Front Page: 3 Creative Ways for Twins to Leverage Their Spending Flexibility

[Nick Nelson]

The Twins find themselves with a lot of freed up money to burn this offseason. What we've learned about this front office is that they don't mind spending, but strongly prefer to avoid long-term commitments and backloaded contracts. Which... can make it kinda hard to spend on premium talent.

 

Thinking beyond your typical high-profile free agent contract, however, there are a number of interesting possibilities.In his Payroll Analysis feature for the Offseason Handbook, John Bonnes surmises that the Twins could plausibly push payroll to around $140 million this winter, giving them up to $70 million in spending flexibility. That total would push them past their 2018 and 2017 payrolls, but only modestly so. It's a reasonable target for a team that's in championship contention and experiencing a wave of renewed fan investment.

 

In three shorts years since taking over as general manager under Derek Falvey, Thad Levine has already made some of the boldest free agent splashes in Twins history. The contracts given to Jason Castro, Addison Reed, Lance Lynn, Nelson Cruz and Marwin Gonzalez may not be lofty signings relative to the rest of the league, but judged against the standard set by Terry Ryan, they were tremendously aggressive signings.

 

With the exception of Castro, however, none of these pacts were for more than two years. The Twins reportedly backed out of the Yu Darvish derby two winters ago because of his contract length demands. Minnesota epitomizes baseball's general aversion to bulky free agent deals, and to committing enormous guaranteed sums to players in their 30s.

 

You know what? It's undeniably smart, especially for a team with finite payroll constraints. Ongoing flexibility is a worthy aspiration and directive for this front office. Let's explore some ways the Twins could maximize their present cash surplus while staying true to their strategically prudent ways.

 

Frontload a Free Agent Contract

 

Are the Twins going to sign Gerrit Cole to a deal pays him $40 million as a 34-year-old in 2025? Probably not. In fact, they're likely aiming to avoid any huge financial obligations down the line. But let me throw a theoretical scenario at you.

 

Say Minnesota is targeting Madison Bumgarner. (You can insert the name of another high-end free agent starter as you please.) He has a five-year, $100 million offer in hand from another team, with salaries evenly dispersed across the length of the contract, maybe even backloaded. Pretty standard framework.

 

Okay, Twins might not want to go there. But what if they proposed this contract: five years and $96 million, with $30 million salaries in each of the first two seasons, followed by an opt-out clause, and then $12 million salaries in each of the final three seasons. This gives Bumgarner the ability to make an extra $20+ million over the next two years, then hit free agency again at age 32 for another big payday. Meanwhile, if things fall apart on him, he still has three years of solid paychecks guaranteed. Basically it gives him the ability to bet on himself while maintaining security.

 

From Minnesota's perspective, the extra money up-front doesn't matter much, and they ensure they won't be saddled with a major payroll drain just as guys like Jose Berrios, Miguel Sano, Byron Buxton and Taylor Rogers are getting expensive or reaching free agency.

 

You can tinker around with the specific terms and numbers, but in general I think the heavily front-loaded opt-out contract is a model that could help the Twins compete for prime talent in free agency while remaining nimble.

 

Trade for a Hefty Salary

 

Teams that are willing to take on a burdensome contract often give up less in prospect capital to acquire a player. As it happens, there are several teams looking to shed payroll this winter, even – if rumblings are to be believed – heavy hitters like the Red Sox and Cubs.

 

With considerable short-term flexibility, might the Twins be able to land a player like David Price ($32M/yr owed through 2023) or Kris Bryant (due around $40 million his final two years of arbitration, pending his service time grievance) for a relatively light return?

 

Frontload Internal Contract Extensions

 

This might not be as exciting as flashy outside pickups, but team-friendly extensions for core players – like the ones inked with Jorge Polanco and Max Kepler in the spring – are critical to the franchise's long-term health, enabling the front office to making impactful additions year after year.

 

In the cases of both Polanco and Kepler, the Twins gave large immediate raises in exchange for reasonable rates and team options during the latter portions (which also happen to encompass the players' primes). It'd be great to see the front office take a similar approach this offseason, maybe even bringing it a step further.

 

Earlier this week, Cody Christie looked at five extension candidates, and of course Berrios was at the top of the list. The 25-year-old is projected to make somewhere around $5 million in his first turn at arbitration this offseason, but what if the Twins bumped that up to – say – $9 million, with an ensuant raise the following year? What kind of discount might that score for his first few years of free agency?

 

The bottom line is that Minnesota has a ton of spending flexibility right now, but it's a fleeting reality if the Twins hope to keep their core intact. They have at least seven key players in the arbitration process now, which puts those fixtures on a rapidly rising pay scale.

 

Moves like the ones above will serve the team's short-term and long-term goals, aggressively pursuing a winning window while maintaining the freedom to keep the band together.

