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January 3, 2011

Contractual Matters

A Texas-sized Payroll Leap

by Jeff Euston

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Four days before Christmas, the commissioner’s office quietly distributed final 2010 payroll figures for the 40-man rosters of all 30 clubs in Major League Baseball.

The simple list of teams and dollar amounts (reproduced below) was not particularly noteworthy. The Yankees topped the list, as they did on Opening Day. The Pirates and Padres trailed the rest of the field by a considerable margin.

The surprising number came from the middle of the pack, where the final payroll tally for the Rangers came in at $74,302,980, good for 22nd overall. By themselves, those two figures are not remarkable, except in comparison to where American League champions had started.

The Rangers’ payroll for the 25-man roster on Opening Day was widely reported as $55 million. Add money committed to Kevin Millwood—shipped to Baltimore last offseason along with $3 million—and the figure was north of $58 million, which ranked 26th in baseball.

Admittedly, it’s not a straight-line comparison. Opening Day figures are usually limited to players on 25-man roster, while year-end numbers include the entire 40-man roster as well as bonuses and buyouts. But the in-season spending jump for Texas represented baseball’s largest leap in raw dollars (about $16 million). That would not be especially surprising, either, except for the minor detail that the Rangers spent more than two months of the 2010 season in bankruptcy.

On May 24, with Texas holding a two-game lead in the American League West, the team filed for Chapter 11 protection. The Rangers then received a loan of $21.5 million from Major League Baseball to remain solvent during the bankruptcy proceeding, on top of an additional $18.45 million in MLB loans since 2009.

Despite financial concerns and an uncertain ownership situation, the Rangers proceeded to operate as buyers as the July 31 trade deadline approached—albeit buyers with a low credit limit. Texas acquired catcher Bengie Molina from San Francisco on July 1, with the Giants sending about $2 million to the Rangers as part of the deal. The extra cash left the Rangers to pay only about $250,000, just slightly more than the major-league minimum salary, pro-rated for the remainder of the season.

By early July, Texas had expanded its lead to 5 ½ games, the largest margin for any division leader in baseball. On July 9, general manager Jon Daniels landed the most sought-after property on the market. He dealt a package of four prospects headed by first baseman Justin Smoak to Seattle in exchange for lefty ace Cliff Lee and reliever Mark Lowe. The new acquisitions had about $4.7 million remaining on their contracts (roughly $4.2 million for Lee and $500,000 for Lowe). But the Rangers received roughly $2.5 million from the Mariners in the trade, adding about $2.2 million to the Texas payroll.

Infielder Jorge Cantu joined the Rangers in a trade from Florida three days before the July 31 trade deadline. The Marlins paid $600,000 of the roughly $2 million left on Cantu’s 2010 deal, putting the cost to Texas at $1.4 million.

One final addition, infielder Cristian Guzman, came at a cheaper price. The Nationals agreed to kick in $2 million in shipping him to Texas on July 30, leaving the Rangers to pay only about $670,000 of his remaining salary.

All told, the Rangers took on about $4.52 million in salary to add Lee, Lowe, Molina, Cantu, and Guzman—all before the group led by Chuck Greenberg and Nolan Ryan won control of the team in August at auction in bankruptcy court. (The August 31 deal that brought outfielder Jeff Francoeur to Texas was a financial wash, as the Mets agreed to pay the remainder of his 2010 salary with the Rangers paying the freight for Joaquin Arias, who was shipped to New York in the trade.)

But Texas also paid out cash for roster and performance bonuses, as well as buyouts for unexercised options. For example, right-hander Colby Lewis reached performance milestones for innings pitched and starts. Vladimir Guerrero earned an additional $900,000 for managing to stay on the active roster during the 2010 season. The Rangers then paid Guerrero a $1 million buyout when the club declined its half of his 2011 mutual option. The club also paid a $1 million buyout to pitcher Rich Harden. Factor in late-season promotions for minor-league players like Alex Cora, Esteban German, and Clay Rapada, and you get a sense of how the Texas payroll ranking jumped from 26th on Opening Day to 22nd by year’s end.

