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January 24, 2011

Contractual Matters

A Brief History of Contract Recycling

by Jeff Euston

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Toronto general manager Alex Anthopoulos pulled off nothing short of a financial coup late Friday in getting his club out from under the taile end of Vernon Wells’ staggering seven-year, $126 million mega-deal. The Blue Jays still owed Wells $86 million through 2014 under the contract, which was signed under the J.P. Ricciardi administration. When you consider Anthopoulos successfully navigated around Wells’ full no-trade clause and apparently did not include any cash in dealing the outfielder to Anaheim, the trade just might be the most impressive salary dump ever.

Well, “dump” might be too strong a word. As Eric Seidman pointed out in March, value and talent are two distinct things, and Wells still has skills, as evidenced by his .291 TAv and 4.2 WARP marks in 2010. So maybe “recycling effort” is a better term. In Juan Rivera and Mike Napoli, Toronto took on about $11 million for 2011, leaving the club a net windfall of roughly $75 million. That means the Jays wound up paying Wells an almost-affordable $40 million over his contract’s first three seasons. And you thought the bailout era was over…

Bad contracts are inevitable. The market shifts, circumstances change, the injury bug bites. Sometimes the fit is just not there any longer. But assuming the player is still upright and holds some value, laundering a bad deal through a trade is usually preferable to riding it all the way to the end. Here, then, is a brief review of active players under contract who became centerpieces in trades or waiver claims with the largest financial implications in recent years.

Alex Rodriguez, $179 million
The Rangers owed Rodriguez $179 million in salary over seven more years when they shipped him to the Yankees for Alfonso Soriano and Joaquin Arias after the 2003 season. To get the deal done, Texas agreed to kick in $67 million, with the Yankees assuming responsibility for $112 million—an annual average of just $16 million, a relative bargain for one of the game’s premium players, even by 2004 standards. Sadly for New York, that arrangement remained in place for only four seasons because Rodriguez exercised his right to opt out of the deal. When A-Rod is pulling down $20 million in his age-41 season in 2017, the Yankees can at least take heart in the fact they were underpaying him those first four years in the Bronx.

Mike Hampton, $84.5 million
For three days in December of 2000, Hampton was baseball’s highest-paid player. After helping lift the Mets to the 2000 World Series, Hampton signed an eight-year, $121 million free-agent deal with the Rockies, only to see his contract dwarfed later the same week when Texas signed A-Rod to his record $252 million deal. Hampton was skewered for lauding the Denver-area school system as one of his motivations for inking the deal in his introductory press conference, and his stay in Colorado went downhill from there. With nearly $85 million left to pay after two forgettable seasons, the Rockies packaged Hampton with Juan Pierre and shipped the pair off to the Marlins, who flipped Hampton to the Braves. As part of the deal, Colorado acquired Preston Wilson and Charles Johnson, who had dubious high-cost contracts of their own. The Rockies paid at least a portion of Hampton’s salaries for each of the next six years and remain responsible for $19 million of his deferred signing bonus, which is to be paid out from 2009 through 2018.

Alex Rios, $59.7 million, and Jake Peavy, $56 million
A general manager spending $100 million during one offseason might fairly be described as aggressive. A GM taking on $115 million in late July and early August is, well… Kenny Williams of the White Sox. With his club struggling to keep pace with the Twins at the top of the AL Central coming down the stretch in 2009, Williams dealt four pitching prospects for Peavy, despite the fact that the 2007 NL Cy Young winner was on the disabled list at the time. The deal—GM Kevin Towers’ last major transaction in San Diego—rid the Padres of pricey eight-figure salaries in each of the next three seasons and helped spur the club’s turnaround in 2010. Williams then put in a waiver claim on Toronto’s Alex Rios, who was in just year two of a seven-year, $69.835 million contract. Rather than dawdle over details like what Chicago might offer in return, then-Toronto GM Ricciardi simply let Rios go for a $20,000 waiver fee, getting the Jays off the hook for nearly $60 million.

Jim Thome, $43.5 million
When the Phillies signed Jim Thome away from the Indians as a free agent after the 2002 season, 23-year-old Ryan Howard was preparing for a season at High-A Clearwater, just his second full season as a pro. Three years later, Howard was mashing in Philadelphia, making Thome expendable. In his first major move as the Phillies GM, Pat Gillick shipped Thome and about $22 million to the White Sox in exchange for center fielder Aaron Rowand and two prospects. Thome spent four productive seasons DHing on the South Side at a relatively affordable price of about $14 million a year, and Gillick had neatly cleared a spot for a future NL MVP.

With Friday’s trade, the Blue Jays have now cleared their books of eight-figure obligations to Wells, Rios, Roy Halladay, and B.J. Ryan, remaking their financial outlook in a span of about 16 months. That’s one impressive recycling drive.

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:  Alex Anthopoulos

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