (the team's previous record) and add or subtract based on their moves.

But it turns out that you've chosen the wrong baseline. If, rather than pay attention to the team's record, you paid attention to their payroll, you would have a better baseline. Statistically, it is a better indicator than a team's record as to how they will do. That's how important it is.

(And to answer the question of the sabremetrically inclined gentleman in the back who is eagerly raising his hand ... No, I haven't compared the correlation coefficient to the run differential. But I can tell you it's in the ballpark. We'll try to get to that sometime this offseason.)

Anyway, payroll counts, whether you want to believe it or not. It has, in the past, been a severe limiting factor for the Twins. That's why I wrote up a four-page analysis of the Twins payroll situation in 2010, 2011 and 2012 for the TwinsCentric Offseason GM Handbook. I and three other hard-working bloggers would sure appreciate it if you would click over and buy it to support us.

But I'm going to copy a bunch of it into today's entry, free of charge, for a simple reason - because it's ALREADY available free of charge. You can request a 61-page sample that is basically 1/3 of the whole book, absolutely free, just by clicking here. And it includes most of what is below.

Why are we doing that? I can't speak for Seth, Nick or Parker, but I'm doing it because I'm tired of the offseason stories being driven by irrelevancies, like whether or not the manager likes Guzman, or happened to whisper some kind words to Alexi Casilla. The latter isn't going to determine whether the Twins go out and sign a second baseman. It's far more relevant whether there are any decent, affordable second basemen on the market this year. And it turns out there are.

So below you'll find the payroll situation for the Twins in 2010, and you'll find a lot of financial wiggle room. At the very bottom I'll also talk briefly about something that ISN'T in the Handbook, but probably should have been.



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Here’s the part of your job you least look forward to: payroll.

Payroll is a limitation for all major league teams, but for the last couple of decades, the Twins have been limited to it more than most. There has been plenty of speculation that could or should change with the opening of Target Field in 2010, but the Twins haven’t announced the level of their commitment to salaries just yet.

That doesn’t mean we can’t give you a guess, especially given that we know how much has been spent the rest of this decade. The chart on the right is the club’s Opening Day salaries as computed by USA Today. We should note that it does NOT include signing bonuses, so that number for 2008 should actually be closer to $66 million due to $8.75 million in signing bonuses paid to Justin Morneau and Michael Cuddyer.

Still, you’ll notice that the Twins payroll has basically leveled off since the announcement of the new taxpayer-subsidized ballpark. And while MLB (and the rest of the world) has faced a recession during that time, we haven’t seen similar stagnation in other teams’ payrolls. Overall, major league payroll climbed 7% across the board over those two years. If the Twins payroll climbed a similar amount, it would be closer to $77 million this year, $12 million higher than it actually was.

So, given that level, we’ll add a 5% increase for 2010 and another $15 million to $20 million bump from the new stadium. Add all that up and you have 95 to $100 million to spend.

Well, not to spend, exactly. Most of that is already spoken for by previous commitments. You have some guaranteed salaries with existing players, and there are more players that you’re going to want to keep while you still control their salaries. On your left, you can see how things are set up, and the salaries of some other Twins farmhands below.

Some assumptions were made to simplify things, so let’s spell them out in case you want to make some changes.

LF/4th OF – Carlos Gomez and Delmon Young will both be eligible for their first year of arbitration, meaning they’re relative bargains, so they’re on the roster for now. I put Young in LF since he’s been there most of Sept, but feel free to move them around.

IF – Nick Punto’s salary is guaranteed, Alexi Casilla is out of options, and Brendan Harris will be eligible for arbitration and end up with a salary somewhere around $1 million. It’s possible you don’t offer him arbitration, but that also seems like a reasonable price for a utility infielder that provides offensive flexibility. Of course, with two infield bench spots, one of the three probably needs to be starting at a middle infield spot. I chose Punto. You’ll need to get rid of one of them to move him to the bench.

SP - In the rotation, Scott Baker, Nick Blackburn and Kevin Slowey seem like locks to return, and Kevin Duensing has likely earned his spot. I could’ve also put Francisco Liriano in there, but I put him in the bullpen so you had a rotation spot for a veteran if you would like. It also moved Glen Perkins off the roster completely, so he’s on the following table, with other bench names that you can use if you like.


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The story goes on to talk about the 2011 and 2012 commitments, but I want to get to a different point. One question I've received since I wrote this is how confident I am in the $15-20 million bump in payroll from the new field. The truth is that is was an off-the-cuff estimate, with almost no realy analysis behind it. So let's add that now....

A few months ago, we looked at a document from the Metropolitan Sports Commission which suggested the Twins cleared approximately $6 million in concessions and $40 million in ticket revenues in 2007 when their attendance was 2.2 million. Just straightlining that to a 3 million attendance figure adds another $16 million in revenue. If we add another 10% to that number (a reasonable expectation over the last three years) it adds another $7 million. That's a $23 million bump in revenue.

I think we can safely assume that with suites, etc., that number could go a LOT higher. But even if it doesn't, and even if payroll runs at just over 50% or overall revenue, we're talking about a $12 million bump.

Now, I should mention, I don't know enough about the other side of the ledger. I don't know how much the Twins are paying to lease the new ballpark, or how that compares to their lease of the Metrodome. Of course, I also don't know how much their receiving for the various sponsorships it's developed, like the "Target Fields" moniker or the recent deal with Treasure Island.

But a $10-$15 million bump doesn't seem unreasonable. If anything, I'd expect it to be higher.

