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Tuesday, April 08, 2014

Reds Payroll, Now and in the Future

With the start of the season, and in light of the Reds' latest long term salary commitment, I thought it would be interesting to take a look at the Reds' payroll for this and the coming few seasons.  First, based on this article from Deadspin, here are opening day payrolls for each team:
The Reds have pushed themselves up above the median, ranking 12th overall.  They are in a cluster of teams from the Arizona Diamondbacks (11th) through the Milwaukee Brewers (16th) that have pretty much average payroll.  This is a far cry from where the Reds used to be a few years ago, often in the lower third of payroll.

Why do we worry so much about payroll?  We hear a lot of talk about parity.  But nevertheless, there still is a clear relationship between team payroll and team quality:
There's scatter, but the regression line explains 32% of the variance between payroll and projected wins.  All but one team (the Phillies) with a payroll over $125 million is projected to win 83 or more games.  The two teams spending the least are projected to have terrible records.

Now, of course, there's a lot of scatter.  Teams spending roughly the same amount on player salaries may differ by 15 or more projected wins.  And these are just projected wins: inevitably, the relationship between actual 2014 wins and payroll will likely show even more scatter.

But the fact remains that teams that spend more, and especially those that spend more wisely, are projected to win more games.  Teams with higher payrolls can afford more talent, whether that's signing free agents or keeping their existing players.  Therefore, it makes sense to keep an eye on the Reds' payroll.

Here are the Reds' current payroll commitments for 2014, as well as the subsequent two seasons.  All data are from Cot's Contracts.

Reds 2014-2016 Payroll Commitments

NamePOSML SrvLength / Total Value201420152016
Votto, Joey1b6.02710 yr/$225M (14-23)$12,000,000$14.00$20.00
Phillips, Brandon2b9.0226 yr/$72.5M (12-17)$11,000,000$12.00$13.00
Bruce, Jayrf5.1256 yr/$51M (11-16)$10,041,667$12.04$12.54
Cueto, Johnnyrhp-s64 yr/$27M (11-14)$10,000,000$0.80
Bailey, Homerrhp-s5.0176 yr/$105M (14-19)+20 opt$9,000,000$10.00$18.00
Ludwick, Ryanlf8.1092 yr/$15M (13-14)+15 opt$8,500,000$4.50
Chapman, Aroldislhp-c3.0341 yr/$5M (14)+converted bonus$7,835,772$11.75$15.67
Latos, Matrhp-s4.0792 yr/$11.5M (13-14)$7,250,000$9.67FA
Broxton, Jonathanrhp8.023 yr/$21M (13-15)$7,000,000$9.00$1.00
Leake, Mikerhp-s41 yr/$5.925M (14)$5,925,000$7.90FA
Marshall, Seanlhp7.0883 yr/$16.5M (13-15)$5,500,000$6.50FA
Parra, Mannylhp6.0632 yr/$5.5M (14-15)$2,000,000$3.50FA
Schumaker, Skip2b-of7.0512 yr/$5M (14-15)+16 cl opt$2,000,000$2.50$0.50
Heisey, Chrisof3.1571 yr/$1.76M (14)$1,760,000$2.35$2.93
Simon, Alfredorhp4.1421 yr/$1.5M (14)$1,500,000$2.00FA
Ondrusek, Loganrhp3.1252 yr/$2.3M (13-14)$1,425,000$1.90$2.38
LeCure, Samrhp3.0722 yr/$3.05M (14-15)$1,200,000$1.85$2.47
Santiago, Ramonss-2b9.0951 yr/$1.1M (14)$1,100,000
Hannahan, Jack3b5.0652 yr/$4M (13-14)+15 c opt$1,000,000$2.00
Pena, Brayanc6.0812 yr/$2.275M (14-15)$875,000$1.40FA
Cozart, Zackss2.0841 yr/$0.6M (14)$600,000$5.12$7.68
Frazier, Todd3b2.0711 yr/$0.6M (14)$600,000$6.48$9.72
Mesoraco, Devinc2.0281 yr/$0.525M (14)$525,000$4.64$6.96
Hoover, J.J.rhp1.1021 yr/$0.52M (14)$520,000$0.57$1.20
Cingrani, Tonylhp-s0.1631 yr/$0.5125M (14)$512,500$0.56$0.62
Partch, Curtisrhp0.0861 yr (14)$500,000$0.55$0.61
Christani, Nickrhp0.0391 yr/$0.5M (14)$500,000$0.55$0.61
Hamilton, Billycf0.0281 yr/$0.5M (14)$500,000$0.55$0.61
Marshall, Brettrhp0.0331 yr/$0.5M (14)$500,000$0.55$0.61
Soto, Neftali3b0.0361 yr/$0.5M (14)$500,000$0.55$0.61
Barnhart, Tuckerc01 yr (14)$500,000$0.55$0.61

The data above assume that the Reds will not pick up any of their options, and thus just pay the buyouts.  More on that in a sec.  Also, the values in red are estimates of what these players might get in salary arbitration, based on either their current salary or a WAR-based salary estimate, and a 40/60/80% estimate for what players will get each of their three years in their arbitration years.

I think these numbers are a little concerning.  Right now, the Reds have three players set to be free agents following this season (assuming the Reds don't pick up the options they have): Johnny Cueto, Ryan Ludwick, and Ramon Santiago.  Roger Bernadina should probably also be on this list, but I accidentally omitted him.  In any case, collectively, those three are combining to make $19.6 M this season, compared to $5.3 M next season in contract buyouts.  That would seem to free up $14.3 Million.

Unfortunately, at the same time, the Reds have three important players who will be arbitration eligible for the first time next year:  Zack Cozart, Todd Frazier, and Devin Mesoraco.  The latter three are all somewhere in the vicinity of league-average players.  Therefore, even though they'll only make 40% of their free agent value, they will probably earn an extra $15 million by themselves.  There goes the savings.  And on top of that, just about all players with existing contracts get an incremental raise, along with players who are in their arbitration years (Aroldis Chapman, Mat Latos, and Mike Leake).

All told, the minimum salary commitments the Reds currently are dealing with have them at about $136 million in 2015, which is about $24 million more than the 2014 payroll.  And that's assuming they don't pick up Johnny Cueto's option!  That scenario seems unfathomable right now.  But picking up his $10 M option would bring payroll to $145.5 Million.  If they try to keep Ludwick, they're over $150 million.  All of this would appear to make the Reds pretty strapped for cash in the coming year.  And it doesn't get a lot better after that: while the payroll commitments drop in 2016, that would require that the Reds lose all of Cueto, Latos, Leake, Marshall, and Parra to free agency.  Between escalating salaries for the young guys, plus Votto and Bailey getting big jumps in their salaries, the Reds are going to need that TV deal to pan out for them to avoid having to gut the team.

We don't know what the Reds' financial situation really is, of course.  It could be that they're running (or anticipating) the kinds of profits that would permit this kind of payroll explosion.  But if this season goes poorly, and the Reds aren't as competitive as we all hope them to be, I would think some effort to trim payroll at the trade deadline might be in order.

Thoughts?  Will the Reds' TV contract let them keep this team together?  Or are we looking at the onset of a retooling period in the next few years?

Here's a short twitter interaction between myself and Kaleb on this article:

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