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The Fault Behind the Arbitration Excuse

Frank Coonelly made some comments about arbitration, but do they actually make sense? Photo by George Gojkovich/Getty Images

If you ?ve paid attention to anything I ?ve ever said, wrote, or tweeted, you would know I don ?t like guessing. I like to talk about what I know, and uncertain variables just aren ?t my forte.

For example, I wrote about the Pirates upcoming arbitration situation in December, theorizing that it may affect their upcoming financial decisions. It turned out to be prescient, as Frank Coonelly came out at PiratesFest and stated payroll was low because of so many pre-arbitration players populating the roster. He also insinuated payroll would eventually grow when those players hit arbitration. I did some back of the napkin math at the time and these comments really didn ?t jive, but I had no actual arbitration estimates to go off of. Until now.

David Slusser at Rumbunter recently worked up estimates for all eight first-time arbitration eligible players for the Pirates. On top of that, he threw out some projections about what the roster may cost. His work inspired me and I wanted to take it a step further.

What follows is a completely in-house projection of the 40-man roster for 2020, as well as what it would potentially cost based on committed salaries, as well as Slusser ?s estimates, among others.

Is Coonelly right, or is he just blowing smoke? Let ?s see:

Potential Roster

Lineup: Diaz, Bell, Frazier, Gonzalez, Moran, Martin, Marte, Polanco

Bench: Newman, Reyes, Stallings, Osuna

Rotation: Archer, Taillon, Musgrove, Williams, Keller

Bullpen: Vazquez, Kela, Koehler, Kuhl, Brault, Crick, Kingham, Rodriguez

26-40: Brubaker, Burdi, Escobar, Kramer, Santana, Slegers, Tucker, Vera, Waddell, Alemais, Craig, Cruz, Hayes, Kelley, Reynolds

Guaranteed Salaries: $36,950,000

This works under the assumption that the club options for Starling Marte and Chris Archer are picked up ?a near certainty in my book. However, it also includes the option for Tom Koehler (yes, that Tom Koehler). The Pirates signed Koehler to a non-guaranteed deal with an option for 2020, and I decided to have some fun and have them exercise it. The $1,250,000 would actually be the 12th highest salary on the team in this scenario.

In total, this figure is made up of salaries for five players from contracts the team is locked in to for the season, including signing bonuses and buyouts. This total is representative of the lack of long-term commitments the team is currently tied to.

Arbitration Salaries: $23,870,000

Included in this total are salaries for nine arbitration eligible players, eight of which are based on Slusser ?s projections. The ninth ?Keone Kela ?is slated to make $3,175,000 this season, and 2020 would be his final year of arbitration. With that in mind, I threw in a salary of $5,000,000 for him, with no real theory to back it up.

In case you ?re counting, this projection is the end of the road for Michael Feliz. My working assumption was that he ?d use his final option in 2019 and be out for 2020, so instead of going to arbitration for a second round ?Slusser agreed ?I assumed the Pirates non-tender him.

Pre-arbitration Salaries: $6,536,639

This includes every other player on the 25-man roster that isn ?t on a guaranteed contract ?11 in total per my projected roster.

As I explained in my 2019 payroll estimate, minimum contract amounts are often determined based on service time, so it ?s not exactly accurate to enter the same number for every player. To account for this, I added a four percent raise on top of the raise I built in for 2019 on the last minimum salary that every player had on the books. I came up with that number by averaging prior raises given to minimum players by the Pirates. This is certainly not a perfect method, but it ?s probably better than using one random estimate, and the total will still probably be within reason of whatever the actual amount ends up being.

Several players who would theoretically be out of options in 2020 had to be sacrificed to make this list, including Clay Holmes, Jesus Liranzo, and Dovydas Neverauskas. You may or may not be missed.

Minor League Salary: $1,105,200

This is the total allocated for players not on the active roster, which I filled for all 15 possible spots.

