Friday, August 6, 2010

Restructuring: An Elegant Solution to the Wells Albatross?

Yesterday in the comments section of Drunk Jays Fans, the point was made that the Yankees may be hamstrung into some serious turmoil in the coming years with their likely big money multi-year extensions of Derek Jeter and Mariano Rivera and the mega-long term deals already doled out to Alex Rodriguez and Mark Teixeira. They have an aging core who they are sentimentally attached to, and will likely continue to pay them premium money even after they have ceased to be premium players (one could argue that his 2010 campaign indicates Jeter could be there already). Of course the Yankees with all of their ancillary revenue can afford to make such missteps.

The Blue Jays, on the other hand, may be more hamstrung by their one bad contract than the Yankees are by their 4 or 5. Vernon Wells is currently sniffing a 3+ WAR season for the first time in 4 years, despite being in the money half of a 7 year, $126MM contract that sees him heading into the final 4 years and $86MM in the 2011 season. He's seen his OPS+ drop from 118 in the 4 years leading up to the contract to 102 since, while he followed up 3 consecutive seasons of plus defense and a combined UZR of 20.6 with a sterling -28.2 since. In 2009 he was the 22nd worst regular hitter in baseball and the worst defensive CF in the game. All while making $10MM last year, a figure which has now doubled and maxed out.

This year Vernon has rebounded quite nicely. While he's still certainly in the bottom half of CF, he's no longer the worst or even close thereabouts. In fact he's posting his best defensive numbers in 3 years. Offensively he's put up a slash line of .275/.325/.529 with 22 home runs and the best isolated power numbers of his career. If he can rebound from a rough July (and so far he's put up 5 XBH in the first 4 games of August), he may end up having a year that is around 3/4 value of his salary. The trouble is that so long as he's a below average defender he's going to have a hard time ever coming close to putting up numbers that warrant the astronomical figure he's set to earn between now and the end of the 2014 season.

If the Jays are going to be competitive going forward, they're going to do so with a player on the declining half of his career who is unlikely to put up more than three quarters of the value his contract dictates (and realistically, given his age this may be the best year Wells has left). With more than a quarter of the team's current payroll invested in this player (and if you take the commitments to BJ Ryan and Roy Halladay out of the discussion, it's really more like a third), it's going to take either a substantial increase in payroll or a lot of players playing above their contracts to get to the point of being a 95 win team. Or maybe both.

The end of the 2011 season gives Vernon an opportunity to opt out of his contract. Obviously, he will not do this. Anyone who would walk away from $63MM over 3 years is the special kind of crazy. When he declines to opt out, the Jays will be on the hook for a declining outfielder in his mid-30s at the very definition of a premium price. Like it or not, the Jays at the end of the season will still be on the hook for another $86MM. But what if we spread it out?

Let's say the Jays look to restructure years 2012-2014, because trying to spread out $86MM would just be ridiculous, not to mention the fact that the team is unlikely to be close to the 95 win plateau next year. So the terms as of now are a $21MM hit in the years 2012-2014. These are three years where the Jays could very realistically be playoff contenders as the aggressive farm building by Alex Anthopoulos and company hopefully start to pay dividends. My idea is something like this:

2012 - $13MM
2013 - $13MM
2014 - $13MM
2015 - $5MM
2016 - $5MM
2017 - $5MM
2018-2026 - $1.5MM

The payments from 2018-2026 wouldn't necessarily start there, but rather when Vernon retired. Give that he would turn 39 at the end of the 2017 season, I think the likelihood of him continuing to play beyond that point would be slim. Over the new terms Wells would make a total of $67.5MM, as I would think some sort of increase in total salary would be necessary to convince him to take such a restructuring. He's giving some, but the truth is that what you end up with here is actually quite beneficial to both parties. Not only do the savings over 2012-2014 ($8MM per) give the Jays breathing room to add pieces, they also make it more possible that Wells' performance will be in the ballpark of his salary. At $13MM, there's also less pressure to keep him at the biggest premium position if, say, a Gose or a Marisnick develops fast. Wells gets considerable tax savings by spreading his income out over several years as well as the stability for his family of being able to play out his career in the same organization. And, perhaps most importantly for a professional baseball player, he gets the increased possibility of being a core player on a championship team.

In all likelihood, the Jays are probably just going to grin and bear what is one of the worst contracts in the game right now. The situation in Toronto is probably going to get worse for Wells as his performance starts to decline and his salary doesn't. It's a shame, what should be a victory lap for Wells as he moves up the Jays all time lists in virtually every offensive category will be a parade of boos every time he strikes out, or puts up an 0 for 4. But I can't help but think that a deal like this is in the interest of both parties. The extra three years of terms will probably be the going rate for an outfield utility player by the time we get to 2015, and when he takes his golden parachute of $1.5 a year for 9 years the cost will probably be in line with a major league replacement player. And it'd take away one of the talking points for all the casual fans in the city who seem to always look for a reason to not support this team.

1 comment:

  1. You have to give him a bit more than that. By stretching his earnings out that far (2026? what will the world be like then?) because you need to takie the time-value of money into account. In blunt terms, you need to use a discount rate. Unfortunately the uncertainty regarding a) lobng-term rates of inflation in CAN & USA and b) $CAN/$US exchange rates (even if paid in $US, remember that he lives here)is immense. No financial advisor would suggest taking that deal. Sadly, because it would be awesome.