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February 24, 2010

Contractual Matters

NL Central

by Jeff Euston

Baseball's largest division will likely feature four of the top 15 payrolls in the game for 2010-the Cubs, Cardinals, Astros, and Brewers. The other two teams, the Reds and the Pirates, project to rank 23rd and 29th or 30th, respectively. Continuing our look at the 2010 payroll forecasts (the projections for the AL Central can be found here), let's take a look at the NL Central.

St. Louis Cardinals
Projected 2010 payroll: $94 million
2009 spending: $94,098,500 (Opening Day), $102,678,475 (year-end)
Future commitments: $64.7 million for 2011, $30.9 million for 2012, $17 million a year for 2013-14

The Cardinals spent much of the offseason waiting out free agent left fielder Matt Holliday, as agent Scott Boras shopped his client to-well, no one is sure, exactly. But St. Louis got its man, signing Holliday to a seven-year, $120-million contract, the richest in club history. With the signing of right-handed starter Brad Penny (one year, $7.5 million), and the possible addition of a third baseman/super-utilityman, the Cardinals' spending for 2010 could approach the $100-million mark. Now GM John Mozeliak faces an even more daunting task: signing Albert Pujols.

Pujols will earn $16 million in 2010, the final guaranteed season of a seven-year, $100-million deal signed in February 2004. The Cardinals hold a $16-million club option for the 2011 season, but no one in St. Louis is comfortable with Pujols coming within even a year of free agency. That suggests that the time to lock up Pujols is the 2010-11 offseason, and the Cardinals and Pujols' agent, Dan Lozano, reportedly have engaged in preliminary discussions about an extension. However, if Holliday could command $120 million to provide protection in the lineup for Pujols, how much is Prince Albert worth? And can the Cardinals afford it?

Pujols will be 31 entering the 2011 season, a year younger than Alex Rodriguez was when he hit the free-agent market after the 2007 season. A-Rod later re-signed with the Yankees, agreeing to a record-setting 10-year deal paying him $275 million through his age-41 season.

Pujols is on record as saying he'd like to retire as a Cardinal. The fact his agent is even entertaining the idea of an extension suggests that he's not hell-bent on becoming a free agent and that he is unlikely to demand anything approaching Rodriguez's $27.5-million average salary. But, at the same time, it's difficult to imagine the Pujols camp taking less than any position player besides Rodriguez. That means Pujols' asking price, in terms of average annual value, likely would top the contracts for Mark Teixeira and Manny Ramirez ($22.5 million annually) and certainly Miguel Cabrera (slightly more than $19 million per year).

But the Cardinals have seen this day coming. The straight-line structuring of the Holliday deal-$17 million annually through 2016-effectively removed the inflationary concern a heavily back-loaded deal would have had on any long-term offer to Pujols. Boras and Holliday also generously agreed to defer $2 million a year, without interest, reducing his contract's present-day value to $113 million, or $16 million annually. (The present-day value of Pujols' current deal is "only" $90 million, or less than $13 million per year, which arguably puts the game's best player on the short list of baseball's best bargains.)

Given the early-career whispers suggesting Pujols is older than advertised, the length of a multi-year deal might be as big a hurdle in the negotiations as the money. Whether the two sides land at $138 million for six years, $184 million for eight years, or somewhere in between, a Pujols extension will shape the look of the franchise for the next decade. As Gordon Gekko taught us, it's a zero-sum game. Somebody wins, somebody loses. Two players pulling in $40 million will limit payroll flexibility for a club that regularly spends $100 million-$110 million, in addition to the roughly $20 million a year the Cardinals pay to service the debt on new Busch Stadium.

The 2011 payroll is likely to feature four players earning eight-figure salaries: Holliday, Pujols ($16-million club option), Chris Carpenter ($15 million) and Kyle Lohse ($11.875 million), as well as Ryan Ludwick, who could approach the $10-million mark in his final year of arbitration. But beyond that, the Cardinals have some flexibility, with just $30.9 million committed for 2012, plus a $15-million club option for Carpenter. The club's only additional financial commitment is the $17 million annually earmarked for Holliday through 2016.

