Thursday, October 06, 2011

Twins Payroll – Lower? Really?

Last offseason was a disappointing one for many Twins fans – but only to those that didn’t want to pay attention to the economic realities the team faced. The Twins had a $140 million team and only had about $110 million in their budget. Indeed, when we suggested that payroll would only increase about $14 million, we were savaged. It increased about $17M and ended up being a frustrating offseason for the organization, the team and their fans.

So what should it be this year? If you want to take an educated guess at the budget, start by looking at the salary level for the last decade (according to USAToday):

Year Payroll % Change
2011 $ 112,737,000 +16%
2010 $ 97,559,166 +49%
2009 $ 65,299,266 +15%
2008 $ 56,932,766 -20%
2007 $ 71,439,500 +13%
2006 $ 63,396,006 +13%
2005 $ 56,186,000 +5%
2004 $ 53,585,000 -3%
2003 $ 55,505,000 +38%
2002 $ 40,225,000 +67%
2001 $ 24,130,000 +54%
2000 $ 15,654,500

The only time that payroll has really dropped, there was a giant extenuating circumstance. Just prior to spring training in 2008, the Twins decide to trade away Johan Santana, rather than have his walk year cause a possible distraction. Santana would have made over $13M, which would have kept payroll about even. By the time they freed up that money, it couldn’t be spent on free agents, because any good free agent had already signed.

Furthermore, those 2008 salary numbers do not include an extra $8.75M that were paid in signing bonuses to Justin Morneau and Michael Cuddyer that offseason. So even that year, it isn’t clear that the Twins planned to cut payroll. It just happened, and they took a big chunk of that leftover money and invested it in future contracts.

That’s why, initially, I was projecting a payroll level of about $120 million this year. That represents just a 6% increase, which they have generally exceeded. However, they Twins may also need to be reserving some extra cash for the MLB June draft, in which they have the 2nd overall pick. Even a $7 million increase seemed like a conservative estimate.

Until LaVelle E Neal’s interview with Jim Pohlad, in which Pohlad hinted it would be less than $115 million.

I’m shocked by that revelation but more shocked by how little reaction there is to it. Really? We’re upset last year because payroll only went up 16% and this year resigned to it going down?

For the record there is no reason the Twins payroll and revenues should be lower this year than last. A major league club’s revenue consist of two sources: local and shared. There is no evidence that shared revenue is going down by evidenced by the increase in payrolls across the board in MLB. Indeed, a higher and higher percentage of clubs revenues are coming from these shared sources such as MLB Advanced Media.

Will local revenues go down? TV won’t – that’s a long term deal. So is radio. Ticket prices are remaining steady. Some season tickets likely won’t be renewed, but the Twins have a waiting list of 3000 names and don’t expect to get all the way through it, so that number is steady too.

Did the team “stretch” too much last year and need to come down? Hardly. There was some evidence that they exceeded their budget when they signed Pavano to his $8M contract, but they also saved $3M by trading away Delmon Young and Jim Thome.

The final reason I’ve heard suggested is that the Twins now need to start paying into revenue sharing instead of getting money out. Supposedly (and I have no reason to doubt these numbers too much) the Twins used to received $20 million from revenue sharing and now must pay $20 million into it.

But here’s the thing – that’s not a $40 million shift THIS year. If the Twins were getting $20 mllion, it was back when their revenues were ludicrously low. If they’re paying $20 million this year, then they certainly paid that much last year, since it’s a reflection of the team’s local revenues. If revenue sharing wasn’t a problem in 2010 and 2011, why would it be this year?

The suggestion that the Twins need to scale back is silly. The Twins have several of their own player that they need to re-sign – fixtures like Michael Cuddyer, Joe Nathan and Jason Kubel. And the free agent market, while thin at many hitting positions is thick with good ideas among the pitching names. The Twins can certainly use that money, and should.


Anonymous said...

All good points.

While I'll always be a fan and root for the Twins, I see no need to spend a single dollar toward the team if they cut payroll or continue to make no front-office changes.

Want my money? Prove you're committed to fielding a competitive team.

