Teams had until Monday to decide whether to offer their free agents arbitration. As I’ve written before, I consider this to be something of a bright-line test of competence for an organization, as the risks and rewards are clear, and in almost all cases favor making the offer. Article XX, Section B(3) of the current CBA (thanks, Maury) states:
The former Club of a free agent, no later than by the December 1 following the free agency election period, may offer to proceed with the Player to salary arbitration under Article VI of this Agreement, for the next following season. The Club’s offer shall be communicated to the LRD, which shall notify the Association in writing. Said offer shall be effective upon receipt by the Association and the Club will not be permitted to retract the offer. If the former Club of the free agent does not so offer, it shall lose all rights to compensation under Section B(4) of this Article XX with respect to that free agent.
On or before December 7, the Player may accept the Club’s offer to arbitrate. The Player’s acceptance shall be communicated to the Association, which shall notify the LRD. The Player’s failure to accept the Club’s offer on or before December 7 shall be deemed to constitute rejection of the offer.
If the Player accepts the offer to arbitrate, he shall be a signed player for the next season and the parties will conduct a salary arbitration proceeding under Article VI; provided, however, that the rules concerning maximum salary reduction set forth in Article VI shall be inapplicable and the parties shall be required to exchange figures on the last day established for the exchange of salary arbitration figures under Article VI.
The choice for the club is pretty simple. If the player is valuable enough to warrant a one-year contract, offer him arbitration. You will get draft-pick compensation if he signs elsewhere, and if he does not, you will have a good player signed to a one-year deal. Remember that the risk in signing free agents is almost always performance after the first season; we generally have a good handle on what any player might do the next year, so evaluating whether you want any player for one year is simply a matter of estimating performance and salary. The Venn diagram that shows “players who are good enough to return a draft pick” in one circle and “players who wouldn’t be worth signing to a one-year deal at an arbitrated salary” intersects in a very, very tiny space.
The Yankees made a mistake by not offering arbitration to either player, the biggest mistakes any team made in this round of decisions. For a team with the Yankees’ revenues, especially as they move into an ATM with foul poles, to decline the services of above-average players or draft picks in the event of their departure is a stunning waste of resources. Bobby Abreu projects as a five- or six-win player, Pettitte a bit below that. Even if you account for the fact that the Yankees may not have much room to grow marginal revenues for the next two years or so, those wins are valuable because they could be the difference between making the postseason and missing it.
Certainly there’s no baseball reason to not want either player. In Abreu’s absence, the Yankees nominally have an outfield of Xavier Nady, Johnny Damon, Melky Cabrera and Hideki Matsui, with Nick Swisher at first base. Abreu is better than all of those players, and if having him would create a logjam, it does so by forcing inferior talent to the bench, the waiver wire or the trade market. Pettitte was the team’s #3 starter last year, and would project as the #4 even if the Yankees were to sign multiple starters in the free-agent market.
All of that assumes, of course, that the players accept arbitration, foregoing multi-year contracts at market salaries to take a one-year contract with the Yankees. The more likely scenario is that both players would sign elsewhere (or in Pettitte’s case, retire), allowing the Yankees to collect two draft picks for each, either a #1 and a sandwich pick or a #2 and a sandwich pick. Even with the Yankees’…mixed…record in the draft of late, forfeiting the right to those picks is an enormous waste.
Two days ago, the Yankees had assets in Abreu and Pettitte that could have been considered short-term investments with minimal risk and fairly certain benefit (were they to rejoin the club), or long-term investments with more risk and uncertain benefit, but higher upside (were they to become draft picks). Now, they have nothing. How a team with the cash reserves of the Yankees can make a choice like that is inexplicable, and recalls the decision to forego the services of Carlos Beltran three years ago, a decision also motivated by short-term cash concerns.
