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The Impact of Arbitration


Greg Logan

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blog-0696087001414779586.jpg“Each year, the Twins have a group of players who are under team control but have accumulated enough major-league service time to be arbitration eligible. This means that the player and his agent have a say in the matter of compensation. Both the club and player submit figures that they believe will be fair, and then the two sides typically reach a compromise in the middle. In extremely rare cases where an agreement can’t be reached, an arbitrator hears the case and selects the figure offered by either the player or the team. [Arbitration eligibility] means that the player and his agent have a say in the matter of compensation. Both the club and player submit figures that they believe will be fair, and then the two sides typically reach a compromise in the middle. In extremely rare cases where an agreement can’t be reached, an arbitrator hears the case and selects the figure offered by either the player or the team.” - Nick Nelson, Twins Daily 2015 Offseason Handbook

 

This brief explanation from Nick Nelson’s arbitration segment in the Offseason Handbook paints a good picture of one of the first stages of the offseason for the Twins, and one that could have a bigger impact on the rest of the Twins’ decisions than most fans realize.

 

Step 1: Committed Payroll

 

To set the stage on how arbitration figures and non-tender decisions might impact the payroll and offseason moves, let’s look at a a very conservative (and very unlikely) projection of a 2015 roster, based solely around current team control:

 

C – Suzuki - $6M

1B – Mauer - $23M

2B – Dozier - $0.5M

SS – Escobar - $0.5M

3B – Plouffe - Arb

LF – Schafer - Arb

CF – Santana - $0.5M

RF – Arcia – $0.5M

DH – Vargas - $0.5M

 

B – Pinto - $0.5M

B – Hicks - $0.5M

B – Nunez - Arb

B – Parmelee/TBD - $0.5M

 

SP – Hughes - $8M

SP – Nolasco - $12M

SP – Gibson - $0.5M

SP – Milone - Arb

SP – May - $0.5M

 

CL – Perkins - $4.7M

SU – Fien - Arb

LHP – Duensing - Arb

RHP – Thielbar - $0.5M

RHP – Tonkin/Pressly - $0.5M

RHP – Swarzak - Arb

RHP – Pelfrey - $5.5M

 

There's a lot of room for variation here, but the point of this exercise isn’t necessarily to predict the 25-man roster. In this example, the fixed portion of the payroll (before factoring in arbitration-eligible players) shakes out to roughly $65M, with Plouffe, Schafer, Nunez, Milone, Fien, Duensing and Swarzak rounding out the 25-man roster as arbitration eligible players.

 

Step 2: Arbitration Projections

 

Projecting arbitration figures is tough work, and everyone has their own ways of doing it. I’ll illustrate this by comparing the Offseason Handbook’s projections (trying to keep the player-specific arbitration figures a mystery for the authors’ sake) to those of the folks at MLB Trade Rumors. For the Twins Daily staff, the total for the arbitration-eligible players came out to $17.3M, or a total of $82.5M in payroll in the example above. By comparison, MLB Trade Rumors projects these players at a total of only $14.8M, for a total payroll of $80M.

 

Two things should jump out to you:

  1. How close both are to the roughly $85M the Twins spent last year, a figure that Terry Ryan has been quoted as saying he “does not see… going down significantly.” If you take Mr. Ryan at his word, Twins fans shouldn’t expect a big investment on a left fielder or a starting pitcher in the unlikely case that all arbitration-eligible players are retained.
  2. The difference of $2.5M between the two, which displays how much uncertainty is associated with these figures. This $2.5M range could impact the free agent tier the team is able to land if/when they do test the market this offseason. For example, the difference between a $7.5M/year pitcher and a $10M/year pitcher could be significant.

Step 3: Non-tender Decisions

 

As mentioned above, it’s highly unlikely the Twins will retain all seven arbitration-eligible players this offseason. Plouffe, Fien and likely Schafer will get their raises, but the remaining non-tender candidates are at risk due to either younger, cheaper alternatives (Duensing, Swarzak and Milone) or a simple lack of production/upside (Nunez).

 

An aggressive approach to the non-tender process, perhaps involving the latter four, could yield an extra $8-9M in extra payroll flexibility (depending on the projection) that could be applied to free agent offers. In this scenario the Twins would land at between a $73.3M (TD) and $73.1M (MLBTR) in payroll, leaving them with roughly $12M to spend before hitting the $85M mark.

 

Step 4: The Impact

 

Putting all of this into context, $12M is decidedly not a lot of money for a team hoping to fill holes in both left field and the rotation. Every little bit counts, however, especially with the competitive disadvantage the Twins struggles give them in signing free agents. An extra $2-3 million from non-tendering a Brian Duensing or a Tommy Milone could push the Twins above a more competitive team for a free agent.

 

What’s your take? Is Duensing worth the money with no proven alternatives to fill the lefty roll in the bullpen? Is Milone due for a bounceback (hint: outfield defense)? Can Schafer maintain enough productivity to warrant ~$1.5M as a fourth outfielder?

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If the Twins are seriously going to pursue a free agent (or two), then the players in question are not worth the monies, if the Twins are holding fast to their payroll figure of, say, $85.

 

If the Twins are NOT going to pursue any free agent above and beyond a mid or low level name, then go ahead and negotiate arbitration on ALL the players. Swarzak and Duensing should be trade chips (and if you had even an inkling of not keeping them, they should've both been traded for something, anything, last July). Nunez (and even Schafer) are replacable players, but both were adequate producers last season and the only reason to keep them would be that they fulfill the backup positions you need and the bench that you could use. I would rather have them, at the moment, than say Beresford and Reynaldo Rodriguez on the bench. 

 

Milone is an interesting case. He's a lefty. Would you keep him, say, over the more expensive Duensing to fil the same role in the bullpen, a long relief guy who could also step in and start (wait, Duensing became a short guy last year...what!!!!!). 

 

So, it all boils down to numbers. Pretty much ALL the Twins arbitration guys (maybe not Fien or even Plouffe) if thrown into the free agent market would make more than they can in arbitration.

 

Which is the pain of the system. Of course, arbitration rewards you for what you have done, in the past few years, for the team you play for. SO that evens out. But unless you truly want to stay with the team and take, perhaps less monies, you say bye-bye and face the real world that may give you an equally low paycheck next year and another release after the following season.

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