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“Arbitration” is a word that has caused Dodgers fans to wince this winter, for understandable reasons. Back in December, the team failed to offer it to Type-A free agents Randy Wolf and Orlando Hudson, thus forfeiting the right to compensation picks in this year’s amateur draft. Amid fears about finances in the wake of divorce proceedings between owner Frank McCourt and wife Jamie, the Dodgers have eschewed the free agent market almost entirely due to the impending salary increases of eight key arbitration-eligible players. Utility infielder Jamey Carroll is their marquee signing to date; no wonder season-ticket sales are sluggish.

Last week, a scrap of good news emerged from the Dodger camp as the team agreed to terms with Matt Kemp and Chad Billinglsley, two of those arbitration-eligible players (both first-time eligibles are represented by former big-league ace Dave Stewart, whose menacing glare surely must have been worth something at the negotiating table). Billingsley, who pitched his way onto the All-Star team last summer before enduring a second half so wracked by injury and inconsistency that he didn’t make a post-season start, signed a one-year deal for $3.85 million. Kemp, who enjoyed a breakout season which saw him lead the team in WARP (7.3) and post the highest EqA of any qualifying center fielder (.304), inked a two-year deal for almost $11 million. His 2010 salary of $4 million is believed to represent a high for a center fielder in his first year of arbitration eligibility, but his 2011 pact ($6.95 million base, plus $600,000 in potential performance bonuses) is more significant.

That 2011 deal more or less represents the Dodgers’ strongest acknowledgment to date that the world will not end after the coming season, which should come as a relief to anxious fans. According to the data at Cot’s Baseball Contracts (h/t new colleague Jeff Euston), the team has just four players under contract after this year: Kemp, Rafael Furcal ($12 million), Casey Blake ($5.25 million), and Carroll ($1.925 million). The club will still have control over the seven remaining arbitration-eligible players: Billingsley, James Loney, and Hong-Chih Kuo (who will be in their second years), Jonathan Broxton, Andre Ethier, and Russell Martin (third years), and George Sherrill (fourth year).

Given the significance of those players to the team’s current and future prospects, one can understand the unease which the uncertainty over their salaries represents at this juncture. That goes doubly when one considers the pre-sale teardown that the recent divorce proceedings of owner John Moores forced upon the National League West rival Padres. Under California’s community property law, Moores and his wife split the team 50-50, requiring the sale of the club to settle the tab. The 2010 season isn’t so much of a concern for the Dodgers, given all the parts in place, but the threat that the McCourts’ divorce could force a similarly wrenching course of action still looms large, particularly when one considers the additional evidence of their tight-fisted ways.

To recap a bit more thoroughly, questions about the McCourts’ financial viability have loomed ever since their highly-leveraged purchase of the franchise, its ballpark and the adjoining real estate from News Corporation in 2004. Yet they’ve actually gotten considerably more bang for their buck than their predecessors did. Consider the contrast between the two periods, which both neatly encompass six seasons:

Years       Win Pct    Playoff G    Payroll%*    Avg. Attendance
1998-2003   .524 (11)     0 (19T)    149% (3)    3.08 million (6)
2004-2009   .528 (7)     23 (7)      125% (6)    3.70 million (2)

*: Percentage relative to MLB-average Opening Day payroll

The numbers in parentheses are their ranking among the 30 teams. Weighted down by a dismal 71-91 record in 2005, the Dodgers’ overall winning percentage hasn’t improved much across the past six years. But they’ve made four trips to the postseason, three of them in the past four years, the last two to the National League Championship Series on the heels of their first post-season series victories since 1988-terra incognita during the Foxies’ reign. They’ve done so while spending relatively less on payroll and improving their already-robust attendance.

The Dodgers’ winter of discontent began when news of the McCourts’ separation hit the day before the team opened last year’s NLCS. By the end of the month, Jamie McCourt had been fired from her job as the team’s CEO and had filed for divorce, with the messy details of their acrimonious split turned into tabloid fodder. In early November, Frank McCourt asserted the validity of a post-nuptial agreement placing the team in his name and the couple’s property in hers, thus raising the possibility that the franchise might not need to be sold.