The inability to balance risk and reward wasn’t restricted to the Bronx. By my count, there were 50 Type A or Type B free agents, one of whom, Jeremy Affeldt, had already signed and will be treated as if he were offered arbitration. That left 49 who could have been offered arbitration, and just 24 were. Of those 24, just five strike me as possibly questionable, and at that, I’m not sure you can criticize any team for rolling the dice on getting the draft pick. Casey Blake, Paul Byrd, Darren Oliver, Dennys Reyes and Brian Shouse are all marginal talents that could accept the offer, but only Blake and maybe Byrd would make enough in arbitration to outweigh their 2009 contributions or make eating their contract painful.
On the other hand, the list of players who were not offered arbitration includes a whole bunch of guys in the same situation as Abreu and Pettitte. The Phillies punted Pat Burrell and Jamie Moyer, both Type A free agents, in a situation identical to that of the Yankees. They have the money and the absence of the players is not easily rectified. Having both on one-year deals would have been a solid solution, and giving up the shot at draft picks is a waste. The Diamondbacks may not be terribly attached to Adam Dunn, but as much as they need his OBP, they should have dangled arbitration. See also Johnson, Randy, given their questions behind Brandon Webb and Dan Haren in the rotation. The Cubs allowed Kerry Wood-arguably the perfect pitcher to have one year at a time, given his health history-to walk.
You can’t even argue any longer that these decisions freeze a team. A player offered arbitration has until just December 7 to accept or decline, allowing a team to go to the winter meetings without uncertainty. Moreover, the player can be traded at midseason (beginning June 16), and sooner should you get his permission. Theres is simply no reason, even given the externalities present, for teams to be as risk-averse as they were in this process. The risk isn’t great enough, and the reward is considerable.
So credit the Dodgers for offering arbitration to Derek Lowe and Manny Ramirez, and the Brewers their decision to offer it to Ben Sheets and CC Sabathia, and the Angels to Francisco Rodriguez and Mark Teixeira. Even if those players accept, and even if that creates a higher payroll in the short term, no MLB team has to be so concerned with cashflow that it can’t accept having good players on one-year deals. The more likely scenario is that these teams will reap the benefits of their decision down the road, when the players they take with the draft picks they get as compensation begin contributing, or becoming valuable properties in trade.
Joe, do you believe the Tigers made a mistake in not offering arb to Renteria? I have thought so....it seems enough clubs have interest that they could have at least traded him if they had been stuck w/him upon him possibly accepting the arbitration. Detroit's system really could have used a shot at getting those compensatory picks. Plus if they end up with Jack Wilson at his money is that any different then having Renteria at his arb-figure next year?
Renteria strikes me as someone who could've gotten an arb-figure much higher than what he's worth. Much of which you might have to swallow if you do subsequently dump him. I guess we'll see when he signs for however much, but Edgar's one case I could certainly see just flat-out declining.
I have to think the economy is playing a not-small factor here for a lot of clubs (probably not the Yankees). This is probably doubly true in Arizona, who may still be paying millions in deferred salaries from the early 2000s teams.
I strongly disagree with the article concerning the Yankees. The Yankees may be flush with cash, but it doesn't mean that they should overpay drastically when they don't have to. Abreu is coming off of a $16 million salary and would likely make at least that in arbitration. He will be lucky to get $16 million for TWO years on the open market. It seems like the Yankees (if they wanted to keep Abreu could do it for a lot less than offering him arbitration and having him accept.
Pettitte is in a similar case, but maybe not as extreme. The Yankees don't value him at his 2008 salary of $16 million, which is at least what they would have paid him if Pettitte were offered and accepted arbitration. I'm not sure I see a team giving Pettitte $16 million either, meaning he may just return to the Yankees eventually for the $10 million reported offer the Yankees have already made him.
I had bought Joe's analysis lock, stock and barrel regarding the 2 Yankees. But mentioning this, you do have a point. Do arbitrarors take current salary into account when deciding how many $$$ to assign? If so, then this does point to declining to arbitrate guys you badly overpaid last year.
I would have to agree with you regarding Pettite. He'll either retire or take less money to stay with the Yankees. Why offer arb to bind yourself to pay millions more than you need to?
And this article doesn't even mention the fact that, since it's the Yankees, if they'd gotten the draft picks, they could have drafted guys with higher salary demands and brought far more talent into their organization.
