Why are the Twins Leaving Draft Bonus Pool Money on the Table?

2 minutes ago, Mike Sixel said:

I'd think they could have gotten one of the last two picks for that money....or signed Jenkins earlier to relive all our anxiety. I don't get it. 

Guess I don't worry about it.

Well I feel better about it knowing there is a benefit for doing so.  That extra money could be planned to help pay payroll and draft and stuff.  With our payroll at an all time high and draft bonus one of the highest in the league, I am not going to complain.  Though if we could have signed one of the 2 last draft picks then that is a missed opportunity for us.

Look I think it would be smart to do.  Spend 500k on a higher level prospect late in the draft and see what happens.  First though you need a player willing to sign at that level,  then you need to see if it hits.  So lets realistically look at it.  How often does an Edouard Julien hit - 2%, 5% 10%. Throw in high schoolers on top of that - 1% 2% 4%?  The odds are not high but they are there.  So we have established a low success rate, add in the tax penalty and it is $875,000.  Do that 10 years and not hit on a prospect and you are spending first round money for nothing and its better to have saved the money.  I think the Twins are taking enough quality bites at the apple in the draft its not as necessary. It is understandable why high revenue teams are willing to constantly go over, but for a small market team you can see the prudency.  It also doesn't avoid the Twins from still trying to maneuver their money and get a Julien like they did in 2019.  However,  that went right down to the wire.   

So if they spent the extra $717,280, they'd pay $537,960 in tax and lose out on about $882,000 in revenue sharing (based on 2022 overages).  That extra $717,280 actually costs about $2.14M if I'm tracking correctly.  Not defending it, but I understand the Twins' side of things a little better.

1 minute ago, Mike Sixel said:

Several HS players taken later did sign for less money than this (IIRC) this year. 

I do agree that in negotiating with Jenkins, this may have been the line......but that doesn't explain every other year since this rule was put in place. One of 2 teams. 

Its because the Twins have a precedence of not going over.  Whether its an overage, or they never want to utilize the penalty its the Twins philosophy.  The advantages is you avoid some of the gamesmanship from agents, and if we had gone over in prior years, I can guarantee that Boras would have used it here.   So the nuts and bolts is likely a situation where the Twins are paying more for the same prospects before if they were willing to use the overage.   I have provided the math and the reasoning why it could actually be a prudent strategy.  It all comes down to the success rate on whether this is a good strategy or not.  Depth wise the Twins have a pretty strong system,  lacking slightly on the extreme top end, but overall very good and will likely only get stronger in the next year or two.  

36 minutes ago, IA Bean Counter said:

How often does an Edouard Julien hit - 2%, 5% 10%. 

Probably closer to 2% than 10%.

I didn't realize not going over was actually tied to a monetary benefit to them in terms of revenue sharing.

I would agree that the the way the draft, team control, and arbitration are all designed to provide excess value to teams, going over by close to 5% every year would be a cost effective way to increase talent in the organization.

Still, the way the numbers worked out this year, the difference between spending $700K over slot and paying the tax vs staying under and receiving the money works out to around a $2MM difference in their operating budget.  Presuming that Falvey and Levine are working with an overall operating budget set by the Pohlads, it's not an insignificant amount of money to shift to other areas of spending.

There also ends up being a bit of a game theory aspect among the revenue sharing teams, who in the long run probably should still find it more valuable to consistently go over their pool.  Half of the revenue sharing teams did "defect" and go over their pool this year.  But if nearly every revenue sharing team did go over their pool in a year, then the few that didn't actually would get a pretty big windfall.  I'm guessing we've already basically reached the Nash equilibrium, which would suggest that the benefit of changing strategies one way or the other for any of the revenue sharing teams is probably pretty marginal.

7 minutes ago, Mike Sixel said:

i saw your numbers....it's a drop in the bucket for a team with a payroll this high, and other costs (FO, marketing, etc.). 

Doesn't matter, I was saying I'd take the chance, you wouldn't. No biggie we don't agree.

