Wednesday, February 7, 2018

What Springer's Arbitration Settlement Tells Us

Long-time friend of Astros County Brian Arbour sent this in for review and, ultimately, publication. Brian is an Associate Professor of Political Science at John Jay College, City University of New York. He is an Astros fan who teaches Yankees fans for a living.

What Springer’s Arbitration Settlement Tells Us: There is a Limit on Future Payrolls
By Brian Arbour

Today the Astros announced that they had agreed to a contract extension with George Springer
that will pay the World Series MVP $24 million dollars over the next two years to patrol center
field in Minute Maid Park.

What is most notable about this extension is its structure. The Astros will pay Springer
$12 million dollars in both the 2018 and 2019 seasons.. The $12 million that Springer will
earn in 2018 is not only higher than the $8.5 million the Astros offered in arbitration, but also
the $10.5 million the team offered him.  

The Astros offered Springer more money in 2018 than he would have made in arbitration,
regardless of outcome. In exchange, Springer agreed to take less money in 2019 than he likely
would have made in arbitration that season.

What should we learn from this unique contract signed by the Astros.

First, the Astros are in a relatively flush financial position in 2018. They had more money
in their budget for 2018 than they had spent so far, and they decided to spend that money now in
an effort to reduce the money the need to spend next season.

Second, the Astros are not likely to sign another major league free agent before Opening Day.
Some have suggested that the Astros might sign someone like Carlos Gonzalez or Lucas Duda to
be a left handed DH, but the team seems focused on letting Evan Gattis DH most days (and,
subsequently, to give a healthy number of plate appearances to Derrick Fisher)

And Third, the Astros are worried about their payroll in 2019 and 2020. By giving Springer
more money now when they are flush, the Astros reduce his salary in 2019, In addition, there is a
good chance this will reduce Springer’s salary somewhat in 2020, as the arbitrator will likely base
Springer’s salary that season as a percentage increase off the $12 million in 2019.

    This third point is the most important to me. The Astros current payroll is relatively low
    (19th entering the 2017 season) and highly efficient. Most of the team’s best players are cost-controlled.
    This allows management not only to operate with a payroll below nearly all of their companions on
    last years election, but also allowed the team to pay market prices for their 2017 veteran additions
    (Reddick, McCann, and Beltran).

    Starting in 2019, the Astros payroll situation becomes murky. Next offseason, Dallas Keuchel,
    Marwin Gonzalez, and Charlie Morton are free agents, and Carlos Correa will get a big raise as he
    becomes eligible for free agency. In 2020, Jose Alruve and Justin Verlander can explore the market.
    In short, the Astros will need to pony up more bucks in the near future to retain their starts and to
    compete for another world championship.

    But how much money will Jim Crane be willing to pony up to re-sign those players or find new ones?
    We don't know. And we don't know not just because the future is unknown. We don't know primarily
    because we have no track record with which to judge Crane and GM Jeff Luhnow’s willingness to
    boost the payroll. For Crane and Luhnow's entire tenure, the Astros have operated as a low budget
    team. But the decision to spend little money was part of a plan to rebuild the team from the ashheap
    left behind by Drayton McClane. The spending spree last off season was based on having a low
    payroll for the rest of the spots on the roster. It offers us little insight moving forward.

    Will Crane spend lots of money in 2019 and beyond to take the teams payroll into the top third in the
    league? We don't know, but the move to frontload Springers contract is a signal that there are
    clearly limits on future payrolls. The Springer contract shaves dollars off of the payroll in 2019 and

    Obviously, Crane could choose to spend up the payroll. The low payrolls up to this point have
    allowed him to run the team at a profit, even in the depths of the consecutive 100 loss seasons.
    I have a fantasy that he tucked some of those profits into certificates of deposits nicknamed 2019
    payroll. Of course, it is just as possible that he used the money to expand his personal collection
    of ivory back scratchers. Crane could of course choose to run the Astros slightly less profitably
    to please his customers. Yeah, and monkeys might fly out of my butt.

    That today’s Springer signing demonstrates that there is a limit to future spending by the Astros
    still does not answer every question about the future of the Astros finances. We do not know, nor
    can we, what the limit is on future spending. We also do not know how this year’s free agent
    market slowdown will depress prices to the point that the Astros future free agents seek out a
    contract extension with the team. What we do know is that the bill for paying the Astros is going
    to increase in the next few years. Management was trying to get ready for that today.