For Pettitte and Abreu, the team could have had 4 "above slot" guys added to their system. Sure, lately the Yankees have been drafting guys like Brackman, but this move is just so shortsighted.
This is something the Giants would have done 5 years ago.
"Bobby Abreu projects as a five- or six-win player, Pettitte a bit below that."
Where are these tabulations coming from? Abreu is a terrible defender for a corner outfield position with a declining bat. Everything I've seen pegs him as more of a 2-3 win player. Could you elaborate on how you arrive at that conclusion.
PECOTA's projection isn't likely to go up from last year significantly and his projected VORP was under 30 for 2009 (not to mention he's a bad outfielder defensively). I'd like to know where these extra 3 wins are coming from.
could you expand on these numbers? In my own calculations, Abreu's defense makes him more of a two win player, but I don't know the WARP formula very well.
WARP1 takes into account defense. The Davenport system had Abreu as 10 runs below average in right last year, which ranks him amongst the worst defensive outfielders in the game. So, if he only had an average glove, his WARP would be around 6. Say what you want about his defense, which is definitely bad, but the guy can still hit.
Right now I cannot but wholeheartedly agree with what Joe has said.
That said I do have to say that most of these FA offices are populated by very smart and savvy GMs; Cashman, Dombrowski, Byrnes and given we haven't seen any real FA signing of note unless you count Dempster's re-upping with the Cubs I have a nagging feeling the longer this goes on the smarter these guys may look for those decisions.
We do have to remember that even draft picks have a value in mind as teams are still free to get comparable talents particularly around the compensation round later in the draft if they want or invest in latin FAs
As a Phillies fan, I kind of understand the reasoning behind not offering arbitration to Burrell. Since Thome, we have avoided spending money incredibly lavishly. This year, as has been repeated by the national media over and over, we won with role players (Werth, Romero, etc).
I think the decision to not offer arbitration to Burrell is an indication that they are preparing offers to Hamels (even though he is under control for a while), Werth, and Madson, and saving the potential payout to Burrell will help secure these players for a longer term than Burrell.
I'd personally rather have Burrell than Werth, and as Joe said, if he accepted it'd only be a year. Not offering him arbitration was a mistake. As a Mets fan, I'm glad to see the Phillies make that mistake.
Role players? This is a team that had a guy who hit 48 HR's and was probably the 5th most valuable player on his team. Werth didn't win the WS for you, neither did Chris Coste.
If both Abreu and Pettitte accepted arbitration, the Yankees would be on the hook for at least $25.6 million, and more likely closer to $32 million. Is that really market value for these two guys? Nate's MORP calculation had them valued at $19.6 for 2008, which Abreu slightly overperformed and Pettitte underperformed. MORP for next year for these two would be $13.7 million.
Teams seem to be holding on to their prospects more; would they be willing to lose high draft picks to sign older players like Abreu/Pettitte? I suspect Cashman has a better handle on this than we do. Perhaps the Yankees concluded the four picks aren't worth the risk of $20 million and two roster spots.
I don't see why the conservatism. Yes, you run the risk of the player accepting for more. But how is that a problem for the Yanks and Phillies when those players are better than the alternatives? You get stuck with better players? You can't afford to sign Ryan Madson? Burrell, Dunn, and probably even Abreu are looking for and going to receive multi-year deals. I can't imagine these teams' budgets are that inflexible, or that they are so set in stone.
You get stuck with better players yes, but you are stuck with an overpaid player. If you can truly sign a player for less than what they'd get in arbitration you'd be a fool not to.
The Yanks might be saving up to bid on Teixeira and Sabathia - or they plan on resigning Abreu and Pettitte for less than they think it will cost them in arbitration.
I thought with Pettitte they may have had an agreement not to offer him arbitration. Maybe not formal, but then he's not limited. I thought one of the issues with Lohse last year was that people didn't want to give up the draft pick for him because they system had "overvalued" him.