Mozeliak has locked up several key contributors to club-friendly contracts: Catcher Yadier Molina is under club control through the 2012 season. Right-hander Adam Wainwright is a bargain at just $4.65 million this season, $6.5 million in 2011, and has reasonably-priced club options through 2013. Closer Ryan Franklin and second baseman Skip Schumaker recently agreed to affordable two-year deals through 2011. However, the big contracts at the top of the payroll put the pressure on the St. Louis farm system to produce affordable, major league-ready talent to complement the Cardinals' core of stars.

Chicago Cubs
Projected 2010 payroll: $140.4 million
2009 spending: $137.8 million (Opening Day), $141.6 million (year-end)
Future commitments: $101 million for 2011, $60 million for 2012, $18 million a year, 2013-14

Since Kevin Goldstein chronicled the contractual cul-de-sac on Chicago's North Side last month, GM Jim Hendry has added outfielder Xavier Nady on a one-year deal worth $3.3 million and worked through the club's eight arbitration cases. The result: The Cubs are likely to spend more in 2010 than every club but the Yankees and Red Sox, absent a multi-million addition by the Phillies. Chicago's projected Opening Day payroll of more than $140 million dwarves the amounts spent by their division rivals: nearly $45 million more than St. Louis, $48 million more than Houston, $53 million more than Milwaukee, $69 million more than Cincinnati, and $103 million more than Pittsburgh. No pressure in Wrigleyville. Just win. Now.

Hendry has already committed more than $101 million in guaranteed deals for 2011, when as many as nine Cubs could be eligible for salary arbitration. He has a start on 2012, too, with $60.5 million on the books, including $18 million each for troubled assets Alfonso Soriano and Carlos Zambrano. But they are out from under the Milton Bradley deal, and shortstop Starlin Castro leads a group of promising prospects, so the hope still lives, though without much payroll flexibility.

Milwaukee Brewers
Projected 2010 payroll: $87.7 million.
2009 spending: $80 million (Opening Day). $90.3 million (year-end).
Future commitments: $22.038 million for 2011, $15.788 million for 2012, $10.288 million a year for 2013 and 2014.

The Brewers begin 2010 facing two primary challenges: First, catch the Cardinals and Cubs, and second, lock up slugger Prince Fielder to a contract extension. Under owner Mark Attanasio, Milwaukee has increased spending in five of the last six seasons. The projected 2010 Opening Day payroll of $87 million is the largest in club history, and the Brewers are likely to top their year-end payroll record of $90.3 million, set in their wild-card season of 2008.

Milwaukee allowed more runs (818) in 2009 than every NL team but Washington. So, Brewers GM Doug Melvin invested $50 million on pitching this offseason, re-signing closer Trevor Hoffman ($7.5 million) and signing free agents Randy Wolf ($29.75 million for three years), Doug Davis ($5.25 million), and right-handed set-up man LaTroy Hawkins ($7.5 million for two years).

And though Milwaukee boasted the highest-scoring offense in the division in 2009, the lineup's biggest cog, Fielder, is not necessarily a permanent fixture. The first baseman will earn $10.5 million this year and figures to receive a substantial raise in arbitration for 2011, the last season before he is eligible for free agency. Fielder has said he is happy in Milwaukee but is not in a hurry to discuss a contract extension, which, for a Boras client in a small market, translates loosely as, "Let's talk after I've filed for free agency."

Fielder turns 26 this year and could hit the open market for his age-28 season, making him the youngest in a high-profile group of free-agent first basemen which could include Albert Pujols (age 32 in 2012), Ryan Howard (32) and Adrian Gonzalez (30). Boras-who delivered $120 million for the 30-year-old Holliday with only one apparent bonafide bidder-is not generally inclined to leave money on the table for his clients. So the asking price for Fielder likely would start at $20 million a year, which is what Howard will earn in 2011. And Fielder is not only younger than Howard; his numbers are superior. Even a five-year extension through Fielder's age-31 season of 2015 would set Milwaukee back at least $110 million.

Could the Brewers play in such a high-stakes game? Ostensibly, yes. Melvin has committed only $22 million for 2011, with most going toward Wolf, Hawkins, and Ryan Braun, who is signed to a club-friendly $45-million deal through 2015. But the Brewers would be devoting more than a quarter of their payroll to one player, banking on his ability to stay healthy, keep his weight down, and continue producing.

