Non-Guaranteed Contracts: Dollars And Sense
Arbitration contracts are not fully guaranteed.
In other words, if Derek Falvey and Thad Levine were to release any of the five arbitration players before the 16th day of spring training, they would only need to pay the player approximately 1/6th of their arbitration agreement. If they are released between the 16th day and the end of spring training, they are guaranteed approximately ¼ of their arbitration number.
Players on arbitration contracts who are cut on or before the 16th day of Spring Training are owed 30 days' termination pay (based on the prorated version of his agreed-upon arbitration salary). A player cut between the 16th day and the end of Spring Training is owed 45 days' termination pay (based on the prorated version of his agreed-upon arbitration salary). The arbitration salary becomes guaranteed if the player is on the 25-man roster when the season begins.
Let’s take a quick look at what that means for the five Twins players.
HECTOR SANTIAGO - When the Twins traded Ricky Nolasco to the Angels last August 1st, they sent $4 million with him. The term ‘salary neutral’ was introduced. Nolasco is owed $12 million in 2017. It was likely known that Santiago was going to get about $8 million in arbitration, so the $4 million made the costs neutral (not factoring in Alex Meyer and Alan Busenitz, the other players involved in the deal).
The Twins aren’t going to release Santiago within the first 16 days. In fact, he’ll be pitching for Puerto Rico in the WBC. It’s actually assumed and very probable that he will be on the 25-man roster. However, it is worth at least noting that if he were released before Opening Day, the Twins would only owe him $2 million, which would give them $6 million to play with later in the season.
Santiago will be in the starting rotation to start the season. A trade is much, much more likely than a release.
BRANDON KINTZLER - The right-hander currently sits atop the list as most likely to be the Twins closer. He was reliable in 2016 and should be reliable in 2017 whether it is in the 7th, 8th or 9th inning. Like Santiago, it’s much more likely that Kintzler would be traded than released. If released he would only be paid $731,250 (25% of his $2.925 million arbitration agreement, saving about $2.2 million).
KYLE GIBSON - The right-hander, like Santiago, will be in the Twins starting rotation to start the season. One year removed from being the Twins pitcher of the year, Gibson is looking to stay healthy and take a step or two forward in 2017. If released, he would still cost $725,000 (25% of his $2.9 million arbitration agreement, saving just under $2.2 million).
EDUARDO ESCOBAR - Escobar finds himself in an interesting position this spring. A year ago, he was finally handed the Twins starting shortstop job. Injury and struggles in 2016 meant that at this time, he’s most likely going into the season as a utility man again, a role he has thrived in. However, with question marks surrounding Jorge Polanco’s defense, Escobar could be valuable as he could move back into the starting role again. However Ehire Adrianza being in the picture complicates that as well. There is a scenario in which the Twins have to pick between Escobar and Adrianza for one spot. In that case, Adrianza (who had agreed to a $600,000 arbitration number with the Giants earlier in the offseason) and his defensive prowess might make more sense. Escobar agreed to a $2.6 million arbitration number. If he is released, the team would save just under $2 million.
RYAN PRESSLY - The former Rule 5 pick agreed to a $1.175 million arbitration deal. While he hasn’t been able to put together a full season yet in the big leagues, he has certainly shown the stuff and velocity to become a terrific set up man. $1.175 million is peanuts in baseball terms. If released before Opening Day, he would still get $293,750, so the Twins would be saving about $900,000.
As I noted, the most likely scenario is that all five of these guys will be on the Opening Day roster. But the finances have to make sense too. The front office will need to evaluate if the dollars make sense for each of these, relative to the other options at the start of the season.
Do you think that this information will, or even should, factor into Opening Day decisions this year?