 

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[IndianaTwin]

Also, don't forget the time value of money on your first example. I did a simplified version of an investment calculation, and at a 7 percent return, 30-30-12-12-12 virtually matches 20-20-20-20-20.

 

(I'm assuming Mad Bum can invest all of it and use the proceeds from prior contracts for groceries and new motorcycle gloves.)

 

[ChrisKnutson]

While a healthy Price would be a significant improvment in comparison to Perez, $32M for 3 years is just way too expensive. Besides, the FO also has other areas of need to address (the rest of the rotation, 1B, and the bullpen). 

 

I'd much rather have E-Rod, even if we have to give up a couple of a top prospects to get him (I'm guessing Duran/Larnach).

[Brandon]

I like it. Kind of like when the Twins signed Morneau to his front loaded extension way back in the day.

[tarheeltwinsfan]

Intriguing concept. It makes sense for the Twins in several ways. 1) Win now; 2) Don't break the future bank by huge back end deals (hmmm, makes me think of our Congress...but then Congress can print money); 3) gives immediate rewards to the players plus security as they age plus an opt out (of course the team would want the opt out be unilateral with the team having the opt out... like Cruz's contract)..but the player will want the opt out control. Tell me more about the opt out options.

[HrbieFan]

Love the idea of a 30-30-12-12-12 for Bum or Wheeler. Supposedly Atlanta is going hard after Madbum. Twins can't strike out on a SP this year.

[Cory Engelhardt]

1) I would be all about Price, especially if Boston covered even some of the salary. Playoff experience, previous working history with Rocco and Josh Kalk. Could be a great role model. If the shoulder holds out, this could be a great way to add talent for relatively low cost in terms of prospects going back!

2) Wheeler or Bumgarner or Ryu (whoever they like the best) getting one in the fold would also significantly add to our team. As many playoff-level starters as possible should be in our rotation.

3) Buxton, Berrios, May, Rogers all should be approached for good extensions. No doubt!

Love the article!

[John Bonnes]

I really like opt-out contract idea. That's very interesting. 

[Rosterman]

Front-loads would be wonderful. Ultimately, a player is looking at the total package when signing a longterm contract, and the new "wow" factor is to be able to opt-out or renegotiate. Haven't seen many of the front-loaded thingies out there. Have seen players walking away from some awesome guaranteed money, or turning their opt out into a further higher priced extension.

 

I like what the Astros did when they had payroll flexibilty. Part with prospects and pick up major contracts (Verlander, Grienke examples). Then you also have the option of adding onto the contract with a smaller number of years. But if absorbing another teams siging of $30, you hope that the player is still productive.

 

Right now, the Kepler and Polanco sigings look like genius, as did the Span signing of years ago. But we also remember such great signings as Joe Mays and Nick Blackburn. Ever since agents have entered the marketplace, baseball salary negotiations have taken on the look of divorce lawyers. Geta s much as you can, who cares about team loyalty, rebuilding, keeping the gang together. Let's just move onto someone else, go to the burbs and a bigger house, there is always someone out there willing to give me what I want, until there isn't. 

 

Our front office has a plan. They have had some flukes. In reality I don't think they say 2019 being like it was, but still surprised they didn't do a better job of weighing prospects to part with going all in. And, as we saw, you just never know. They gave some solid names to the Giants, only time will tell. I would sure like to see notes published 3-4 years from now showing front ofice evaluations of the Twins farm system. Like how us in Twins Daily territory can always go back and look at the pecking order from years ago and wonder where we went wrong in the evaluations, or right.

 

Be interesting to see the long-term contracts handed out this year. And next year got the player union negotiations happening. If anything, baseball is showing that you don't have to overspend to be competitive (Twins, A's, Rays). But putting together a team is the core, and spending when necessary for a few key parts is a must, although you never know how those parts will play out over a season.

[birddog]

Great article, Nick. I love the concept here. It could make the Twins competitive in signing high end free agents. At the trade deadline I would have loved Bumgarner, but now in the off season my sights are set higher for top-of-the-line pitching. I love every move the front office has made so far and hope they continue the aggressive approach.

[Elliot]

Boston is a great cautionary tale. Price and Sale were the perfect examples of spend big on starting pitching both in terms of $ and prospects. I think they then felt compelled to resign Sale to a large extension, but I may be wrong. Neither was a complete bust. However; their huge contracts, along with the FA deal for JD Martinez will now probably cost them Mookie Betts unless they can essentially pay someone to take Price or Sale off their books.

I totally endorse the shorter term front loaded approach that provides some control over payroll and gives you a few years of the prime of a player without the tail end of grossly overpaying.

Just a slight detour, but the Twins employed a similar approach with both Torrey Hunter and Johan Santana. We tend to forget that both had signed and completed large contracts (I think 4 yr $40M) prior to leaving in FA. We got the best of their careers without the long term baggage.