But the alternatives provide no easy answer for Melvin, either. He can play out the next two seasons, hoping Milwaukee can win now, a strategy that yielded mixed results with CC Sabathia in 2008, or he can explore the trade market for Fielder, which probably is both the most reasonable plan and the decision guaranteed to disappoint Brewers fans.

Cincinnati Reds
Projected 2010 payroll: $71 million
2009 spending: $71.4 million (Opening Day), $72.7 million (year-end)
Future commitments: $42.733 million for 2011, $16.275 million for 2012

After a disappointing 2009 season and a drop in attendance of more than 300,000 from 2008, the Reds were reportedly looking to cut payroll over the winter. The most likely candidates for a cost-cutting trade were two starting pitchers earning eight-figure salaries: Aaron Harang ($12.5 million) and Bronson Arroyo ($11 million). In addition, the Reds' 2010 books feature two other high-dollar salaries: closer Francisco Cordero ($12 million) and third baseman Scott Rolen ($11 million). A trade never materialized, and GM Walt Jocketty simply aimed to keep the spending for 2010 close to the $72 million the club spent in 2009.

That's when Jocketty got creative, approaching Rolen in mid-December with an offer of a two-year, $13-million extension for 2011-12. The deal included a catch: the third baseman would agree to restructure his $11-million salary for 2010. Rolen agreed, allowing the Reds to convert $5 million of his 2010 salary into a deferred signing bonus, to be paid without interest over three years, freeing up about $3 million for 2010 payroll.

With the Rolen deal in place, Jocketty turned his attention to Aroldis Chapman, putting together a creative $30.25-million offer that managed to top bids from at least seven other clubs while limiting the deal's impact on the Reds' spending for 2010. The major-league contract includes a $16.25-million signing bonus, with $1.5 million paid upon approval from Major League Baseball, $1.5 million each Nov. 1 from 2010-13, and $1.25 million each Nov. 1 from 2014-20. Chapman will earn salaries of $1 million per year in 2010 and 2011, $2 million each in 2012 and 2013, $3 million in 2014, and $5 million in 2015, with the final season at the pitcher's option.

Jocketty upgraded his middle infield inexpensively, signing free-agent shortstop Orlando Cabrera for $3.02 million, dealt Willy Taveras and his $4-million salary to Oakland for utility infielder Aaron Miles, and brought back outfielder Jonny Gomes this week for $800,000.

Cincinnati should have more payroll flexibility for 2011. The Reds hold options for both Harang and Arroyo, but the only other substantial commitments are $12 million for Cordero, $11 million for second baseman Brandon Phillips and $6 million for Rolen.

Houston Astros
Projected 2010 payroll: $92,171,500
2009 spending: $104.8 million (Opening Day), $108 million (year-end)
Future commitments: $44.25 million for 2011, $26.5 million for 2012

Astros owner Drayton McLane reportedly would not be averse to the idea of selling his club. Quietly. For the right price. Say, $650 million. But, despite interest from Houston businessman Jim Crane and a group led by former U.S. Olympic Committee executive Harvey Schiller, he has not found an offer to his liking. McLane, who paid $117 million for the Astros in 1993, is now seemingly content to hold the club and wait for the right buyer.

Though an owner might be inclined to slash payroll in anticipation of a sale, that has not happened in Houston. The Astros have had no shortage of cash to spend on the major-league roster, doling out more than $305 million over the last three seasons, according to year-end payroll figures. The result has been a disappointing average of 78 wins per year.

The 2010 payroll projects to start at $91 million, putting the team on course to again approach the $100-million mark. More than half that total will go to three players: Carlos Lee ($18.5 million), Roy Oswalt ($15 million), and Lance Berkman ($14.5 million). Houston added three free agents this winter: reliever Brandon Lyon ($15 million for three years), third baseman Pedro Feilz ($4.5 million), and right-hander Brett Myers ($5.1 million). GM Ed Wade, who signed a two-year contract extension through 2012 last week, also had to contend with eight arbitration cases, notably right fielder Hunter Pence, who settled for $3.5 million, and left-hander Wandy Rodriguez, who will earn $5 million after losing his case at a hearing.