15 comments:

Jesse H said...

Twins president Dave St. Pater has stated on the record that the new ballpark will result in $40-50 million in new revenue, of which half will go towards the on the field product.

"“That’s all new money,” said Twins President Dave St. Peter, who notes that the ballpark will generate $40 million to $50 million a year in new revenues."

"Remaining competitive is one reason the Twins will continue to target 50 to 52 percent of their revenue toward player salaries, St. Peter said."

http://www.startribune.com/local/18217239.html

If you take the $77 million the payroll can support today by Twins Geek calculations, add the %5 growth number estimated by the Twins Geek ($4 million), and add $20-25 million in new stadium revenues you come up with a estimated payroll of $101-106 million. Given this we have almost $30 million in payroll room for 2010.

Anonymous said...

Awesome work...I'll be ponying up to buy this as I pretty much check out each of the contributors blogs frequently. Looking forward to it!

TT said...

The problem with this analysis is that it ignores what salaries the Twins are likely to have coming in the future. They have a lot of young players whose salaries are going to slowly increase and hopefully some that warrant really large increases.

If you are a real GM, you are looking beyond this year's payroll. If you hit your payroll limit this year, what are you going to do to hold onto players moving into the future? Suddenly you are shedding salary every year.

"Statistically, it is a better indicator than a team's record as to how they will do."

No, it isn't. While there is certainly a correlation between salary and success, its not at all clear to what degree each is cause or effect. And it is quite clear that the past year's record is a better predictor of the next year's record than the opening day payrolls are.

John said...

I wonder how well the front office will adapt to their increased financial resources. It provides much more potential flexibility but it's only recently that the payroll has even gone above $70MM. A larger payroll impacts strategy with respect to free agency, trades, and so forth.

One thing is for sure though- there will no longer be an excuse for failing to provide the core players with an adequate supporting cast.

TT said...

"One thing is for sure though- there will no longer be an excuse for failing to provide the core players with an adequate supporting cast."

I don't think that is really true either. The more likely scenario is that the Twins hold onto some players they have let go in the past. Beyond Hunter and Santana, I think the Twins would have held onto players like Silva, Guzman, Jones, Hawkins and Guardado if they had more money to spend.

That means a player like Kubel may get a long term contract, where in the past he would have been moved or let go as a free agent. But would signing Carlos Silva have made the Twins better last year? Or Jacque Jones? I don't really think so.

The Twins will always need to spend their money wisely. And paying premium prices for established free agents is almost never a wise use of money. You usually end up paying for declining production at the tail end of a contract.

The more effective use of the money may be to tie up some of the young players earlier. But that has its risks as well. Joe Mays being an example of a guy who ended up being overpaid for several years.

In any case the idea that the Twins have $20-30 million dollars to play with in the off-season is highly exaggerated. If they sign Mauer and a veteran pitcher like Pavano, that is probably going to use up most of what is really available.

And its important to remember, they haven't made any money from the new stadium yet. They won't really have the money in hand until after next season.

John said...

"I don't think that is really true either."

You don't say anything to dispute my claim. You assume the Twins will misuse their additional funds, and while that is certainly possible, I don't count that as a legitimate excuse.

John said...

Thanks Jesse! Great story. I remembered that, but couldn't find it.

Thanks Anonymous!

TT - the 2011 and 2012 breakdowns you want are in the Offseason GM Handbook available at Twinscentric.com

TT - "And it is quite clear that the past year's record is a better predictor of the next year's record than the opening day payrolls are."

That's demonstrably and statistically false. The correlation between payroll and record is higher than between previous year's record and record.

Anonymous said...

Perhaps this isn't the right article to post this under, but before the Twins start counting their money and looking at who they can add for 2010 and beyond, the Twins need to evaluate what type of team they're going to be.

This season, we saw the transition of the team into more of a power team - lower stolen bases, more home runs, etc.

I think that largely makes sense, as the Twins are no longer going to survive as pirannas at the new stadium.

So I'd like to see the Twins front office commit to a style of play before hitting the market, as that will have an effect on who we go after.

Anonymous said...

The handbook is a great buy. Thanks for the great work.

Anonymous said...

When the taxpayers of MN go to all of the effort to build a state-of-the-art new baseball stadium for the Twins, why do the Twins continue to target the same old 50 - 52% of revenue toward player salaries?

I have never heard but I don't think the huge increase in the value of the Twins franchise because of the new stadium is ever factored into how much the Twins can increase player salaries?

Why doesn't the state of MN say to the Twins, "How abut sending us a check for the 50-52% of the increase in the value of the Twins franchise as payment for building you this beautiful new stadium?"

PS: This same discussion should be had with the State and the Vikings. If you share the increase of the value of the Vikings franchies that is the result of the new stadium, the State of MN will be more likely to build it for you?

Anonymous said...

Whoa whoa whoa, back the truck up....Nick Punto makes $4M?!?! Who signed that contract? I just got sick to my stomach...

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Amy said...

Yes, payroll is really important. Payroll management needs to be efficient and reliable. That is what I want in my cousin's small business in their payroll Las Vegas, Nevada office.

Belle said...

Doing payroll is really tough. We are so lucky now because computers exist, Unlike then, they have to manually count everything. Withdrawing is faster too. Through ATM and online payroll services, people can get their salaries at real time. That is one progress in terms of the technology of outsourcing payroll.

In my small business, up to now, I never had any problems with my payroll. Colorado can have a better tax and economic flow because of my contribution.

Good Post!

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