Guaranteed Contracts

This time of year as GM’s throughout baseball try to figure out trades, fill out rosters, upgrade where possible, one of the hardest parts of the financial side of the game is figuring out how much a player is worth. All of MLB is built on a pure supply and demand model. Just look at a few contracts:

Clayton Kershaw $32 million
Justin Verlander $28 million
Giancarlo Stanton new contract 13 years, $325 million or $25 million per year
A-Rod $252 million for 10 years
Ryan Howard $125/5
Albert Pujols $240/10

Yesterday, Max Scherzer (P) announced that he wants a $200 million contract. John Lester already signed a big contract with the Cubs. Therefore, that only leaves James Shields as the low-end of the high-priced pitchers on the market.

It was announced yesterday that the Rangers had a meeting with James Shields, but that the likelihood of signing him was very low. That is because the Rangers are trying very hard to stay around last year’s $133-$135 million payroll.

The Team does have some flexibility because of the release of Alex Rios, and the trade/release of some others last year. In total that saved the team about $25 million. There are some guys due higher amounts, free agents will need to be brought in, the bullpen fortified, and a few other details that eat into that number. Still that would leave the team with $15 million or so, but unfortunately, that is not enough to get Price.

The really hard part of these long-term guaranteed contracts is what the Rangers are facing this year. Martin Perez is under contract for about $1 million while he rehabs after Tommy John surgery, and his salary climbs to $2.9 million in 2016 even if he does not return 100% completely healthy. The bigger kick is Matt Harrison who was paid $8 million last year is due $13 million this year and every year through 2018. Since, he is not officially unable to perform, he is still under contract. If he was physically unable to come back from his back injury, the Rangers could file on their insurance policy for his salary. That $13 million combined with the other dollars would free up enough money for them to go sign a James Shields, or someone else if they wanted to.

As of now the highest priced Ranger players are Prince Fielder $24 million this year and $18 million through 2018; Elvis Andrus is due $15 million through 2018; Derek Holland $7.4 this year, then it goes to $10, and $11 million; Adrian Beltre $18 million then $16 million; Shin-Soo Choo is due $14 million this year, and $20 million for a long time after that, and finally Yu Darvish at $10 million through 2018.

Long-term contracts do have consequences, unless there is a career ending injury, which allows the team to collect insurance money. This year the Rangers start the season with $14 million in dead salary and they are missing two starting pitchers.

As of now, the numbers clearly show why the Rangers just cannot afford to enter the big name sweepstakes for pitching. Ownership/management faces a huge dilemma, pile on more money to the tune of either another $20-$25 million this year, trade-off young talent that might be ready this year and some certainly in 2016, or try to do something in the middle. The team may know more on Harrison’s status in January, and he very well could retire. Frankly, that would be the best for the organization. Don’t misunderstand I truly like Matt Harrison, and thought him a very good pitcher, but I just don’t see anyone coming back to full form after multiple back surgeries.

James Shields would be a huge upgrade to the staff, but there are two problems.  First the $20-$25 million it would take to sign him for at least 6-long years, and then what to do with all the young talent you have been growing on the farm. My next article will go back to 2005-2006, and review what they did with that talented group on the farm. I think if we look at that, you will get a very good idea of what Daniels might be thinking.

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