Even so, many off the team’s actions have suggested otherwise. Neither Wolf nor Hudson was expected to return to the Dodgers, so offering them arbitration appeared to be a no-lose proposition. Both had signed incentive-laden one-year deals last February, when general manager Ned Colletti took advantage of the winter’s frigid free agent market to fill glaring holes in the infield and rotation. Wolf’s strong work (11th in the league in SNLVAR via personal bests for starts, innings and ERA+) positioned him as the second-best starting pitcher on the free agent market behind John Lackey, eventually netting him a three-year, $29.75 million deal from the Brewers. Hudson earned All-Star honors, but his late-season fade and subsequent benching in favor of Ronnie Belliard drew incendiary comments regarding manager Joe Torre, thus burning his bridge back to Chavez Ravine.

By foregoing the arbitration offers, the Dodgers sacrificed easy gains of two first-round picks and two sandwich picks, the values of which were estimated at $9 million and $3 million apiece by Nate Silver back in 2005. Such picks cost significant bonus money, but it’s nonetheless alarming that a team would forgo $24 million (or more) in potential future value for the price of $4-6 million worth of investments in 2010. Just as troubling is the fact that they’ve paid a major-league low $8.5 million in signing bonuses over the past two years, according to Baseball America, and that they’ve squandered their long-held advantages in Asia and Latin America by cutting back to just two big-bonus ($100,000 or more) signings in that span.

Meanwhile, the Dodgers have routinely surrendered better prospects in key mid-season trades than they might otherwise have to in exchange for remaining more or less payroll-neutral. Catcher Carlos Santana (the Indianstop prospect, traded as part of the Blake deal in 2008) and third baseman Josh Bell (the Oriolessecond-best prospect, traded as part of last summer’s Sherrill deal) are only the most prominent of this bunch. As strong as the team’s scouting and player development system under Logan White has been in recent years, that’s an alarming burn rate, especially given that they lowered their Opening Day payroll by $18 million last year, saved an additional $8 million in compensation via Manny Ramirez‘s suspension and just shed $30 million worth of contracts via this year’s free agency crop. Oh, and they also saved another $8 million in 2010 and 2011 commitments by foisting Juan Pierre on the White Sox. Of course, between the departed Pierre and Andruw Jones, they’ve got enough deferred money on the books that their year-end payroll actually rose from $125.8 million to $131.5 million, even allowing for Ramirez’s suspension (h/t Maury Brown).

In the face of all of that cost-cutting, one can see where locking in Kemp, if only for one extra year, counts as progress. The team has reportedly discussed two-year deals with Broxton, Ethier, and Loney. They may move closer to such pacts once arbitration figures are exchanged today, though the latter rebuffed the initial overture, hoping to rebound from two years of sub-par production (a combined 3.1 WARP, -9 Runs Above Position at the plate, -3 Fielding Runs Above Average). The conventional wisdom is that the Dodgers should thank their lucky stars that Martin similarly spurned such a multi-year offer two years ago, though his numbers since then (9.6 WARP, +32 RAP, +19 FRAA) aren’t nearly so bad as one might have suspected. Even during his down 2009, in which he hit for a .256 EqA, Martin still totaled 3.8 WARP on the strength of his defense (+12 FRAA), trailing only Joe Mauer (8.8 WARP), Yadier Molina (5.7 WARP) and Brian McCann (4.0 WARP) among major-league catchers.

Despite all the talk of this crop of baby blues, it is worth noting that the team’s strong showing last year had less to do with the performances of their young and largely homegrown nucleus-not only the bulk of those arbitration-eligible players but also key pre-arbitration players like Clayton Kershaw, Ramon Troncoso and Ronald Belisario-than is sometime assumed. A couple of weeks ago, Matt Swartz ranked the 30 teams according to the WARP contributions of players in various service-time classes. The Dodgers ranked just 13th in the majors in WARP received from non-market salaries (NM), players either in their pre-arbitration or arbitration-eligible years. On the other hand, they ranked third in the majors in WARP received from auction-market salaries (AM), players with enough service time to be eligible for free agency or to have come from Japan or other foreign markets:

