Thursday, October 14, 2010

Understanding the Payroll



Before diving head first into the off-season and all of us playing GM, it's important that we take a look at what the Twins payroll is likely to be for the second season in Target Field. The Twins finished 2010 with a payroll that was either very close to or exceeded $100MM. Their beautiful new ballpark, Target Field, drew over 3 million people this year. These clearly aren't the Twins of the early part of the millennium. A very good team to use that is a great example is the Cleveland Indians in the mid-90's, particularly between 1993 and 1995, as brand new Jacobs Field opened in 1994. Here is how the Indians payroll jumped up as they developed an elite contender, and a look at what their attendance did during the same time period. Due to the strike-shortening 1994 season and then the late-starting 95 season, it's much easier to look at attendance numbers on a per-game basis.

1993 Indians payroll: $17MM 26th in the league, 26,888 fans per game, 76-86
1994 Indians payroll: $31MM, 16th in the league, 35,313 fans per game, 66-47 (Strike)
1995 Indians payroll: $40MM, 7th in the league, 39,483 fans per game, 100-44 (Strike)
1996 Indians payroll: $47MM, 4th in the league, 41,220 fans per game, 99-62
1997 Indians payroll: $58MM, 3rd in the league, 42,295 fans per game, 86-75

In each of those five years, the Indians ranked 18th, 8th, 3rd, 3rd and 4th in MLB in attendance. The reason Cleveland is a good model (certainly not perfect, but the most similar you'll find) to follow is because they were a small to mid-market team that had consistently been in the lower half in payroll much like our Twins about a decade ago. Basically, this example would seem to suggest that those who think 2010 was a one-time deal as far as a $100MM payroll is concerned are off the mark. The Twins likely will increase payroll over the next few years, and 2010 is likely to be just the stepping stone. The tricky part, of course, is guessing how much that number will actually increase.

If we go back to the Indians, their payroll increased by the following percentages each year: 45%, 23%, 15% and 19%. The 45% is a bit mis-leading, because Cleveland had several young talented players due arbitration raises. I really don't think the Twins will be making a 45% payroll increase between now and opening day 2011. It's beyond unlikely, as the Twins will not have a $145MM payroll this coming season. However, even if we are very very conservative with our predictions, a 10% increase each year for the next four years is certainly not that hard to fathom. If we assume the Twins payroll was indeed $100MM as has been predicted they spent, a 10% increase over the next four years would put the Twins payroll numbers in this general direction:

2011: $110MM
2012: $121MM
2013: ~$133MM
2014: ~$147MM

Well look at that. On what I would consider a very conservative increase, the Twins seem likely to reach that $145MM plateau in the near future, assuming the world doesn't end in 2012. However, with nobody other than the Twins front-office people looking ahead four years, the only relevant information for this off-season is the 2011 payroll and on a much smaller scale the 2012 payroll as well.

So we've pinpointed the Twins likely lowest possible payroll. Now let's look at the salary obligations for next year, compliments of Cot's Baseball Contracts.

C: Joe Mauer $23MM, Jose Morales $400K, Drew Butera $400K = $23.8MM
IF: Justin Morneau $14MM, JJ Hardy $7MM, Brendan Harris $1.75MM, Alexi Casilla $500K, Danny Valencia $400K, Matt Tolbert $400K = 24MM
OF: Michael Cuddyer $10.5MM, Jason Kubel $5.25MM, Delmon Young $4MM, Denard Span $1MM = $20.75MM
SP: Scott Baker $5MM, Francisco Liriano $4.5MM, Nick Blackburn $3MM, Kevin Slowey $2.5MM, Brian Duensing $500K = $15.5MM
MR/CL: Joe Nathan $11.25MM, Matt Capps $5MM, Jose Mijares $400K, Alex Burnett $400K = $17MM
Other Obligations: $500K Buyout for Nick Punto = $500K

I've assumed the Twins simply let go of Pat Neshek and Glen Perkins, as that would shed about $1MM in salary they don't need to pay if they don't want to.

These numbers put the Twins current 2011 obligations at about $101.6MM. If the Twins have a conservative approach, that would leave them with just under $9MM to spend. I expect about a 20% increase though this year, at least, so I'm going to put the Twins maximum payroll at $123MM, but contending teams like the Twins almost always try to leave some room in their payroll in-case they have the chance to add an impact player during the year. I'd put the Twins expected opening day payroll at about $117MM, give or take a few million. That gives us about $15MM to spend.

First, what are positions of need? If the season started tomorrow, the current unfilled roster would have this lineup:
C: Joe Mauer
1B: Justin Morneau
2B: Alexi Casilla
3B: Danny Valencia
SS: JJ Hardy
LF: Delmon Young
CF: Denard Span
RF: Michael Cuddyer
DH: Jason Kubel

Second Base, like it is every year, is a major need yet again with Orlando Hudson having a sub-par year and becoming a free agent. A utility man would be nice, as Tolbert isn't a major league caliber player and despite making almost $2MM next year, Harris has a long ways to go to be back with the Twins. The Twins also need to find an impact bench bat that rips lefties. Someone like Marcus Thames, who can hit for Kubel in late-game situations against lefties and also get most starts at DH when a left-hander starts the game. The team will likely look to add one or two relievers as well, and I'm sure they'll look to bring Thome back.

However, despite the team likely to lose Carl Pavano, who had a great year, the team really doesn't need a starter. They have five solid under-30 starters that given another full year should be just fine. They also have Anthony Swarzak in AAA for depth purposes, and top prospect Kyle Gibson could be ready as soon as Opening Day to jump into the rotation, so the team has both talent and depth for the first time in quite a while. No reason to spend money on the rotation as it's better allocated to other parts of the team.

So who would I target to fill these needs? Who are the Twins likely to target? We'll get to all of these needs and questions over the next week or two, so keep checking back. First will be what I believe to be the team's biggest need yet again; a starting second baseman.