MLB Trade Rumors' arbitration projections underline the Jays' tricky financials

On payroll, the offseason, and some big questions already coming into focus.

Image via the Toronto Blue Jays/@BlueJays

Let’s get something out of the way right off the hop, shall we? Any mention of the Blue Jays and their budget or what they may be able to spend in the coming years comes with the understanding that of course Rogers Communications could — and should — spend more than they currently do. Rogers did a good thing by allowing the club to stick to plan when the pandemic hit, and absorbing the costs associated with that. A ton of money is going to revamp the stadium in the coming years. The payroll is already as high as it has ever been. It’s all very nice. But this is a company so disgustingly large that when their internet infrastructure goes down most of the country can’t make a simple purchase at the store or call 911. Keep it coming, ya jerks!

More than that, even, this stuff needs to also come with the understanding that the Blue Jays themselves are likely a much more valuable proposition than they let on. That’s true of every MLB team, of course, but the one had the seventh-most fans come through their turnstiles this season, and drew astonishing TV numbers that stack up to games on national US networks (even if the TV ad revenue streams don’t necessarily), is especially suspect.

So keep that all in mind here! But also keep in mind that we have something of a sense of where payroll will be allowed to go, based on past actions and past statements, and it’s that kind of stuff — not what anybody could, or should, or friggin’ must! do — that’s going to inform what comes next: a look at payroll and what the roster might be in for this winter now that MLB Trade Rumors has added a big piece to that puzzle by releasing its annual arbitration salary projections.

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MLB’s system for deciding arbitration-eligible players’ salaries is archaic, complicated, and I don’t particularly want to spend a whole lot of time talking about it here. In short, once a player reaches three (or in some cases two) years of MLB service (based on days on the active roster, not calendar years) he becomes eligible to have his salary for the following season decided by an arbitrator. The factors that the arbitrator can consider are so narrow and so well-established that for years folks like MLBTR contributor Matt Swartz have been able to reverse engineer them to project what each eligible player is likely to earn. Teams do this in-house, as do players and their agents, and later on in the offseason, if no contract has been agreed upon (and the team chooses to tender the player a contract), the two sides each file their “number” and get set for a date with the arbitrator (which usually doesn’t come, as most cases are settled beforehand).

Arbitration salaries usually represent a significant jump from the league minimum deals players are on in their early years of service, and for the best players can escalate very quickly. We’ll see that in the cases of Bo Bichette (who will be eligible this winter for the first time) and Vladimir Guerrero Jr. (who will be going through the process a second time despite having only just reached three full years of service, because he was called up early enough in 2019 to be among the rare group of four-time arbitration eligible players referred to as “Super Twos”).

The Jays have a large number of arb-eligible players this year who will be adding significantly to what is already a fairly high level of payroll commitment (for them). Sites can differ slightly in their calculations, but my go-tos — RosterResource, which is based at FanGraphs, and Cot’s, which is based at Baseball Prospectus — both have them with about $123 million already committed for 2023.

To that figure they will have to, per MLBTR, add approximately the following (depending on which of these guys they want to tender contracts to):

• Vladimir Guerrero Jr: $14.8 million

• Teoscar Hernández: $14.1 million

• Bo Bichette: $6.1 million

• Raimel Tapia: $5.2 million

• Jordan Romano: $4.4 million

• Danny Jansen: $3.7 million

• Adam Cimber: $3.2 million

• Cavan Biggio: $2.6 million

• Santiago Espinal: $2.1 million

• Tim Mayza: $1.9 million

• Trevor Richards: $1.5 million

• Bradley Zimmer: $1.3 million

• Trent Thornton: $1.1 million 

I’m just guessing here, obviously, but I don’t see the need to tender Tapia or Zimmer at those numbers. Thornton is relatively cheap and a guy they seem to like, but they’ve got a bunch of guys they’re going to need to get onto the 40-man roster in order to avoid having them poached in the Rule 5 draft — Addison Barger, Spencer Horwitz, Adrian Hernandez, Orelvis Martinez, possibly Gabriel Martinez, probably some other guys I’m missing — so I’m not sure he hangs on to his spot. Mayza’s second half was iffy, and Richards’ whole year wasn’t great, but for right now I’d guess they’re in. Quibble if you must! The rest we don’t really need to talk about, as they’re all fairly easily tendered I think.

So… if we non-tender Tapia, Zimmer, and Thornton, that means we’re adding $54.2 million to the payroll here, taking the total up to $177.2 million.

The Jays’ highest ever opening day payroll was this year’s figure of $171 million.

Yikes!

We don’t yet know what they might be allowed to spend this winter, but for anyone with dreams of big free agent signings — or even just retaining Ross Stripling — this doesn’t seem good.

