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Article: Report From The Fort: Peeking Ahead At Payroll

brian dozier joe mauer logan harrison fernando rodney eduardo escobar
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#1 John Bonnes

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Posted 06 March 2018 - 10:21 PM

FT. MYERS - If you think the shopping was good this offseason, wait until you look at next offseason. A little back-of-the-napkin figuring shows that the Twins could have upwards of $30-40M to spend in the 2019 offseason, and be looking for basically one bat.

Or at least that’s one option. Let’s look at a few options and where they Twins could be by November 2018.OPTION ONE: Most hitters walk.
There has been a lot of talk about Brian Dozier hitting the free agent market next year. There have also been some questions to Joe Mauer about the end of his mega-contract. Eduardo Escobar will also be a free agent and so will closer Fernando Rodney. The Twins will likely have options on Logan Morrison and a choice on whether to offer arbitration to Robbie Grossman.

First, we’ll include anticipated raises to Byron Buxton, Miguel Sano, Jorge Polanco, Eddie Rosario and Max Kepler. Then, let everyone but Morrison test the free agent market. Finally, bring back all their starting pitchers.

The Twins would have a payroll at about $93M heading into the 2019 offseason. This year’s payroll is about $118M, and if we assume a modest increase to about $130M, they would have almost $40M to spend. Plus, they really only need to replace Mauer (who will likely be available for less than $10M on the free agent market) and Dozier (who might be replaced by top prospect Nick Gordon.)

That would leave $20-30M to fill… bullpen? Upgrade some positions? Add to the starting rotation?

OPTION TWO: Strategic decisions on the rotation.
If the Twins want to overhaul the starting rotation, it could mean even more available money. The Twins could free up as much as another $30M by declining options or not offering arbitration to three members of the rotation: Ervin Santana ($14M team option), Kyle Gibson (~$7M arbitration option) and Jake Odorizzi (~$9.5M option).

Turning all three down would drop the payroll to about $60M, leaving the team as much as $70M to spend, but it also opens more spots that the team would need to fill. It’s worth noting that the Twins do have some promising (and cheap) arms in AAA this year who could be competing for rotation spots by midyear.

LOOKING AHEAD: More in 2020
Things get even crazier in 2020. Santana, Gibson and Odorizzie will all be free agents. So will Phil Hughes, who is chewing up $13.5M of salary the next two years. So would reliever Addison Reed (8.5M/year), Jason Castro ($8M) and Morrison. That leaves a lot of gaps to fill but also a lot of money to use.

Of course, there are lots of other scenarios. If you aren’t crazy about the two I listed, feel free to play with the numbers yourself. Maybe you want to keep Dozier? Maybe you want to only give up on Gibson. You can do whatever you like: just follow this link, download the google sheet to your own spreadsheet program, and have fun.

The remarkable story of this offseason isn’t just how inexpensive some of these players have been. It’s been how short their deals are, and that becomes apparent when looking at the Twins payroll over the next few years. It also means there is some urgency in each of these next couple years. There is going to be some major turnover to this roster. For these players, the time to compete is right now.

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#2 Matthew Lenz

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Posted 07 March 2018 - 07:51 AM

Just out of curiosity, where do you get the $130-$140 numbers from?There is no salary cap, so I'm wondering why the Twins would be limited to $140 million?

 

I personally think there will be a combination of options 1 and 2.As with most others, I would love to see them lock up the young talent.To me that's a priority over signing Dozier.


#3 Seth Stohs

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Posted 07 March 2018 - 08:32 AM

 

Just out of curiosity, where do you get the $130-$140 numbers from?There is no salary cap, so I'm wondering why the Twins would be limited to $140 million?

 

I personally think there will be a combination of options 1 and 2.As with most others, I would love to see them lock up the young talent.To me that's a priority over signing Dozier.

 

The goal for most teams (and Tony Clark acknowledged last year as well) was for teams' payrolls to be 48-52% of their revenues. 

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#4 spycake

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Posted 07 March 2018 - 09:03 AM

 

A little back-of-the-napkin figuring shows that the Twins could have upwards of $30-40M to spend in the 2019 offseason, and be looking for basically one bat.

Sounds like a recipe for another $100 million offer for Harper or Machado!

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#5 bean5302

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Posted 07 March 2018 - 03:25 PM

The Twins have run under 48% opening day payroll for the past decade except one season. Revenue vs. Opening Day Payroll.

2009 - $162M vs. $66M = 41%

2010 - $213M vs. $97M = 46%

2011 - $213M vs. $113M = 53%

2012 - $214M vs. $94M = 44%

2013 - $221M vs. $76M = 34%

2014 - $223M vs. $86M = 39%

2015 - $240M vs. $109M = 45%

2016 - $249M vs. $108M = 43%

2017 - $249M vs. $108M = 43%

2018 - $249M? vs. $118M= 47%

 

Revenue from:

https://www.statista...ins-since-2006/

and

https://www.forbes.c...innesota-twins/

 

Payroll from:

http://www.stevetheu...tm#2016_payroll

 

At this point, with this owner, I think it's unreasonable to expect the Twins to approached the expected target for MLB team expenditures.