Wade could face as many as eight arbitration cases again next offseason, when he also will need to decide whether to exercise Houston's $15-million option on Berkman for 2011. The Astros have committed $44 million for 2011, with most of the cash going to Lee and Oswalt, who were signed to multi-year deals by Wade's predecessor, Tim Purpura. With three years and $55.5 million left on his $100-million contract, Lee will almost certainly remain the division's highest-paid player until Fielder or Pujols sign an extension. Oswalt will earn $16 million in 2011, the final guaranteed year of his $73-million deal. The Astros hold a $16-million option for 2012, but Oswalt may opt out of the option year, which will be his age-34 season. Nevertheless, Houston's payroll flexibility should improve after the 2010 season, allowing Wade to shop the free-agent market or explore long-term extensions with Rodriguez or Pence.

Pittsburgh Pirates

Projected 2010 payroll: $37.4 million
2009 spending: $52.2 million (Opening Day), $47.99 million (year-end).
Future commitments: $13.75 million for 2011, $3.45 million for 2012.

The Pirates will take the field April 5 at PNC Park with a payroll of about $37 million, at least $65 million less than their Opening Day opponent, the Los Angeles Dodgers. Say this for the Pirates: They are not weighed down by bloated contracts. In fact, they haven't made many long-term financial commitments at all, at any price. Beyond the major-league contract for 2008 first-round pick Pedro Alvarez, no Pirate is signed beyond 2011.

GM Neal Huntington-entering the final year of his own three-year contract-kept payroll near the $50-million mark in each of his first two seasons on the job. Year-end figures, which show what the club actually paid out in-season, put the Pirates at $50.7 million in 2008 and $48 million in 2009. But Huntington spent much of 2008 and 2009 dismantling 90-loss clubs, dealing off usable parts for the young players who will make up the core of the club for 2010 and beyond.

The result is a projected payroll of about $37 million-28 percent less than the 2009 Opening Day figure of $52 million-with as many as many as 14 players making less than $1 million. The Pirates' fortunes now largely rest with Alvarez, Andrew McCutchen, Evan Meek, Jeff Clement, Jose Tabata, Lastings Milledge, Brad Lincoln, and Daniel McCutchen.

Huntington has filled gaps with inexpensive veterans. He spent more than $6 million to revamp the bullpen, signing Octavio Dotel ($3.5 million), Brendan Donnelly ($1.35 million), Javier Lopez ($775,000), and D.J. Carrasco (minor-league deal paying $950,000 in the majors). The three other notable off-season additions-Akinori Iwamura, Ryan Church and Bobby Crosby-came at a combined cost of just $7.35 million.

The Pirates appear determined to stick with the plan and play the kids, much like the 2003 Indians, a successful rebuilding effort Huntington took part in as Cleveland's assistant GM.

That sort of sensible approach is generally far preferable to giving lip service to building through the farm system, then giving guaranteed multi-year contracts to fair-to-middling free agents. But Huntington's current rehab project takes place in a much different environment. The off-season spending cut has not stirred enthusiasm in Pittsburgh, where fans have endured 17 consecutive losing seasons and begun to question the club's use (or non-use) of revenue sharing and central fund proceeds from Major League Baseball.

Attendance has fallen in each of the last three seasons. The editorial board of the Pittsbugh Post-Gazette has taken the unusual step of writing an open letter urging Pirates owner Bob Nutting to sell the team. Some in Pittsburgh have long clamored for Nutting to sell to billionaire and long-time Pirates fan Mark Cuban, who has become something of a patron saint for long-suffering fans of losing franchises everywhere. More recently, billionaire Ron Burkle and hockey Hall-of-Famer Mario Lemieux-co-owners of the NHL's Pittsburgh Penguins-expressed interest in adding the Pirates to their portfolio, but Nutting insists the team is not for sale and points out that payroll will increase as the club's core of young talent matures. Until then, the fans who make their way to PNC Park can expect more financial mismatches.

Jeff Euston is an author of Baseball Prospectus. 
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