Analysis

New Phils’ Financial Climate Allows For Greater Future Flexibility

Around the Twittersphere, there were some tweets floating about about the Phillies payroll now that Chase Utley has been traded. With high priced players like Cole Hamels, Jonathan Papelbon, and Utley traded, some Phillies fans are getting excited at the prospect of having a lower payroll and having some money to spend. I am here to tell you that yes, the Phillies will have a lower payroll and possibly money to spend on this free agent class but that no, it is not as much as you may think. Still, the team is in its most nimble financial state since 1999, a team that was able to leverage low-cost cost players into a contender in 2001 before working magic through the draft, making key trades, and signing free agents to help their ascent to a championship in 2008.

Although the math can get tricky and sometimes downright difficult, here’s a look at the Phillies financials for the remainder of 2015 and beyond.

2015:

Big contracts and commitments: Ryan Howard, Cliff Lee at $25 million each, Cole Hamels at $23.3 million ($14.3 million paid, $9 million kicked to Texas), Chase Utley at $15 million (~$4 million kicked to LA, LA assumes only $2 million buyout at end of season), Jonathan Papelbon at $12.8 million ($7.86 million paid, $5.14 million kicked to Washington, Washington picks up $196 K)

Medium contracts and commitments: Matt Harrison at $8.02 million (prorated following Hamels deal), Carlos Ruiz at $8 million, Aaron Harang at $5 million, Marlon Byrd salary money sent to Cincinnati was $4 million, Ben Revere at ~$2.61 million (~$2.61 million of $4.1 million contract paid prior to trade), Domonic Brown at $2.6 million, Jerome Williams at $2.5 million

Small contracts and commitments: Grady Sizemore at $2 million, Chad Billingsley at $1.5 million, Jimmy Rollins salary money sent to LA was $1 million, Jeff Francoeur at $950 K

With just the players who are not making the league minimum, the Phillies have about $139.45 million committed to 13 players in 2015, including the money headed to teams as part of deals. When dealt, Hamels had a guaranteed $76 million left and the Rangers are only on the hook for $40 million of that, meaning the Phillies are kicking in $36 million spread across four seasons, or $9 million per year. Instead of factoring this as one lump sum, I’m budgeting $36 million across four years. Similarly, the Nationals will only pay the prorated league minimum for Papelbon for the rest of the season, which is about $196 K from the time of the trade, so essentially the Phillies have no savings following the Papelbon trade, although they were able to get out from under his 2016 option, which is a plus.

Factoring in league minimum contracts is tricky because they are prorated based on service time so let’s make a dangerous assumption to get a ballpark number: because 13 players were committed to, 12 players at any given time would be making around the league minimum, right? Well, let’s take that 13 and add a full season to account for Billingsley’s replacement and ballpark estimate a half year for a replacement for Hamels, a half year for a call up that is replacing Papelbon, a half year of a Harang replacement, a half year of a Revere replacement, a half year of a Brown replacement from when he was injured, a half year replacement for Williams for when he was injured, and a full year replacement for Sizemore, In total, you are looking at the league minimum for 12 players plus five due to injuries and trades. For 2015, the league minimum salary rose to $507,500, meaning the Phillies spent somewhere close to $8.63 million on Major Leaguers making the minimum.

Money shaved from payroll through trades in 2015: $1.686 million (Papelbon and Revere savings)

Money spent in trade kickers: $23.14 million (Hamels, Utley, Papelbon, Byrd, and Rollins all had money attached to their trades, presumably all attached to 2015 payroll)

Total Payroll for 2015, not including draftee signing bonuses, international signings, etc.: ~$148.02 million

(Note: tenured bullpen arms like Justin De Fratus and tenured infielders like Freddy Galvis have contracts slightly higher than the league minimum but assuming somewhere slightly north of $140 million is a safe bet for total payroll in 2015.)

2016:

Big contracts and commitments: Howard at $25 million, Harrison at $13.2 million, Lee pre-retirement buyout at $12.5 million

Medium contracts and commitments: Hamels trade kicker at $9 million to Texas, Ruiz at $8.5 million, Brown arbitration at ~$3-3.5 million

Small contracts and commitments: De Fratus, Galvis, and Jeanmar Gomez reach arbitration for the first time at ~$1.25 to $1.50 million apiece, likely

Heading into 2016, the Phillies will have a very small percentage of money allocated to players actually on their roster. Approximately $21.5 million total will head to Lee and the Texas Rangers, while Howard will get his annual $25 million for the very last time. Despite a down year, Brown will receive a pay increase via arbitration while Chooch will remain behind the plate as the perfect battery mate for what should be a very young, intriguing pitching staff. While the Hamels trade saved the Phillies about $14 million, the Papelbon trade saved them about $13 million as well.