The Rangers’ drive to a division title and the AL pennant was one of 2010’s best stories. But in an industry where the wise use of limited resources can be the difference between a good season and a great season, Texas enjoyed a generous boost from the commissioner’s office. It’s all a far cry from the plight of the 2003 Montreal Expos, wards of the MLB state, who were tied for the National League wild-card spot in late August but could not promote players from the minors in September because of cost concerns.

Rank

Club

2010 Year-end Payroll

1

Yankees

$215,053,064

2

Red Sox

$170,650,856

3

Phillies

$145,539,931

4

Cubs

$142,410,031

5

Tigers

$135,913,308

6

Mets

$127,560,042

7

Angels

$123,478,263

8

White Sox

$112,197,078

9

Dodgers

$109,753,719

10

Twins

$103,039,407

11

Giants

$101,417,943

12

Cardinals

$98,354,244

13

Brewers

$94,554,209

14

Mariners

$93,376,107

15

Astros

$90,119,188

16

Braves

$89,226,985

17

Rockies

$87,974,390

18

Blue Jays

$86,803,549

19

Reds

$82,451,340

20

Rays

$77,510,502

21

Royals

$76,781,350

22

Rangers

$74,302,980

23

Orioles

$73,231,289

24

Nationals

$71,937,323

25

Diamondbacks

$70,531,163

26

Athletics

$61,773,644

27

Indians

$60,500,460

28

Marlins

$47,331,979

29

Pirates

$44,146,967

30

Padres

$43,654,177 

Jeff Euston is an author of Baseball Prospectus. 
Click here to see Jeff's other articles. You can contact Jeff by clicking here

Related Content:  Texas Rangers,  Rangers,  Buyers,  Texas

16 comments have been left for this article. (Click to hide comments)

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Sacramento

I wonder if a salary *floor* should be included in the next CBA.

Jan 03, 2011 02:02 AM
rating: 0
 
baserip4

No.

Jan 03, 2011 05:47 AM
rating: 1
 
fatted

I'm surprised how "little" of that jump in team salary is due to the players they acquired. Only about 30% of the 16 million increase is due to the acquisitions you listed.

What is the highest increase in-season ever? I'd assume it was the Yankees when they traded for A-Rod, but I know Texas paid for a large amount of that contract.

Jan 03, 2011 05:50 AM
rating: 0
 
Taldan9
(107)

When Selig goes into the Hall of (In)Fame(y), he should wear an Expo's hat. It's so clear Bud just didn't want to save baseball in Montreal, for no good reason. As a faithful Expo fan, I just despise Selig and his used car mentality.

Jan 03, 2011 08:28 AM
rating: 4
 
SC

RIP Youppi.

Jan 03, 2011 12:17 PM
rating: 1
 
ScottyB

To play devil's advocate (though I largely agree with you): What is better for baseball- a small market team with tiny local revenues in Montreal or a team in Washington DC?

Jan 03, 2011 12:44 PM
rating: 0
 
Taldan9
(107)

I don't think it is a choice between Washington and Montreal. Destroying baseball forever in Montreal cannot be in the best interests of baseball. Anyone who saw the crowds and the intense interest in baseball from 1969-1994 in Montreal would know that. Selig buried his strike errors by burying the team he ruined in 1994, the 1994 first-place team with top attendance, to make a deal for his friends in Washington and in Montreal, screwing baseball and the public, just like the small time car dealer he is. Long live Youppi!

Jan 03, 2011 13:59 PM
rating: 3
 
Richie

ARod was not acquired in-season.

Jan 03, 2011 09:04 AM
rating: 1
 
stevejbr

MLB has to find a way of implementing Revenue sharing. It's worked fine for the NFL. I realize individual team media markets vary greatly but with more parity will come more interest.

(And this is from an ardent Red Sox fan).

Jan 03, 2011 10:06 AM
rating: -1
 
SC

MLB has revenue sharing, and has been using it for more than a decade.

In addition to sharing all national revenues (primarily from the TV contracts) unevenly so small markets get more of that, all teams pay in 31 percent of their local revenues and that pot is split evenly among all 30 teams. Since the Yankees generate a lot more local revenue than the Marlins, they pay into the system.