Here’s what Jays president and CEO Mark Shapiro said one year ago about future payrolls and the possibility of the team eventually pushing toward the competitive balance tax threshold, which at the time was $210 million:

That's not something I've thought a lot about. I'm not sure, with how we're currently constructed, we've got the revenues to support a team that goes over the CBT. That's not to say that ownership doesn't make the strategic decision at some point to go over. But I feel like we can continue to raise the payroll, as we already have done, to unprecedented levels. And that our team and our fans, and this city and this incredible market, which is a country, can support us continuing to raise it.

But those are things that we'd have to determine whether there are revenue sources outside that we have not currently tapped into or mined, if we're going to get those areas. Or a level of proactively deficit spending that our ownership deemed to be a strategic decision. But it's not something that we're planning for as we sit here and look at the payrolls moving out.

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Continuing to raise payroll is good! And the fact that the CBT threshold is also rising, thanks to the new CBA, and will be at $233 million in 2023, maybe indicates that the Jays will have a little more flexibility than all this feels on first blush. But even if they “only” go up to $200 million this winter, that won’t let them make many significant additions without some real subtraction.

There are certainly ways for the club to shed some dollars and find some extra wiggle room, but they’re not necessarily as simple as you’d think.

For one thing, in talking about this on Twitter, I’ve had a few fans wonder whether Hyun Jin Ryu’s 2023 salary is included in these calculations, and whether or not his contract is insured. This isn’t publicly known — it would be interesting to hear someone ask Ross Atkins about it when he faces the media on Tuesday! — but, as I wrote back in July, my guess would be that it is not.

Apologies for copy-pasting something I’ve written before and many of you have already seen, but this one deserves a bit of an explanation. Here’s what I wrote at the time.

I'd say it's very unlikely that they have it fully insured, if at all, but maybe they have some protection. Teams don't disclose stuff like that, but the premiums to get pitcher deals insured are really high, and I think Ryu's age and health history might have made it more trouble than it would have been worth.

It's not mandatory for MLB clubs to get deals insured, so they have to go into the open marketplace and get it done one a case-by-case basis. A 2016 Washington Post piece suggested that the premiums for pitchers can be something like 7%, that there are plenty of exemptions, that teams don't get all of the money back on their claims, and that, at the time, the Nationals had found the process "vexing" to the point where they hadn't insured any of their $100 million-plus deals (Scherzer, Strasburg, Werth, Zimmerman).

Other teams don't so much find it vexing as they simply don't think it's worth it — including the Blue Jays back in the Paul Godfrey days. I don't think we can draw much from the way the team operated three CEOs ago, but in a 2007 Toronto Star piece, Godfrey told Mark Zwolinski that the team paid big premiums for years and never collected, so they stopped doing it. Zwolinski added this detail:

"Insurance policies only kick in when a player is lost for the entire season, or for the remainder of his contract.

"In those situations, a player must first be sidelined for 60 days, after which the team receives only 50 per cent of the balance of his salary for that season."

This is old info, so it may not be exactly how it works now or in every case, but based on the other piece I'd say the shape is likely similar. If so, I can see Godfrey's point.

Ryu will have missed like 60% of this season. He'll likely be healthy enough to at least be removed from the IL at some point in the back half of next year (what they do with him at that point is obviously another question). The Star piece is saying that this year the Jays would get 50% of 60% of Ryu's $20 million salary, which works out $6 million. A 7% premium over the life of the contract would be $5.6 million.

The WaPo piece said it's more like 60-80%. Ryu will miss probably 60% of next year, at least, so even at 50% that's another $6 million. But, of course, the Jays didn't know all this at the time they'd have been getting him insured. And then you have to factor in that they'd be paying premiums on other big deals, too.

The Post says 7% for pitchers, 3% for position players. If we assume that if they'd insure one big multi-year deal they'd insure them all, that means premiums paid for Springer, Chapman, Berríos, Gausman, and Kikuchi. At those percentages on this year’s salaries that's $4.6 million paid out, plus $1.4 million for Ryu. So... for 2022 that's $6 million paid out to receive $6 million back. And probably a similar calculation for next year.

We have no idea the actual figures, and this is far from my area of expertise, but if this is even close, considering that most years there won’t be a heavily insured contract where an insurance claim is applicable, I can see how teams might choose the path of what Godfrey called “self insurance.”

So, assuming that’s not a way to cut these numbers down, we’re really left with two options.

1) They could sign long-term extensions with players like Vlad, Bo, Teo, or Matt Chapman, that pay them less than they’re expected to make in 2023, but that build those dollars back in later on in the contract. (Or, depending on whether or not the team’s internal accounting still works this way, they could theoretically sign those players to deals with lower 2023 salaries, but use a signing bonus — which would go on the books for 2022 — to keep the 2023 payroll in check.)

2) They could trade away salary.

The problem there is that’s a difficult thing to do on a significant scale while still making your team better. Like, you could trade Richards to a team that can better handle the fact that he’s out of options, as Tammy Rainey suggested to me on Twitter, and save a little that way. If for some reason they’re not going to turn Barger into an outfielder (or simply prefer Gabriel Moreno ending up there), maybe he’s ready enough to replace Biggio and you can find a little more by dealing him. How else, though?