[JimmyD]

When you factor in the time value of money I agree 30, 30, 12, 12, 12 is about the same as 20 * 5.  However, you might as well look at it as 2 years at 30 with the potential downside of another 12, 12, 12 for a bad pitcher.  If he does not elect free agency after 2 years his value will have declined substantially.  That would be the only reason why he would not elect free agency again after 2 years.  You might as well look at your contract idea as a 2 year premium contract if he performs well and a 5 year bad contract if he doesn't.  That is not a good way to do business.

[Nick Nelson]

 

When you factor in the time value of money I agree 30, 30, 12, 12, 12 is about the same as 20 * 5.  However, you might as well look at it as 2 years at 30 with the potential downside of another 12, 12, 12 for a bad pitcher.  If he does not elect free agency after 2 years his value will have declined substantially.  That would be the only reason why he would not elect free agency again after 2 years.  You might as well look at your contract idea as a 2 year premium contract if he performs well and a 5 year bad contract if he doesn't.  That is not a good way to do business.

Yes, this is the downside you have to deal with in order to play in FA at this level. If you could sign Bumgarner to a 2-year, $60M contract I'm sure teams would be lining up to do it. But adding that security blanket is what makes it work. 

 

At $12M/yr, you could comfortably afford to do something like move him to the bullpen, or deal with him being just an okay mid-rotation SP. I have to think the odds that he's completely useless by age 32 are very low. (But high enough that he'd value that security; this is a guy who nearly had his career derailed by a freak dirtbike incident.)

[Twins33]

I’m fine with all of these scenarios. Falvey/Levine have said they prefer to not give opt outs though. I think they refused to give one to Darvish.

[USAFChief]

 

Boston is a great cautionary tale. Price and Sale were the perfect examples of spend big on starting pitching both in terms of $ and prospects. I think they then felt compelled to resign Sale to a large extension, but I may be wrong. Neither was a complete bust. However; their huge contracts, along with the FA deal for JD Martinez will now probably cost them Mookie Betts unless they can essentially pay someone to take Price or Sale off their books.
I totally endorse the shorter term front loaded approach that provides some control over payroll and gives you a few years of the prime of a player without the tail end of grossly overpaying.
Just a slight detour, but the Twins employed a similar approach with both Torrey Hunter and Johan Santana. We tend to forget that both had signed and completed large contracts (I think 4 yr $40M) prior to leaving in FA. We got the best of their careers without the long term baggage.

Perhaps that World Series Trophy takes a bit of the sting away.

[Otto von Ballpark]

 

Just a slight detour, but the Twins employed a similar approach with both Torrey Hunter and Johan Santana. We tend to forget that both had signed and completed large contracts (I think 4 yr $40M) prior to leaving in FA. We got the best of their careers without the long term baggage.

Those were arb buyout extensions, so I don't think the "approach" is really similar to what Nick is proposing for FA contracts.

 

(And FWIW, Torii's 5 years in LA were more better by bWAR than his best 5 years in Minnesota.)

[BrianTrottier]

 

Boston is a great cautionary tale. Price and Sale were the perfect examples of spend big on starting pitching both in terms of $ and prospects. I think they then felt compelled to resign Sale to a large extension, but I may be wrong. Neither was a complete bust. However; their huge contracts, along with the FA deal for JD Martinez will now probably cost them Mookie Betts unless they can essentially pay someone to take Price or Sale off their books.
I totally endorse the shorter term front loaded approach that provides some control over payroll and gives you a few years of the prime of a player without the tail end of grossly overpaying.
Just a slight detour, but the Twins employed a similar approach with both Torrey Hunter and Johan Santana. We tend to forget that both had signed and completed large contracts (I think 4 yr $40M) prior to leaving in FA. We got the best of their careers without the long term baggage.

 

A cautionary tale, maybe--they are in a tough spot with some of their talent. But in addition to being a cautionary tale, they're also the 2018 WS champions.

[bird]

The David Price scenario (assuming some acceptable level of expected performance) is exactly the kind of opportunistic trade initiative I want this FO to pursue. I want them circling when there's blood in the water and dancing on graves. I want them to sniff out desperation and urgency, to take advantage of greater leverage over the situation.

 

This is not a criticism of Boston, but an observation:

 

Word has it that, given JD's decision to keep them on the hook for his $62M, Boston has the need to create some space to avoid penalties and might have to peddle Betts. They rank dead last in terms of pipeline talent, and we're talking, by FanGraph's measures, 25% worse than KCR at #26! By other measures, they may not even be a top 10 team these days when it comes to MLB talent, although that's probably a bad measurement.