Team         NM     AM     Tot
Yankees     18.6   46.3   64.9
Cardinals   24.1   32.2   56.3
Dodgers     29.4   31.7   61.1
Cubs        21.2   24.0   45.2
White Sox   20.8   19.4   40.2
Red Sox     35.7   18.6   54.3
Astros      13.9   18.0   31.9
Braves      38.4   17.6   56.0
Mets        18.4   16.9   35.3
Mariners    23.0   16.4   39.4
Angels      31.9   16.2   48.1
Giants      26.7   16.0   42.7
Blue Jays   30.9   14.1   45.0
Rockies     37.9   12.4   50.3
Brewers     27.9   11.9   39.8
Reds        26.6   10.0   36.6
Twins       37.3    9.9   47.2
Phillies    40.2    9.5   49.7
Tigers      29.9    9.1   39.0
Rays        39.1    8.7   47.8
Rangers     34.3    8.3   42.6
Orioles     21.1    7.8   28.9
Nationals   17.8    7.3   25.1
D'backs     28.8    6.1   34.9
Indians     26.9    5.4   32.3
Athletics   32.8    4.2   37.0
Pirates     20.8    2.6   23.4
Royals      25.5    1.5   27.0
Marlins     39.6    0.1   39.7
Padres      28.3   -0.1   28.2

While the Dodgers received more value from their non-market players than three of their four NL West competitors (all except the Rockies), their advantage over the Giants, who received the least value from such young ‘uns, amounted to less than three wins. On the other hand, the Dodgers got nearly as much value from their auction-market players as the rest of their NL West competitors combined. Of their eight most valuable players according to WARP, five (Hudson, Blake, Furcal, Ramirez, and Wolf) were free-agent signings.

Despite the hand-wringing over their winter inactivity, that chart above only underscores the Dodgers’ position with regards to the competitive ecology of the NL West. During the McCourt era, they’ve been able to capitalize on their large-market resources in a division where the other four franchises have been increasingly hamstrung by payroll concerns and unable to field winning teams with consistency. The Dodgers finished first in the league in attendance five times during the 2004-2009 span and only once were they outspent by a division rival. While that alone guarantees nothing, it helps explain why they were the only team in the division to post a winning record and one of only two to spend an above-average amount on payroll:

Team         Payroll% (Rank)  Win Pct
Dodgers           125 (6)      .528
Giants            107 (14)     .487
Diamondbacks       80 (18)     .459
Padres             76 (22)     .497
Rockies            74 (25)     .480

Still, it’s not as though the Dodgers can depend upon such good fortune in the free agent market in perpetuity. The 36-year-old Blake is coming off a career year, the going-on-38-year-old Ramirez off a late-season showing which may portend a more permanent decline, though as Freud said, sometimes a slump is just a slump. The voids left by Hudson and Wolf are at this juncture filled by young and largely untested options as Blake DeWitt is the likely second baseman, with an assist from Carroll, while Scott Elbert, Josh Lindblom and James McDonald will compete for at least one of the rotation’s two open spots.
With no impact free agents on the way, the Dodgers’ Opening Day payroll is unlikely to top last year’s $100 million mark. While it’s important that the team start solidifying its talent base for the future, realizing some savings in buying out pre-arbitration years and calming a nervous fan base, it is incumbent on this crop of arbitration-lings to give the Dodgers their money’s worth. And then some.

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The Dodgers are quickly taking care of business this morning. According to the twitscape, they've signed one-year deals with Sherrill ($4.5M), Loney ($3.1M) and Kuo ($950K).
And the hits keep coming. Russell Martin, one year, $5.05 million. Two-year deals with Ethier and Broxton, dollar amounts pending.
Ethier's two-year deal is for $15.25 million with additional incentives, Broxton's for $11 million, presumably with incentives attached as well.
Jay, do you foresee more successful bargain bin scraping by Colletti in the weeks before spring training? If so, who would be the best fits?
It would be tough to be more successful than Colletti was last year on that particular front. At this point I do expect him to sign at least one more starting pitcher. Whether that's higher-ceiling injury-related flier like Erik Bedard or Ben Sheets, or a lower risk (healthwise) innings guy like Jon Garland or Doug Davis, I don't know. I think they're more likely to go the latter route and also wind up with Chien-Ming Wang as a reclamation project given the Torre connection, but that's just a guess.
Many observers have mentioned the Torre connection in relation to ex - Yankee's but I've yet to actually see one show up other then in the coaching ranks.