The vast majority of the NFL's revenues come from their national TV contract, which is distributed evenly among the 31 teams. The majority of MLB clubs' revenue is local (tickets and local TV). They don't share all of that because it would create a major disincentive for clubs to innovate and profit maximize.

More revenue sharing doesn't equal more "parity" anyway. The Reds (19th) and Rangers (22nd) did just fine under the current regime, while the Mets and Dodgers and Cubs and Tigers spent tons of money very ineffectively.

Jan 03, 2011 12:16 PM
rating: 0
 
Richie
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Of course more revenue sharing would lead to more parity. Feel free to make whatever other arguments against it you want. But of course a hard cap (and floor) a la the NFL would lead MLB in the direction of NFL-style parity.

Jan 03, 2011 12:36 PM
rating: -5
 
SC

"Of course"? How about you make an argument in support of your point beyond "of course"?

First, define parity. Is it a reduction in deviation from the mean (so more teams will be closer to 81-81 in a system with more parity)? Or simply that different teams win the division each year? Or that more teams are capable of producing a winning record?

Once you've done that, apply your definition to the last 9 seasons (2002-2010, with revenue sharing) and the previous 9 (1992-2001). I don't have a ton of time to look through it all, but I think the last 10 years the richest clubs (Yankees, Red Sox, Dodgers) have been a lot more successful than they were in the pre-revenue sharing period.

So the anecdotal evidence I've come up with suggests that revenue sharing does nothing to increase parity. Pirates and Royals' records would also support this.

Just looking at division winners over the last 10 years, in the AL East, one club won the division in 7 of 9 years (Yankees). In the AL Central it's 6 of 9 (Twins). AL West: Angles won 5 of 9. NL East: 4 Phils, 4 Braves, both in succession. NL Central: Cardinals 5 times, Cubs 3.

Only in the NL West is there any semblance of parity, with each non-Rockies team winning the division three times.

Over six divisions in nine seasons, there are a total of 54 division winners. Yet since revenue sharing has been implemented, supposedly to increase parity, just six teams have won the division 57% of the time (31/54). Doesn't sound like parity to me.

NFL parity is also strongly driven by their uneven scheduling. The worst teams play the easiest schedules the following seasons, ensuring that some of the bad teams dramatically improve their records. Such a system can't be implemented in baseball.

Jan 03, 2011 12:57 PM
rating: 1
 
jlefty

Comparing parity of the NFL to MLB based solely on payroll structures and revenue streams is a fool's errand.

The sports are so incredibly different in so many other ways: MLB's season consists of roughly 10 times as many game (meaning we can be far more confident in a teams W/L record approximating their talent level), the difference in impact and timing of top draft picks, the scheduling, etc.

Jan 03, 2011 13:41 PM
rating: 0
 
Richie
Other readers have rated this comment below the viewing threshold. Click here to view anyway.

Parity defined as every sports fan other than one trying to frenziedly win an argument point defines it. Varying teams winning, year-in and year-out. If this doesn't fit whatever jargon you're using, then start off your posts with a glossary.

Half of last year's NFL division winners finished last this year. Which isn't that odd, leastwise in terms of record variance. Can you find an NFL observer who thinks revenue equalization doesn't factor in to teams having much more equal shots?

If you want to redefine parity so as to show you're smarter than the remaining 99.48% of us simpletons, feel free. But do so upfront, else I'll figure you're using the same language the great mass of us are using.

Jan 03, 2011 15:13 PM
rating: -4
 
FLeghorn

I'm noticing in quite a few threads that this 'Richie' guy can't help but sound like a condescending asshole in every one of his responses.
Do the world a favor, and put a sock in it. You're not nearly as interesting or smart as you, alone, seem to think.

Jan 03, 2011 20:25 PM
rating: -1
 
wonkothesane1

Didn't the 2001 Diamondbacks do something similar WRT borrowing money? I don't think they increased the payroll though.

Jan 03, 2011 22:27 PM
rating: -1
 
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