 

A deal with the Twins in exchange for Price might give them a chance to "buy" prospect talent by absorbing a larger part of the $96M contract liability over the next three years, thereby killing a couple of birds (a phrase which saddens me of course) with one trade decision.

 

We've seen many hints that Falvey thinks opportunistically, likes finding players who lack leverage. I'm hoping he gets better at finding TEAMS who fit that bill, like Houston seems to do.

[Mike Sixel]

I'd rather opportunistically get Betts.......I'm not sure Price's elbow is going to last. If the Twins think it will, go for it. But I'd be worried about that elbow....but in general, yes, opportunities like this should be taken when the team thinks it is a good idea.

[gman]

I wouldn't take David Price. He hasn't been better than a number 3/4 in about 4 years.

 

I agree with the idea of taking high cost players from non contending teams, though.

[tarheeltwinsfan]

 

I really like opt-out contract idea. That's very interesting. 

Please tell me more about who can opt out...the player or the team? Who has the option to walk away from the contract? Is it unilateral with just one party?

[Twins33]

Please tell me more about who can opt out...the player or the team? Who has the option to walk away from the contract? Is it unilateral with just one party?

The player is the one who can opt out. Never the team.

[DocBauer]

I like the big buyout for a quality player from a team that needs to shed salary, gain prospects, etc. I just don't know that Price has enough left in the tank to be worth anything close to what he is due.

 

Great minds think alike, lol, as I suggested a front loaded contract on another thread. I am also very much on favor of front loaded extensions.

 

These are all great ideas as a way to maintain flexibility for the next few years. Something tells me they are smart enough to do these things.

[tarheeltwinsfan]

 

The player is the one who can opt out. Never the team.

What term would have been used if the Twins had chosen not to pay Cruz's option for 2020? I'm not arguing a point, I'm just trying to gets the term for when the team elects to sever a contract by not renewing the contract, or buys it out? Apparently, it would be incorrect for me to say that the team "opted out " of the contract in that scenario. 

[tvagle]

 

What term would have been used if the Twins had chosen not to pay Cruz's option for 2020? I'm not arguing a point, I'm just trying to gets the term for when the team elects to sever a contract by not renewing the contract, or buys it out? Apparently, it would be incorrect for me to say that the team "opted out " of the contract in that scenario. 

 

Player-Option - Player chooses to pick up the option in the contract or become a Free Agent (Opts-Out)

 

Club Option - Team chooses to exercise the option in the contract to keep the player or declines the option and the player is a Free Agent...typically there is a buyout amount that the club pays to end the contract

 

Mutual Option - Either Player or Team can pick-up or decline the option in the contract 

 

Fan Option - No such thing...but it's fun to wish and hope for some to stay and others to go

Edited November 9, 2019 by tvagle

[mikelink45]

The thing I am interested in is the metrics that tell us who is willing to sign with us.  All the noise about Cole and Strasburg mean nothing if neither would consider us.  I do not need to talk about every FA on the list, only those we have a real chance to sign. 

[Shaitan]

Front-loaded deals sound good on paper, but since nobody does it, I have to assume there are more downsides. One was mentioned above. I imagine there are significant tax differences too. Not all $100 million contracts equal the same amount.

[tarheeltwinsfan]

 

Player-Option - Player chooses to pick up the option in the contract or become a Free Agent (Opts-Out)

 

Club Option - Team chooses to exercise the option in the contract to keep the player or declines the option and the player is a Free Agent...typically there is a buyout amount that the club pays to end the contract

 

Mutual Option - Either Player or Team can pick-up or decline the option in the contract 

 

Fan Option - No such thing...but it's fun to wish and hope for some to stay and others to go

Thank you for this explanation.

[whosafraidofluigirussolo]

Front-loaded deals sound good on paper, but since nobody does it, I have to assume there are more downsides. One was mentioned above. I imagine there are significant tax differences too. Not all $100 million contracts equal the same amount.

 

Teams tend not to do it because, independent of other payroll concerns, expected inflation means that $X (whatever amount) a few seasons from now is less than $X now. So in "real" monetary value (granted, a pretty abstract concept), the same dollar amount in a multi-year contract is somewhat smaller if it's back-loaded than if it's front-loaded or at a flat yearly rate.

 

That's the explanation I've heard. I suppose players might like the greater "real" value of a front-loaded contract—but maybe also wouldn't like the chances that decreasing salary in the later years of a contract could make it easier for their teams to trade them.

 

Anyway, those are general cases, and I don't think it's impossible that a team or a player would be more interested in a front-loaded contract under particular circumstances. Having a young core that's a year or two away from getting expensive seems to be a reason to consider it.

 

Edited November 9, 2019 by whosafraidofluigirussolo

[Mr. Brooks]

When the FO refused to offer Darvish the opt out he wanted, Falvey said something to the effect of, "I don't imagine a scenario where I'd ever consider giving a player opt out."