Instead of these amounts being specified for 2020 in the CBA, it simply calls for a Cost of Living Adjustment (COLA) for 2020 and 2021. Therefore, I created an estimate based on percentage raises in 2018 and 2019, coming up with $92,000 for players on second contracts or with major league experience, and $46,200 for players new to the 40-man roster.

To determine who would occupy the final spots on the roster, I focused on who would be eligible for the 2020 Rule 5 Draft. This wasn ?t the first time I ?ve done this ?I analyzed this on Twitter before the prior Rule 5 Draft:

Eight spots are a lot, but since I ?m purely projecting from within the system, it probably makes the most sense.

Credits: $(2,437,321)

This is purely an accounting trick for Competitive Balance Tax purposes, but if the Pirates pick up the three options as assumed, they would be able to deduct the amount of prorated buyouts that would have hit the books in years prior.

In practice, this makes sense; if the buyouts for Marte, Archer, and Koehler had been accounted for in prior years, it only makes sense to deduct those expenses since they were never actually realized.

2020 Payroll Projection: $66,024,518

2020 AAV Projection: $63,324,518

2020 Cash Projection: $66,511,839

Is this exercise practical in any way? No, obviously not. Do I believe Jason Martin will be the starting left fielder (maybe, I suppose) or Nick Kingham will act as a swingman for a second year in row (probably not)? For this purpose, it doesn ?t really matter.

This was not an effort to see what the payroll or roster will look like in 2020; it was to illustrate the holes in Frank Coonelly ?s logic.

Yes, payroll expenses will be going up in a vacuum for the players due to hit arbitration, and more than likely a significant amount relative to the Pirates budget; however, those increases are more than negated by the five contracts and $27,800,000 that will be coming off the books. In total, after two built-in raises and nine through arbitration, as well as three option pickups, the Pirates would be realizing roughly $4.8 million in estimated payroll savings from 2019 to 2020. This is evident in the 2020 estimate falling from my 2019 estimate by $6,755,476.

So, what ?s the moral of the story? Yes, the Pirates are going to see significant raises through arbitration in 2020, but those alone are not going to increase their payroll. For that to happen, there will have to be moves from outside the organization, because it ?s not happening in-house, no matter what Coonelly says.

Ethan is a Pirates contributor to The Point of Pittsburgh. An Accountant by trade, Ethan is passionate about the business of sports and won't apologize for enjoying it more than the actual games. He's a believer in analytics, hasn't played a game since little league, and can be contacted via Twitter @EthanHullihen

4 Comments on The Fault Behind the Arbitration Excuse

  1. To view Coonelly’s statement has having much validity, you’d have to accept the assumption that the salaries resulting from the arbitration process would result in payroll taking an untenable percentage of total revenue. I have neither read nor heard nothing that would justify that assumption.

  2. Norm Cubellis // March 1, 2019 at 10:04 AM // Reply

    Nice article. Shows once again the double talk in which this management team excels. Regardless as to how much people knock Huntington, this analysis shows how difficult his job even appear competitive with these financial restrictions. It also emphasizes just how important it is to draft and train these draftees in order to be competitive. Unfortunately this has not been a strong suit in my opinion.

  3. Is it too early to think about what would actually make sense to spend money on next offseason ?

    Replacing Dickerson with Marcell Ozuna could be fun and would get that payroll back up around 85!

    That said, i think we all know that they arent gonna do that and that Martin and Reynolds are gonna be the dudes in LF.

    or get Gerrit Cole back on that megadeal

  4. So many missing pieces in your assumption. Who is the left fielder? Dickerson possibly or another piece that is acquired at a higher price? Are they ready to commit to Diaz, before another season in 2019 for 2020 or is it possible they may have to make an acquisition? Williams numbers don’t appear sustainable based on his peripherals. Do you commit to him for 2020 until you see, or, do you leave yourself flexibility? What about the 5 slot in the rotation? Do you assume that they run next year the same as they do this year or do they need the ability to add if it doesnt work? Josh Bell? If he doesnt improve in 2019, do you have to move to the outside for 2020? All of these contingencies must be accounted for. The team isnt going to indicate that as it looks like a lack of support of their current players, but, they are real life issues.

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