Money adds up.  An organization can decide how they want to use their financial resources.   I can make a valid argument on why it is a reasonable philosophy to continue,  and yes you can full state and believe that they should.  I guess I am not always willing to be a defender of the front office but I get the strategies and things they have been successful at over the past 5 years.  There are things that can be critiqued I am just not sure this is one of those items.  

As to money 717,000 is what would be the overage,  with penalty that is 1,254,750.  I don't think that is a drop in the bucket. Thats 1% of payroll.  Add up if consistently do it over several years.  It adds up.  The question becomes what is the benefit from that and will you hit on an extra player from doing it for several years that is worth the extra money that has been spent.  Differing opinions is always a good thing,  would rather have this than group think.   

I was curious since the premise of this question all summer has been regarding giving extra money to guys drafted in the 11-20 range to go over the Twins bonus pool. I quickly looked through the MLB.com top 100 rankings and here are the players in the top 100 who were not picked in the first 10 rounds and their signing bonus:

C Logan Hoppe 23rd round 2018 $215,000

RHP Ben Brown 33rd round 2017 $60,000

There are currently two guys in the MLB.com top 100 who weren't picked in the top 10 rounds. They were both picked in rounds that no longer exist and certainly didn't cost $1.2 million (extra bonus pool + tax penalty) to sign. This doesn't include Julien who we know was briefly in the top 100 and signed for just shy of $500k.

Outside of those two, there was one guy picked in the 7th and a couple others in the 5th round. The vast majority were 1st round picks and international free agents.

It is interesting the Twins are 1 of 2 teams to have never gone over their bonus pool. I'm all for the Twins spending as much as they can to acquire players but I don't have a problem with this. It would be different if the Twins had been terrible at drafting but that hasn't been the case.

11 minutes ago, DocBauer said:

ONE LAST POINT: The Twins can still follow 19th rounder Sam Parker as he will be attending a JC. They can still sign him next spring, before the 2024 draft. But what I DON'T know is, would any signing $ come from the 2023 pool? Or from 2024? It would make more sense to me that a potential signing would still reflect on the 2023 number as that was when he was selected, and should have nothing to do with any upcoming 2024 draft

Anyone know how that might work???

I read up on this very subject the other day.

The maximum they can sign him for as a draft-and-follow is $225,000.  But, if they do sign him, whatever it costs won't count against their pool.  So essentially the DAF rule increases the slot value from $150,000 to $225,000, but it becomes a hard cap.

1 hour ago, Jamie Cameron said:

For sure agree on two big points you make:

1) We'll never know how that extra revenue is appropriated, so I guess we can't make a useful judgement call.

2) I definitely think this was the hold up with Jenkins. My assertion would be that Boras was pushing them to dig into their 5%, which, for whatever reason, seems like an organizational line in the sand.

Definitely will be monitoring if they dip into overage moving forwards. I'll just close with this: keeping company with the Rockies is not generally where I want to be.

It's understandable to not want to be doing the same thing as the Rockies. In the tweet you linked the Royals are second in MLB in overage%. The Royals definitely aren't a franchise we should be modeling after either.

Just shaking my head as I read another shot at the Twins for not spending money.

First, none of us know that the Jenkins signing was a protracted negotiation.  Both the Twins and Boras are on record saying there was no problem getting it done by 4pm, Tuesday.  We don't know, but the number may have been loosely agreed upon early and Boras and Jenkins took the time to deal with personal issues.  Do we know if he moved his residence to Florida, like Joe Mauer did back when, to not pay any state income tax on the bonus?  [I checked and North Carolina has a 5.25% tax]  With a check this big, he likely spent time with both an attorney and investment advisor.  I don't know if this was the case, but I suspect you also don't know it wasn't.  All we do know is that he was in Minneapolis on Tuesday and signed his contract early afternoon.

Thanks to those who pointed out that not only would the Twins be liable for the 75% tax, but also would lose out on revenue sharing.  Combined with the actual dollars spent on the player, that is real money even for the Twins.

As I read your report, I was hoping you did some checking to see which draft picks since the arrangement began, was it 2011?, didn't sign and if any of those guys have become players the Twins wished they had.  I don't know if there are any.  Or not.  But considering how few players actually make it I would be surprised if more than one or two, if that, have turned out to have played more than a cup of coffee.