Something not really mentioned yet is the loyalty to Pettitte. He is revered in the Yankee organization and they are willing to not interfere with his freedom. I don't know if they actually had an agreement or not, but offering arbitration would seriously curtail his options. As a follower of the Yanks, I get the impression that if Pattitte pitches next year it will be closer to Texas.
Also, I agree with the general sentiment here that Abreu kind of sucks. How many fly balls did he misplay in right? He was lousy most of the season before it got to be $$$ time. He'd be too expensive in arbitration and the risk was great he'd accept.
With all due respect to Joe and his opinions, I have to give greater credibility to the GMs involved who know their team's needs, budgets and other constraints. They are the ones answerable to the owners for the millions in salary that are at risk andIMO are the best judges of the risk-reward situation. I suspect that in the current economic environment, the balance is towards a more conservative approach in terms of offering arbitration. It does appear that salaries are likely to be lower than initially expected except for the top 2 or 3 FAs which suggests that accepting arbitration may become the more sensible option for many more players than expected.
Peter, this appeal to authority could apply to every baseball decision made. GMs aren't always the best judges for the precise reason that they are answerable to the owners.
I'm not appealing to authority but rather to the fact they they may (1) have information that we are not privy to; (2) must operate within a budget; and (3) their jobs are on the line. In economic hard times (based on what happened in the last "recession") GMs may be very justified in being more conservative than usual.
I do find that most of us are much more willing to "risk" someone else's money than our own :)
Offer good players arbitration = Expensive 1 yr rental of a good player. Which would more than likely lead to wins = more cash flow. More cash flow = better production than other alternatives and pays for his better production with gate receipts.
If the player declines = Early draft pics = Possibly 6 years of cheap talented ball players.
Joe is absolutely right. The Yankess and Phillies have no business not offering arbitration, and give credit to LA and MILW for doing so.
Can anyone explain to me the downside of offering Kerry Wood arbitration? Isn't one year of Wood at maybe 10 million better than one year of Kevin Gregg at maybe 6? Not to mention losing out on six years of Jose Ceda for the privilege? Or maybe, at worst, getting a couple picks to replace Ceda? Just seems to me that kerry wood's Type A status was an asset on the cubs balance sheet that they let expire worthless. Poor business.
The Cubs offering Wood arbitration wasn't a choice between not offering and offering with a chance that he'd take it and getting draft picks if he didn't -- the draft picks simply weren't going to happen. If they had offered it to him, I think they knew he would have accepted it.
I still don't get it though. Why not offer and keep him for another year? The guy obviously wanted to stay, and for a club chasing a championship is worth a one-year arb deal. Instead they trade for Kevin Gregg? Similar to the Yankees trading for Swisher, trading for Kevin Gregg shouldn't stand in your way of also bringing in/back a superior player. The Cubs could still really use Wood just like the Yankees could still pursue Teixeira.
As Cliff Corcoran detailed over at Bronx Banter (http://tinyurl.com/58t4qf) this past November, the Yanks (after offering CC about $24M/year) have about $32M to play with, unless they want to raise payroll. (And still have 11 unsold luxury suites at their ATM with foul poles.)
Arbitration awards for Pettitte and Abreu - both highly likely to accept, IMO, and win - would have eaten up that $32M. I think that's the reason why the Yanks didn't offer arbitration. Without getting into the "do the Yanks really have a payroll ceiling" issue, I think they made a reasonable decision.
I have two issues with Joe's otherwise-correct analysis:
1) How often does an arbitrator award a player a one-year deal that is significantly more expensive than a multi-year deal that that player would get on the free-agent market? I can see an argument for not offering arbitration, if Player A might be awarded, say, a $10 million, one-year deal, but is likely to get, say, a $12 million, two-year deal on the FA market.
2) The analysis is overly simplistic in that it ignores any inside information and/or interactions between the players and the GMs, as well as indirect concerns involving the club. For instance, having Burrell (or some other player) around on a one-year deal might be a distraction of some kind for the Phillies. I don't really see it, but perhaps the Phillies do, since they've seemingly been shopping him for eons.
