Backloading Payroll, and How It Can Help

In this offseason that has been rife with long-term contracts, two teams stand out above the pack for their spending: the Los Angeles Angels, and the Miami Marlins. Both teams made quite a splash in free agency, with the Angels signing Albert Pujols and CJ Wilson, and the Marlins signing Jose Reyes, Mark Buerhle, and Heath Bell. One thing that all of these contracts have in common: they’re all severely backloaded. 

Let’s look at the Angels first. Pujols’ contract starts off at just $12 million in 2012 and $16 million in 2013, before jumping up to $30 million by the end of the deal in 2021. Wilson’s contract starts off at $10 million in 2012 and $11 million in 2013, and finishes up at $20 million in 2016. Hell, we can even look at Jered Weaver’s extension signed during the season. That deal starts off at $14 million in 2012, and ends at $20 million in 2016. Now, a big reason that the Angels backloaded these deals was because of the albatross contracts they have to deal with in the here and now. Torii Hunter will make $18.5 million in 2012, Bobby Abreu makes $9 million, Vernon Wells is making over $24 until 2014…these are big, ugly contracts, and by backloading the deals, the Angels are getting some flexibility in the present time. But here’s a major caveat. In 2015, when Wells’ contract comes off the books, the Angels still have $60.7 million committed in payroll. They have $65.7 million committed in 2016. Compare that to the final two years of Wells’ deal, 2013 and 2014, when the team has $74.45 and $76.7 million commited, respectively. By losing Wells’ contract, the Angels are really only saving between $10 and $15 million in those first two years. Assuming the team obviously picks up the options on Ervin Santana & Dan Haren in 2013, the savings would look even greater, but Haren and Santan would be guys that the team would probably want to bring back….and probably sign to backloaded contracts to help them out in the near future, just like they did this offseason.

Now, take a look at the Marlins. Their payroll in 2012, compared to 2011, is already up nearly $17 million. That doesn’t even count arbitration-eligible players, which the team has a lot of. The payroll goes up another $9 million in 2013. Then, the contracts start falling off the books….but things don’t really get much better. In 2014, Miami has just four players under contract, and they’ll be making $61 million. That’s more than their 2011 payroll, not including the FOURTEEN players eligible for arbitration in 2014 that the team has, and the holes they’ll have with the expirations of the contracts of three starting pitchers in 2013 and 2014. The Marlins have just two players under contract for 2015, at $42 million. Five of those arbitration eligible players will be free agents in 2015, including a couple of starters. If owner Jeffrey Loria goes back to his old spendthrift ways, the Marlins will really be hamstrung by their payroll situation in the future. Just imagine if the new park in Miami doesn’t sell out every game, and it goes back to looking like Joe Player Life Stadium. Something is going to hit the fan there.

In contrast to the Marlins and Angels, look at the Tampa Bay Rays. The Rays also have a fetish for backloading contracts, but when they do it, the players they sign are young, and usually pre-arbitration. We all know about the insane Evan Longoria contract (six years, $17.5 million with three club options), but Ben Zobrist also has an affordable deal (four years, $18 million with two club options), and ace James Shields does as well (four years, $11.25 million with three club options, the first of which has already been exercised). Rookie Matt Moore just got an affordable deal following the same criteria as the rest of the gang, with not even a week’s worth of experience in the majors (five years, $14 million with three club options). Wade Davis also got a deal similar (four years, $12.6 million with three club options), and his contract illustrates the genius of the Rays’ contract strategy. The Rays are experiencing a bit of a logjam on the mound, with Shields, Jeremy Hellickson, David Price, and Moore having rotation spots seemingly locked down going into 2012. Davis has proven to be a good innings eater in his two full seasons in the majors, but the secondary stats really aren’t there. Instead of being saddled with Davis for seemingly an eternity, the Rays can simply decline his club options when they become eligible to in 2014, and get off the hook paying Davis just $12.6 million over four years, which translates to roughly 3 fWAR. In his two full and one partial season in the majors so far, Davis has been worth 2.6 fWAR. So the Rays are going to make out on this deal no matter what.

Because of the option years that Tampa Bay has locked up in these contracts, their actual payroll tied up in them is very low. In 2013, the team has just $17 million committed to payroll. If something catastrophic happens to James Shields in 2012, the team can simply decline his option for 2013 and walk away, or attempt to sign him to a lower value deal. This is in contrast to the Angels and Marlins, because if something happens to one of their fancy new free agents, be it injury or ineffectiveness, they’re still saddled with that contract.

Teams are always going to backload. It’s the natural order of things. The issue is WHO you give your backloaded deals to. If you’re giving aging veterans deals that are light in the present and heavy in the future, you’re going to run into more problems than a team who signs a young player to a backloaded deal, in the sense that they’re not making a lot of money to begin with, and the highest value of the contract could be in the range of $8 to $10 million, which is pennies for a star player in the current economic climate.

Joe Lucia

About Joe Lucia

Managing editor of Awful Announcing. News editor of The Comeback. Managing editor of The Outside Corner. You guessed it - not actually Frank Stallone.

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