Ben said...

I thought teams get to deduct a certain amount of new stadium costs when revenue sharing is calculated. Maybe that's why the change wasn't immediate.

TT said...

Geek -

I'm confused. $115 million would be an increase from what they spent this year according to your figures. And the difference between 2011 and 2010 is $15 million, not $17 million.

I also don't see any suggestion that the Twins can expect an increase in revenue next year. In fact, shouldn't they expect to take an attendance hit from their poor performance this year?

I believe there has been an overall decline in revenue for major league baseball, so if the Twins have bucked that trend its perfectly possible their revenue sharing costs have gone up.

Fans are always going to be frustrated with the Twins as long as it is run as a business. For us its a game and source of entertainment.

What this really says is that its unrealistic to think the Twins are going to be able add a shortstop, starting pitcher, offense oriented catcher and bullpen help while hanging onto either Kubel or Cuddyer to play right field. They aren't the Yankees and, as always, they are going to have to fill some needs from the bargain basement.

T said...

Considering what happened this season, I think it's pretty normal to expect payroll to "drop" this season. Do you honestly think Cuddy is worth the contract he's going to get?

If the Twins can keep even at payroll while actually IMPROVING the team then yes, keep even (or increase). But as we saw this year...let's not just throw money around for the sake of appeasing people who only care about a number.

The Twins can cut payroll while still improving if they get out of bad contracts and aquire some younger talent via trade. They can also focus on one or two free agents at KEY positions.

I'd rather not see the Twins jump up in payroll if it means overpaying for another Nishioka.

Anonymous said...

The Twins were over budget this year that's why payroll won't be as high. I believe they were 10 million or so over. So, expect a 10 million drop add another 5 million back in due to inflation and payroll should come in around 105-110 million. Basic stuff. Revenue sharing was a problem in 2010 hence why payroll was a little under 100 million. Again 112 million was OVER budget. In any case this is pointless and the blogger is not understanding what's needed to fix the Twins. Re-Sign Kubel, Cuddyer and Nathan!? Why? Cuddyer getting 10.5 million was worth 3.5 WAR this year. That's not getting your moneys worth. Medicore fielding at best and average hitting for a corner outfielder. If he is awarded Type A Free Agent status you take the 1st rd pick, heck I'd take a supplmental. Kubel is worthless unless you can get him for under 4 million and a 1 year deal. Solid DH against right handed hitters but ineffective as a fielder or full-time starter. Why are these guys needed when the Twins lost 99 games? Speed, Defense and Starting pitching are needed not medicore hitting. If Nathan wants to come back at 1-2 million great, if not bullpen isn't a worry right now the above is. Target field is designed for Pitching, speed and defense. The Twins need to design a team around their park. Pitching, Infielders and the return of Mauer and Morneau at full strength is a big step in that direction.

Anonymous said...

I like your post. I don't see any reason the Twins should drop payroll but every one else seems to. -sigh-

Anonymous said...

I'd expect us to spend wisely, not so concerned about the total spend.

Shane Wahl said...

I agree with the post except for there is one issue: If they don't sign Cuddyer (3 years, 30ish million) or Kubel (3 years, 21ish million) as they should not because of the year commitment, then where are they going to be spending $30 million+? Many of the free agent replacements available are available for quite cheap. I suppose there could be a Alfonso Soriano type who could be a salary dump that the Twins could trade some low salary guys for, but it is kinda hard to imagine just where the money would go. I kinda get the sense that Pohlad might have this in mind because it just isn't clear that it will go up even if they re-filled the roster with adequate players (Abreu, Pudge, Renteria, Wigginton (trade), Hawpe, D. Lee, etc.).

Shane Wahl said...

Also, keep in mind that the Twins will be forecasting a sizeable drop in payroll in coming years with Morneau's contract being gone and prospects arriving on the cheap. So they might be willing to spend a bit on one-year guys now.

One big spend addition I would like to see is Ryan Dempster if he declines his option with the Cubs. I am not sure where they are going to find other starting strikeout pitchers this year.