I do know that they went over by a large amount for Julien and this year they went nearly double for was it the third round pick and a lesser amount for the kid from Wisconsin.

Is it possible the Twins have a policy which leads to a better job of negotiating with all their picks so they have room to go over with the kids they really want, like the two picks this year, whereas other teams may not negotiate as well with the majority and are forced to go over the pool to sign those they really want?

I'd be more concerned if the twins weren't spending to the pool line. I'm guessing some of this is about draft philosophy as well, where they're looking at it and thinking they're just as well off trying to mine the lower rounds of the draft for possible hits from smaller colleges that are likely to sign than rolling the dice trying to entice high school prospects away from college with a big bonus, particularly when they can grab someone for the flat $150K and not have it charge against the cap the same way. It's also going to give them fewer moving parts in a draft signing process where they're trying to wing it with someone that may or may not sign at a bigger number and leave them either shooting over or under in a given year. I'm guessing that most of the team spending under the line is because they had X dollars allocated for a flier in the late rounds that they could sign...because it's not like you get to add daft picks after the fact if one doesn't sign 9at least not until next draft).

Overall the Twins seem to manage their draft pretty well and they spend the whole thing. They also give the $150K signing bonuses to late rounders that's way over "slot" all the time, so while that's not counting against the pool, it's still money they're spending. (seeing as how the usual "cheap Pohlads" complaint has already come up)

1 hour ago, IA Bean Counter said:

Look I think it would be smart to do.  Spend 500k on a higher level prospect late in the draft and see what happens.  First though you need a player willing to sign at that level,  then you need to see if it hits.  So lets realistically look at it.  How often does an Edouard Julien hit - 2%, 5% 10%. Throw in high schoolers on top of that - 1% 2% 4%?  The odds are not high but they are there.  So we have established a low success rate, add in the tax penalty and it is $875,000.  Do that 10 years and not hit on a prospect and you are spending first round money for nothing and its better to have saved the money.  I think the Twins are taking enough quality bites at the apple in the draft its not as necessary. It is understandable why high revenue teams are willing to constantly go over, but for a small market team you can see the prudency.  It also doesn't avoid the Twins from still trying to maneuver their money and get a Julien like they did in 2019.  However,  that went right down to the wire.   

I did some analysis over the past 15 years of Twins draft choices that received outsized signing bonus over the past 15 years.  

2008   BJ Hermsen   6th round   $650,000

2008  Michael Tonkin  30th round   $270,000

2009  Steve Liddle  15th  $200,000

2010  Dallas Gallant  23rd round  $122,500

2010   Kelly Cross  26th round  $100,000

2011  Austin Malinowski  16th round  $175,000

2011  Trent Higginbotham  26th round  $195,000

2012  Zack Larson  20th round  $190,000

2018  Laron Smith   25th round  $125,000

2019  Edouard Julien  18th round  $493,000

Only 2 of those players ever reached the major league level:  Michael Tonkin (who is back in the majors with Atlanta after several years of exile) and Julien of course.  

The success rate of major league draft picks is marginal at best and most of this money allocated to signing these mostly high school players seems to be money down the drain.  The Twins could perhaps adjust their draft strategy to target the higher ranked college bound high school players,   The top undrafted player on MLB.com draft prospects was Roch Cholowsky, ranked 44th with a UCLA commitment.   Do you utilize a pick of one of the college pitchers they drafted in the 15th - 18th rounds and take a shot at him or a similar prospect?

The Twins went far above draft slot to sign 3rd round pick Brandon Winokur ($1.5 million bonus vs. $859,700 slot value) and a bit over slot to sign Dylan Questad.   So they already have significant bonus pool money committed to these two signings.

However, I question the new trend to give out 6 figure signing bonuses to the college players they drafted in the later rounds, including a couple of draft picks who were college seniors like 17th round pick Kade Bragg.   Nothing against Kade, but he was a college senior that really had limited leverage in his signing.  

In the end, the data suggests that these flyers are probably big wastes of money.  The utilization of this money, especially if it is over pool and taxed at 75% is something an organization should do seldom, if at all.