Like our estimate for minimum salaries last time, let’s assume that there are six players accounted for on the roster (Brown, De Fratus, Galvis, Gomez, Howard, and Ruiz) and they will need 20 more players at the league minimum to satisfy a Major League roster. From 2014 to 2015, the Major League minimum salary went up about 1.5% so let’s assume that happens again from 2015 to 2016, meaning the league minimum should end up around $515,112. The Phillies will thusly be accountable for $9.78 million in league-minimum salaries.

Money shaved from payroll through trades in 2015: $27 million (Hamels and Papelbon trades)

Money spent in trade kickers: $9 million (Hamels)

Total Payroll for 2016, not including draftee signing bonuses, international signings, etc.: ~$86 million, assuming the highest figures for Brown, De Fratus, Galvis, and Gomez through arbitration

2017:

Large contracts and commitments: Harrison at $13.2 million

Medium contracts and commitments: Howard buy out at $10 million, Hamels trade kicker to Texas at $9 million, Ruiz at $4.5 million team option (or $500 K buyout), Brown final year of arbitration at ~$3.5-4 million, De Fratus, Galvis, and Gomez at ~$2-2.5 million in arbitration

Small contracts and commitments: Cody Asche, Cesar Hernandez, and Darin Ruf reach arbitration for the first time, ~$1.25-1.50 million apiece

This is where things start to get pretty cool for the Phillies. The Phillies’ highest paid player in 2017 that is currently under contract is that is the most likely to take the field is Chooch, who may be dealt prior to 2017, could be a solid bargain as a part-time player as a contributing catcher in 2017, or could simply be bought out for a half of a million. I have purposefully inflated Brown, De Fratus, and Galvis’s second arbitration years to plan for the absolute worst in terms of salary commitment. It is very possible that any of the three aren’t even Phillies by 2017. I have also artificially inflated the arbitration numbers for Asche, Hernandez, and Ruf for those still banking on a 40 HR season from Ruf, although, with the young outfield depth now found throughout the Phillies’ system, it wouldn’t surprise me if any or all of those three are not Phillies through 2017.

Assuming they all stay and assuming they all do very well in arbitration, the Phillies are in solid financial shape for 2017. The Phillies have $40 million, worst arbitration case scenario, allotted with eight players on the field. Having to fill the team with at least league minimum players, and assuming the league minimum goes up 1.5% again, the Phillies will be on the hook for $522,839 per player or $8.89 million in minimum salaries, meaning the Phillies are committed to $48.89 million if Chooch’s option is picked up and if their arbitration-eligible players have knock-down, drag out seasons. It is just as likely, however, that that figure is much lower, with Ruiz getting his $500 K buyout, that players like Asche and Ruf are either DFA’ed or traded and the players that do stick, I’m thinking De Fratus and Gomez, are closer to $2 million players than $2.5 million players. Because of this, the final 2017 number will come with a range and a qualifier: ~$48.89 million as the worst case, ~$40 million best case.

Money shaved from payroll through trades in 2015: $14 million (Hamels)

Money spent in trade kickers: $9 million (Hamels)

Total Payroll for 2017, not including draftee signing bonuses, international signings, etc.: Somewhere between $53.2 million and $62.2 million, dependent on arbitration figures and Chooch’s option.

In short, the Phillies may have some money to spend this offseason but their greatest financial flexibility may begin prior to the 2017 season and becomes greater in 2018. I won’t go through the 2018 projections as it is so hard to predict arbitration numbers and who will be DFA’ed years out, but in 2018, the Phillies lose at least $14.5 in commitments to Howard and Ruiz. If they haven’t moved on already, the will also likely shake loose around $4 million more from Brown’s free agency. And what is pretty amazing is the whole process could theoretically restart (it won’t) in 2019, when there is no money, buy outs, trade kickers, etc. allocated at this time.

When is the last time the Phillies didn’t have big, long term money committed like this? You’d have to go back to the 1999 Phillies who had only Rico Brogna (two years), Ron Gant (two years), and Curt Schilling (three years) on the books with multi-year deals, the rest of the team filled with one-year players like Chad Ogea or arbitration eligible players like Bobby Abreu and Mike Lieberthal. It remains to be seen if the Phillies will splurge this offseason on free agent targets but they have the positional availability and the money to do so with a long term outlook that allows them to offer big money for long years.

(Note: the original article was composed with an assumption that the majority of Matt Harrison’s $13.2 million per year will be offset by insurance payments should he not be able to return to play and was omitted in error. He was added in a revision to this post.)

 

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