Given the Schmidt fiasco I'd be shocked if Ned goes for Bedard or Wang. Sheets can prove he's healthy today, those two can't.
Excellent job Jay.

Based on those signing and Eric Stephens Payroll spreadsheet at TBLA the Dodgers should have around $8 - 10 Million to spend on a pitcher and still stay under a $100 Million Payroll.

A little more cost certainty in 2011 with Broxton, Andre, and Kemp now under contract for 2011. Martin and Loney will have 2010 to prove they deserve more in 2011 or risk being replaced as this is the last year they will be bargains.

The Jacksonville group has made out just fine. Wish you could have joined us JtD, instead of becoming one of the decades biggest busts.
I disagree with the idea that Hudson wouldn't have accepted arbitration. He most likely would have and would be due a raise. And would Wolf really be off the market right now were he not free? I don't think we can say that either. I think Collett is rather more justified with a little hindsight. The Dodgers can do better than those 2 for a lot less.
I tackle this question as part of today's piece:
Wang Chung soundtrack FTW.
Great piece. I'd love to see the NM v. AM chart over a three- or five-year span.

More pressing for the Dodgers: As of today, can they still win the NL West?
I'd ask Matt Swartz if he's produced the NM v. AM data over longer ranges of time - it's his baby.

As for the Dodgers, I think that if they can find one more patch for their rotation, yes, they have a very good chance at winning the West. Their offense is clearly the best in the division, with half the lineup in the age 25-29 "prime" window. Their bullpen should be the best as well. The rotation has a ton of upside at the front end but really needs some bulk innings, which is why a Jon Garland or Doug Davis makes sense (see today's piece by Eric Seidman).
Scratch Davis from the list, as he's agreed to a deal to return to the Brewers: $4.25 million base, with a $6.5 million mutual option for 2011 and a $1 million buyout. And while it's not an apples-to-oranges comparison with the reliever Sherrill, it's worth noting that he's averaged 2.2 WARP per year for the past five seasons.
Somebody hand me a step ladder, pronto! Vicente Padilla is the Dodgers' new marquee free agent at one year, $4 million.

I don't hate the deal on its face because the low cost doesn't preclude further expenditures down this avenue, but wow, that's a lot of faith placed in the small samples of his on- and off-field behavior last fall.
Actually, I seem to have missed the fact that Matt did a three-year follow up here.
$4.5 million for Sherrill? I don't like it.
It's only for one year....he'll be fine as the team's primary setup guy.
Sherrill is nothing more than a loogy. He shreds lefties, gets shredded by righties. at $4.5 M he is grossly overpaid.
Dodgers FAIL again.
Shredded by Righties? Sure he's certainly better against LHB but he had a .244 BAA and .696 OPS for Sherrill in 2009. That's comparable to guys like Fuentes and Mike Gonzalez. Are they LOOGYs too?

Sherrill is good enough to escape the LOOGY tag.
Taking a larger sample size, his three-year splits (2007-2009) against righties are acceptable but not outstanding: .242/.333/.376 (439). His performance against lefties in that span is a knockout: .156/.227/.238 (264 PA)

In all, his performance is good enough that his OPS+ against during that span is just 65, in a virtual tie for 14th among relievers with 150 innings in that span: link.

In that timespan he's averaged about 2.5 WARP per year. Paying him $4.5 million on a one-year deal is hardly outrageous.
You know, this is actually an endorsement for corporate ownership. after all, corporations don't get married, therefore they don't have messy divorces. It could have been worse. imagine if Frank McCourt caught Jamie with a player and then demanded that that player be released (or traded!)

Oh, dear God no. One need only look at the mistakes and miseries of the News Corp-era Dodgers relative to the McCourt-era ones for an easy refutation of that assertion.

On the heels of nearly a half-century of O'Malley ownership, the Foxies did considerable damage to the Dodger brand very quickly. McCourt, despite his underfinanced operation, has restored a lot of the luster to the brand and spruced up Dodger Stadium (now the majors' third-oldest park behind Fenway and Wrigley, amazingly enough) considerably.
I was concerned over Sheehan's departure. Articles like this make me feel a lot better about the state of the BP union. Bravo.
After a closer look at Sherrill's numbers, perhaps I was a bit hasty with the LOOGY tag. I still think Torre and the Dodgers would be best served using him primarily as a lefty specialist though.