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#6 caninatl04

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Posted 07 March 2018 - 04:02 PM

2 :cool: Let's see how many of the starting pitcher prospects deserve to start in 2019 before deciding on options.

If I had to guess, I would guess that options will be declined on Gibson and Santana.

I would concur that re-signing Dozier would be nice, but shouldn't be a high priority since:

- one place where the Twins farm is particularly strong is middle infield, and

- scoring runs will not be a problem.

By the way, does anyone have a guess what starting pitcher free agents might be available in 2019?

#7 Oxtung

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Posted 07 March 2018 - 04:10 PM

 

2 :cool: Let's see how many of the starting pitcher prospects deserve to start in 2019 before deciding on options.

If I had to guess, I would guess that options will be declined on Gibson and Santana.

I would concur that re-signing Dozier would be nice, but shouldn't be a high priority since:

- one place where the Twins farm is particularly strong is middle infield, and

- scoring runs will not be a problem.

By the way, does anyone have a guess what starting pitcher free agents might be available in 2019?

You can find next seasons FA's here.

 

I'm not as confident as many seem to be that removing Dozier's bat from the lineup will have little effect on run scoring. The drop from him to Gordon will likely be significant.

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#8 tvagle

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Posted 07 March 2018 - 05:06 PM

So...we help pay for and build a new park...Pohlad's take in $51M more in revenue first year at Target Field

 

1st year of Mauer's big deal is only time 50% payroll threshold has been breached (or remotely approached) 

 

They used to get by on $96M after Player Payroll...the last few years it's been $140M

 

I thought recycling rain water and LED lights were supposed to save overhead?

 

And that's not even taking into account the $50M from Bam-BamTech sale to Mickey & Minnie

 

Anyway...Here's a link to another payroll tool

 
Make a copy of it start typing in Lance Lynn and select his name an the out-of-touch with the current market MLBTR projection will fill in 42$14M per (bet Lance would take that in a heartbeat)
 
If you want to enter your own numbers, enter the full number ($14000000 for 14M) and the totals will add up correctly

Is it 2020 yet?


#9 Thrylos

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Posted 07 March 2018 - 05:44 PM

Way too early to think about the 2019 off-season and it depends on many many things.

 

- How the Twins do in 2018 overall

- How Mauer and Morrison do (kinda need one for 1B in 2019)

- How Dozier and Gordon and Escobar and Adrianza do (need one for second base in 2019)

- I think that Santana is a goner after this season

- May, Romero, Gibson, Mejia, Gonsalves, Littell will likely fighting for 3 spots behind Berrios and Odorizzi, depending on how they did on 2018 (that's mainly for May and Gibson who could potentially be non-tender candidates.)

- As far as Grossman goes, he will have to make the team in 2018 (his contract is non-guaranteed) before start thinking about 2019, and as of now he seems behind the 8 ball...

- Transactions.If let's say the Twins are competing for the division come July, and get an arm or so, let's say Archer, all bets for 2019 are off.Same if they do not compete and trade assetts.

- The pen will be a mystery because all are in play for 2018 as well, other than Rodney, Reed and Duke... Nobody knows who will win a spot and tons of relievers have options...

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#10 Brock Beauchamp

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Posted 07 March 2018 - 07:12 PM

 

By the way, does anyone have a guess what starting pitcher free agents might be available in 2019?

It may seem weird to say now but there's a good chance the Twins won't be looking for a starting pitcher next offseason. Here are their available options, and some of them either have a good track record or are promising prospects:

 

- Santana

- Berrios

- Mejia

- Gibson (likely gone unless he really breaks out, IMO)

- Pineda (easy to forget but he's a pretty good pitcher)

- Odorizzi

- Gonsalves

- Romero

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#11 jimmer

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Posted 07 March 2018 - 07:34 PM

 

It may seem weird to say now but there's a good chance the Twins won't be looking for a starting pitcher next offseason. Here are their available options, and some of them either have a good track record or are promising prospects:

 

- Santana

- Berrios

- Mejia

- Gibson (likely gone unless he really breaks out, IMO)

- Pineda (easy to forget but he's a pretty good pitcher)

- Odorizzi

- Gonsalves

- Romero

Bite your tongue (though you are almost assuredly right)

 

P.S.You forgot May,

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#12 Brock Beauchamp

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Posted 08 March 2018 - 05:31 AM

 

Bite your tongue (though you are almost assuredly right)

 

P.S.You forgot May,

Damn it, I knew there was someone else injured who I missed but couldn't think of who it was.