I saw someone tweet out the idea of tying Yusei Kikuchi’s contract to someone like Moreno as way to get good trade value and some savings back, which is definitely creative and something we’ve seen teams do in the past. I think it would be a brutal use of Moreno, though. And an even worse look for Rogers and the Jays. If the Padres can run the payrolls that they do, surely this team can as well.

However, as we go up the pay scale, I don’t think finding great deals for the Jays gets any easier. Lourdes Gurriel Jr. and Teoscar Hernández are two names that get brought into this conversation often, but I can’t help but wonder if that ship has sailed, as both are entering the final seasons of their contracts.

It was once thought that Gurriel Jr. would have an extra year of arbitration after his deal expired, but last winter we learned that’s not the case. Players with service time in foreign leagues are sometimes credited with big league service time when they make the move to MLB, which may have been the situation here. Whatever it was, a team acquiring him would only have him for a year, and there’s just not a lot anyone’s going to give up for that — especially if they’re taking on his $5.89 million salary. Lourdes has had great stretches, he intrigued a bit when he turned into a slap hitter this year, but he’s always hurt, doesn’t play great defence, and isn’t good on the base paths, which really just adds up to him being an average regular at best.

Teo has more value, to be sure. Go-nowhere teams won’t have much use for him, as he’s only under contract one more year, but any win-now team would love to have his bat in their lineup, I’m sure. But what would a win-now team be able to send back the other way? The Jays wouldn’t want prospects for him. They can’t just deal him for salary relief. They could maybe trade him for a starting pitcher on a similar short-term deal, then go spend some money on — or make a trade for — a hitter to replace him. There are ways to go about it, I suppose. But the path to making the team better by dealing him is not at all clear to me.

So what do they do?

Well, there actually is a third option for the team this winter, it’s just not one that I think anybody is going to like the thought of in the wake of whatever the hell that season was and the miserable exit that followed it. Not doing a whole lot.

I’m not saying that’s where this front office will land, or that it’s where they should land. But it’s an option, and there’s an argument for it. Plenty of people have understandably raged about changes being necessary here. I’ve seen it suggested that the backlash from fans could render the idea of a quiet offseason untenable. But Shapiro and Atkins have long made it plain that they believe the way to appease and appeal to Jays fans is simply by winning. All will be forgiven if they win.

There’s something to that. And while in the moment it seems absurd to even suggest that doubling down on this roster is the way to go, the more I think about it the more I think there’s something to that, too. Pat Gillick would do it! Hear me out!

First of all, I kind of think they made the decision to double down on this roster a year ago. I could be wrong, obviously. They could get creative or go on some kind of a mad spending spree. But the talk I hear about the team needing to go out and sink more money into a rotation they spend over a quarter of a billion dollars on over the last year strikes me as somewhat fanciful. Manoah, Gausman, Berríos — they’ll all be there next spring. The team will be hard pressed to move his money, so Kikuchi will likely get another shot, at least during the spring. Mitch White impressed nobody but is better than he looked and will be in the conversation. That’s five. With Yosver Zulueta (assuming he’s healthy and they try to keep him as a starter), Ricky Tiedemann, and others not far from knocking at the door..

Don’t get me wrong, that’s not enough. They need depth. They’d be better with more than just depth. The clock on this team is absolutely ticking and they should do more. But do I think they could get by with somewhat modest improvements and then waiting to sort it out at the trade deadline? Yeah, probably.

Could they get away with one more year of Springer in centre the bulk of the time and Merrifield as their best alternative? Not ideal, but I wouldn’t necessarily say no.

Do they really need that big, left-handed bat everyone has always been talking about? I mean, it would be nice! But they were a very good offence this year without it, despite what we all hope and pray were down years from Vlad, Bo, and Teoscar.

I’m not saying that doing nothing is an option, and if I was Ross Atkins I would certainly not be thinking that way. For the sake of his job I don’t think this team can take a step back of any kind over the next year, because that’s when you really start to worry that they’re truly squandering a golden generation. I guess I’m just saying that if the team has to be a little more calculated with how they go about their business this winter, that might not be the worst thing in the world. They were good under John Schneider. The offence is good and should be better. The bullpen with Bass and Pop was better than it’s given credit for. Flip Espinal and Bichette defensively and actually use your glove-first guys when it friggin’ matters and they’re pretty sound on that side of the ball, too. It doesn’t all have to be smashed to the ground, nor is it so dire that only blockbusters can save it.

Now go spend a barrel full of Edward Rogers’ goddamn money and get these guys a few more horses, Ross!

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One last thing…

As mentioned above, GM Ross Atkins will meet the media on Tuesday. I’ll be covering his comments on the site here, to be sure, and I’ll also be back on the Callin app with Nick to talk all about it — and to look back at the 2022 season, the playoff “run,” and to look forward at some of the stuff I’ve touched on here — at 5:30 PM ET.

Be sure to get the Callin app and follow us on there so you can tune in live!

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