In general, I think bad contracts are bad contracts. I don't think it should matter who's writing the contract, whether it be the Yanks or the Marlins or whoever. And I just don't think the Yankees want to pay $16 MM to a player that isn't worth $16 MM--even if they can easily afford it, or even if that happens to be the market price for that player. Those circumstances shouldn't matter, in my opinion. Good organizations make good deals, and good deals make good organizations. If the Yanks want to be in that category, I personally view the shunning of Abreu/Pettitte as a step in this direction.
Now, if anyone wants to make the claim that either of those players is actually worth $16 MM (even for one year under arbitration), I'd like to read that argument. But it would have to be an argument that is as applicable to a team like Cleveland (i.e. small-market, limited budget, but playoff-contending) as it is to the Yanks.
Not all draft classes are created equal. Giving away or gaining a late-first-round or early-second-round draft choice is going to be more consequential in a year with a very deep talent pool than one with a very few truly top-notch prospects and then a sea of blah guys. This must impact the decisions as to whether to offer arbitration, at least to Type A free agents.
Does anyone know what the 2009 draft is expected to look like? Kevin G, are you reading this?
The Yankees decision to not offer arbitration says to me a lot more about their financial expectations going forward than the view that this is a short term cash decision. The assumption that Joe makes that might be incorrect, is that the Yankees new stadium is an effective ATM. The increased revenue portion of that was to be primarily derived from the huge increase in luxury boxes. Considering what has happened in the industry that is the largest employer in the metro area, and by far the biggest source of demand for these boxes; I think the Yankees are likely correctly reading the tea leaves that that demand isn't going to be there or come back anytime within the next decade. Thus, considering the debt they've added to build it, I suspect that they have a much lower ceiling in terms of expenses going forward than people appreciate in baseball. The reality is that all of us are going to have to get used to a new economic reality that incorporates lower leverage and less consumption going forward for many years. The biggest losers in this year's free agency may be the teams that get too aggressive with their total expense level relative to revenues, and then start seeing a continual decline in those revenues for years to come.
Johnpark99, I respect your concepts but doesn't this speak to the whole idea that there is a greater incentive and need for a team like the Yankees than a team like Cleveland or Florida (at least this year), as you mentioned? The Yankees were an 89-win team last year in a historically tough division, moving into a potential cash cow of a ballpark this year. In order for them to bring that nascent promise into fruition, they've gotta put their best foot forward in making the playoffs- so they clearly have a wildly disparate set of needs and exigencies than the Marlins do. The incentive for them to retain players worth five or six wins such as Abreu is greater, and is different than other teams at this juncture, especially given their offensive difficulties last year. I respect the sentiment but acting like there should be no difference in the context of a deal with regards to how it is judged in the media or by fans, etc., seems more like a thing for fantasy baseball or armchair quarterbacking (both of which I adore mightily), but not real baseball. I'm just saying, while the context may be at times overvalued, to act like it should be disregarded when judging a good deal ignores the very real and potent incentive for teams on the cusp of 90-95 wins to overpay for a player, in a way that would be clearly irresponsible on the part of say, the Nationals.
1) The economy is taking a much more serious toll than you seem to believe. Not only are revenues going to decline (or increase less than forecast, in the Yankees' case), but the owners are all far less rich than they were 18 months ago, and will be unwilling or perhaps not liquid enough to carry a negative cash-flow operation for long.
2) You couldn't give us the complete list? Or a lik?
oh, so in reply to my own question...the question I want to ask is, was it an unusual number of Type A/B FAs that were not offered arbitration this year? Or is this more or less par for the course?
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Joe, do you believe the Tigers made a mistake in not offering arb to Renteria? I have thought so....it seems enough clubs have interest that they could have at least traded him if they had been stuck w/him upon him possibly accepting the arbitration. Detroit's system really could have used a shot at getting those compensatory picks. Plus if they end up with Jack Wilson at his money is that any different then having Renteria at his arb-figure next year?
Renteria strikes me as someone who could've gotten an arb-figure much higher than what he's worth. Much of which you might have to swallow if you do subsequently dump him. I guess we'll see when he signs for however much, but Edgar's one case I could certainly see just flat-out declining.