#13 Platoon

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Posted 08 March 2018 - 06:53 AM

The Twins have run under 48% opening day payroll for the past decade except one season. Revenue vs. Opening Day Payroll.
2009 - $162M vs. $66M = 41%
2010 - $213M vs. $97M = 46%
2011 - $213M vs. $113M = 53%
2012 - $214M vs. $94M = 44%
2013 - $221M vs. $76M = 34%
2014 - $223M vs. $86M = 39%
2015 - $240M vs. $109M = 45%
2016 - $249M vs. $108M = 43%
2017 - $249M vs. $108M = 43%
2018 - $249M? vs. $118M = 47%

Revenue from:
https://www.statista...ins-since-2006/
and
https://www.forbes.c...innesota-twins/

Payroll from:
http://www.stevetheu...tm#2016_payroll

At this point, with this owner, I think it's unreasonable to expect the Twins to approached the expected target for MLB team expenditures.

Assuming your numbers are correct. :). I never expect the Twins to be able to compete with NY, LA, Cubs, etc year to year on big contracts. Nor spend uselessly in a down cycle, aka tanking. That said, I still have always thought the Pohlads were particularly tight fisted when it came to financially backing the purchase of a FA who could be a season changer. That's been my constant complaint about ownership. But these percentages are consistently low over that cycle. I can live with some 43% some years, but you better be banking that money for the 55% years when you want to make a run at it!

Edited by Platoon, 08 March 2018 - 06:54 AM.

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#14 Riverbrian

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Posted 08 March 2018 - 07:10 AM

 

The Twins have run under 48% opening day payroll for the past decade except one season. Revenue vs. Opening Day Payroll.

2009 - $162M vs. $66M = 41%

2010 - $213M vs. $97M = 46%

2011 - $213M vs. $113M = 53%

2012 - $214M vs. $94M = 44%

2013 - $221M vs. $76M = 34%

2014 - $223M vs. $86M = 39%

2015 - $240M vs. $109M = 45%

2016 - $249M vs. $108M = 43%

2017 - $249M vs. $108M = 43%

2018 - $249M? vs. $118M= 47%

 

Revenue from:

https://www.statista...ins-since-2006/

and

https://www.forbes.c...innesota-twins/

 

Payroll from:

http://www.stevetheu...tm#2016_payroll

 

At this point, with this owner, I think it's unreasonable to expect the Twins to approached the expected target for MLB team expenditures.

 

Assuming these numbers are correct and I have no reason to doubt them. The Twins have under spent by over 100 million.

 

I imagine they will not make up the difference in future years by going over 52%.  

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#15 Old Twins Cap

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Posted 08 March 2018 - 07:42 AM

So, if player salaries need to run about 48-52%, does anyone know what expenses eat up the remaining @50% on an MLB team?

 

In restaurants, accountants break things down roughly:food costs @30%, labor @35%, facility/utilities @10%, F.F.E. @5%, overhead/inventory @5%, marketing @5%, profit @10%. In a good year.

 

MLB teams have a ton of people, MiLB players, scouts/coaches/admin, equipment, marketing, travel, facilities, and on and on. And the owner will want to make money, millions likely, every year.

 

Though, the main way to make money in sports franchising is to buy the team low, i.e. @$250M, and sell it high, i.e. @$400M.

 

Be interesting to see their target percentages across the board.


#16 spycake

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Posted 08 March 2018 - 08:03 AM

They could be including player benefits as part of payroll -- I know they are used for calculating luxury tax. Cot's estimates them at $14 mil per team for 2018, on top of $118 mil player salaries.
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#17 bean5302

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Posted 08 March 2018 - 01:23 PM

Other costs include operating facilities, front office employees, scouting, minor league teams, marketing, draft bonuses, and a huge host of other operational expenses. Pohlad indicated he said from a cash flow perspective, the Twins would be lucky to break even in 2017.

 

Forbes reported they think Operating Income (essentially positive cash flow) was $30M last year. That said, profitability from the franchises has a lot more to do with franchise value as businesses NEVER report profits and losses based solely on cash flow. P&L is based on growth of value combined with cash flow. For the Twins, Forbes estimated a $115M increase in value and a $30M operating income for a total profit of $145M for 2017.

 

In regard to the Twins' potential revenue, a better product on the field makes an immense impact on revnue. The Royals had a revenue of $161M in 2012. Then, as the team began to perform, revenue grew, and after their World Series appearance in 2014 it skyrocketed from $178M to $231M in 2015, then to $273M in 2016. Yes, the ROYALS had significantly higher revenues than the Twins. What did the Royals do with that revenue? They reinvested it to grow the fan base and revenue pool. The Twins have not been willing to do that, instead being more focused on ensuring cash flow stability and positive operating income.




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